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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
[x] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the Fiscal Year Ended December 31, 1999
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
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Commission File Number 0-14508
ENSTAR INCOME PROGRAM II-1, L.P.
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(Exact name of Registrant as specified in its charter)
Georgia 58-1628877
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
12444 Powerscourt Dr., Suite 100
St. Louis, Missouri 63131
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (314) 965-0555
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Securities registered pursuant to Section 12 (b) of the Act: None
Securities registered pursuant to Section 12 (g) of the Act
Name of each exchange
Title of each Class on which registered
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Units of Limited Partnership Interest None
Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
Registrant was required to file such reports) and (2) has been subject to such
filing requirements for the past 90 days.
Yes X No
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Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein, and will not be contained,
to the best of Registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. [X]
State the aggregate market value of the voting equity securities held
by non-affiliates of the registrant - all of the registrant's 29,936 units of
limited partnership interests, its only class of equity securities, are held by
non-affiliates. There is no public trading market for the units, and transfers
of units are subject to certain restrictions; accordingly, the registrant is
unable to state the market value of the units held by non-affiliates.
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The Exhibit Index is located at Page E-1.
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PART I
Item 1. BUSINESS
Introduction
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Enstar Income Program II-1, L.P., a Georgia limited
partnership, is engaged in the ownership and operation of cable television
systems in small to medium-sized communities. The partnership was formed on July
3, 1984. The general partners of the partnership are Enstar Communications
Corporation, a Georgia corporation (the "corporate general partner") and Robert
T. Graff, Jr. (the "individual general partner"). On November 12, 1999, Charter
Communications Holdings Company, LLC, an entity controlled by Charter
Communications, Inc., acquired both the corporate general partner, as well as
Falcon Communications, L.P., the entity that provided management and certain
other services to the partnership. Charter is the nation's fourth largest cable
operator, serving 6.2 million customers and files periodic reports with the
Securities and Exchange Commission. Charter and its affiliates (principally CC
VII Holdings, LLC, the successor-by-merger to Falcon Communications, L.P.) now
provide management and other services to the partnership. See Item 13., "Certain
Relationships and Related Transactions." See "Employees" below. In this annual
report, the terms "we" and "our" refer to the partnership.
In accordance with the partnership agreement, the corporate
general partner has implemented a plan for liquidating the partnership. In
connection with that strategy, the corporate general partner has entered into an
agreement with a cable broker to market the partnership's cable systems to third
parties. Should the partnership receive offers from third parties for such
assets, the corporate general partner will prepare a proxy for submission to the
limited partners for the purpose of approving or disapproving such sale. Should
such a sale be approved, the corporate general partner will proceed to liquidate
the partnership following the settlement of all final liabilities of the
partnership. We can give no assurance, however, that we will be able to generate
a sale of the partnership's cable assets.
A cable television system receives television, radio and data
signals at the system's "headend" site by means of over-the-air antennas,
microwave relay systems and satellite earth stations. These signals are then
modulated, amplified and distributed, primarily through coaxial and fiber optic
distribution systems, to customers who pay a fee for this service. Cable
television systems may also originate their own television programming and other
information services for distribution through the system. Cable television
systems generally are constructed and operated pursuant to non-exclusive
franchises or similar licenses granted by local governmental authorities for a
specified term of years.
Our cable television systems offer customers various levels,
or "tiers", of cable services consisting of:
* broadcast television signals of local network, independent and educational
stations
* a limited number of television signals from so-called "super stations"
originating from distant cities, such as WGN
* various satellite - delivered, non-broadcast channels, such as
- Cable News Network, or "CNN"
- MTV: Music Television, or "MTV"
- The USA Network
- ESPN
- Turner Network Television, or "TNT" and
- The Disney Channel
* programming originated locally by the cable television system, such as
public, educational and government access programs, and
* information displays featuring news, weather, stock market and financial
reports, and public service announcements.
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For an extra monthly charge, our cable television systems also
offer "premium" television services to their customers. These services, such as
Home Box Office, or "HBO", and Showtime are satellite channels that consist
principally of feature films, live sporting events, concerts and other special
entertainment features, usually presented without commercial interruption. See
"Legislation and Regulation."
A customer generally pays an initial installation charge and
fixed monthly fees for basic, expanded basic, other tiers of satellite services
and premium programming services. Such monthly service fees constitute the
primary source of revenues for our cable television systems. In addition to
customer revenues, our cable television systems receive revenue from the sale of
available advertising spots on advertiser-supported programming and also offer
to our customers home shopping services, which pay the partnership a share of
revenues from sales of products to our customers, in addition to paying us a
separate fee in return for carrying their shopping service. Certain other
channels have also offered the cable systems managed by Charter, including those
of the partnership, fees in return for carrying their service. Due to a general
lack of channel capacity available for adding new channels, our management
cannot predict the impact of such potential payments on our business. See Item
7., "Management's Discussion and Analysis of Financial Condition and Results of
Operations - Liquidity and Capital Resources."
