An ordinance granting to Time Warner Entertainment company L.P., a franchise for the purpose of constructing, maintaining, operating and using a cable system in public streets, alleys, and rights-of-way in the city of austin to provide cable service;

• Providing for the conditions governing the construction, expansion, use, reconstruction, excavation, maintenance and operation of such;
  
• Providing for a bond and insurance;
  
• Providing for the regulation of work by others, construction by abutting owners and requiring alteration to conform with public improvements;
  
• Providing for the provision of public, educational and governmental access channels and an institutional network;
  
• Providing for the compensation for the privileges conferred under this franchise;
  
• Providing for accounting and other information;
  
• Providing for conditions of transfer;
  
• Providing an indemnity clause;
  
• Providing for a local office;
  
• Providing for consequences of franchise violations;
  
• Providing for compliance with existing laws;
  
• Providing for written acceptance of the terms of this franchise; and providing for an effective date.

WHEREAS, as a condition of receiving this franchise, Grantee has agreed to abide by the City's current and future policies, ordinances and regulations regarding infrastructure usage, and street-cuts and rights-of-way; and

WHEREAS, the City desires to ensure that the quality and level of services offered to its citizens by Grantee are consistent with the then current industry standards for Cable Systems prior to granting the six (6) year extension provided for hereunder; and

WHEREAS, the City desires to promote the economic development of its local music industry and intends to develop a channel devoted to Austin music; NOW THEREFORE,

BE IT ORDAINED BY THE CITY COUNCIL OF THE CITY OF AUSTIN:

SECTION 1. DEFINITIONS

For the purpose of this Franchise the following terms, phrases, words and their derivations shall have the meaning given herein. When not inconsistent with the context, words used in the present tense include the future, words in the plural number include the singular number and words in the singular number include the plural number. The words "'shall" and "will" are mandatory and "may" is permissive. Words not defined herein shall be given the meaning set forth in the Communications Act of 1934 as amended by the Cable Communications Policy Act of 1984, the Cable Television Consumer Protection and Competition Act of 1992, and the Telecommunications Act of 1996, if not defined there, shall be given their common and ordinary meaning

1.1. "Affiliate" means each Person who falls into one or more of the following categories: (i) each Person having, directly or indirectly, a Controlling Interest in the Grantee; (ii) each Person in which the Grantee has, directly or indirectly, a Controlling Interest; (iii) each officer, director, general partner, limited partner holding an interest of five percent (5%) or more, joint venturer or joint venture partner, of the Grantee; and (iv) each Person, directly or indirectly, controlling, controlled by, or under common Control with, the Grantee; provided that "Affiliate" shall in no event mean any limited partner holding an interest of less than five percent (5%) of the Grantee, or any creditor of the Grantee solely by virtue of its status as a creditor and which is not otherwise an Affiliate by reason of owning a Controlling Interest in, being owned by, or being under common ownership, common management, or common Control with, the Grantee.

1.2. "Allocation Percentage" means the number of Franchise Area Subscribers divided by the number of total System Subscribers.

1.3. "Cable Service" means (A) the one-way transmission to subscribers of video programming or information that Grantee makes available to all subscribers generally, and (B) subscriber interaction, if any, which is required for the selection or use of such video programming or information.

1.4. "Cable System" means a facility, consisting of a set of closed transmission paths and associated signal generation, reception, and control equipment that is designed to provide cable service which includes video programming and which is provided to multiple subscribers within a community, but such term does not include (A) a facility that serves only to retransmit the television signals of one (1) or more television broadcast stations; (B) a facility that serves Subscribers without using any Public Rights-of-Way (C) a facility of a common carrier which is subject, in whole or in part, to the provisions of Title II of the Communications Act of 1934, except that such facility shall be considered a Cable System to the extent such facility is used in the transmission of video programming directly to subscribers.

1.5. "Channel" means a portion of the electromagnetic frequency spectrum which is capable of delivering both the audio and video portions of a television signal, At the time of enactment of this Franchise, such capability generally requires a 6 MHz capacity, but this is subject to changes in technology.

1.6. "City" means the City of Austin, a home-rule municipality incorporated under the laws of Texas.

1.7. "City Council" means the elected governing body of the City of Austin, Texas.

1.8. "City Requirements" means all laws, rules, regulations, policies and directives of general application of the City of Austin, in effect at present or to be adopted in the future by the City Council.

1.9. "Converter" means an electronic device which converts cable channel frequencies which are not normally receivable by some television sets to an appropriate channel which permits a Subscriber to view signals included in the service being delivered, according to a designated tuning or channel selector dial.

