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HomeMy WebLinkAbout12/01/14 08 Meeting Location: Municipal Center City of W.Wiley 7100 147th Street West Apple Valley, Minnesota 55124 TELECOMMUNICATIONS ADVISORY COMMITTEE REGULAR MEETING AGENDA December 1, 2014 - 7:00 P.M. 1. Called Meeting to Order 2. Approved Agenda 3. Audience—No one requested to speak. 4. Approved Minutes of September 8, 2014 Regular Meeting 5. Regular_ Agenda Items: A. Reviewed 4th Quarter Complaints B. Reviewed 4th Quarter Activities Report C. Received Franchise Renewal Update D. Recommended Franchise Transfer of Ownership E. Recommended Extension of Franchise Agreement F. Viewed Council and Control Room Equipment Upgrades G. Received Annual IT Update H. Approved 2015 Meeting Schedule 6. Informational Items A. Reviewed FCC Rulemaking and Other Franchise Issues B. Reviewed E-Commerce and Business Development Issues C. No Other Staff and Committee Updates 7. Adjourned NEXT REGULARLY SCHEDULED MEETING: Monday March 2, 2015 7:00 p.m. (Regular) 08 Meeting Location: Municipal Center City of W.Wiley 7100 147th Street West Apple Valley, Minnesota 55124 TELECOMMUNICATIONS ADVISORY COMMITTEE REGULAR MEETING TENTATIVE AGENDA December 1, 2014 - 7:00 P.M. 1. Call to Order 2. Approval of Agenda 3. Audience - 10 Minutes Total Time Limit - For Items NOT on this Agenda 4. Approval of Minutes of September 8, 2014 Regular Meeting 5. Regular_ Agenda Items: A. 4th Quarter Complaints B. 4th Quarter Activities Report C. Franchise Renewal Update D. Consider Franchise Transfer of Ownership E. Consider Extension of Franchise Agreement F. Annual IT Update G. Approve 2015 Meeting Schedule 6. Informational Items A. FCC Rulemaking and Other Franchise Issues B. E-Commerce and Business Development Issues C. Other Staff and Committee Updates 7. Adjourn NEXT REGULARLY SCHEDULED MEETING: Monday March 2, 2015 7:00 p.m. (Regular) Telecommunications Advisory Committee City of Apple Valley September 8, 2014 7:00 P.M. Municipal Center Minutes 1. Call to Order Chair Westbrook called the meeting to order at 7:00 p.m. Members Present: Rollin Bible, Jerry Brown, Scott Hugstad-Vaa, Dale Rodell, David Westbrook Members Absent: John Magnusson Others Present: Charles Grawe 2. Approval of Agenda MOTION: Mr. Brown moved, second by Mr. Hugstad-Vaa,to approve the agenda as presented. Motion passed 5 —0. 3. Audience Items There were no audience items. 4A. Approval of Minutes of June 2, 2014 Regular Meeting MOTION: Mr. Bible moved, second by Mr. Brown,to approve the minutes of June 2, 2014 as presented. Motion passed 5 —0. 4B. Approval of Minutes of July 21, 2014 Special Meeting MOTION: Mr. Hugstad-Vaa moved, second by Mr. Brown,to approve the minutes of July 21, 2014 as presented. Motion passed 5 —0. 5A. 3rd Quarter Complaints Mr. Grawe reported three line burial complaints. He said he expects complaints on the need for digital decoding boxes when Charter makes its transition from analog to digital signals. The Committee members noted that customers are able to get one decoding box for free, but expressed concern that the company may not be prepared for the large number of customers with multiple television sets requiring many boxes. 5B. 3rd Quarter Activities Report Mr. Grawe reported that most of the quarter was dedicated to updating the control room equipment at the three city halls. 5C. Franchise Renewal Update Mr. Grawe reported no significant progress on the renewal of the franchise. 6A. FCC Rulemaking and Other Franchise Issues Mr. Grawe reported no new issues. 6B. E-Commerce and Business Development Issues Mr. Grawe noted that Frontier has created a prize contest for community projects. 6C. Other Staff and Committee Updates Mr. Grawe suggested having a tour of the new control room equipment at the next meeting. 7. Adjourn MOTION: Mr. Rodell moved, second by Mr. Bible,to adjourn the meeting. Motion passed 5 - 0. The meeting was adjourned at 7:48 p.m. 470 US Bank Plaza Kennedy 200 South Sixth Street Minneapolis MN 55402 Robert J.V.Vose (612)337-9275 telephone Graven (612)337-9310 fax rvose@kennedy-graven.com CHARTERED REPORT ON FCC FORM 394 REORGANIZATION TO NEW CHARTER AND RELATED TRANSACTIONS November 20, 2014 This Report is prepared for the cities of Albert Lea, Faribault, Little Falls, Owatonna, the Apple Valley, Farmington, Rosemount Cable Commission ("AV, F, R Commission"), a 3-city joint powers consortium, and the Sherburne/Wright Counties Cable Commission ("SW Commission"), a 10-city joint powers consortium, (collectively, the "LFAs"). CC VIII Operating, LLC holds a cable franchise in Albert Lea, Faribault, Little Falls and the SW Commission cities.I Charter Cable Partners, LLC (formerly Marcus Cable Partners) holds a franchise with the AV, F. R Commission cities. Both franchise-holding entities are wholly-owned subsidiaries of Charter Communications, Inc. ("Charter"). Thus, the LFA's franchises (together, "Franchise") are indirectly held by Charter. Charter requests LFA consent to reorganize by transferring ownership of Charter Communications, Inc. to a newly formed entity. This Report addresses Charter's request. This Report also addresses certain other contractual arrangements and transactions that directly result from, or are conditions precedent to, Charter's reorganization. Charter's reorganization is premised entirely on these arrangements and transactions. 