Article 2 Grant of Franchise

Any franchise granted shall be nonexclusive and city-wide. The city may grant additional franchises as it deems appropriate.

In the event that, subsequent to the effective date of this chapter, the city grants an additional franchise for a cable communications system on terms that, on a whole, are more favorable or less burdensome than those contained in an existing grantee's franchise granted pursuant to this chapter, such more favorable or less burdensome terms shall be automatically extended to such existing grantee to the effect that any provision in such grantee's franchise which is inconsistent with such more favorable or less burdensome terms shall be superseded by such more favorable or less burdensome terms. Such more favorable or less burdensome terms shall be effective with respect to the grantee's franchise as of the effective date of the franchise granted to such other person. In order to invoke the benefit of this clause such existing grantee shall notify the city in writing of the specific terms in the proposed franchise that are more favorable or less burdensome than the terms of the existing franchise prior to the public hearing described in Section 5.06.316, provided that the city has given such existing grantee at least ten days prior written notice of such public hearing, together with a copy of the proposed franchise.

(Ord. 1598 § 1, 1992)

§ 5.24.310 Franchise nontransferable.

Except as otherwise provided in the franchise ordinance, the franchise shall not be transferred, sold, hypothecated or assigned, nor shall any of the rights or privileges therein be hypothecated, assigned, sold or transferred, either in whole or in part, nor shall title thereto, either legal or equitable, or any right, interest or property therein, pass to or vest in any person, except the grantee, either by act of the grantee or by operation of law, without the prior consent of the city expressed by resolution. Nothing set forth in this chapter shall prevent the grantee from leasing or otherwise allocating use of any channel or programming time to any person, over a commercial use channel.

In reviewing a transfer request, the city may inquire into the qualifications of the prospective transferee or controlling party, and grantee shall assist the city in any such inquiry. In seeking the city's consent to any change of ownership or control, grantee shall have the responsibility of insuring that the transferee completes an application in form and substance reasonably satisfactory to the city, which application shall be submitted with all application fees required pursuant to Section 5.24.320 of this chapter. An application shall be submitted to the city not less than sixty days prior to the date of transfer. The grantee shall be in material compliance with its franchise. The transferee shall possess the qualifications and financial and technical capability to operate and maintain the system and comply with all franchise requirements for the remainder of the term of the franchise. If the city finds that the legal, financial, character, technical and other public interest qualities of the applicant are satisfactory, and that the proposed transferee has the capability to operate and maintain the system and comply with all franchise requirements for the then remaining term thereof, the city shall consent to the transfer and assignment of the rights and obligations of such franchise. The city may not withhold its consent to a transfer unreasonably.

Notwithstanding the foregoing, pledges in trust or mortgages of the assets of the system to secure an indebtedness may be made without the city's prior consent; except that no such arrangement may be made which would in any respect under any condition prevent the grantee or any successor from complying with all its obligations under the franchise, nor may any such arrangement permit a third party to succeed to the interest of the grantee without the prior consent of the city.

(Ord. 1598 § 1, 1992)

§ 5.24.312 Change in control.

City consent is further required for any change in control of the grantee, pursuant to Section 5.24.310 above. "Change of control" shall mean any acquisition of grantee's or grantee's parent's voting stock by a person or group of persons acting in concert which results in that person or group of persons owning more than fifty percent of the voting stock of the grantee or grantee's parent.

§ 5.24.314 Franchise area—Annexations.

Any change of control of the grantee occurring without prior city approval shall constitute a material breach of the franchise.

(Ord. 1598 § 1, 1992)

The franchise ordinance shall establish the franchise area.

Territory annexed to the city which is not within the franchise area of an existing franchise may be added to an existing franchise pursuant to council resolution adopted after conducting a noticed public hearing, provided that such new territory shall be deemed a part of the franchise area of any grantee authorized to serve the entire geographic area of the city without action by the council.

Territory annexed to the city that is already covered by an existing franchise or license granted by another public entity but where the grantee of such franchise or license has not commenced installation of a cable television system in the area of such annexed territory shall be deemed not to be served by a franchise or license, and all rights acquired under said franchise or license in the area of such annexed territory shall terminate by operation of law as of the effective date of the annexation.

