And since then I have 58 01/26/05 - PUBLIC PROPERTY - BILL 041071 had no contact -- personally I've had no 3 contact with them. You asked me why I have not been contacted by them.
Is it my understanding that there is some level of financial relationship between the local partner and Inner City?
I'm sorry. I'm looking up at Urban Cable Works of Philadelphia, LP. So there is some financial relationship between the two. I assume as this transaction moves through the process, 59 01/26/05 - PUBLIC PROPERTY - BILL 041071 there would be some need or some impact between those two entities as a result of this transaction. Why wouldn't the parties be in discussion?
That would be representatives from Inner City and representatives from PhilaComm have had contact with each other concerning the arrangement.
Okay. Let's go back to the second page of your testimony and talk about -- you made a statement, Councilman Clarke had a question, and then you had Q and A as a result I'd like 60 01/26/05 - PUBLIC PROPERTY - BILL 041071 to further explore. Your statement is the Inner City INVESTORS have no knowledge of a plan to transfer the Area II franchise from Time Warner Cable to Comcast.
Are you also then saying that you are completely unaware of any discussions about such a concept?
That is absolutely correct. As we sit here, I am completely unaware of any discussion that Time Warner has had with Comcast with regard to the Area II franchise.
And you've never participated in a discussion, you've never heard anyone talk about it?
I have never heard anyone talk about that discussion, no. No, sir, I have not.
So how did you become aware of it in order to reference it in your testimony?
Our counsel has had 61 01/26/05 - PUBLIC PROPERTY - BILL 041071 some discussion with the counsel of the Public Property and Public Works area and --
So your counsel has had discussions with the City Solicitor's Office?
I believe so, yes, sir. And also Time Warner's counsel, John Fogarty who is present has had discussions with them, and out of those discussions, my understanding is that these two issues arose out of those discussions that I referenced.
Why don't we have your counsel up at the table for a second.
Good morning. My name is Eric Holder. I'm with the law firm of Covington and Burling. I'm joined by my colleague Gerald Waldron and Murad Kalam, both whom are with Covington Burling as well, and 62 01/26/05 - PUBLIC PROPERTY - BILL 041071 we're from Washington, D.C.
Thank you, Mr. Chairman. I want to make sure that we're clear as to today's hearing. You were invited to participate in today's hearing, I'm assuming, by the Department of Public Property? How did you become knowledgeable about today's hearing?
Gerald Waldron from Covington and Burling. In our conversations with the City and indeed with your office and your staff, we became aware of this hearing.
And you're participating in this hearing in accordance with not only the franchise agreement requirements, but also in accordance with the various provisions of federal law that govern franchise transfers; is that correct?
The federal law does govern the franchise transfer process and has 63 01/26/05 - PUBLIC PROPERTY - BILL 041071 rules and procedures as part of that process, yes, sir.
So you would be in agreement that we are conducting today's hearing in accordance with Title 47 in Section 7 537, Sales of Cable Systems; is that correct?
Sir, if I might, the hearing is held consistent with the Communications Act and with the City's role in terms of approving a transfer. As both Time Warner and Urban Cable Works notified the City's attorney, there is an argument which, frankly, we are exclusively preserving by being here that because the City's opportunity to review is defined by federal law, that the parties at least want to reserve the legal argument that the time for the City's purview has lapsed. Though I do want to underscore that Mr. Shirley is here today in order --
But you're not making that argument as we sit here today, 64 01/26/05 - PUBLIC PROPERTY - BILL 041071 correct?
You are physically here, you are participating in this hearing that we're conducting in accordance with both the franchise agreement and the federal statute; is that right?
Sir, what I'm saying is we are here today to urge City Council to act, but we are not -- and that's why we shared the letter with Council. We are not relinquishing our legal argument or somehow waiving our legal argument. Nonetheless, we are anxious to see this City Council act on the ordinance.
If I might add, as I understand Mr. James' testimony, it appears to me that the City seems satisfied that the information that would be required under Section 394, in fact, has been provided?
We appreciate Mr. James' testimony. And I think, as I indicated earlier, we will have some 65 01/26/05 - PUBLIC PROPERTY - BILL 041071 additional questions for him at a subsequent time. Notwithstanding our respect for Public Property, the City solicitor's Office, and the fine work that both of them do, this City Council will reserve its rights under our responsibilities to conduct a process and have a public hearing, ask the kinds of questions that we think we need to have answered as we are required to take action in these particular matters. So everyone can reserve whatever rights they want to reserve. We're going to reserve ours, and we're the legislative body of this City and we'll conduct the process as we see fit.