We own and operate two cable television systems that provide
service to customers in the cities of Taylorville, Litchfield and Gillespie,
Illinois and portions of unincorporated Christian County, Illinois. As of
December 31, 1999, we served approximately 7,100 basic subscribers in these
areas. We do not expect to make any additional acquisitions during the remaining
term of the partnership.
Charter receives a management fee and reimbursement of
expenses from the corporate general partner for managing our cable television
operations. See Item 11., "Executive Compensation."
The Chief Executive Officer of the general partner is Jerald
L. Kent. The principal executive offices of the partnership and the general
partner are located at 12444 Powerscourt Drive, Suite 100, St. Louis, MO
63131-0555 and their telephone number is (314) 965-0555. See Item 10.,
"Directors and Executive Officers of the Registrant."
Business Strategy
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Historically, the partnership has followed a systematic
approach to acquiring, operating and developing cable television systems based
on the primary goal of increasing operating cash flow while maintaining the
quality of services offered by its cable television systems. Our business
strategy has focused on serving small to medium-sized communities. We believe
that given a similar rate, technical, and channel capacity/utilization profile,
our cable television systems generally involve less risk of increased
competition than systems in large urban cities. In our markets, consumers have
access to only a limited number of over-the-air broadcast television signals. In
addition, these markets typically offer fewer competing entertainment
alternatives than large cities. Nonetheless, we believe that all cable operators
will face increased competition in the future from alternative providers of
multi-channel video programming services. See "Competition."
Adoption of rules implementing certain provisions of the Cable
Television Consumer Protection and Competition Act of 1992 by the FCC has had a
negative impact on our revenues and cash flow. These rules are subject to
further amendment to give effect to the Telecommunications Act of 1996. Among
other changes, the Telecommunications Act of 1996 caused the regulation of
certain cable programming service tier rates to terminate on March 31, 1999.
There can be no assurance as to what, if any, further action may be taken by the
FCC, Congress or any other regulatory authority or court, or their effect on our
business. See "Legislation and Regulation" and Item 7., "Management's Discussion
and Analysis of Financial Condition and Results of Operations."
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Clustering
We have sought to acquire cable television operations in
communities that are proximate to other owned or affiliated systems in order to
achieve the economies of scale and operating efficiencies associated with
regional "clusters." We believe clustering can reduce marketing and personnel
costs and can also reduce capital expenditures in cases where cable service can
be delivered through a central headend reception facility.
Capital Expenditures
As noted in "Technological Developments," certain of our cable
television systems have no available channel capacity with which to add new
channels or to provide pay-per-view offerings to customers. As a result,
significant amounts of capital for future upgrades will be required in order to
increase available channel capacity in those systems, improve quality of service
and facilitate the expansion of new services such as advertising, pay-per-view,
new unregulated tiers of satellite-delivered services and home shopping, so that
our cable television systems remain competitive within the industry.
Our management has selected a technical standard that
incorporates the use of fiber optic technology where applicable in its
engineering design for the majority of our cable television systems that are to
be rebuilt. A system built with this type of architecture can provide for future
channels of analog service as well as new digital services. Such a system will
also permit the introduction of high speed data transmission/Internet access and
telephony services in the future after incurring incremental capital
expenditures related to these services. We are also evaluating the use of
digital compression technology in our cable television systems. See
"Technological Developments" and "Digital Compression."
The Partnership has completed the rebuild of its cable system
in Taylorville, Illinois and neighboring communities at a total cost of
approximately $3.5 million including approximately $144,000 in 1999. Other
capital expenditures for 1999 were approximately $223,300 for the improvement
and upgrade of other assets, including approximately $118,000 to introduce
digital services in the community of Gillespie, Illinois which was required
under a provision of its franchise agreement. Capital expenditures budgeted for
2000 are approximately $1,590,700 including an upgrade of our cable plant in
Litchfield, Illinois at a total estimated cost of approximately $1.0 million.
The franchise agreement requires completion of the upgrade by January 2001. This
requirement is expected to negatively impact any offers we may receive for our
cable television systems. See "Legislation and Regulation" and Item 7.,
"Management's Discussion and Analysis of Financial Condition and Results of
Operations - Liquidity and Capital Resources."
Decentralized Management
The corporate general partner manages the partnership's cable
television systems on a decentralized basis. The corporate general partner
believes that its decentralized management structure, by enhancing management
presence at the system level, increases its sensitivity to the needs of its
customers, enhances the effectiveness of its customer service efforts,
eliminates the need for maintaining a large centralized corporate staff and
facilitates the maintenance of good relations with local governmental
authorities.
Marketing
Our marketing strategy is to provide added value to increasing
levels of subscription services through "packaging." In addition to the basic
service package, customers in substantially all of our cable television systems
may purchase additional unregulated packages of satellite-delivered services and
premium services. We have employed a variety of targeted marketing techniques to
attract new customers by focusing on delivering value, choice, convenience and
quality. We employ direct mail, radio and local newspaper advertising,
telemarketing and door-to-door selling utilizing demographic "cluster codes" to
target specific messages to target audiences. In some cable television systems,
we offer discounts to customers who
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purchase premium services on a limited trial basis in order to encourage a
higher level of service subscription. We also have a coordinated strategy for
retaining customers that includes televised retention advertising to reinforce
the initial decision to subscribe and encourage customers to purchase higher
service levels.