Territory annexed to the city that is already served by a franchise or license issued by another public entity, may continue to be served by the grantee under said franchise or license for the balance of the term of said franchise or license, subject to the provisions of said franchise or license and the provisions of this chapter, and provided the franchise fees, which the city may establish by resolution up to the maximum permitted by law, are paid.

(Ord. 1598 § 1, 1992)

§ 5.24.316 Franchise applications.

Any person may apply for the grant of a new franchise.

The city may, by advertisement or any other means, solicit applications for new franchises pursuant to a request for proposals.

Upon receipt of an application, the city manager shall cause to be prepared a report, including his or her recommendations respecting such application, which shall be filed with the council, each applicant, and existing grantees. Upon receipt of said report, a public hearing shall be noticed to consider the approval of the application.

The city may, at any time prior to the close of the public hearing, require the applicant to provide supplementary information reasonably necessary to determine whether the application should be approved.

(e)

Following the public hearing, the council, at its discretion, shall determine whether to approve the application. In making its determination, the council shall give due consideration to the quality of the service proposed, income to the city, experience, character, technical and financial responsibility of the applicant, and any other considerations deemed pertinent by the council for safeguarding the interests of the city and public.

(Ord. 1598 § 1, 1992)

§ 5.24.317 Multiple franchises.

The city may grant franchises on a city-wide basis only. The city may limit the number of franchises granted, based upon, but not necessarily limited to, the following considerations:

(1)

The capacity of the public rights-of-way to accommodate the facilities of two or more cable systems;

(2)

The benefits that may accrue to cable subscribers as a result of cable system competition, such as lower rates and improved service;

(3)

The disadvantages that may result from cable system competition, such as the requirement for multiple pedestals on residents' property, and the disruption arising from numerous excavations of the rights-of-way.

The city may require that any new grantee be responsible for its own underground trenching and the costs associated therewith, if, in the city's opinion, the rights-of-way in any particular area cannot feasibly and reasonably accommodate additional cables.

(Ord. 1598 § 1, 1992)

§ 5.24.318 Franchise renewal.

The city may establish franchise renewal procedures by resolution subject to applicable federal and state law.

(Ord. 1598 § 1, 1992)

§ 5.24.320 Franchise processing costs.

Any application for either a new franchise grant, a franchise renewal or a franchise transfer, shall be made in a manner prescribed by the city manager, and shall include an application fee, in an amount to be set by the city manager, to recover the costs necessary to adequately analyze the application. In addition, the grantee shall reimburse the city for all out-of-pocket processing costs, which shall include, but not be limited to, costs of publications of notices, development and publication of relevant franchise ordinances and agreements, and any other out-of-pocket not covered by the application fees, incurred by the city in its study and evaluation of applications. The city may periodically bill the applicant for such additional amounts to reimburse the city for administrative expenses incurred in addition to the application fee. The bills shall be supported with evidence of the expense or cost incurred. The applicant shall pay such bills within thirty days of receipt.

These franchise processing costs are over and above any construction inspection and permit fees and the franchise fees specified in this chapter or the franchise ordinance.

(Ord. 1598 § 1, 1992)

§ 5.24.322 Franchise fee.

Every grantee shall pay a franchise fee to the city in the amount designated in the franchise ordinance. The city, upon request, shall be furnished a statement, either audited and certified by an independent certified public accountant or certified by a financial officer of the grantee, reflecting the total amounts of gross revenues and all computations for the period covered by the payment. The city shall have the right to conduct an independent audit of those records of grantee reasonably necessary to determine gross revenues, and if such audit indicates a franchise fee underpayment of five percent or more, the grantee shall assume all costs of such an audit.

Acceptance of a franchise fee payment for more than four years after its receipt shall amount to a release and accord and satisfaction as to any claim the city may have for additional sums payable. The grantee shall maintain gross revenue records for a minimum of four years.

Any delinquent franchise fee payment shall be subject to an interest charge of one and one-half percent per month. In addition, failure to pay a franchise fee payment which is due and payable within fifteen days after receipt of a notice from the city shall subject the quarterly payment to a five percent penalty.