That's fine, Councilman. We're here to try to cooperate with you in any way that we can, understanding the reservations that s we have expressed as well.
Everybody's in agreement. Very good. 66 01/26/05 - PUBLIC PROPERTY - BILL 041071 Mr. Shirley, tell me a little bit about, so I can better understand, what is the relationship between Inner City, Time Warner, the local group, the other investors. How does this all work?
Shall I refer to the chart, Councilman? Or would you just like a narrative?
Well, you can refer to the chart. You can give me a little bit of narrative as long as I don't have to hear about where you went to grade school or high school or that you take care of your cats. So just tell me the story.
The easiest way to start, I think, is with the chart, if I may. If we start at the top of the chart, Councilman, you'll see that you have the franchise, Area II franchise, which is owned by -- please interrupt me if I'm going over 67 01/26/05 - PUBLIC PROPERTY - BILL 041071 material you already know.
60 percent is owned by an investor group, which I'll get into later, and 40 percent is owned by Time Warner. If you look at the 60 percent going to right, the 60 percent group, that is a general partnership structure which is why you have the general partner which owns 3 percent and the limited partner piece which is a 57 percent. As it happens in this group, the owners of the GP are the same as the owners of the LP.
Now, of that 60 percent, City Cable Works, Inc. is a C Corporation which owns 80 percent of that 60 percent.
Okay. And then your investor group owns 20 percent of the 80 percent?
Our investor group owns 20 percent of City Cable Works and 20 percent of the -- Urban Cable Works of 68 01/26/05 - PUBLIC PROPERTY - BILL 041071 Pennsylvania, LLC, is owned by the local group PhilaComm. 80 percent of City Cable Works is owned by Urban Cable Works of Philadelphia, Inc., which is a subsidiary of Inner City Broadcasting.
They only own 80 percent of that because you investor group owns the other 20?
That's correct. And Urban Cable Works of Philadelphia, Inc., is wholly owned by Inner City Broadcasting Corp.
Okay. Now, with regard to all the various investors, they've made an investment. Since we're in America, the assumption is that you an investment, it appreciates, hopefully, over some time, value is added, additional customers, cable growth and activities, and that ultimately in the finest rendition of the American dream, people make more money. Is that basically what we're doing here?
Yes, sir, that is the general idea. 69 01/26/05 - PUBLIC PROPERTY - BILL 041071
And the various parties as a part of their investments, I'm assuming then, now that there would be a sale to one entity which is in essence buying everyone OUT.
All parties would then be satisfied as a part of whatever their investment is; is that ultimately the way this works?
Yes -- well, all parties have recent agreement that would be satisfactory, yes.
And is that where we are today? Have all the parties reached agreement about their investments or their return on their investments?
I think it's safe to say that most of the parties have reconciled themselves to being better off with a sale than continuing.
Okay. Now, what is the value of the sale here? Who's buying what from whom and what's the total sale 70 01/26/05 - PUBLIC PROPERTY - BILL 041071 price?
The total consideration is $87 million for the 60 percent interest.
Okay. So Urban Cable Works of Pennsylvania, LLC, and Urban Cable Works General, LLC, which are the 60 percent owners of Urban Cable Works of Philadelphia, LP --
-- will receive $87 million for their 60 percent interest; is that what you're saying?
And this is from the transaction -- this all came about in the transaction from 1999; is that right?
The transaction, yes. The Time Warner, Inc., and the investor group bought from Time Warner, Inc., the system in actually January of 2000. 71 01/26/05 - PUBLIC PROPERTY - BILL 041071
No, sir. What happened there was Time Warner -- well, if you look at -- Urban Cable Works of Philadelphia, LP, bought from Time Warner Cable 100 percent of the system.
Well, let me under understand this. I got the 87 million for the 60 percent interest. What was the value five years ago?
I'm sorry, I'm trying to count the total -- the 100 percent was bought so at -- excuse me, Councilman. Councilman, I would like to provide you that answer at a later time. The issue is that 100 percent of the system was purchased. There was debt involved. So you are asking 72 01/26/05 - PUBLIC PROPERTY - BILL 041071 what the value of the net equity was?
So from your perspective, at least -- I mean, engaged in a transaction five years ago, you're now selling 60 percent interest five years later for $87 million, what's the net profit as a result of the transaction?
The net profit -- we look at it as a return on investment, Councilman. The net return over a five-year period, gross return, is roughly to the investors roughly 2 times the investment which is over five years approximately 15 percent internal rate of return.