Customer Service and Community Relations
We place a strong emphasis on customer service and community
relations and believe that success in these areas is critical to our business.
We have developed and implemented a wide range of monthly internal training
programs for employees, including our regional managers, that focus on our
operations and employee interaction with customers. The effectiveness of our
training program as it relates to the employees' interaction with customers is
monitored on an ongoing basis. We are also committed to fostering strong
community relations in the towns and cities we serve. We support many local
charities and community causes in various ways, including marketing promotions
to raise money and supplies for persons in need, and in-kind donations that
include production services and free air-time on major cable networks. We also
participate in the "Cable in the Classroom" program, whereby cable television
companies throughout the United States provide schools with free cable
television service. In addition, we install and provide free basic cable service
to public schools, government buildings and non-profit hospitals in many of the
communities in which we operate.
Description of the Partnership's Systems
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The table below sets forth certain operating statistics for
our cable systems as of December 31, 1999.
<TABLE>
<CAPTION>
Premium Average Monthly
Homes Basic Basic Service Premium Revenue Per Basic
System Passed(1) Subscribers Penetration(2) Units(3) Penetration(4) Subscriber(5)
- ------ ------ ----------- ----------- ----- ----------- ----------
<S> <C> <C> <C> <C> <C> <C>
Taylorville, IL 6,155 4,255 69.1% 836 19.6% $34.74
Litchfield, IL 5,199 2,867 55.1% 531 18.5% $34.65
----- ----- ---
Total 11,354 7,122 62.7% 1,367 19.2% $37.42
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</TABLE>
1 Homes passed refers to our estimates of the approximate number of
dwelling units in a particular community that can be connected to the
distribution system without any further extension of principal transmission
lines. Such estimates are based upon a variety of sources, including billing
records, house counts, city directories and other local sources.
2 Basic subscribers as a percentage of homes passed by cable.
3 Premium service units include only single channel services offered
for a monthly fee per channel and do not include tiers of channels offered as a
package for a single monthly fee.
4 Premium service units as a percentage of homes subscribing to cable
service. A customer may purchase more than one premium service, each of which is
counted as a separate premium service unit. This ratio may be greater than 100%
if the average customer subscribes for more than one premium service.
5 Average monthly revenue per basic subscriber has been computed based
on revenue for the year ended December 31, 1999.
Customer Rates and Services
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Our cable television systems offer customers packages of
services that include the local area network, independent and educational
television stations, a limited number of television signals from distant cities,
numerous satellite-delivered, non-broadcast channels such as CNN, MTV, USA,
ESPN, TNT and The Disney Channel and certain information and public access
channels. For an extra monthly charge, we also provide certain premium
television services, such as HBO and Showtime. We also offer other cable
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television services to our customers. For additional charges, in most of our
cable television systems, we also rent remote control devices and VCR compatible
devices, which are devices that make it easier for a customer to tape a program
from one channel while watching a program on another.
Our service options vary from system to system, depending upon
a cable system's channel capacity and viewer interests. Rates for services also
vary from market to market and according to the type of services selected.
Under the 1992 Cable Act, most cable television systems are
subject to rate regulation of the basic service tier, the charges for
installation of cable service, and the rental rates for customer premises
equipment such as converter boxes and remote control devices. These rate
regulation provisions affect all of our cable television systems not deemed to
be subject to effective competition under the FCC's definition. Currently, none
of our cable television systems are subject to effective competition. See
"Legislation and Regulation."
At December 31, 1999, our monthly rates for basic cable
service for residential customers, including certain discounted rates, ranged
from $22.05 to $25.51 and our premium service rate was $11.95, excluding special
promotions offered periodically in conjunction with our marketing programs. A
one-time installation fee, which we may wholly or partially waive during a
promotional period, is usually charged to new customers. We charge commercial
customers, such as hotels, motels and hospitals, a negotiated, non-recurring fee
for installation of service and monthly fees based upon a standard discounting
procedure. We offer most multi-unit dwellings a negotiated bulk rate in exchange
for single-point billing and basic service to all units. These rates are also
subject to regulation.
Employees
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The various personnel required to operate our business are
employed by the partnership, the corporate general partner, its subsidiary
corporation and Charter. As of February 19, 2000, we had one employee, the cost
of which is charged directly to the partnership. The employment costs incurred
by the corporate general partner, its subsidiary corporation and Charter are
allocated and charged to the partnership for reimbursement pursuant to the
partnership agreement and management agreement. The amounts of these
reimbursable costs are set forth below in Item 11., "Executive Compensation."
Technological Developments
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As part of our commitment to customer service, we seek to
apply technological advances in the cable television industry to our cable
television systems on the basis of cost effectiveness, capital availability,
enhancement of product quality and service delivery and industry-wide
acceptance. Currently, our cable television systems have an average channel
capacity of 87, 77% of which is presently utilized. We believe that our cable
television system upgrades will enable us to provide customers with greater
programming diversity, better picture quality and alternative communications
delivery systems made possible by the introduction of fiber optic technology and
by the application of digital compression. See "Legislation and Regulation" and
Item 7., "Management's Discussion and Analysis of Financial Condition and
Results of Operations."