1 The franchise issued by Owatonna is expired. Notwithstanding, Charter has committed to continue operations in Owatonna until the pending franchise renewal process is competed. 1 STANDARD FOR REVIEW The Franchise, Minnesota state law, and federal laws and regulations all apply to the LFA's review of Charter's FCC Form 394. Under Minnesota Statutes, Section 23 8.083, subd. 2, and corresponding language in the Franchise, the LFAs must approve or deny in writing any "transfer of stock in a corporation so as to create a new controlling interest in a cable communication system." The term "controlling interest" includes both a change in majority stock ownership and a change in actual working control, however exercised. "The approval cannot be unreasonably withheld." Minn. Stat. § 23 8.083, subd. 4. Additionally, the Cable Communication Policy Act of 1984, as amended by the 1992 Cable Act and Telecommunications Act of 1996 (collectively the "Cable Act"), establishes a national policy concerning cable television regulation. Under the Cable Act, a franchisee must receive franchising authority consent to transfer a franchise. FCC Form 394 is the appropriate form to request approval of a change in control over a cable franchise-holding entity under state and federal law. Charter filed FCC Form 394s with the LFAs or their member cities.2 The statutory directive that approval of Charter's request may not be "unreasonably withheld" is instructive. Municipal decisions enjoy a presumption of correctness and will be reversed only when they reflect an error of law or where the findings are arbitrary, capricious, or unsupported by substantial evidence. Cable Communications Bd. v. Nor-West Cable 2 The Cable Act establishes a 120-day period for local review of FCC Form 394 and such other information as may be required. A franchising authority has 30 days from filing to question the accuracy of information provided, and the franchisee has 10 days to provide "additional information reasonably requested by the franchise authority." 47 C.F.R. 76.502(b). As described herein, Charter refused to provide information reasonably requested by the LFAs and subsequently refused to agree to a mutually acceptable deadline for LFA action. As a result, the applicable 2 Communications Partnership, 356 N.W.2d 658, 668 (Minn. 1984). Where the evidence is conflicting or more than one inference may be drawn from the evidence, findings will be upheld. City of Minneapolis v. Richardson, 239 N.W.2d 197, 202 (1976). Local determinations regarding a cable transfer are entitled to significant deference and will be sustained if fairly debatable. Charter Communications v. County of Santa Cruz, 304 F.3d 927 (9th Cir. 2002). Although the only applicable legal standard is that the LFA's cannot "unreasonably withhold" approval of Charter's request, municipal review of such requests typically focuses primarily on the legal, technical, and financial qualifications of the company that will ultimately control the franchise-holder. REPORT I. INFORMATION REVIEWED The LFAs have reviewed information provided by Charter and information obtained through public sources. Such information is as follows: 1. FCC Form 394 "Application for Franchise Authority Consent to Assignment or Transfer of Control of Cable Television Franchise" dated on or about August 29, 2014, provided by Charter(the "Application"), along with several attached exhibits; 2. Comcast/Charter Transaction Agreement between Comcast Corporation and Charter Communications, Inc. dated April 25, 2014 (the "Transaction Agreement"); 3. Form 10-K for Charter Communications, Inc. filed with the Securities and Exchange Commission on February 21, 2014, for the fiscal year ended December 31, 2013; 4. Form 10-Q for Charter Communications, Inc. filed with the Securities and Exchange Commission on October 31, 2014 for the fiscal quarter and nine-month period ended September 30, 2014; 5. Form 8-K for Charter Communications, Inc. filed with the Securities and Exchange Commission on April 25, 2014; 6. Form S-1 for Midwest Cable, Inc. filed with the Securities and Exchange Commission on October 31, 2014; deadline for action is disputed. That dispute is irrelevant, however, because the LFAs intend to act prior to the deadline urged by Charter. The LFAs have reserved their rights in this regard. 