Could I just have a number? 73 01/26/05 - PUBLIC PROPERTY - BILL 041071
I'm sorry. Excuse me, Councilman. I omitted a debt portion. There was debt on the -- we did borrow on the system. That debt portion, along with the accompanying warrants was approximately 23.4 million. So the net to the investors is basically 63 million. I'm sorry.
Could you -- and I appreciate you kind of walking through it with maybe pen and paper other there. Similar to the wonderfully revised colorful chart that you provided with my last request, could you maybe give me a financial structure from '99, who purchased what, what the values were, debt, and show me a bottom line? Can you do 74 01/26/05 - PUBLIC PROPERTY - BILL 041071 that?
Yes, at a future time. I think that for the moment -- you're going to get back to me on that. We've talked about the structure, value. I'll have some operational questions, but they're probably not for you. Thank you.
If I might just add that we would -- because Mr. Shirley went through this without his financial notes, that we may seek permission to revise and extend, if you will, in addition to providing the material.
To revise and extend. It may be just in terms of doing some of the math. I just want to make sure that we will 75 01/26/05 - PUBLIC PROPERTY - BILL 041071 get back to you with all the information, but there may be some changes. That's the only thing I'm saying.
I appreciate that. I do want the accurate figures as long as you comment to coming back with something that doesn't have like you at zero.
Any other questions from Members of the Committee? (No response.)
Thank you so much for your testimony this afternoon. Our next witness will be Regina Martin. Please state your name for the record and begin your testimony please, and whoever else is accompanying you.
My name is John Fogarty. I'm an attorney with Time Warner 76 01/26/05 - PUBLIC PROPERTY - BILL 041071 Cable. Regina Martin is with me. I will make a few remarks and then Ms. Martin will speak.
I'd first like to thank the Committee for meeting with us today. I also would like to extend our appreciation to the City staff members in both the Department of Public Property and City Attorney's Office who have been working with us through this process, and I think we'll be continuing to do so to deal with a number of issues and questions that have arisen and some other ones that still require resolution. I will try to be very brief because a lot of the information I think you have already heard from Mr. James and Mr. Shirley. We'd like to just briefly, again, outline the transaction. The current franchisee, Urban Cable Works of Philadelphia, is, as you heard, 60 percent owned by two partners who are subsidiaries of Inner City Broadcasting. The other 40 percent is owned by Time Warner Cable, Inc. And the transaction is rather simply that Time Warner Cable, Inc., has 77 01/26/05 - PUBLIC PROPERTY - BILL 041071 agreed with Inner City Broadcasting to purchase the partnership interest of its subsidiary entities. And when that happens, Time Warner Cable, Inc., will own a hundred percent of the partnership interest in Urban Cable Works of Philadelphia and then merge that entity up into itself and the franchise will then be held by Time Warner Cable, Inc. As Mr. James indicated, Time Warner Cable, Inc., is the second largest cable operator in the country. We think we provided information to the City which clearly establishes, as Mr. James agreed, our financial, technical, and legal ability to operate the system. And as Mr. James outlined, we are no strangers to the City of Philadelphia. Time Warner from the period beginning around 1996 through 2000 wholly owned the system here in the Area II franchise. In 2000, the franchise was transferred to Urban Cable Works, the current franchisee. Time Warner continued to own its 40 percent interest and to manage the system. So when this transfer closes, there 78 01/26/05 - PUBLIC PROPERTY - BILL 041071 will be no perceptible change to our subscribers here in Philadelphia. We will have the same management, the same policies, the same operations, the same programming lineup. We don't expect any changes in operation to result from this. Over the past several years, as indicated, we have made, we believe, significant investment and improvements in the system, and I think the person who can best address those is Regina Martin who is our system manager here.