The use of fiber optic cable as an alternative to coaxial
cable is playing a major role in expanding channel capacity and improving the
performance of cable television systems. Fiber optic cable is capable of
carrying hundreds of video, data and voice channels and, accordingly, its
utilization is essential to the enhancement of a cable television system's
technical capabilities. Our current policy is to utilize fiber optic technology
where applicable in rebuild projects which we undertake. The benefits of fiber
optic technology over traditional coaxial cable distribution plant include lower
ongoing maintenance and power costs and improved picture quality and
reliability.
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Digital Compression
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We have been closely monitoring developments in the area of
digital compression, a technology that enables cable operators to increase the
channel capacity of cable television systems by permitting a significantly
increased number of video signals to fit in a cable television system's existing
bandwidth. Depending on the technical characteristics of the existing system, we
believe that the utilization of digital compression technology will enable our
cable television systems to increase channel capacity in a manner that could, in
the short term, be more cost efficient than rebuilding such cable television
systems with higher capacity distribution plant. However, we believe that unless
the cable television system has sufficient unused channel capacity and
bandwidth, the use of digital compression to increase channel offerings is not a
substitute for the rebuild of the cable television system, which will improve
picture quality, system reliability and quality of service. The use of digital
compression will expand the number and types of services these cable television
systems offer and enhance the development of current and future revenue sources.
This technology has been under frequent management review.
Programming
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We purchase basic and premium programming for our systems from
Charter. In turn, Charter charges the partnership for these costs at its costs,
which are generally based on a fixed fee per customer or a percentage of the
gross receipts for the particular service. Prior to the acquisition of the
corporate general partner, Falcon Communications charged the partnership for
these services based on an estimate of what the corporate general partner could
negotiate for such programming services for the 15 partnerships managed by the
corporate general partner as a group (approximately 81,100 basic subscribers at
December 31, 1999). Other channels have also offered Charter and the
partnership's cable systems fees in return for carrying their service. Due to
our pending sale, our management cannot predict the impact of such potential
payments on our business. In addition, the FCC may require that such payments
from programmers be offset against the programming fee increases which can be
passed through to subscribers under the FCC's rate regulations. Charter
programming contracts are generally for a fixed period of time and are subject
to negotiated renewal. Accordingly, no assurances can be given that its, and
correspondingly our, programming costs will not continue to increase
substantially in the near future, or that other materially adverse terms will
not be added to Charter programming contracts. Management believes, however,
that Charter's relations with its programming suppliers generally are good.
Our cable programming costs have increased in recent years and
are expected to continue to increase due to additional programming being
provided to basic customers, requirements to carry channels under retransmission
carriage agreements entered into with some programming sources, increased costs
to produce or purchase cable programming generally (including sports
programming), inflationary increases and other factors. The 1996 retransmission
carriage agreement negotiations were completed with essentially no change to the
previous agreements. Under the FCC's rate regulations, increases in programming
costs for regulated cable services occurring after the earlier of March 1, 1994,
or the date a system's basic cable service became regulated, may be passed
through to customers. Generally, programming costs are charged among systems on
a per customer basis.
Franchises
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Cable television systems are generally constructed and
operated under non-exclusive franchises granted by local governmental
authorities. These franchises typically contain many conditions, such as time
limitations on commencement and completion of construction; conditions of
service, including number of channels, types of programming and the provision of
free service to schools and other public institutions; and the maintenance of
insurance and indemnity bonds. The provisions of local franchises are subject to
federal regulation under the Cable Communications Policy Act of 1984, or the
"1984 Cable Act", the 1992 Cable Act and the 1996 Telecommunications Act.
See "Legislation and Regulation."
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As of December 31, 1999, we operated cable systems in six
franchise areas. These franchises, all of which are non-exclusive, provide for
the payment of fees to the issuing authority. Annual franchise fees imposed on
our systems range up to 5% of the gross revenues generated by a system. The 1984
Cable Act prohibits franchising authorities from imposing franchise fees in
excess of 5% of gross revenues and also permits the cable system operator to
seek renegotiation and modification of franchise requirements if warranted by
changed circumstances.
The following table groups the franchises of our cable
television systems by date of expiration and presents the number of franchises
for each group of franchises and the approximate number and percentage of basic
subscribers for each group as of December 31, 1999.
Number Number of Percentage of
Year of of Basic Basic
Franchise Expiration Franchises Subscribers Subscribers
-------------------- ---------- ----------- -----------
Prior to 2001 1 1,903 26.7%
2001 - 2005 2 3,855 54.1%
2006 and after 3 1,225 17.2%
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Total 6 6,983 98.0%
= ===== ====
At December 31, 1999, one of the Partnership's franchise
agreements was expired, but was renewed subsequent to year end. We operate cable
television systems which serve multiple communities and, in some circumstances,
portions of such systems extend into jurisdictions for which we believe no
franchise is necessary. In the aggregate, approximately 139 customers,
representing approximately 2.0% of our customers, are served by unfranchised
portions of such systems. In certain instances, where a single franchise
comprises a large percentage of the customers in an operating region, the loss
of such franchise could decrease the economies of scale achieved by our
clustering strategy. We have never had a franchise revoked for any of our
systems and we believe that we have satisfactory relationships with
substantially all of our franchising authorities.