3 7. The audited financial statements of Charter Communications, Inc. and Subsidiaries as of December 31, 2013 and 2012, including Consolidated Balance Sheets as of December 31, 2013 and 2012, Consolidated Statements of Operations, Cash Flows and Change in Shareholders' Equity for the years ended December 31, 2013, 2012 and 2011, and the Independent Auditors' Report of KPMG LLP dated February 20, 2014; 8. The unaudited financial statements of Charter Communications, Inc. and Subsidiaries as of September 30, 2014, including a Condensed Consolidating Balance Sheet as of September 30, 2014, and Statements of Operations, Cash Flows and Comprehensive Income (Loss) for the nine-month period ended September 30, 2014 and 2013; 9. Draft Charter Services Agreement by and between Midwest Cable, Inc. and Charter Communications Operating, LLC (received from other sources on a confidential, non- public basis with assurances that the document would be made public at some future time); 10. Letters from the LFA's counsel dated September 19, 2014 (responding to review cost reimbursement issues), September 25, 2014 (posing questions #1-7 re: financial), October 14, 2014 (posing questions #8-11 re: operational and requesting extension) and October 31, 2014; and 11. Letters from Charter representative, Mark Brown, dated October 8, 2014 (re: questions #1-7), and from Charter's outside corporate counsel, J.D. Thomas, dated September 17, 2014 (review cost reimbursement), September 30, 2014 (reimbursement), and October 24, 2014 (reimbursement, deadline and responding to questions #10 and 11, and declining responses to #8 and 9). 12. Numerous e-mails and oral communications between the LFA's counsel and local counsel for Charter. II. OVERVIEW Charter provides cable services along with other video programming, Internet services, voice services and other advertising to residential and commercial customers across the United States.3 Charter is one of the largest cable operators in the United States.4 As of December 31, 2013 Charter's cable system passed approximately 12.8 million potential customers and Charter served approximately 5.9 million residential and commercial cable customers.5 Charter holds a 3 Form 10-Q at p.25. 4 Form 10-K for Charter Communications, Inc. filed with the Securities and Exchange Commission on February 21, 2014,for the fiscal year ended December 31,2013 ("Form 10-K")at p. 1. 5 Id. 4 total of approximately 3,300 franchises.6 Charter currently operates in 29 states and employs over 21,000 employees.7 In 2009, Charter filed for bankruptcy protection under Chapter 11 of the United States Bankruptcy Code.8 A Joint Plan of Reorganization was confirmed by the Bankruptcy Court in November of 2009 and a final decree closing the case was entered into in December of 2013.9 During the bankruptcy period, Charter continued to operate and provide cable services. In April, 2014, Charter entered into the Transaction Agreement with Comcast Corporation ("Comcast"). Among other transactions, this Agreement provides for the merger of Charter into a new wholly owned indirect subsidiary of Charter.10 This new Charter subsidiary will acquire one hundred percent (100%) of the ownership interests of Charterll resulting in reorganization of the parent entity.12 The proposed transactions are structured as follows:13 1. CCH I, LLC, a Delaware limited liability company, a subsidiary of CCH I Holdings, LLC, a Delaware limited liability company, will distribute all of its interests in CCH II, LLC, a Delaware limited liability company, to CCH I Holdings, LLC. 2. CCH Holdings, LLC, wholly owned by Charter, will distribute its CCH I, LLC interests to Charter. 3. CCH I, LLC will convert to a new corporation ("New Charter") to become the surviving merger subsidiary. 4. New Charter will merge with Charter and Charter will become a wholly owned subsidiary of New Charter. Charter's organizational structure before and after these transactions is shown in Exhibits A and B attached. After these transactions, all of the Charter shareholders will become New Charter 6 Id. at pp. 9-10. Application at Exhibit 9. 8 Form 10-K at p. 1. 9 Id. to Comcast/Charter Transaction Agreement between Comcast Corporation and Charter Communications, Inc. dated April 25,2014 at p.2. 11 Application at Figure 2. 