1.10. "Control" or "Controlling Interest" means actual working control in whatever manner exercised.

1.11. "Days" means calendar days unless otherwise specified.

1.12. "Director" means the Director of Financial and Administrative Services Department of the City, or any successor, or his or her designee.

1.13. "Direct Cost" means all expenses associated with a specific activity or function, excluding overhead.

1.14. "FCC" refers to the Federal Communications Commission.

1.15. "Franchise" means this contract between the City and Grantee.

1.16. "Franchise Area" means all of the geographic area within which the City of Austin owns or controls the Public Rights-of-Way, at present or in the future, located within the full-purpose annexed areas of the City of Austin.

1.17. "Grantee" means Time Warner Entertainment Company, L.P., a Delaware limited partnership authorized to do business in the State of Texas and doing business as Austin CableVision, or any successor.

1.18. "Gross Revenue" means any and all consideration of any kind or nature, including without limitation, cash, credits, property and in-kind contributions (services or goods) received by Grantee or Affiliates which is derived from (or by way of clarification and not expansion, attributable to or arising from) the operation of Grantee's Cable System, provision of Information Services, and any lease or license of Grantee's Transmission Network. It is the intent of the parties to include in the term Gross Revenue all consideration to Grantee and Affiliates to the fullest extent allowed by law. For purposes of this definition, the term "Affiliate" is limited to an entity acting as a provider of a service authorized by this Franchise.

Gross Revenue includes by way of illustration and not limitation, all fees charged Subscribers for any and all services provided by Grantee over the Cable System, provision of Information Services, and any lease or license of Grantee's Transmission Network, and all compensation received by Grantee or Affiliates from any source which is derived from the operation of the Cable System, such as compensation for billing services provided to third parties using the billing functions of the Cable System, sales or commissions for any product or services derived from the operation of the Cable System, sales or commissions which are paid to Grantee as compensation for promotion or exhibition of any products or services on the Cable System, and sales or commissions derived from the sale or rental of Cable System's Subscriber list.

Gross Revenue does not include any revenue not actually received, even if billed (e.g., bad debt).

Gross Revenue includes an allocated portion of all revenue derived by Grantee or Affiliates pursuant to regional or national compensation arrangements for any service or activity derived from the operation of a Cable System in the Franchise Area, e.g. advertising and sale or rental of Subscriber lists. The allocation shall be based on the number of subscribers in the Franchise Area divided by the total number of subscribers relevant to such regional or national arrangements.

Revenue of an Affiliate derived from the operation of the Cable System, provision of Information Services, and any lease or license of Grantee's Transmission Network shall be Gross Revenue to the extent the treatment of such revenue as revenue of Affiliate and not Grantee has the effect of avoiding the payment of franchise fees which would otherwise be paid to the City. In no event shall revenue of an Affiliate be Gross Revenue to the Grantee if such revenue is otherwise subject to franchise fees to be paid to the City.

1.19. "Information Service" means, to the extent not a Cable Service, the offering of a capability for generating, acquiring, storing, transforming, processing, retrieving, utilizing, or making available information via telecommunications, and includes electronic publishing, but does not include any use of any such capability for the management, control, or operation of a telecommunications system or the management of a telecommunications service.

1.20. "Institutional Network" means a communication network, which is described in Section 7, constructed and operated by Grantee and used for non-commercial purposes by entities designated by the City, under the terms of agreements entered into with the City.

1.21. "Normal Operating Conditions" is defined as being those service conditions which are within the control of the Grantee. Those conditions which are ordinarily within the control of the Grantee include, but are not limited to, special promotions, pay-per-view events, rate increase, regular peak or seasonal demand periods, and maintenance or upgrade of the System, except for unscheduled and/or emergency equipment replacement, testing required by the FCC or this Franchise and cutovers performed in connection with the Rebuild. Those conditions which are not within the control of the Grantee include, but are not limited to, natural disasters, civil disturbances, power outages, telephone network outages, programmer originated interruption, and severe weather. The definition of Normal Operating Conditions is relevant in assessing compliance with telephone answering time, installations, service calls, and repair of Service Interruptions.

1.22. "Office of Cable & Regulatory Affairs" means the division of the Financial Services Department , its designee, or any successor thereto, that is responsible for administration and enforcement of this franchise.

1.23. "Person" means any corporation, partnership, proprietorship, individual or organization or any natural person, excluding any governmental entity.

1.24. "Public, Educational, Governmental Access Channel," "Access Channel", or "PEG Access Channel" means the Channel(s) on the Cable System which are reserved for non-commercial public, educational and governmental uses, in accordance with applicable law and with the rules and procedures established by the City.

