I started up at the top with Urban Cable Works of Philadelphia. You said that was the entity that bought the franchise for $160 million, right?
Right. I'm just saying that in terms of trying to figure out the 60 percent -- in terms of the 60 percent that is not Time Warner, all of that ultimately is Inner City, looking at this chart as, I think, you were working your way back.
Right. But then three are pieces split off with all the different groups.
So what is the purchase price of the Area II franchise as we're sitting here today, and how are the 129 02/17/05 - PUBLIC PROPERTY - BILL 041071 dollars being split up?
What you have to understand is that in terms of the deal -- I wouldn't call it the purchase price, but the deal that was struck between Time Warner and Inner City, a component of that is the purchase price, but there are other parts of that. And I'm prepared to tell you those. So you have $53 million that would go to Inner City for its interest in the franchise.
And if I were to take that $53 million, where would I put it on this chart? Would I start down at the bottom?
I think that would go to the bottom, Inner City Broadcasting -- I guess Urban Cable Works of Philadelphia, that's what I mean.
Okay. Which five years ago, the way this all works out, appears to have a value of $58.4 million.
Again, you can't divorce the totality of the deal. I don't think you can segregate them that way. In structuring the deal, as I've called it, there 130 02/17/05 - PUBLIC PROPERTY - BILL 041071 are a number of components. And so to the extent that the value might appear to be less, it's not actually less when you look at the total value of what happened between the entities.
Inner City Broadcasting Corporation or -- they are one in the same with Urban Cable Works of Philadelphia, right?
I guess technically it was Urban Cable Works of Philadelphia.
All right, why don't we use that? Urban Cable Works of Philadelphia, Inc., right?
There is then an amount that goes to Inner City of $34 million to 131 02/17/05 - PUBLIC PROPERTY - BILL 041071 settle disputes between the parties.
Is that the same Urban Cable Works of Philadelphia, or is that Inner City Broadcasting?
Councilman Nutter, the 34 million went to Urban Cable Works of Pennsylvania, LLC, and Urban Cable Works General, LLC.
That goes to Urban Cable Works PA, LLC/Cable Works General, LLC. Now, this is for disputes? Must have had a big dispute.
Part of what I've called the deal. 132 02/17/05 - PUBLIC PROPERTY - BILL 041071
Well, Councilman, now we're getting into things that I think that are not a part necessarily of this deal. There is a connection in that the parties are trying to work out all that existed between them. And I'm not sure I can ascribe any portion of that 34 or I can tell you today what portion --
Yes, I'm sure that's the catalyst for the resolution of all that existed between them.
And this becomes the point of precipitation, to some extent?
We'll come back to that. What else is involved in the 133 02/17/05 - PUBLIC PROPERTY - BILL 041071 transaction?
$66 million to eliminate the debt owed to Time Warner Cable by Inner City.
$66 million to eliminate a debt owed to Time Warner by Inner City -- I guess it's actually by Urban Cable Works.
Urban Cable Works owes Time Warner $66 million. And I appreciate your sensitivity, but just so I can understand this, are we essentially talking about debt forgiveness, or are we talking actual cash?
The value of debt forgiveness by Time Warner to Inner City?
Urban Cable Works. 134 02/17/05 - PUBLIC PROPERTY - BILL 041071 Let me ask this question. This Urban Cable Works, does this entity only operate in Philadelphia, or is this a corporate entity that operates in jurisdictions outside of Philadelphia?
I think the last part then is the assumption of debt by Time Warner in the amount of $55 million -- of Urban Cable Works.
Time Warner is literally placing onto its own balance sheet $55 million in debt?
I'm not an accountant. I don't exactly how they would do it, but they 135 02/17/05 - PUBLIC PROPERTY - BILL 041071 assume debt. I wouldn't want to go further than that. I assume it goes on their balance sheet, but I'm not an accountant.
