Chairman Linda W. Cropp at the request of the
Mayor
A BILL IN THE COUNCIL OF THE DISTRICT OF COLUMBIA
Chairman Linda W. Cropp introduced the following bill, at the request of the Mayor, on
_____
To approve the application for the transfer of the stock of District Cablevision, Inc.,
which is the general partner of District Cablevision Limited Partnership, to AT&T
Corp.
BE IT ENACTED BY THE COUNCIL OF THE DISTRICT OF COLUMBIA, That this act may be cited as
the "Approval of the Application for Transfer of Control of District Cablevision,
Inc., to AT&T Corp. Act of 1999."
Sec. 2. Definitions. For the purpose of this act, the term:
(a) "AT&T" means AT&T Corp., a New York corporation.
(b) "AT&T Cable Merger Company" means a District of Columbia corporation
and wholly owned subsidiary of AT&T.
(c) "Cable Ordinance" means the Cable Television Communications Act of 1981,
as amended, effective August 21, 1982 (D.C. Law 4-142; D.C. Code §43-1801 et seq.).
(d) "CFA" means the Cable Franchise Agreement, dated September 30, 1985, as
amended, between the District of Columbia and District Cablevision Limited Partnership.
(e) "Change of Control Agreement" means the binding contractual agreement
between the District of Columbia, DCI, AT&T Cable Merger Co., AT&T, and DCLP,
dated _, 1999, which sets forth the details regarding the change in control.
(f) "Committee" means the Council Committee on Economic Development.
(g) "Council" means the Council of the District of Columbia.
(h) "DCI" means District Cablevision, Inc., a District of Columbia
corporation.
(i) "DCLP" means District Cablevision Limited Partnership, a District of
Columbia Limited Partnership.
(j) "District" means the District of Columbia.
(k) "Franchisee" means District Cablevision Limited Partnership or DCLP.
(l) "OCTT" means the Office of Cable Television and Telecommunications.
(m) "Proposed Transaction" means the Agreement and Plan of Merger dated as of
September 1, 1999, among AT&T, AT&T Cable Merger Co., DCI and Robert L. Johnson,
under which AT&T Cable Merger Co. will be merged with and into DCI, with DCI
surviving.
(n) "System" means the cable system currently serving the District of
Columbia.
(o) "Transfer Application" means the completed Federal Communications
Commission Form 394, together with all exhibits, that was filed as of September 9, 1999.
Sec. 3. Findings.
The Council finds that:
(a) DCLP currently holds a cable franchise from the District, subject to the Cable
Ordinance and other applicable laws, and subject to the terms and conditions of the CFA.
(b) AT&T, DCI, and AT&T Cable Merger Co. have entered into the Proposed
Transaction.
(c) DCI is the general partner and controls twenty-five percent (25%) of the Franchisee
and has approximately 100 shareholders, most of whom live in the District of Columbia and
who are individuals with long-term holdings.
(d) Pursuant to approval granted by the Council via the Approval of the Application for
Transfer of Control of District Cablevision Limited Partnership from TeleCommunications,
Inc. to AT&T Corporation Emergency Act of 1999, effective February 5, 1999 (D.C. Act
13-20; 46 DCR 2535), AT&T is the parent corporation of TCI of D.C., Inc., the limited
partner of DCLP. TCI of D.C., Inc. owns and controls seventy-five percent (75%) of DCLP
and exercises day-to-day operational control over the System.
(e) On June 22, 1999, AT&T and DCI filed materials with the District seeking the
District’s consent to the Proposed Transaction by which DCI’s stock would be transferred
from individual shareholders to AT&T, and AT&T would become the one hundred
percent (100%) owner of the Franchisee. However, various documents, including a final,
signed agreement, were not included.
(f) On June 30, 1999, OCTT determined that DCI did not submit a completed Federal
Communications Commission Form 394, together with all exhibits, and that additional
information would be necessary to complete the application and for OCTT to make a
recommendation regarding the proposed transaction. Therefore, OCTT requested supplemental
information from AT&T and DCI.
(g) AT&T and DCI submitted the additional information to complete the Transfer
Application on September 3 and September 9, 1999.
(h) The Council has legal authority, as the local franchising authority, to approve or
deny the transfer of control over DCLP that would result from the Proposed Transaction
pursuant to section 21 of the Cable Television Communications Act of 1981, effective
August 21, 1982 (D.C. Law 4-142; D.C. Code §43-1820), and Section 3.11.03 of the CFA.
(i) Pursuant to section 617 of the Communications Act of 1934, as amended, approved
October 5, 1992 (106 Stat. 1489; 47 U.S.C. §537), and title 47, section 76.502 of the
Code of Federal Regulations (47 CFR §76.502), the Council has 120 days following the
filing of the completed Transfer Application to render a final decision thereon or the
Transfer Application will be deemed to be granted, unless the District, DCI, and AT&T
agree to an extension.
(j) While reserving all applicable rights, the parties mutually agree to take steps to
finalize all necessary review and authorization of the Proposed Transaction by November
22, 1999.
(k) Pursuant to section 21 (g) of the Cable Television Communications Act of 1981,
effective August 21, 1982 (D.C. Law 4-142; D.C. Code §43-1820(g)), and Section 3.11.05 of
the CFA, OCTT has reviewed the Transfer Application, supplemental information submitted by
AT&T and DCI, and the relevant qualifications of AT&T.
(l) DCLP, DCI, and AT&T entered into a Change of Control Agreement with the
District to certify the District’s consent to the transaction and to establish the
parties’ rights in connection with the transaction.
(m) Based on the foregoing, OCTT has recommended that the Council approve the Proposed
Transaction.
Sec. 4. Consideration of recommendation.