The 1984 Cable Act provides, among other things, for an
orderly franchise renewal process in which franchise renewal will not be
unreasonably withheld or, if renewal is denied and the franchising authority
acquires ownership of the system or effects a transfer of the system to another
person, the operator generally is entitled to the "fair market value" for the
system covered by such franchise, but no value may be attributed to the
franchise itself. In addition, the 1984 Cable Act, as amended by the 1992 Cable
Act, establishes comprehensive renewal procedures which require that an
incumbent franchisee's renewal application be assessed on its own merit and not
as part of a comparative process with competing applications. See "Legislation
and Regulation."
Competition
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We face competition in the areas of price, service offerings,
and service reliability. We compete with other providers of television signals
and other sources of home entertainment. In addition, as we expand into
additional services such as Internet access, interactive services and telephony,
we will face competition from other providers of each type of service.
To date, we believe that we have not lost a significant number
of customers, or a significant amount of revenue, to our competitors' systems.
However, competition from other providers of the technologies we expect to offer
in the future may have a negative impact on our business in the future.
Through mergers such as the recent merger of
Tele-Communications, Inc. and AT&T, customers will come to expect a variety of
services from a single provider. While the TCI/AT&T merger has no direct or
immediate impact on our business, it encourages providers of cable and
telecommunications services to expand their service offerings. It also
encourages consolidation in the cable industry as cable operators recognize the
competitive benefits of a large customer base and expanded financial resources.
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Key competitors today include:
BROADCAST TELEVISION. Cable television has long competed with
broadcast television, which consists of television signals that the viewer is
able to receive without charge using an "off-air" antenna. The extent of such
competition is dependent upon the quality and quantity of broadcast signals
available through "off-air" reception compared to the services provided by the
local cable system. The recent licensing of digital spectrum by the FCC will
provide incumbent television licenses with the ability to deliver high
definition television pictures and multiple digital-quality program streams, as
well as advanced digital services such as subscription video.
DBS. Direct broadcast satellite, known as DBS, has emerged as
significant competition to cable systems. The DBS industry has grown rapidly
over the last several years, far exceeding the growth rate of the cable
television industry, and now serves approximately 10 million subscribers
nationwide. DBS service allows the subscriber to receive video services directly
via satellite using a relatively small dish antenna. Moreover, video compression
technology allows DBS providers to offer more than 100 digital channels, thereby
surpassing the typical analog cable system. DBS companies historically were
prohibited from retransmitting popular local broadcast programming, but a change
to the existing copyright laws in November 1999 eliminated this legal
impediment. After an initial six-month grace period, DBS companies will need to
secure retransmission consent from the popular broadcast stations they wish to
carry, and they will face mandatory carriage obligations of less popular
broadcast stations as of January 2002. In response to the legislation, DirecTV,
Inc. and EchoStar Communications Corporation already have initiated plans to
carry the major network stations in the nation's top television markets. DBS,
however, is limited in the local programming it can provide because of the
current capacity limitations of satellite technology. It is, therefore, expected
that DBS companies will offer local broadcast programming only in the larger
U.S. markets for the foreseeable future. The same legislation providing for DBS
carriage of local broadcast stations reduced the compulsory copyright fees paid
by DBS companies and allows them to continue offering distant network signals to
rural customers. America Online Inc., the nation's leading provider of Internet
services has recently announced a plan to invest $1.5 billion in Hughes
Electronics Corp., DirecTV's parent company, and these companies intend to
jointly market America Online's prospective Internet television service to
DirecTV's DBS customers.
DSL. The deployment of digital subscriber line technology,
known as DSL, will allow Internet access to subscribers at data transmission
speeds greater than those of modems over conventional telephone lines. Several
telephone companies and other companies are introducing DSL service. The FCC
recently released an order in which it mandated that incumbent telephone
companies grant access to the high frequency portion of the local loop over
which they provide voice services. This will enable competitive carriers to
provide DSL services over the same telephone lines simultaneously used by
incumbent telephone companies to provide basic telephone service. However, in a
separate order the FCC declined to mandate that incumbent telephone companies
unbundle their internal packet switching functionality or related equipment for
the benefit of competitive carriers. This functionality or equipment could
otherwise have been used by competitive carriers directly to provide DSL or
other high-speed broadband services. We are unable to predict whether the FCC's
decisions will be sustained upon administrative or judicial appeal, the
likelihood of success of the Internet access offered by our competitors or the
impact on our business and operations of these competitive ventures.
TRADITIONAL OVERBUILDS. Cable television systems are operated
under non-exclusive franchises granted by local authorities. More than one cable
system may legally be built in the same area. It is possible that a franchising
authority might grant a second franchise to another cable operator and that
franchise might contain terms and conditions more favorable than those afforded
us. In addition, entities willing to establish an open video system, under which
they offer unaffiliated programmers non-discriminatory access to a portion of
the system's cable system may be able to avoid local franchising requirements.