5 shareholders. The closing(s) under the Transaction Agreement is expected to occur in early 2015.14 The foregoing transactions are part of a larger group of transactions involving Comcast, Time Warner Cable Inc. ("TWC") and Midwest Cable, Inc., a newly formed Delaware corporation (which will be-named GreatLand Connections Inc. as part of the transactions) ("GreatLand").15 These transactions include: (i) Charter's purchase from Comcast of systems currently served by TWC with approximately 1.5 million video subscribers; (ii) An exchange of subscribers between Charter and Comcast/TWC; and (iii) Comcast's formation and "spin-off' of GreatLand, with Comcast contributing 2.5 million video subscribers to GreatLand and distributing GreatLand stock to Comcast's public shareholders. After spin-off, GreatLand will be a publicly traded stock.16 These transactions are subject to many conditions including federal regulatory approval, stockholder approvals, performance covenants, financing, favorable tax opinions and other requirements of the parties.17 In order to complete these transactions, it is estimated that Charter will acquire new indebtedness of approximately $8 billion.18 Charter will acquire an approximately thirty-three percent (33%) interest in GreatLand.19 The acquisition will be completed by merger of a newly created Charter subsidiary into GreatLand.20 As consideration for this merger, Charter will issue new stock to GreatLand shareholders.21 12 Id. 13 Application—Charter Communication,Inc. cover letter dated August 29,2014. 14 Comcast Corporation Press Release—August 26,2014. 15 Form 10-Q for Charter Communications, Inc. filed with the Securities and Exchange Commission on October 31, 2014 for the fiscal quarter ended September 30,2014("Form 10-Q")at p. 6. 16 Id. at p. 5. 17 Form 10-Q at p.40. 18 Form 10-Q at p. 5 19 Id. at p. 6. 20 Id. 21 Id. 6 In addition to owning 1/3 of GreatLand, Charter will enter into a Charter Services Agreement ("CSA") with GreatLand. The CSA will obligate Charter to provide certain services and perform certain operations for GreatLand systems.22 Charter will receive a services fee equal to 4.25% of GreatLand's gross revenues along with reimbursement of its out-of-pocket costs incurred in performing these services.23 The CSA has an initial three (3) year term with automatic one (1) year renewals. The CSA wil obligate Charter to provide a wide variety of operational and management services to GreatLand. Charter will handle many of GreatLand's "customer-facing" functions including customer service, billing, technician deployment, and fleet management. The CSA will also give GreatLand rights to use Charter's video programming packages, communications offerings and product trade names and let GreatLand utilize Charter's purchasing power to obtain programming. Charter's obligations to GreatLand will be particularly significant in markets where the companies have systems that are "contiguous." III. DISCUSSION Charter's Form 394 fails to address significant issues or questions raised by the reorganization and associated transactions and agreements, including the CSA. The LFA's posed 11 narrowly focused questions in order to shed light on these issues. With few exceptions, however, Charter declined to provide meaningful additional information. Regarding our requests for additional financial information, Charter responded that "very little, if any, of the information [we requested is] relevant to or necessary for" the LFA's review. The LFAs informed Charter that, contrary to its response, the information requested is relevant 22 Draft Charter Services Agreement by and between Midwest Cable, Inc. and Charter Communications Operating, LLC. The CSA has been provided as a confidential,non-public document via parties other than Charter. We do not include citations to or quotes from the CSA. Relevant conclusions about the draft CSA are summarized. 23 Id. 24 Id. 7 and reasonably necessary to understand the likely financial impact of the reorganization and associated transactions on the LFAs and their constituents/subscribers. No supplementary responses or information was provided. Regarding operational issues, the LFAs repeatedly emphasized that Charter's proposed corporate reorganization and creation of "New Charter" is solely the result of the proposed merger of Comcast and Time Warner. Questions about Charter's resulting new business relationships--- particularly Charter's intertwined, partial-ownership relationship with GreatLand and its 500,000+ subscribers in Minnesota--- is relevant. The Form 394 provides very little information about these matters. IV. FINANCIAL FINDINGS The cable business is inherently capital intensive, requiring capital for the construction and maintenance of expensive communications facilities and systems. The financial performance of cable television operators, like Charter, are subject to many factors, including general business conditions, competing satellite services, technology advancements, employee issues, and customer preferences, as well as competition from new sources that provide programming, information, news, entertainment and other telecommunication services.25 We requested information on Charter capital expenditures budget, but Charter declined to provide that information.26 Charter's substantive responses to our requests are, in sum, that the reorganization and associated transactions will not result any operational changes, nor interfere with Charter's ability to comply with the Franchise, nor cause adverse impact on local cable service or operations. These are, of course, simply self-serving conclusions providing no support, nor shedding any light on the financial issues raised. We have been provided no 25 Form 10-K at pp 16-27. 