1.25. "Public Rights-of-Way" means the surface, the air space above the surface, and the area below the surface of any public street, highway, lane, path, alley, sidewalk, boulevard, drive, bridge, tunnel, easement or similar property in which the City holds any property interest or exercises any rights of management or control and which, consistent with the purposes for which it was acquired or dedicated, may be used for the installation and maintenance of a Cable System and/or Transmission Network. No reference in this Franchise to a "Public Right-of-Way" shall be deemed to be a representation or guarantee by the City that its interests or other rights in such property are sufficient to permit its use for the installation and maintenance of a Cable System and/or Transmission Network, and the Grantee shall be deemed to gain only those rights which the City has the right and power to give.

1.26. "Rebuild" means the upgrade process by which Grantee brings its Cable System into compliance with the standards set forth in Section 9 and Exhibit C hereof.

1.27. "Residential Dwelling Unit" means each home, house, building, or other structure that normally accommodates the living quarters of one (1) family, and each apartment, condominium, or co-operative unit that normally accommodates the living quarters of one (1) family in any multiple-unit building or complex of multiple-unit buildings; provided, however, that if the Grantee has not been granted the authority by an owner or association of owners to extend its facilities to individual apartments, condominiums, and co-operative units within the interior of such multiple-unit buildings or complex of multiple-unit buildings, then any such multiple-unit building or complex of multiple-unit buildings shall be considered a single Residential Dwelling Unit.

1.28. "Service Interruption" or "Outage" is defined as being a Cable System malfunction resulting in the loss of picture or sound on one or more channels affecting more than one Subscriber. The definition of Service Interruption or Outage affects the timing of when the Grantee must respond to a Service problem.

1.29. "Standard Drop" means the cable up to a maximum length of one hundred twenty-five (125) feet that connects the antenna terminal on a Subscriber's radio or television set, computer terminal, or other terminal, to the nearest feeder cable of the Cable System.

1.30. "Standards" refers to Consumer Service Standards described in Exhibit A.

1.31. "Subscriber" means any person within the City who receives any Cable Service or Information Service delivered by the Cable System.

1.32. "Transmission Network" means the set of transmission paths, property, facilities and associated transmission, reception, control and switching equipment within the Public Rights-of-Way and used to provide services authorized by this Franchise.

SECTION 2. GRANT OF FRANCHISE

2.1. There is hereby granted, subject to Grantee's acceptance of the terms of this Franchise as provided herein and the City's prompt receipt of monetary compensation, to Time Warner Entertainment Company, L.P., hereinafter called "Grantee," for a term as described below, unless otherwise terminated as provided for herein, the non-exclusive right and privilege to have, acquire, construct, expand, reconstruct, maintain, use and operate in, along, across, on, over, through, above and under the Public Rights-of-way of the City, a Cable System and Transmission Network to provide Cable Service and Information Services; in addition, Grantee is authorized to lease capacity on its Cable System and its Transmission Network to other service providers, including Affiliates.

2.2. The term of this franchise shall commence on August 12, 1996 and shall extend for a period of nine years until August 12, 2005. Grantee may request an extension of the term of this franchise for an additional six years until August 12, 2011 provided that Grantee shall have complied with the conditions set forth in this Section and shall have notified the City of the request for the extension on or before December 12, 2002, as set forth below. The City may deny the extension of the term if Grantee has failed to comply with the conditions set forth in this Section. The City shall notify Grantee of its denial and the basis therefore on or before June 12, 2003.

Grantee shall have a right to obtain such extension only if Grantee is 1) in substantial compliance with the material terms and conditions of this franchise, including without limitation Sections 14 and 18; 2) Grantee provides written notice to the City by December 12, 2002 that it seeks the six (6) year extension (and agrees not to give formal renewal notice under 47 U.S.C. 546(a), before such time); and 3) Grantee's performance is consistent with current overall industry technical practices and range and level of services, existing and planned in the 100 largest U.S. cable systems that have been renewed or entered into since December 12, 1997 ("Survey"), taking due consideration of the then current practices and trends in the industry and Grantee has the ability and agrees to perform consistently with the industry practice in the six year extension period by implementing improvements that have been demonstrated to be commercially feasible in the Survey. An expert or experts in the area of cable television shall be designated by the City Manager to conduct the Survey and to assess, in full consultation with Grantee, and advise the City whether Grantee meets these requirements of item number 3.