Good morning. Thank you very much, and I appreciate the opportunity to testify. The Area II franchise of Philadelphia, as John said, has been managed by Time Warner Cable, the second largest cable operator in the country since 1996. As a general manager of the system, I have been employed by Time Warner Cable for over 20 years and have had the opportunity to serve in the City of Philadelphia since February of 2002. 79 01/26/05 - PUBLIC PROPERTY - BILL 041071 During my tenure, there have been tremendous changes in the services and operations of the system. Over the past six years, we've invested over $62 million in capital to upgrade the system and support the operation. A focus has been on growing our core base of business, introducing new services, improving the customer operations and partnering with our local organizations to improve the community in which we serve. We've partnered with a number of organizations, local organizations over the years, including the Negro Baseball League Memorial, the West Philadelphia branch of the YMCA, American Red Cross, Parkside Day at the Zoo, Women making a Difference Annual Conference, Canal Days. These are just to name a few. In today's competitive landscape for video and high speed data servers is rapidly changing. Therefore, we have worked to ensure that we have a state-of-the-art technical platform which allows us to offer new products and services that are currently not available 80 01/26/05 - PUBLIC PROPERTY - BILL 041071 from some of our competitors, such as video on demand and even local high definition channels. During the past three or four years we've added over 60 new channels and services. Operational improvements have included expanding our phone and installation and service hours to include Saturdays and until 9:00 p.m., as well as working to retrain our staff to better meet the needs of our customers. In 2004, customer satisfaction surveys conducted by CNR Research, Philadelphia's customer satisfaction scores was one of the most improved of all the Time Warner divisions. The cable system is currently two-way 860 megahertz capacity system with a hundred percent digital technology. It was the first 100 percent digital cable system in the country. Through the use of digital technology, our customers have access to over 250 channels, again, including video, on demand programming, music channels, four high definition channels, and digital video 81 01/26/05 - PUBLIC PROPERTY - BILL 041071 recorders. Future services included digital phone service as well as increasing web based customer service operations. We truly appreciate the opportunity to serve the Area II residents of Philadelphia, and we look forward to continuing to provide our customers with technically advanced products and services for a variety for the information and entertainment needs. Thank you. If are there are any questions.
Thank you, Mr. Fogarty and Ms. Martin, for your testimony. Any questions for these witnesses from the Committee? Councilman Nutter.
Thank you, Mr. Chairman. Thank you, Ms. Martin, for your testimony, and Mr. Fogarty, for your statement as well. First, Mr. Fogarty, let me thank you for your response to the letter that I wrote 82 01/26/05 - PUBLIC PROPERTY - BILL 041071 to both you and Mr. Holder back earlier this month, making a request for a variety of pieces of information. As best I can tell, you either have a tremendous amount of excess paper over at Time Warner and Urban Cable Works or you were attempting to not only be responsive but thought that you might overwhelm me with documentation.
We've been well trained by your attorneys in responding completely.
I appreciate that. The reports that you make reference to are the monthly operational reports which I requested, the penetration reports in terms of franchise utilization, audited financial statements and a copy of the management agreement between Urban Cable Works of Philadelphia and Time Warner Cable. You also seem to indicate that you've submitted all of these document to the City as well; is that correct?
Which I do appreciate. Mr. Chairman, when we reach that point in the hearing, but I'll make the request now, given the nature of this transaction, its significance and importance to the people in Area II and throughout Philadelphia, I would like to add these documents to the record of this particular hearing so that whenever that future point in time comes and people want to understand what happened with this particular transaction, they'll have all the documentation in one place as they made need it, with your permission, Mr. Chairman.
Councilman Nutter, we'll make sure that the documentation that has been forwarded to you are included in the record of this hearing.
Thank you very much. 84 01/26/05 - PUBLIC PROPERTY - BILL 041071 Mr. Fogarty, let's talk a little bit about not only today's hearing but some of the details of Time Warner, its proposed complete ownership. I understand the structure from the chart and previous conversations you're managing the system now. Ms. Martin has indicated that she is also a Time Warner employee. There was discussion earlier about both a local group participation in the current transaction as well as -- you've been around for some time. You know that historically Area II, when cable was just a twinkle in other people's eyes back in the early '80s, has been designated as a franchise area to be primarily owned and operated by minority individuals or persons of color; you are aware of that history, are you not?
I have some awareness of it, yes, from previous experience here.
And the fact of the matter is is that the franchise was originally -- the Wade Cable system franchise back at that time, a series of sales of shares 85 01/26/05 - PUBLIC PROPERTY - BILL 041071 took place over the years, ultimately resulting in a majority of those shares being owned by different majority entities. Of course, given the history of the franchise area, many components of the customer base in Area II and just general issues here in Philadelphia, of course, there is continued interest in at least that concept of participation, a sense of ownership and involvement in such an enterprise. Can you tell us today what plans Time Warner, should the transaction go forward, what is the current view with regard to minority participation in either an investment environment or partial ownership environment involving this franchise?
Well, as we've outlined the proposal and the proposed transfer is that if Time Warner Cable, Inc., would own a hundred percent of the franchise, and there are no plans for any subsequent transaction.
Are you opposed to the kind of structural participation that 86 01/26/05 - PUBLIC PROPERTY - BILL 041071 has been made available? I believe even at one point in time in the earlier history, was required. Is the company opposed to that kind of discussion or that kind of involvement?