§ 5.24.324 Revocation of franchise—Assessment of damages and penalties.

The franchise fee shall be received by the city within forty-five days after the close of each quarter of the grantee's fiscal year.

(Ord. 1598 § 1, 1992)

§ 5.24.326 Procedure for adjudication of breaches of the franchise.

The city reserves the right to terminate any franchise in the event of a material breach of any of its material terms or any material term of any applicable federal, state or local statute or regulation, which breach is not cured following written notice and a reasonable opportunity to cure. Such a breach may include, but not be limited to:

(1)

If the grantee practices, or attempts to practice, any fraud or deceit upon the city;

(2)

If the grantee becomes insolvent, unable or unwilling to pay its debts, or upon listing of an order for relief in favor of grantee in a bankruptcy proceeding;

(3)

If the grantee materially fails to substantially meet the customer service standards established in this chapter over a three-month period of time;

(4)

If the grantee fails to provide or maintain in full force and effect, the liability and indemnification coverages, letter of credit or bonds as required by the franchise;

(5)

If the grantee willfully violates any orders or rulings of any regulatory body having jurisdiction over the grantee relative to the franchise, provided that the grantee may contest any such orders or rulings by appropriate proceedings conducted in good faith, in which case no breach of the franchise shall be deemed to have occurred;

(6)

If the grantee ceases to provide at least eighty percent of its standard cable service over all or a substantial portion of its cable system for a period of five days or more;

(7)

If the grantee willfully fails to provide the city with required information, reports and/or test results in a timely manner as provided in the franchise;

(8)

Subject to any applicable force majeure provisions, if the grantee fails to initiate or complete scheduled system construction or reconstruction within the time set forth in the franchise ordinance;

(9)

Any other wilful act or omission by the grantee which materially violates the terms, conditions or requirements of the franchise or any order, directive, rule or regulation issued thereunder and which is not timely corrected or remedied following receipt of written notice of the violation;

(10)

A documented pattern and practice of material violation of the material terms, conditions, or requirements of the franchise followed by a cure which was prompted by a notice to cure received from the grantor.

(Ord. 1598 § 1, 1992; Ord. 1622 § 4, 1994)

Prior to imposing any sanction or penalty including termination of the franchise upon the grantee, the city council or the city manager shall give the grantee a reasonable notice and an opportunity to cure period to correct the material breach. The written notice shall be by certified mail or by other means providing for certification of receipt.

The notice to cure period shall be a minimum of fifteen days in the case of any payments due under the franchise and a minimum of thirty days in all other cases (except in cases of emergency where a shorter time may be prescribed consistent with the nature of the emergency). Where thirty days is insufficient time for the grantee to cure the noticed breach, the grantee shall be deemed in compliance with the provisions if, within that thirty-day time period grantee begins a good faith effort to cure such breach and shall present a specific and reasonable timetable to the city for the cure of the breach.

Upon receiving the city manager's notice of the breach, the grantee shall investigate the alleged breach, and within the time period established in the notice and in accordance with subsection (b) above, notify the city manager in writing of the results of the investigation and its proposed action or resolution, if any. In the event the city manager does not refer the matter to a hearing officer or the city council as provided under subsection (d) within thirty days of the receipt of the grantee's response, the grantee's proposed action or resolution shall be final.

If the breach is not cured within such time period as the city manager establishes, the city manager shall cause to be noticed a public hearing before the city council or refer the matter to a hearing officer. All breaches of the customer service standards where the city manager determines that the penalty may not include franchise termination shall be referred to a hearing officer.

(e)

The grantee shall not be deemed to be in default in the performance of its obligations under this chapter and no penalty or sanction shall be imposed upon the grantee where the grantee has remedied the breach to the reasonable satisfaction of the city manager within the period specified in the notice specifying the breach.

(Ord. 1598 § 1, 1992; Ord. 1622 § 5, 1994)

§ 5.24.327 City council procedures.