26Correspondence to author from Mark E. Brown, Vice President, State Government Affairs, Charter Communication,Inc. dated October 6,2014. 8 information demonstrating that the contemplated transactions will not have a significant financial impact on Charter's ability to perform under the Franchise. Having only recently emerged from bankruptcy, Charter's reorganization and associated transactions will result in an even more highly leveraged company which may reduce its ability to withstand the business pressures described above. Applicable law does not establish criteria for evaluation of financial qualifications of a cable franchisee or parent of such franchisee. The FCC Form 394 itself suggests that, at an absolute minimum, Charter must demonstrate that it has "sufficient net liquid assets on hand or available from committed resources" to consummate the transaction and operate the System, together with its existing operations, for three (3) months. This minimum standard is not easy to apply to the Charter's complex organizational structure and its proposed new relationship including with GreatLand under the CSA. We analyzed Charter's historical financial statements and publicly filed information along with its CSA with GreatLand.27 Charter declined to provide projected statements of cash flow and income and a balance sheet for its future operations and further stated that "projected pro forma statements of cash flows and income for 2014 and 2015 have not been created and it is not possible to make them available at this time."28 As such, findings must be based on Charter's historical information. Historical operations, however, do not account for the additional debt, and likely additional revenue and expenses, resulting from the transactions under the Transaction Agreement and CSA. The information provided shows that Charter has sustained losses over the last few years, is highly leveraged, and will become more highly leveraged. A summary of the metrics used to reach this conclusion is attached in Exhibit A. 27 We consulted with an outside expert to assist with our analysis. 9 Notwithstanding, based solely on Charter's financial information provided, Charter apparently has sufficient debt commitments to consummate the Transaction Agreement and operate in the near term. Based solely on that, we do not believe Charter's request can reasonably be denied based solely on a lack of financial qualifications if the financing is obtained (failure to obtain such debt would almost certainly terminate the proposed transactions). However, in order to ensure compliance with its obligations to operate the System and since we have based a significant part of our analysis on the Financial Statements of Charter, the parent entity; we recommend that the City confirm existence of any performance bonds or other security required under the Franchise. V. OPERATIONAL FINDINGS Charter will become the second largest cable provider, providing cable services to approximately 7.5 million residential and commercial customers.29 Charter is technically qualified to operate cable systems. In addition, Charter's franchise-holding subsidiaries are registered to do business in Minnesota and otherwise legally qualified. The FCC Form 394, however, also requires certification by "New Charter" that it will "use best efforts"to comply with the Franchise and all applicable laws and regulations, and "cure any violations thereof or defaults presently in effect or ongoing." Taken together, these certifications require a promise and showing that the transactions at issue will not result in operational changes that impact performance under the Franchise and applicable law. Charter's proposed reorganization and associated transactions leave concerns about future operations unanswered. 28 Id. 29 Form 8-K for Charter Communications, Inc. filed with the Securities and Exchange Commission on April 25, 2014 at p.1. 