I don't think there's any opposition to any kind of proposal. Time Warner owned a hundred percent of the system for a number of years and operated it. And then there was a change, and the franchise was owned by Urban Cable Works. You know, in this business we're always willing to entertain proposals from people who might be interested, but there is certainly no plans at this time to make any change beyond the one that's before you now, which is to transfer the entire ownership to Time Warner Cable, Inc.
Well, let me ask you this question: If you were approached by those of the necessary means, this is obviously, by Mr. Shirley's testimony, this is not for the faint of heart or light of pocket kind of enterprise. But if you were approached by individuals or an organization or a company about that kind of structure 87 01/26/05 - PUBLIC PROPERTY - BILL 041071 participation, would you engage in legitimate discussion about it?
I think if anybody came to us with an offer to invest in any of our systems and it seemed a good business deal, it's certainly something we would probably entertain. But I'm not aware of any such approach or proposals.
Well, I'm not aware of any at the moment either, but we're in the process right now. I need to ask that question so I can understand what the mindset is. If you told me under no circumstance, over my dead body, something like that, then maybe we would be having a different discussion.
Like any business, we're always willing to entertain a proposal that makes business sense to us.
Let's get to the Comcast component of this discussion. That has been talked about. You don't have to be a cable expert to kind of figure out. What's the nature of that discussion at this point? 88 01/26/05 - PUBLIC PROPERTY - BILL 041071
I want to thank students from Temple University from the Journalism School and a couple of their professors. I see Mr. Len Washington and he's accompanied by other professor. Thank you so much for coming and being able to witness democracy in action. Thank you. Continue. I'm sorry.
As I was saying, if there was ever an agreement to transfer the system to Comcast or to any other party, obviously that's something we would advise the City of. And based on the nature of the transaction, the City would have consent rights.
So your testimony earlier was that other than possibly 89 01/26/05 - PUBLIC PROPERTY - BILL 041071 an action by this body, the customers should not notice -- although I assume you'll send them something. But the customers should not notice any change in service, if not even in personnel.
I don't expect there should be any resulting from this. It's been operated by Time Warner for the last several years and obviously we'd continue that.
In terms of the brand name. Presently on all the materials, letterhead, vehicles and the like, it reads Urban Cable Works of Philadelphia and in one of the smaller font sizes available in the universe, a partnership with Time Warner Cable. Will the name of the franchise change to just Time Warner Cable? What do you call all your own franchises?
Generally, it's Time Warner Cable. Frankly, Regina might have a better idea than I. I don't know whether a decision has been made about that or not. We probably would keep -- could have the rights 90 01/26/05 - PUBLIC PROPERTY - BILL 041071 to still do business as Urban Cable Works because we would own a hundred percent of that. It would be merged out of existence, but it still could be a DBA. I don't know. Has any decision been made, Regina?
I think we would look to make that change at the appropriate time. We haven't put a timeline on that but would look to make the change to Time Warner Cable at the appropriate time.
You heard the questioning earlier with regard to different representatives. And notwithstanding the fact that I have this wonderful chart, it is still a little difficult to figure out who can tell who or whom what to do. But I would strongly encourage at the reconvening of this hearing, just so we can get to the bottom of everything and get all the rest of the questions answered, I would strongly encourage that, with every respect to the previous witness, Mr. Shirley, who is an investor and on the board of one of the entities, for this type of hearing, given the nature of this transaction 91 01/26/05 - PUBLIC PROPERTY - BILL 041071 and its complexity, there should be an on-staff or officer of the Inner City entity at such a hearing. It's appropriate and also respectful to the body and to the Committee so that we have all of the appropriate individuals in the Chamber. Given that you're trying to drive the transaction and just the wonderful nature that you have, Mr. Fogarty, maybe you would be the appropriate person to make the communication so that folks can understand who needs to be in the room as we move through this process. Could you do that?
I'd appreciate it. I think that would be, for the moment, all the questions that I would have for these witnesses, Mr. Chairman.
Thank you, Councilman Nutter. Are there any other questions from Committee Members? (No response.) 92 01/26/05 - PUBLIC PROPERTY - BILL 041071
Not seeing any, thank you so much for your testimony this afternoon.
Next to testify, according to this list that's been given to me, is Wendy Hyatt. Ms. Hyatt, please state your name for the record and proceed with your testimony.