Well financed businesses from outside the cable industry, such as public
utilities which already possess fiber optic and other transmission lines in the
areas they serve may over time become competitors. There has been a recent
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increase in the number of cities that have constructed their own cable systems,
in a manner similar to city-provided utility services. Constructing a competing
cable system is a capital intensive process which involves a high degree of
risk. We believe that in order to be successful, a competitor's overbuild would
need to be able to serve the homes and businesses in the overbuilt area on a
more cost-effective basis than us. Any such overbuild operation would require
either significant access to capital or access to facilities already in place
that are capable of delivering cable television programming.
TELEPHONE COMPANIES AND UTILITIES. The competitive environment
has been significantly affected by both technological developments and
regulatory changes enacted in the 1996 Telecommunications Act, which were
designed to enhance competition in the cable television and local telephone
markets. Federal cross-ownership restrictions historically limited entry by
local telephone companies into the cable television business. The 1996
Telecommunications Act modified this cross-ownership restriction, making it
possible for local exchange carriers who have considerable resources to provide
a wide variety of video services competitive with services offered by cable
systems.
If we expand our offerings to include Internet and other
telecommunications services, we will be subject to competition from other
telecommunications providers. The telecommunications industry is highly
competitive and includes competitors with greater financial and personnel
resources, who have brand name recognition and long-standing relationships with
regulatory authorities. Moreover, mergers, joint ventures and alliances among
franchise, wireless or private cable television operators, local exchange
carriers and others may result in providers capable of offering cable
television, Internet, and telecommunications services in direct competition with
us.
Several telephone companies have obtained or are seeking cable
television franchises from local governmental authorities and are constructing
cable systems. Cross-subsidization by local exchange carriers of video and
telephony services poses a strategic advantage over cable operators seeking to
compete with local exchange carriers that provide video services. Some local
exchange carriers may choose to make broadband services available under the open
video regulatory framework of the FCC. In addition, local exchange carriers
provide facilities for the transmission and distribution of voice and data
services, including Internet services, in competition with our existing or
potential interactive services ventures and businesses, including Internet
service, as well as data and other non-video services. We cannot predict the
likelihood of success of the broadband services offered by our competitors or
the impact on us of such competitive ventures. The entry of telephone companies
as direct competitors in the video marketplace, however, is likely to become
more widespread and could adversely affect the profitability and valuation of
the systems.
Additionally, we are subject to competition from utilities
which possess fiber optic transmission lines capable of transmitting signals
with minimal signal distortion.
SMATV. Additional competition is posed by satellite master
antenna television systems known as "SMATV systems" serving multiple dwelling
units, referred to in the cable industry as "MDU's", such as condominiums,
apartment complexes, and private residential communities. These private cable
systems may enter into exclusive agreements with such MDUs, which may preclude
operators of franchise systems from serving residents of such private complexes.
Such private cable systems can offer both improved reception of local television
stations and many of the same satellite-delivered program services which are
offered by cable systems. SMATV systems currently benefit from operating
advantages not available to franchised cable systems, including fewer regulatory
burdens and no requirement to service low density or economically depressed
communities. Exemption from regulation may provide a competitive advantage to
certain of our current and potential competitors.
WIRELESS DISTRIBUTION. Cable television systems also compete
with wireless program distribution services such as multi-channel multipoint
distribution systems or "wireless cable", known as MMDS. MMDS uses low-power
microwave frequencies to transmit television programming over-the-air to paying
customers. Wireless distribution services generally provide many of the
programming services provided by cable systems, and digital compression
technology is likely to increase significantly the channel capacity of their
systems. Both analog and digital MMDS services require unobstructed "line of
sight" transmission paths.
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<PAGE>
LEGISLATION AND REGULATION
The following summary addresses the key regulatory
developments and legislation affecting the cable television industry.
The operation of a cable system is extensively regulated by
the FCC, some state governments and most local governments. The 1996
Telecommunications Act has altered the regulatory structure governing the
nation's communications providers. It removes barriers to competition in both
the cable television market and the local telephone market. Among other things,
it also reduces the scope of cable rate regulation and encourages additional
competition in the video programming industry by allowing local telephone
companies to provide video programming in their own telephone service areas.
The 1996 Telecommunications Act requires the FCC to undertake
a host of implementing rulemakings. Moreover, Congress and the FCC have
frequently revisited the subject of cable regulation. Future legislative and
regulatory changes could adversely affect our operations, and there have been
calls in Congress and at the FCC to maintain or even tighten cable regulation in
the absence of widespread effective competition.
CABLE RATE REGULATION. The 1992 Cable Act imposed an extensive
rate regulation regime on the cable television industry, which limited the
ability of cable companies to increase subscriber fees. Under that regime, all
cable systems are subject to rate regulation, unless they face "effective
competition" in their local franchise area. Federal law now defines "effective
competition" on a community-specific basis as requiring satisfaction of
conditions rarely satisfied in the current marketplace.
Although the FCC has established the underlying regulatory
scheme, local government units, commonly referred to as local franchising
authorities, are primarily responsible for administering the regulation of the
lowest level of cable--the basic service tier, which typically contains local
broadcast stations and public, educational, and government access channels.