Nope, that's it. Councilman, just for the record, I've attempted to answer these questions. And with all due respect, we're not conceding. I just want to reserve the record the answer these questions are necessarily germane or consistent with the scope of what the Council has before it, but in attempt to cooperative, I've supplied these answers with that reservation.
I appreciate it. And I guess if we were in court, the Chairman would say "so noted"?
So in reality, the deal or the transaction is clearly much more than a $53 million transaction?
It's really 136 02/17/05 - PUBLIC PROPERTY - BILL 041071 about a 208-plus million dollar transaction?
Because all of the other little hundreds of thousands will add on to the thing. First let me go back and say, while I do appreciate the effort and even your belief in attempting to answer the question that I'd ask Mr. Shirley a while ago, today's exercise gets a lot closer to really answering that question. Now, the $53 million, is that cash?
And the $34 million, I didn't make myself, what is that?
So we've got cash and cash and then we've got $66 million in debt being forgiven. That must really take a load off somebody's mind.
And then 55 million which is really coming off of somebody's balance sheet and going somewhere else, right?
Okay. Now, how does this all get distributed based on the chart and the interlocking relationships among these various parties?
Councilman, I do not have an ability to answer that question today. I couldn't give you answers that I would feel comfortable with in trying to figure out the percentages and how -- I just don't have that ability today.
Okay. But we at least know that there's $87 million in cash that is being paid for -- is it fair the 138 02/17/05 - PUBLIC PROPERTY - BILL 041071 $87 million at a minimum in cash is covering the 60 percent ownership?
No. I don't think you can look at it that way. Again, I think you have to look at the --
Or is it really the $208 million in overall cash and consideration that's taking care of the 60 percent?
It's a hard question. The settlement amount, I'm not sure you necessarily could put as a value in terms of a value if you're trying to value the system. I really don't want to get into what the settlement --
What that settles, but I don't think you can necessarily ascribe that to a value of the franchise. I mean, there were disputes between the parties.
Right. And obviously you've got other considerations going on because you've got over a hundred 139 02/17/05 - PUBLIC PROPERTY - BILL 041071 million dollars, more than half of the total transaction amount is dealing with various debts either being for given or written off or assumed. Who would have the ability to -- I mean, as you've now reconstructed the transaction, who would then have the ability to take it apart in its components related to the 208?
That $208 million of cash and consideration, you have any number of parties here, Urban Cable Works of Philadelphia, you've got these investors over to the side, Fairview, Pacesetter, Mesbit. I assume they're getting something. You've got PhilaComm. You've got an entity which is probable no person called the Urban Cable Works of Pennsylvania, LLC, and Urban Cable Works General, LLC. I mean, you've put a transaction together, a deal, as you've called it. It now has a value of $208 million. It then has to be deconstructed 140 02/17/05 - PUBLIC PROPERTY - BILL 041071 because dollars have to go different places. I mean, people didn't make these investments because they didn't have anything else to do with themselves.
Councilman, I really don't see how -- and this is with all due respect, how the money gets distributed among the investors, how that could possibly be a part of the suitability analysis that you are charged with doing. And it really gets into private relationships and financial relationships between parties.
Well, I think I'd say back to you with the same amount of respect, one, we ask these questions all the time. Two, you're in a public forum. Three, you're contracting with a public entity that has some responsibility to try to understand the transactions in front of it. This is what we do. So as a part of our jobs -- I mean, I didn't ask you how the signal gets from one place to the other or what kind of equipment you use to run the operation. You're asking to transfer a 141 02/17/05 - PUBLIC PROPERTY - BILL 041071 franchise. We're in a public hearing about that. The franchise has a value. We're trying to understand how the different pieces and components all fit together as a part of our responsibility to understand what it is that we're voting on.
It is conceivable -- I don't say it is likely, but it is conceivable it could be litigation between PhilaComm and my client. For me now to put on the record in a public foreman what the value is or what I think the value is of PhilaComm share puts us in a position that is, I think, almost untenable, basically not fair.