10 First, we understand that contemporaneous with consideration of this Report, some LFAs may consider issuance of violation notices related to Charter's current operations. Any such notice is incorporated herein by reference. Refusal to approve, or conditioning approval, due to non-compliance with the Franchise would be reasonable under Minnesota law and entirely consistent with the Form 394 itself. Further, under the CSA, Charter will newly operate and manage, or assist in the operation and management of, GreatLand systems serving 2.5 million residential and commercial customers.30 We requested that Charter provide a copy of the final CSA 31, and a narrative or description of its expected relationship to GreatLand in Minnesota, particularly with respect to GreatLand and Charter systems that are "contiguous" or close. We also asked Charter to explain how its operations in Minnesota will change; particularly any changes in customer service operations in Minnesota. Finally, we asked for Charter's plans to increase its current 1300 employees in Minnesota as will plainly be necessary to take on Charter's new obligations to GreatLand. Charter responded that these inquires were irrelevant, and have "no bearing whatsoever on [the LFAs] review of the basic qualifications of Charter following the Internal Restructuring." Notwithstanding, counsel for the LFAs obtained additional details concerning the Charter/GreatLand arrangement from Comcast in relation to a separate cable franchise transfer review process. It is unclear, of course, whether Comcast has complete information about the expected Charter/GreatLand relationship. These will all be separate, publicly-traded companies that are subject to significant restrictions on the sharing and disclosure of operational or management information that may impact stock prices. 30 Form 10-Q at p. 6. 31 At the time Charter's Form 394 was filed, the CSA had not been drafted. As of the date of this report, no executed CSA has been received by counsel for the LFAs. 11 Moreover, consultants retained by municipalities other than the LFAs received a draft of the CSA from Comcast in order to review Comcast's transactions. The LFA's counsel has obtained a copy of the draft CSA from those consultants subject to a confidentiality/non- disclosure agreement. Therefore, our ability to disclose details of the CSA are constrained. It is also unclear whether a final CSA has been executed and, if so, how its terms compare to the confidential draft. We sought and would have preferred information about these matters from Charter, but Charter continues to maintain that our operational questions are irrelevant. Charter will not supply any information, evidence or support for its assertion that the GreatLand relationship will not impact operations in the LFAs. The information that the LFAs have been able to obtain, however, confirms the contrary. Charter will be providing a wide variety of labor-intensive, "customer-facing" services to GreatLand.32 Charter's obligations to GreatLand will be further intensified in where the companies have nearby systems. Charter's performance of obligations to GreatLand will directly impact (either positively or negatively) Charter's operations in Minnesota, and require significant changes in those operations. The resulting impact on Charter's ability to comply with the Franchise and other regulatory obligations is uncertain. Charter's self-serving, conclusory statement that these issues are irrelevant and will have no impact on Charter's operations is unsupported by evidence and not credible. Should the LFAs decide to approve Charter's request, we recommend requiring a signed certification by "New Charter" consistent with the requirements of Form 394 described above. CONCLUSION 32 Charter will provide: customer service; marketing, sales, billing, plant maintenance, tech dispatch and tracking, fleet management,reporting,training,and multiple additional basic operations for GreatLand. In effect, Charter will operate and provide local management of those systems. 12 Adoption of the resolution attached as Exhibit D conditionally approving the reorganization and related transactions would be appropriate. The conditions imposed confirm: the LFA's right/obligation to consent to any future significant changes in control over the local cable franchise; that the franchisee remains fully subject to the franchise and applicable laws, and; that Charter remains subject to all liabilities or obligations regardless of when such liabilities or obligations arose. All rights are reserved. Additionally, the conditions would require Charter to reimburse legal fees and expenses associated with this review, and provide a certification (guarantee) by "New Charter" consistent with the language of Form 394. 