Before a local franchising authority begins basic service rate regulation, it
must certify to the FCC that it will follow applicable federal rules. Many local
franchising authorities have voluntarily declined to exercise their authority to
regulate basic service rates. Local franchising authorities also have primary
responsibility for regulating cable equipment rates. Under federal law, charges
for various types of cable equipment must be unbundled from each other and from
monthly charges for programming services.
As of December 31, 1999, none of our local franchising
authorities were certified to regulate basic tier rates. The 1992 Cable Act
permits communities to certify and regulate rates at any time, so that it is
possible that localities served by the systems may choose to certify and
regulate rates in the future.
The FCC historically administered rate regulation of cable
programming service tiers, which is the expanded basic programming package that
offers services other than basic programming and which typically contains
satellite-delivered programming. As of December 31, 1999, we had no cable
programming service tier rate complaints pending at the FCC. Under the 1996
Telecommunications Act, however, the FCC's authority to regulate cable
programming service tier rates terminated on March 31, 1999. The FCC has taken
the position that it will still adjudicate pending cable programming service
tier complaints but will strictly limit its review, and possible refund orders,
to the time period predating the termination date. The elimination of cable
programming service tier regulation on a prospective basis affords us
substantially greater pricing flexibility.
Under the rate regulations of the FCC, most cable systems were
required to reduce their basic service tier and cable programming service tier
rates in 1993 and 1994, and have since had their rate increases governed by a
complicated price cap scheme that allows for the recovery of inflation and
certain increased costs, as well as providing some incentive for expanding
channel carriage. The FCC has modified its rate adjustment regulations to allow
for annual rate increases and to minimize previous problems associated with
regulatory lag. Operators also have the opportunity to bypass this "benchmark"
regulatory scheme in favor of traditional "cost-of-service" regulation in cases
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<PAGE>
where the latter methodology appears favorable. Cost of service regulation is a
traditional form of rate regulation, under which a utility is allowed to recover
its costs of providing the regulated service, plus a reasonable profit. The FCC
and Congress have provided various forms of rate relief for smaller cable
systems owned by smaller operators. Premium cable services offered on a
per-channel or per program basis remain unregulated. However, federal law
requires that the basic service tier be offered to all cable subscribers and
limits the ability of operators to require purchase of any cable programming
service tier if a customer seeks to purchase premium services offered on a
per-channel or per-program basis, subject to a technology exception which
terminates in 2002.
As noted above, FCC regulation of cable programming service
tier rates for all systems, regardless of size, terminated under the 1996
Telecommunications Act on March 31, 1999. As a result, the regulatory regime
just discussed is now essentially applicable only to basic services tier and
cable equipment. Some legislators, however, have called for new rate regulations
if unregulated rates increase dramatically. The 1996 Telecommunications Act also
relaxes existing "uniform rate" requirements by specifying that uniform rate
requirements do not apply where the operator faces "effective competition," and
by exempting bulk discounts to multiple dwelling units, although complaints
about predatory pricing still may be made to the FCC.
CABLE ENTRY INTO TELECOMMUNICATIONS. The 1996
Telecommunications Act creates a more favorable environment for us to provide
telecommunications services beyond traditional video delivery. It provides that
no state or local laws or regulations may prohibit or have the effect of
prohibiting any entity from providing any interstate or intrastate
telecommunications service. A cable operator is authorized under the 1996
Telecommunications Act to provide telecommunications services without obtaining
a separate local franchise. States are authorized, however, to impose
"competitively neutral" requirements regarding universal service, public safety
and welfare, service quality, and consumer protection. State and local
governments also retain their authority to manage the public rights-of-way and
may require reasonable, competitively neutral compensation for management of the
public rights-of-way when cable operators provide telecommunications service.
The favorable pole attachment rates afforded cable operators under federal law
can be gradually increased by utility companies owning the poles, beginning in
2001, if the operator provides telecommunications service, as well as cable
service, over its plant. The FCC recently clarified that a cable operator's
favorable pole rates are not endangered by the provision of Internet access.
Cable entry into telecommunications will be affected by the
regulatory landscape now being developed by the FCC and state regulators. One
critical component of the 1996 Telecommunications Act to facilitate the entry of
new telecommunications providers, including cable operators, is the
interconnection obligation imposed on all telecommunications carriers. In July
1997, the Eighth Circuit Court of Appeals vacated certain aspects of the FCC
initial interconnection order but most of that decision was reversed by the U.S.
Supreme Court in January 1999. The Supreme Court effectively upheld most of the
FCC interconnection regulations. Although these regulations should enable new
telecommunications entrants to reach viable interconnection agreements with
incumbent carriers, many issues, including which specific network elements the
FCC can mandate that incumbent carriers make available to competitors, remain
subject to administrative and judicial appeal. If the FCC's current list of
unbundled network elements is upheld on appeal, it would make it easier for us
to provide telecommunications service.