I understand that. I didn't ask you about any one entity in particular. There are any number of entities on this sheet of paper. I mean, you've walked through the front end of the transaction. I'm just asking you does someone have the ability to then deconstruct it to understand where it's all going?
In order to do that, I would have to look at the contracts, the 142 02/17/05 - PUBLIC PROPERTY - BILL 041071 relationships, the agreements that exist between, on the right side of the chart, Fairview, Pacesetter, Mesbit, I suppose, and City Cable Works, ultimately Urban Cable Works. You'd have to look at the PhilaComm component on the left side. And as I said, I think that gets into material that really is of a private nature.
Well, you have definitely made that point clear. What I would ask you to do when you're away from the table is at least give some consideration to the request so that we can better understand this prior to any final actions being taken here. I do also want to at least want to inquire, during the course of the break and you took the time to try to put all this together, I'm intrigued as to given that some of this information was actually in a public document, as required as a part of your filing, why did you seemingly decide to torture this body by withholding --
See, that's not fair, 143 02/17/05 - PUBLIC PROPERTY - BILL 041071 Councilman. Had I known or --
Let me finish what I'm saying. By seemingly withholding the information or certainly I think it's easily characterized if we looked over the record there was not a sense of urgency to provide the information that you've subsequently now provided, which I appreciate. But it's clearly in another document which, if we had forever, any one of us could have searched through and tried to put together. But it certainly was not forthcoming. I guess I'm just trying to understand why would you go through that?
I think that proves my point. Had I understood what you wanted, I could have come up with this number out of the 10-Q quite easily. I thought in sending the letter on February 4th I was responding to that which y ou had asked. If I understood that, I could have included this in the letter on February the 4th. I had no desire to hide it. You can't hide that which is public anyway. 144 02/17/05 - PUBLIC PROPERTY - BILL 041071
All right. Obviously, I didn't ask the right question.
Mr. Chairman, at least on this particular issue, I think I got the information that I needed. Thank you.
Thank you, Councilman. Anyone else on this panel to testify? (No response.)
Any other questions by Committee for any of these witnesses?
No, I think we testified at the last session. We're just here to answer questions.
Mr. Chairman, as everyone seems to take great efforts to maintain their place in the record with regard to their position, notwithstanding what would 145 02/17/05 - PUBLIC PROPERTY - BILL 041071 appear at the moment to be the hearing coming to some amount of conclusion, I would at least reserve the right at a subsequent hearing to raise additional questions with regard to qualifications. I think there are still some outstanding information with regard to number of subscribers, households, paths, the true penetration rate for the franchise and there could be other matters that may arise at a subsequent time.
I'll amend any question. Any questions of these witnesses at this time? (No response.)
There being none, thank you so much for your testimony. Any other witnesses to testify on this bill? Please come to the witness table. State your name for the record.
Thank you. My name is Judith Robinson. I'm here to testify 146 02/17/05 - PUBLIC PROPERTY - BILL 041071 regarding the amendments to Bill No. 041071. Just a few items in regards to consumers. Thank you again for continuing this hearing because I understand that no one came to testify regarding consumers and public access. I just was wondering how does public access fit into this hearing and this transfer? From what I understand, this has something that has been requested for many years, and a small portion of the cable fees were supposedly set aside in the name of having public access. It's been well over 14 years now, and that still has not happened as 15 our cable rates increase over the years. So 16 that's one issue I just want to raise. 17 In addition, when Mr. Wade back all 18 those many years ago came to the body of City 19 Council to get this franchise, 20 African-American inclusion was very, very important at that time. So if it was important then, I know good and well it must be important all these many years later. So I want to know how just that fits into the plan also. 147 02/17/05 - PUBLIC PROPERTY - BILL 041071 And just as a consumer, will this transaction in any way -- and this is kind a rhetorical question -- reduce the cable fees as they have increased tremendously over the years? And those are my three areas of concern. Thank you very much.
You're welcome. Mr. James, you want to take a shot at responding to those questions?