13 EXHIBIT A Charter Communications, Inc. Organizational Structure (immediately prior to reorganization) Existing Charter Communications, Inc. Public Shareholders Charter Communications, Inc. CCH I Holdings, LLC CCH I LLC (Merger Sub I/New Charter) CCH II LLC Charter Communications Operating, LLC 100% Indirect CC VIII Operating, LLC and Charter Cable Partners, LLC (Franchise Holder) 14 EXHIBIT B Charter Communications, Inc. Organizational Structure (immediately after reorganization) Existing Charter Communications, Inc. Public Shareholders "'New Charter", Inc. f/k/a CCH I. LLC Charter Communications, Inc. CCH I Holdings, LLC CCH II LLC Charter Communications Operating, LLC 100% Indirect CC VIII Operating, LLC and Charter Cable Partners, LLC (Franchise Holder) 15 EXHIBIT C Summary of Financial Data Charter's operations include both cable television video services (which represent approximately 49% of its operations as of September 30, 2014) and other non-cable television video services (which represent approximately 51% of its operations as of September 30, 2014). The following information includes all of the Charter operations, including the non-cable television video services. These metrics are based on Charter's Financial Statements as of December 31, 2013, December 31, 2012 and September 3 0, 2014: Assets. Charter had (i) current assets of $370 million, $322 million, and $330 million; (ii) working capital of a negative $1,216 million, a negative $1,145 million, and a negative $894 million; and (iii) total assets of $20,950 million, $17,295 million, and $15,596 million as of September 30, 2014, and December 31, 2013 and 2012, respectively. Working capital, which is the excess of current assets over current liabilities, is a short-term analytical tool used to assess the ability of a particular entity to meet its current financial obligations in the ordinary course of business. The trend shows an increase in the negative working capital from December 31, 2012 to September 30, 2014 and suggests that Charter's cash flow may be unable to meet is current obligations. Charter's current ratio (current assets divided by current liabilities) as of September 30, 2014, of 0.23:1 is well below a generally recognized standard of 1:1 for a sustainable business operation. Charter's Total Assets have continued to grow, however, the asset growth in 2014 relates to approximately $3.5 billion of financing acquired in anticipation of the transactions discussed in this Report. Liabilities and Net Equity. Charter had (i) current liabilities of $1,586 million, $1,467 million and $1,224 million; (ii) long-term debt of$17,595 million, $14,181 million and $12,808 million; and (iii) shareholders' net equity of$97 million, $151 million and $149 million as of September 30, 2014, December 31, 2013 and 2012, respectively. As part of the Transaction Agreement, Charter will borrow an additional approximately $8 billion of debt which will increase its long-term debt. Charter has received debt commitments from a number of banks that will be used for the transactions and represents almost $9 billion of debt commitments. This additional debt will require Charter to generate additional cash flow, including through the acquired Comcast operations and its service arrangement with GreatLand, to fund its debt service. The interest rates on the Charter debt ranged from 5.125% to approximately 8.125% and the debts mature in varying amounts over the next 10 years including $1 billion in 2017 and $1.4 billion in 2019. As of September 30, 2014, Charter had $774 million of available credit on its credit facilities. This available credit along with the committed debt (which if not received 16 would likely terminate the above described transactions) appears to be sufficient to allow Charter to fund its operations and acquisitions in the near term. Income and Expense. Charter had (i) revenue of $6,748 million, $8,155 million, and $7,504 million; (ii) operating expenses of $6,054 million, $7,230 million and $6,588 million; and (iii) operating income of $694 million, $925 million, and $916 million for the nine-month period ending September 30, 2014, and the years ending December 31, 2013 and 2012, respectively. Charter's operating income has remained relatively steady from 2012 through the third quarter of 2014. For the nine-month period ending on September 30, 2014, Charter generated cash flow from operations of $1,729 million. However, Charter has experienced a net loss in each period due to the large amount of interest expense and other deductions, including a current year loss through September 30, 2014 of$135 million. The ability to generate cash is important for Charter due to its highly leveraged operations. Charter's growth mode and goals to increase customers and revenue require that Charter continue to expand with leverage as is the case with the Transaction Agreement. As a result of the transactions and changes in its business and business structure, Charter will incur significant non-recurring expenses which may negatively affect Charter's short-term income statement performance. In addition, as a result of the transactions, Charter may be required to incur significant capital expenditures for the assimilation of the new systems and services into Charter's existing network. 