The Council has reviewed the OCTT’s recommendation and has received and considered
comments, evidence, and information from the public and interested parties, including DCI
and AT&T.
Sec. 5. Adoption of recommendation.
Pursuant to authority granted under the Cable Ordinance and the findings contained in
section 3, the Council hereby adopts the recommendation regarding the proposed transfer of
control of DCI’s general partnership interest in DCLP to AT&T.
Sec. 6. Approval.
By adoption of the recommendation, pursuant to section 5, the Council hereby approves
the Transfer Application. The Council approves the Change of Control Agreement, allowing
the transfer of control of DCI’s general partnership interest in DCLP to AT&T, as set
forth below.
Sec. 7. Interpretation.
The Council, as the local franchising authority intends that this act constitutes a
"final decision" of the franchising authority, for purposes of section 617 of
the Communications Act of 1934, as amended, approved October 5, 1992 (106 Stat. 1489; 47
U.S.C. §537), and the "consent of the Council" required under the Cable
Ordinance.
Sec. 8 Authorization to sign.
This act authorizes the Chairman of the Council to sign, on behalf of the Council, the
Change of Control Agreement, referred to herein, and approved by this act.
Sec. 9. Fiscal impact statement.
The Council adopts the attached fiscal impact statement as the fiscal impact statement
required by section 602(c)(3) of the District of Columbia Home Rule Act, approved December
24, 1973 (87 Stat. 813; D.C. Code §1-233(c)(3)).
Sec. 10. Effective date.
This act shall take effect following approval by the Mayor (or in the event of veto by
the Mayor, action by the Council to override the veto), approval by the Financial
Responsibility and Management Assistance Authority as provided in section 203(a) of the
District of Columbia Financial Responsibility and Management Assistance Act of 1995,
approved April 17, 1995 (109 Stat. 116; D.C. Code §47-392.3(a)), a 30-day period of
Congressional review as provided in section 602(c)(1) of the District of Columbia Home
Rule Act, approved December 24, 1973 (87 Stat. 813; D.C. Code §1-233(c)(1)), and
publication in the District of Columbia Register.
EXECUTIVE SUMMARY REGARDING PROPOSED DCI/AT&T AT&T TRANSFER
Prepared by the Office of Cable Television & Telecommunications
October 29, 1999
Description of Transfer
District Cablevision Limited Partnership ("DCLP") currently provides cable
television service to District residents and has held a cable television franchise from
the District of Columbia since March, 1985. DCLP is a District of Columbia entity and
consists of one limited partner and one general partner. District Cablevision, Inc.
("DCI") is the general partner and owns and controls twenty-five percent (25%)
of DCLP. AT&T Corp. ("AT&T") is the parent corporation of TCI of D.C.,
the limited partner, which owns and controls seventy-five percent (75%) of DCLP.
Control of DCLP’s limited partner was transferred in February 1999, from
TeleCommunications, Inc. ("TCI") to AT&T pursuant to approval by the Council
of the District of Columbia ("Council"). DCI is owned by approximately one
hundred (100) individual shareholders, most of whom are residents of the District of
Columbia. TCI, and now AT&T pursuant to Council approval, has managed the day-to-day
operations of the franchisee in accordance with the terms of a management agreement.
In the proposed transaction, the existing shareholders of DCI would sell their shares
to AT&T in exchange for AT&T shares. DCLP would remain the franchisee and
AT&T, which already controls 75% of DCLP, would acquire ownership of one hundred
percent (100%) of the franchise. DCI would continue to exist as a wholly-owned subsidiary
of AT&T. Pursuant to the terms of the proposed transfer, the franchisee would continue
to abide by all of the terms and conditions of the existing Cable Franchise Agreement
("CFA") after the stock exchange occurs. Three current members of the DCI Board
of Directors would continue to serve on the AT&T appointed DCI Board to assure
continuity and compliance with the terms of the CFA.
Although effectuating little or no change to the cable system or its day-to-day
operation, this transaction is significant to DCI’s shareholders because it permits the
shareholders an opportunity to capitalize on their long-term investment in the cable
system. Nearly all of the shareholders are individuals with small interests in DCI that
they have held for many years, some since 1982 when DCI was formed to apply for the cable
franchise.
City Council’s Authority
The Council, as the local franchising authority, is charged with reviewing the proposed
transaction. Two provisions, D.C. Code Section 43-1820 and CFA Section 3.1 1.03 of the
CFA, establish the authority of the Council to grant or withhold consent to the proposed
transfer of DCI stock to AT&T. These provisions also require the transferor and the
transferee to seek consent of the District of Columbia prior to any change in control or
transfer of interest exceeding 5%. Hence, DCI and AT&T must seek and receive the
consent of the District of Columbia before the proposed transfer of control is
consummated.
The Council must review the proposed transaction and make a final decision within an
appointed time period or the transaction automatically would be deemed granted. Federal
law gives local franchising authorities one hundred-twenty (120) days to consider
completed transfer applications. Although the District maintains that the review period
will not expire until early January 2000, the District, DCI and AT&T have agreed to
complete all required actions by November 22, 1999 to accommodate the time constraints in
the agreement between DCI and AT&T.
The Office of Cable Television and Telecommunications’ Recommendation
After carefully reviewing the qualifications of the transferee, AT&T, as well as
the contents of the completed FCC Form 394 (transfer application) submitted by DCI and
AT&T, OCTT recommends that, the Council approve the proposed transfer. OCTT further
recommends that, as is customary in such transactions, AT&T and/or DCI be required to
reimburse the District of Columbia for all reasonable costs and expenses the District of
Columbia incurred for services of third parties (including attorneys and other
consultants) in connection with its consideration of the proposed transaction.