Notwithstanding the above designation by the City Manager, at Grantee's request, a panel of experts in the cable industry shall recommend to the City whether Grantee complies with item number 3. The designation of such experts shall be agreed upon by both Grantee and the City Manager promptly upon Grantee's request for an extension; if they are unable to do so, each party shall designate an expert within one (1) month after Grantee's request and the two experts so designated shall designate a third, all of whom shall have the qualifications above stated. The reasonable costs of such experts shall be borne equally by the Grantee and the City. No one serving as an expert as designated in the immediately preceding paragraph shall be an agent or employee of Austin CableVision, or an affiliate of Austin CableVision or have been employed within the last year by a municipal franchise authority or a multiple systems operator or a telecommunication provider or the City of Austin.

In the event an improvement identified in the Survey is requested by the City, then the Grantee shall agree to make the improvement in order to obtain the extension. However, upon request Grantee shall be afforded the opportunity to demonstrate to the City that the improvements requested by the City as a condition for the extension are not commercially feasible (i.e. provides a reasonable expectation for a reasonable return on Grantee's investment to make the improvements in the remainder of the original term, and the six year extension.)

In the event that an improvement identified in the Survey is requested by the City and is not commercially feasible, then the Grantee may obtain the extension without providing the improvement.

The City of Austin may waive the requirement of expert assistance and stipulate that Grantee has met the conditions.

2.3. Grantee shall not allow the use of its Cable System nor Transmission Network by any service provider (including cable television), unless the service provider warrants that it has obtained all the authorizations required by the City in order to provide such service. Grantee or Affiliates shall not install or construct facilities within Public Rights-of-Way to be used for services which are not authorized by this Franchise, or by applicable law or by another franchise.

2.4 Nothing in this Franchise shall authorize Grantee to attach any part of its Cable System to the City Electric Utility infrastructure or to use any City-owned conduits or facilities until Grantee has entered into a separate agreement with the City, supported by independent consideration, for such rights of attachment or use.

2.5. Any other franchise granted by the City which allows the provision of Cable Service , Information Service, and capacity leases shall be on a competitively neutral basis, taking into account without limitation Grantee's obligations with respect to PEG Access and the Institutional Network. To the extent within the City's control, this provision shall apply to all other similarly situated multichannel video providers, including without limitation, open video system providers.

SECTION 3. SERVICE AVAILABILITY

3.1 Throughout the term of this Franchise, the Grantee covenants and agrees to construct, operate, maintain and upgrade the Cable System so as to make all Cable and Information Services distributed over the Cable System and/or Transmission Network available to any person within the Franchise Area in accordance with the terms, schedule, sequence and procedures established in this Franchise, except for any such service which is provided on a test basis and provided, however, that a new Cable Service or Information Service may be introduced on a phased basis in different areas of the City over a period no longer than two years, except as may be dependent on the Rebuild. In Services authorized by this Franchise on the Transmission Network , neither the Grantee nor any Affiliate shall unreasonably discriminate, nor permit unreasonable discrimination between or among any Persons, in the availability of Cable Services or Information Services or in the rates, terms and conditions thereof. Further, the Grantee and each Affiliated Person shall ensure that access to any Cable Service or Information Service is not denied to any group of potential Subscribers because of the income of the residents of the area in which such group resides or geographic location (subject to Section 3.2). It shall be the right of all Subscribers to receive continuously all available Cable Services and Information Services insofar as their financial and other obligations to the Grantee are honored. The Grantee shall continuously monitor the implementation of the commitments set forth in this Section.

3.2 Line Extension Policy. Grantee shall extend its cable system in the Franchise Area pursuant to the following requirements:

3.2.1 Grantee shall extend its cable system and make cable service available to every existing residential area within the Franchise Area whenever density of at least thirty (30) Residential Dwelling Units per cable mile (or any proportionate amount thereof measured over a shorter or longer distance) is realized, as measured from the existing facilities of Grantee's cable system in the Franchise Area. For purposes of this section, density per cable mile shall be computed by dividing the number of Residential Dwelling Units in the area by the length, in miles or fractions thereof, of the total amount of aerial or underground cable necessary to make service available to the Residential Dwelling Units in such area in accordance with Grantee's system design parameters. The cable length shall be measured from the nearest point of access to the then-existing system, provided that extension is technically feasible from that point of access, and located within the Public Rights-of-Way. The total cable length shall exclude the drop cable necessary to serve individual Subscriber premises.

3.2.2 Grantee shall extend its cable system necessary for the provision of cable service and make cable service available to any business in the Franchise Area when the business subscriber agrees to pay for the labor costs incurred and materials used in making the extension.