17 EXHIBIT D RESOLUTION NO. CONSENT TO CHANGE OF CONTROL WHEREAS, Charter Communications, Inc. ("Charter") is the ultimate parent of the holder of a cable communications franchise (the "Franchise") authorizing operation and maintenance of a cable communications system and the provision of cable service in the City of Minnesota (the "City"), all under the terms and conditions of the Franchise and applicable law; and WHEREAS, on February 12, 2014, Comcast Corporation ("Comcast") and Time Warner Cable Inc. ("TWC") entered an agreement to merge; and WHEREAS, on April 25, 2014, Charter and Comcast entered into the Comcast/Charter Transactions Agreement, contingent on the Comcast/TWC merger, requiring Charter to restructure and establish "New Charter;" and WHEREAS, New Charter will be formed by completion of a multi-step corporate restructuring resulting in Charter shareholders receiving New Charter shares ("Corporate Restructuring"); and WHEREAS, as a result of the Corporate Restructuring, New Charter will become the ultimate parent of the franchise-holding entity; and WHEREAS, pursuant to the Comcast/Charter Transactions Agreement, Comcast will divest certain systems to a newly formed company, Midwest Cable (to be renamed GreatLand Connections)("GreatLand"), in which Charter will be a 33% owner; and WHEREAS, Comcast's divestiture will include its systems serving 550,000 subscribers in Minnesota, primarily in the Twin Cities metro area; and WHREAS, the Comcast/Charter Transactions Agreement provides for establishment of a Services Agreement between New Charter and GreatLand ("SA") pursuant to which New Charter will assist in operation and management of GreatLand's systems including those in Minnesota; and WHEREAS, under the terms of the Franchise, and pursuant to Minnesota Statutes, Section 23 8.083, subds. 1 and 2, the Corporate Restructuring constitutes a "fundamental corporate change" which, by law, "requires the written approval of the franchising authority." WHEREAS, Minnesota Statutes, Section 23 8.083, subd.4, provides: "[t]he franchising authority shall approve or deny in writing the [request]. The approval must not be unreasonably withheld." 18 WHEREAS, on or about August 29, 2014, Charter filed an FCC Form 394 with the City seeking approval of the Corporate Restructuring; and WHEREAS, the City's cable counsel reviewed the FCC Form 394, requested additional information concerning the Corporate Restructuring, and communicated with Charter representatives several times about these issues; and WHEREAS, the City has received a report from its cable counsel dated November 20, 2014 ("Report"), which is incorporated herein by reference; and WHEREAS, as described in the Report, New Charter's operations in Minnesota will be impacted as a result of the Corporate Restructuring relative to current operations; and WHEREAS, the existence of any prior or current Franchise violations, including any violation notices considered and approved contemporaneous herewith, are incorporated herein by reference. NOW, THEREFORE, BE IT RESOLVED BY THE CITY AS FOLLOWS: 1. The foregoing recitals are incorporated herein by reference. The City conditionally consents to the Corporate Restructuring. 2. Within thirty (30) days of receipt of a copy of this Resolution, Charter or Franchisee shall provide copies of the bond(s), letter of credit, and certificate of insurance required by the Franchise, or other evidence compliance with the associated Franchise requirements. 3. New Charter shall notify the City in writing within ten (10) days of completion of the Corporate Restructuring. Such notice shall include the certification provided in FCC Form 394, Section V. Part II(c), stating that New Charter: Will use its best efforts to comply with the terms of the franchise and applicable state laws or local ordinances and related regulations, and to effect changes, as promptly as practicable, in the operation of the system, if any changes are necessary to cure any violations thereof or defaults thereunder presently in effect or ongoing. Such certification shall be provided by, and executed on behalf of, New Charter. 4. Charter,New Charter or the Franchisee shall reimburse the City's legal fees and other costs incurred in review of the FCC Form 394 within thirty (30) days of receipt of an invoice detailing such fees and costs. 5. The City makes no findings or representations regarding the continuing validity and enforceability of the Franchise, nor any Franchise compliance matters. The City expressly reserves and does not waive authority to enforce the Franchise with respect to any Franchise violations or compliance matters whether arising before or after the date of this Resolution, and whether known or unknown as of the date hereof. 19 6. This Resolution shall be effective upon adoption. Any violation of this Resolution shall render the City's consent to the Corporate Restructuring null and void. The City shall endeavor to provide written notice of any violation of this Resolution to the Franchisee. PASSED, ADOPTED AND APPROVED this day of , 2014. By: Name: Title: ATTEST: Clerk 20