The council shall hold a public hearing, upon ten days written notice duly given to grantee and published notice provided to the public. The grantee may appear at the public hearing before the council and present information, orally or in documented form, that it deems relevant and appropriate to the council's deliberations. Based on the evidence presented at the public hearing, the council shall determine by resolution whether the franchise should be revoked or the grantee should be assessed damages. Nothing herein is intended to limit the council's right to make other determinations which are reasonably related to the franchise.

Should the city council find that there has been a material breach of the franchise, but that revocation is inappropriate, then the council may assess and levy against the letter of credit of the grantee monetary damages up to the limits established in the franchise ordinance for material franchise violations. This provision for assessment of damages is intended by the parties to be separate and apart from city's right to enforce the provisions of the construction and performance bonds and liquidated damages.

The city council shall cause the grantee to receive written notice of any action taken following the public hearing.

Within not less than thirty days of receiving notice of the city council's action, grantee shall be entitled to initiate an action in state or federal court to challenge the determination of the council wherein all claims and defenses shall be heard de novo. Once such an action is initiated, any assessment or other determination by the city council shall be stayed pending a final determination of the court.

(Ord. 1598 § 1, 1992)

§ 5.24.328 Hearing officer procedures.

The city manager may refer to a hearing officer any controversy or claim arising out of or relating to the franchise or its existence, construction, interpretation, performance, enforcement, operation, breach, continuance or termination. Such hearing proceedings shall be initiated by the city manager by written notice to the grantee. Notice shall be by certified mail or by other means providing for certification of receipt.

The city manager shall select a retired California Superior or Appellate Court Judge, or a retired Federal Court Judge as the hearing officer.

The hearing shall be conducted according to California Code of Civil Procedure Section 1280, et seq., (the "General Arbitration Act").

§ 5.24.330 Force majeure—Grantee's inability to perform.

The hearing officer shall commence the hearing within thirty days of his selection unless the parties and the hearing officer otherwise agree. Any party to the hearing may issue a request to compel reasonable document production from the other party. Disputes concerning the scope of document production and enforcement of document requests shall be subject to agreement by the parties, or if agreement is not reached within twenty days of the document request, then by disposition by order of the hearing officer. Except as may be otherwise specifically agreed by the parties, no other form of pretrial discovery shall be available to the parties; provided that the provisions of Code of Civil Procedure Section 1283.05 shall apply.

(e)

The hearing officer shall be vested with quasi-judicial authority, and shall be entitled to: (1) order the grantee to undertake remedial action to cure any breach of its obligations under its franchise, (2) assess liquidated damages and/or levy a penalty upon the grantee in accordance with the terms of this chapter and the franchise ordinance, (3) determine that the grantee has not violated any of its obligations under its franchise, or (4) terminate the franchise.

(f)

At any hearing conducted pursuant to this section, the city shall have the burden of establishing a material breach to the satisfaction of the hearing officer by a preponderance of the evidence. The cable television provider may present such evidence, as it may desire.

(g)

The hearing officer shall enter findings of fact and conclusions of law which must be supported by the evidence. The hearing officer shall not have the power to commit errors of law or legal reasoning, and the award may be vacated or corrected pursuant to California Code of Civil Procedure Section 1286.2 or 1286.6 for any such error. Any party to a hearing may petition the Superior Court for Los Angeles County, California to confirm, correct or vacate the award on the grounds stated in the General Arbitration Act. Any proceedings on appeal shall be in accordance with Code of Civil Procedure Sections 1294 and 1294.2.

(h)

All witnesses testifying at the hearing shall be sworn. Witnesses shall be subject to direct and cross-examination. However, formal rules of evidence applicable to the trial of civil or criminal proceedings in the trial courts of this state shall apply to evidence adduced at the hearing only to extent that such rules are reasonably necessary to the preservation of the probative nature of the evidence proffered. The hearing may be continued from time to time.

(i)

Except as may be apportioned by the hearing officer in his discretion, each party shall bear one-half of the fees and expenses of the hearing officer, together with any other expenses of the hearing proceedings, incurred or approved by the hearing officer. Each part shall bear its own witness and attorneys' fees or other expenses incurred by such party for its own benefit.