Thank you. My name is Wendy Hyatt. Good afternoon and thank you sincerely, Councilman Nutter, Members of the Committee, concerned citizens. I'm glad to have the opportunity to express my views here today. My name is Wendy Hyatt, as I've said, and I'm coming here on behalf of the Grass Roots Cable Campaign, which include members of Penn PIRG, the Philadelphia Community Access Coalition, Media Tank, the Communication Workers of America, Jobs With Justice, Kensington Welfare Rights Union, and the Coalition of Labor Union Women. Specifically, the Philadelphia Community Access Coalition 93 01/26/05 - PUBLIC PROPERTY - BILL 041071 has been fighting to get public access television for the City of Philadelphia for almost nine years now. I come here to say that I'm opposed to the transfer of Urban Cable Works to the Time Warner Corporation under Bill 041071. Our current system of mass communication is evolving rapidly, and cable has emerged as a dominate player and the primary source of information for the average person. And in Philadelphia, we have specific knowledge of the systemic problems with cable monopolies. The Grass Roots Cable Coalition was formed as an outreach response to the non-civic minded practices of Comcast which, as you know, just received a $43 million tax incentive to build its new headquarters in our downtown just a few blocks away. At a time when basic municipal services like healthcare and public transportation are on the chopping block, it's only fair that such a reward come with some civic demands. So far, Philadelphia has not seen a reward from its cable companies but rather a litany of grievances. So whether 94 01/26/05 - PUBLIC PROPERTY - BILL 041071 Time Warner ultimately seeks to be a competitive cable provider replacing a minority-owned cable company or as we suspect ultimately trade subscribers with Comcast, there should be expectations set forth at the beginning. The debate around cable must be expanded. We are increasing talking about basic communications, technologies necessary to participate in today's modern society. We're here to demand unobstructed labor organizing, oversight for poor customer service, fair price, truth and transparency in reporting to regulatory agencies. We also expect that any cable company not stand in the way or otherwise obstruct the creation of public access television in our community. This is what Philadelphia has seen from its cable company so far: Consistently raised rates and poor customer service with little or no repercussions for consumers. Technology redlining of poor communities and lack of community involvement in its affairs. Lack of respect for consumers' privacies, 95 01/26/05 - PUBLIC PROPERTY - BILL 041071 specifically not seeking expressed affirmative permission from consumers before collecting, storing, and sharing information about viewing or online habits. Low employee morale. High turnover. Poor safety and union busting. And lip service to the public interest while at the same time exercising political or legal clout to eliminate the so-called burdens of fulfilling franchise agreement obligations to provide funding, channel space and technical quality to run effective state-of-the-art public access systems. We want cable workers to have an atmosphere of free of coercion and intimidation, a workplace free of employment discrimination which includes nationality, race, religion, political opinion or affiliation, or ethnic origin. We want diverse and locally oriented workforces whenever and wherever possible with minimal outsourcing of jobs. We want public access television. Public access provides a means for people to exercise their first amendment rights, to access information and express 96 01/26/05 - PUBLIC PROPERTY - BILL 041071 their views. We want cable companies to conduct their business matters in a fully transparent manner.
We want a commitment to improve consumer satisfaction, ensure equal and fair treatment of workers, support for public access, provide up-to-date technology in the public interest for all areas of the City, utilize transparent and community-centered business practices. As consumers, workers, and citizens living in the same community in which it operates, we demand that our cable companies take action immediately to make necessary policy changes and performance improvements. In so doing, it will be signaling to its customer base, workers and civic leaders that it truly cares about the communities in which it operates and from which it derives its profits. Barring these commitments, we cannot support the transfer of Urban Cable Works to Time Warner. Thank you.
Thank you, Ms. Hyatt, for your testimony. Please correct me if I'm wrong. You're here on record opposed 97 01/26/05 - PUBLIC PROPERTY - BILL 041071 to this transaction?
You outline a number of grievances on the operation of cable companies. Have you in your capacity as a spokesperson of the Philadelphia Community Activist Coalition made any of these grievances s known to the cable companies in Philadelphia, in particular cable companies here before us today?
Yes, we have. We have issued an official code of conduct request which is available over at the table there which has been released publicly through press conferences here in Philadelphia. And they're also available on our web site and has been sent to the cable companies.
Have you or any representatives of your groups sat down and talked to our cable operators in Philadelphia about these concerns of yours?
I can relate to 98 01/26/05 - PUBLIC PROPERTY - BILL 041071 some of the things that you have stated in your testimony, being an activist most of my life regardless of what my bread and butter might have been at any given time of my life. But I always found it very necessary to meet with the people that I'm criticizing and to see in there was things that we can agree on, that we can work out and so forth. And my life experience has always indicated that the more I did of that, the more I found out that everyone on the other side was not as bad as I thought they might have been. And vice versa, they realized I might not have been as bad as they might have thought I was. So I would suggest that you bring these concerns. I've heard some of the over the years as well. And you, as a good citizen that I know you are, set out to meet with our cable. These are people that do business in this town, provide a service that all of our citizens are more and more involved in than ever before. And I wanted to make those points to you.