Thank you, Councilman. We appreciate the questions that are raised by the resident related to public access and also consumer service and rate regulation. I'll try to address them in somewhat the same order. The issue of public access, as we have known since we've been doing rate regulation, has been a very important issue and has been raised at any opportunities. At every opportunity, and this opportunity not being anything different, what we are assuring those who have an interest in public access is that the franchisee who will be taking over 148 02/17/05 - PUBLIC PROPERTY - BILL 041071 the franchise if the transfer is approved has agreed to honor all the obligations that are in the existing the franchise which includes obligations to meet commitments for public access at the point in time the City decides to initiate public access by the formation of a non-profit foundation and the assignment of channels for public access purposes. So this particular transaction will not do anything to diminish that obligation, and the franchisee isn't looking to be excused from that obligation. It still remains an issue that the Administration and City Council has to reach some conclusion at some point in time. And we're working very hard to try to assemble as much information to better quantify the issues related is not bringing public access to Philadelphia.
So am I hearing that the responsibility to bring public access to the City of Philadelphia pretty much rests with the City of Philadelphia and the commitment based on the obligations in the franchise agreements for all the franchises, 149 02/17/05 - PUBLIC PROPERTY - BILL 041071 all four, are in effect in place. It's essentially our inability to get --
It still remains an issue between the City Council and the Administration to resolve that issue. It is not an issue with any of the cable franchisee. And this franchisee is applying, like other franchisees, continue to make their commitment to fulfill that obligation at the point in time that the City moves forward. As far a consumer service, that's an issue that we are, as the responsibility department for oversight of that, very much interested in consumers concerns as far as the level of service that they're receiving, the rates that they pay, the product offering that they receive. We do feel that it's important to note that Time Warner who is applying to be the sole owner of the franchise does have a very good strong record as the No. 2 cable provider in the nation to be able to provide those services. We will continue and hopefully through the amendment that we instituted today increase the level of 150 02/17/05 - PUBLIC PROPERTY - BILL 041071 oversight as we look at the areas of consumer service. To the extent any consumer has a complaint, we make ourselves available through our cable office to try to work with the cable operator to rectify that on behalf of the subscriber. The final issue as far as rate regulation, as you know rate regulation was deregulated at the federal level. We have no 11 role other than the oversight role for compliance with the basic service.
There was also a question about minority participation based on the original franchisee and the potential diminishment of that.
The obligations that are in the franchise for participation as far as providing services and employment are retained in that and will be retained through the transfer. As Councilman Nutter requested earlier, we are going to prepare a report for the Chair and members of the Committee to document the franchisee's previous compliance with meeting those obligations. 151 02/17/05 - PUBLIC PROPERTY - BILL 041071
Thank you, Mr. James. We will be recessing until a.m. on 8 February 24th. 9
May I address the Committee on that? I am unavailable on that date. (Inaudible, not on microphone.)
I just wanted to say that I am unavailable, but I guess that's not a reason to postpone. But the other thing I think would be helpful is there's been mentioned by Mr. Holder that there's a chance of resolving this issue, and I think time would help us with that; not lot time, some time. And Number two, what would help us resolve it is get the rest of the information that we need, especially that settlement 152 02/17/05 - PUBLIC PROPERTY - BILL 041071 agreement which is part of the purchase price, the 34 million. We own percent of the 4 company it was paid to and we still can't get 5 a copy of it. We don't know what it's for. 6 And that, to me, we're going to be in the same 7 position a week from now as far as our 8 position unless we can actually get that 9 document. 10
This Committee 13 will be in recess until February 24th, 9 a.m. 14 Thank you very much for your participation. 15 (Council recessed at 5:05 p.m.) 16 - - - - 17 18 19 20 153 C E R T I F I C A T I O N I HEREBY CERTIFY that the foregoing proceedings of the Council of the City of Philadelphia of Wednesday, February 17, 2005, were reported fully and accurately by me, and that this is a correct transcript of the same. RE: COMMITTEE ON PUBLIC PROPERTY AND PUBLIC WORKS _________________________ Lisa C. Bradley, RPR