(j)

Any failure of the grantee to comply with the final order of the hearing officer shall be deemed a material breach of the franchise, and may be grounds for termination of the franchise.

(k)

The decision of the hearing officer shall be final. It shall be subject to judicial review pursuant to California Code of Civil Procedure Section 1094.5. In the event grantee initiates such a review, the hearing officer's determination, orders and recommendations shall be stayed pending a final order of the court.

(Ord. 1598 § 1, 1992; Ord. 1622 § 6, 1994)

In the event the grantee's performance of any of the terms, conditions or obligations required by this chapter or its franchise is prevented by any cause beyond the grantee's reasonable control, such inability to perform shall be deemed to be excused and no penalties or sanctions shall be imposed as a result thereof, provided the grantee has notified the city in writing within thirty days of its discovery of the occurrence of such an event. In such an instance, the grantee shall have reasonable time, under the circumstances, to perform its obligation under this chapter or to procure a substitute for such obligation which is satisfactory to the city. For the purpose of this section, causes or events not within the control of the grantee shall include, but not be limited to acts of God, strikes, sabotage, riots or civil disturbances, epidemic, labor disputes, shortage of labor, freight embargoes, shortages or unavailability of materials and supplies, explosion, natural disasters such as floods, earthquakes, landslides and fires, rationing, and power or communications failures, but shall not include financial inability of the grantee to perform or failure of the grantee to obtain any necessary permits or licenses from other governmental agencies or the right to use the facilities of any public utility where such failure is due solely to the acts or omissions of the grantee.

(Ord. 1598 § 1, 1992)

§ 5.24.332 Removal and abandonment—Purchase of system.

In the event that the franchise is terminated, or nonrenewed, then such grantee shall, upon demand of the city, and at the sole expense of the grantee, promptly remove or, in its discretion, abandon in place, all or any portion of its cable television system. Upon abandonment of the cable television system in place, the grantee shall cause to be executed, acknowledged and delivered to the city, such instruments as the city attorney shall prescribe and approve, transferring and conveying the ownership of the cable television system to the city.

In removing its cable television system, the grantee shall refill, at its own expense, any excavation it made and leave all streets in as good condition as that prevailing prior to the grantee's removal of its cable television system without materially affecting the electrical or telephone cable, wires, or attachments. The liability, indemnity, insurance, security fund and bonds required under the franchise shall continue in full force and effect until the removal is complete.

In the event a franchise is not renewed or is terminated, the city and the grantee may agree that the grantee will maintain and operate its cable television system until a subsequent grantee is selected and a subsequent or modified cable television system becomes operational. The city, or another party approved by the city pursuant to the franchise application procedures, may acquire the cable television system at a price established pursuant to the provisions of Section 627(a) of the Federal Cable Communications Policy Act of 1984.

§ 5.24.334 Receivership and foreclosure.

Notwithstanding anything to the contrary set forth in this chapter, the grantee may not abandon any of its cable television system in place if it materially interferes with the use of the street or public rights-of-way in which such property is located or with the use thereof of any public utility, which material interference shall be reasonably determined by the city engineer. The grantee shall not be required to remove any portion of its cable television system which has been abandoned or deemed abandoned in accordance with the provisions of this chapter unless it constitutes a substantial portion of the cable television system.

(Ord. 1598 § 1, 1992)

Subject to applicable provisions of the bankruptcy code, any franchise shall, at the option of the city, cease and terminate one hundred twenty days after the appointment of a receiver or trustee to take over and conduct the business of the grantee whether in a receivership, reorganization, bankruptcy or other action or proceeding unless such receivership or trusteeship shall have been vacated prior to the expiration of said one hundred twenty days, or unless:

(1)

Such receiver or trustee shall have, within one hundred twenty days after his or her election or appointment, fully complied with all terms of the franchise and remedied all breaches of the franchise or provided a plan for the remedy of such breaches which is satisfactory to the city; and

(2)

Such receiver or trustee shall, within said one hundred twenty days, execute an agreement duly approved by the court having jurisdiction, whereby such receiver or trustee assumes and agrees to be bound by each and every term, provision and limitation of the franchise.