Thank you. I sincerely 99 01/26/05 - PUBLIC PROPERTY - BILL 041071 agree. We would definitely welcome the opportunity to sit down, and what we're seeking here is positive change for the community.
And I would suggest you take that initial step and reach out, and I'm quite sure that you'll see that people will be more willing to talk than to fight from afar. Because we need the services, but we have to make sure -- Councilman Nutter brings up a very important issue around here, and that is minority participation. This Council has been very strong traditionally in the support of minorities, folks that have been left out of business and to be a part of the economic life of Philadelphia. So these are concerns that are legitimate concerns.
Any questions from Members of the Committee? Councilman Nutter.
Thank you, Councilman Ramos. 100 01/26/05 - PUBLIC PROPERTY - BILL 041071 Ms. Hyatt, I appreciate your testimony. You may know from others in the coalition, I've been generally a strong supporter of the public access issue. I've worked with many people, at least in the Philadelphia Community Access Coalition. I'm a little newer or seeing this somewhat new, the Grass Roots Cable Campaign. Maybe that's a new entity. I do want to at least make sure -- and I respect your testimony, but I at least want to make sure that the record is clear and at a minimum even. On of your testimony, you point out that this is what Philadelphia has seen from its dominant cable company. For the moment, I will take from that that you are not, at least with these comments, talking about either Urban Cable Works of Philadelphia or Time Warner, as they are not the dominate cable entity in Philadelphia at this point in time; is that correct?
So you're 101 01/26/05 - PUBLIC PROPERTY - BILL 041071 talking about another company, not Time Warner or Urban Cable Works of Philadelphia?
And with regard to concerns around public access, I would only suggest to you that any of my conversations with either of the two companies, there's never been any indication of a lack of either interest or maintenance of the commitment which is a part of the franchise agreement wherever you are in Philadelphia, but there has been a missing step in this process which from time to time gets debated within the government and certainly within this Council that the cable companies are only required to participate in the public access issue, whether it is by capital investment in technology and equipment or even on the operating side, they can only do so if there is a public access corporation established by the government. And until that time, even if they wanted to do something, there is nothing for them to do because there's no one for them to provide those services with. 102 01/26/05 - PUBLIC PROPERTY - BILL 041071 So I know it is -- and I'm not saying this about you, I mean, it is easy to complain or to criticize a public utility, a cable company, the phone company, PECO, PGW, anyone for their activities, and I'm sure there are people who have -- some of them call my office from time to time -- complaints about their cable issues. But I think it only fair at least to be clear on the record that until the City government takes an action, there will not be any public access television even with the cable companies wanting to provide service, putting aside dollars for capital equipment and the like. And so the real issue is over here with the collective us and is really not, at the moment, a cable company issue. If the City establishes a public access corporation and we go to the cable companies and they don't fulfill their commitment, then I'll be right out there with you making the charge and making the complaint. But until that time, that the government does what its supposed to do, the only real issue is with us. 103 01/26/05 - PUBLIC PROPERTY - BILL 041071
Any other questions from Members of this Committee? (No response.)
Thank you, Ms. Hyatt for your testimony this afternoon. The next person to testify will be Sal DeBunda -- please correct me if I've pronounced your name wrong -- a PhilaComm attorney.
Good afternoon, Councilman. Thank you all for giving us the chair. My name is Sal DeBunda. I'm an attorney with Pelino & Lentz Law Firm in Philadelphia. Accompanying me is Aldie Loubier, a member of our firm. I am counsel for PhilaComm who's been mentioned here as a 20 percent partner in the 60 percent interest owned by Urban Cable Works. I want to thank you for the opportunity to testify on behalf of my client this morning. You've heard the name of Obra 104 01/26/05 - PUBLIC PROPERTY - BILL 041071 Kernodle this morning. Upon his untimely death, I was retained by PhilaComm to represent them. So I cannot testify here as the long-term Council of PhilaComm. I was not counsel when they entered into this transaction in 1999. I only became counsel actually in December of 2004. Before that, Obra Kernodle was their counsel. At the time that I became counsel to PhilaComm, I notified Time Warner, Mr. Fogarty, that I was their counsel. I notified Inner City I was counsel for PhilaComm. And I also notified the City of Philadelphia Solicitor's Office, and actually notified Mr. Nutter's office that I was counsel for PhilaComm. The reason that that's important is that the time that I did that, I knew about these possible hearings and the request for transfer and while we did go through Mr. Kernodle's files, we were only able to get pieces of what had been going on here. So either they're lost somewhere in his office or he had a terrible filing system, but we did not have a lot of records. 105 01/26/05 - PUBLIC PROPERTY - BILL 041071 As a result, we did ask both Time Warner and Inner City to get copies of all the documents in connection with this transfer request. And it's interesting to see today that they've given out -- they have a tremendous binder, they have charts. We have not received -- despite that request, we have not received from the City or from Inner City or Time Warner copies of any of those documents even though we had repeatedly asked for them. So that's the background on which I'd like to make this statement on behalf of my clients. The principals of PhilaComm entered into this transaction, not for a short-term windfall, but to be long-term participants in the Area II franchise. We're not in favor of exiting at this time but is only being considered because we're part of the 60 percent that's being sold. We don't stand alone as having our own interest. So we would like to not exit and we would like to find a way not to exit. In our opinion, a better 106 01/26/05 - PUBLIC PROPERTY - BILL 041071 solution would be for Inner City to exit and for the PhilaComm principals to either continue to participate in an approved Area II franchise with Time Warner or to participate with other investors or other cable operator in the Area II franchise. We would like to stay in. While we would like to participate in this hearing, we have made a request for all documents issued by the City of Philadelphia and by Time Warner in connection with this transaction, but those requests have not been responded to Time Warner. We have no 15 information on which to comment. So therefore, we would very much like to be involved. We'd like to be able to have a discussion with Time Warner about possibly staying in. But unfortunately, because we have no information, we're not in a position do that. I understand there will be continuance here, but I would like to request a continuance of this hearing until the time that we get the documents and have sufficient 107 01/26/05 - PUBLIC PROPERTY - BILL 041071 time to review them. We are basically a percent partner in the company that's involved in the transfer and we have no information. Now, that may be partially because of the untimely death of Mr. Kernodle, but I have notified them now for over a month that I have been their counsel and still have not received information. We have received some information, but not the information specifically in connection with this transfer.
12 So on that basis, I would like to 13 continuance, but I would ask for commitments, 14 since representatives are here, that they'll 15 get us the documents in time to be able to be 16 here at the next hearing or that this hearing 17 be continued until the time that we do get 18 them. And I will make that request on behalf 19 of our clients. 20
Thank you, Mr. DeBunda. Are you going to add anything to the testimony of Mr. DeBunda?
Let me just for 108 01/26/05 - PUBLIC PROPERTY - BILL 041071 my purpose of understanding your statement. You're not in favor of this transfer of cable operation to Time Warner?
We would have no 6 objection to Inner City transferring their portion, assuming all other things are met, the City is satisfied and all the things are met. We would have no objection to Inner City transferring their interest to Time Warner. Our principals would like to stay in the franchise. Councilman Nutter mentioned the minority participant. Our company is a hundred percent minority-owned, and they would like to remain involved in this franchise. They did not come into this with the idea of exiting within five years.
Your last request, it is my understanding that the Chairman of the Committee, Councilman Clarke, has indicated there will be continuance of 109 01/26/05 - PUBLIC PROPERTY - BILL 041071 this Committee hearing. Any questions?
But my point is if it's continued and we don't have the information, we'll be in exactly the same position we're in today. I don't have anything to review. I can't comment if I don't have documents. The binders have been given out, charts have been referred to. I have not seen any of that information even though I am counsel for one of the investors in the group.
Your concern is well taken. Councilman Rizzo, you have a question?
Thank you, Mr. Chairman. That disappoints me that they expect to do a transaction where you have significant interest and have not received the information. You communicated this request to, I assume, the cable franchise people here and our City Government Communications Division of 110 01/26/05 - PUBLIC PROPERTY - BILL 041071 Public Property.
They weren't sure they could give it to me. They weren't sure it was a matter of public record, was their response to us.
They suggested I do what exactly what I did. I contacted the cable company, Time Warner, Mr. Fogarty himself. I wrote to him and I wrote to Inner City. And their counsel and I have had conversation, Mr. Holder, but I still have not yet as of this moment received that information.
Honestly, I couldn't be supportive of anything occurring if you don't have the materials that you need to be prepared. And those are extenuating circumstances. But I think -- the Chair is 111 01/26/05 - PUBLIC PROPERTY - BILL 041071 here, that you'll have to communicate with us when you're prepared so this can be rescheduled or we need to intercede to make sure that at least from the City end that you get the cooperation that you need. In fact, if it is public information, I can't imagine, Counselor, that it not be, correct?