INTERNET SERVICE. Although there is at present no significant
federal regulation of cable system delivery of Internet services, and the FCC
recently issued several reports finding no immediate need to impose such
regulation, this situation may change as cable systems expand their broadband
delivery of Internet services. In particular, proposals have been advanced at
the FCC and Congress that would require cable operators to provide access to
unaffiliated Internet service providers and online service providers. Certain
Internet service providers also are attempting to use existing modes of access
that are commercially leased to gain access to cable system delivery. A petition
on this issue is now pending before the FCC. Finally, some local franchising
authorities are considering the imposition of mandatory Internet access
requirements as part of cable franchise renewals or transfers. A federal
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district court in Portland, Oregon recently upheld the legal ability of local
franchising authorities to impose such conditions, but an appeal was filed with
the Ninth Circuit Court of Appeals, oral argument has been held and the parties
are awaiting a decision. Other local authorities have imposed or may impose
mandatory Internet access requirements on cable operators. These developments
could, if they become widespread, burden the capacity of cable systems and
complicate our own plans for providing Internet service.
TELEPHONE COMPANY ENTRY INTO CABLE TELEVISION. The 1996
Telecommunications Act allows telephone companies to compete directly with cable
operators by repealing the historic telephone company/cable cross-ownership ban.
Local exchange carriers, including the regional telephone companies, can now
compete with cable operators both inside and outside their telephone service
areas with certain regulatory safeguards. Because of their resources, local
exchange carriers could be formidable competitors to traditional cable
operators. Various local exchange carriers already are providing video
programming services within their telephone service areas through a variety of
distribution methods, including both the deployment of broadband wire facilities
and the use of wireless transmission.
Under the 1996 Telecommunications Act, local exchange carriers
or any other cable competitor providing video programming to subscribers through
broadband wire should be regulated as a traditional cable operator, subject to
local franchising and federal regulatory requirements, unless the local exchange
carrier or other cable competitor elects to deploy its broadband plant as an
open video system. To qualify for favorable open video system status, the
competitor must reserve two-thirds of the system's activated channels for
unaffiliated entities. The Fifth Circuit Court of Appeals reversed certain of
the FCC's open video system rules, including its preemption of local
franchising. The FCC recently revised the applicable rules to eliminate this
general preemption, thereby leaving franchising discretion to state and local
authorities. It is unclear what effect this ruling will have on the entities
pursuing open video system operation.
Although local exchange carriers and cable operators can now
expand their offerings across traditional service boundaries, the general
prohibition remains on local exchange carrier buyouts of co-located cable
systems. Co-located cable systems are cable systems serving an overlapping
territory. Cable operator buyouts of co-located local exchange carrier systems,
and joint ventures between cable operators and local exchange carriers in the
same market are also prohibited. The 1996 Telecommunications Act provides a few
limited exceptions to this buyout prohibition, including a carefully
circumscribed "rural exemption." The 1996 Telecommunications Act also provides
the FCC with the limited authority to grant waivers of the buyout prohibition.
ELECTRIC UTILITY ENTRY INTO TELECOMMUNICATIONS/CABLE
TELEVISION. The 1996 Telecommunications Act provides that registered utility
holding companies and subsidiaries may provide telecommunications services,
including cable television, despite restrictions in the Public Utility Holding
Company Act. Electric utilities must establish separate subsidiaries, known as
"exempt telecommunications companies" and must apply to the FCC for operating
authority. Like telephone companies, electric utilities have substantial
resources at their disposal, and could be formidable competitors to traditional
cable systems. Several such utilities have been granted broad authority by the
FCC to engage in activities which could include the provision of video
programming.
ADDITIONAL OWNERSHIP RESTRICTIONS. The 1996 Telecommunications
Act eliminates statutory restrictions on broadcast/cable cross-ownership,
including broadcast network/cable restrictions, but leaves in place existing FCC
regulations prohibiting local cross-ownership between co-located television
stations and cable systems.
Under the 1992 Cable Act, the FCC adopted rules precluding a
cable system from devoting more than 40% of its activated channel capacity to
the carriage of affiliated national video program services. Also under the 1992
Cable Act, the FCC has adopted rules that preclude any cable operator from
serving more than 30% of all U.S. domestic multichannel video subscribers,
including cable and direct broadcast satellite subscribers. However, this
provision has been stayed pending further judicial review.
MUST CARRY/RETRANSMISSION CONSENT. The 1992 Cable Act contains
broadcast signal carriage requirements. Broadcast signal carriage is the
transmission of broadcast television signals over a cable system to cable
customers. These requirements, among other things, allow local commercial
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<PAGE>
television broadcast stations to elect once every three years between "must
carry" status or "retransmission consent" status. Less popular stations
typically elect must carry, which is the broadcast signal carriage requirement
that allows local commercial television broadcast stations to require a cable
system to carry the station. More popular stations, such as those affiliated
with a national network, typically elect retransmission consent which is the
broadcast signal carriage requirement that allows local commercial television
broadcast stations to negotiate for payments for granting permission to the
cable operator to carry the stations. Must carry requests can dilute the appeal
of a cable system's programming offerings because a cable system with limited
channel capacity may be required to forego carriage of popular channels in favor
of less popular broadcast stations electing must carry. Retransmission consent
demands may require substantial payments or other concessions. Either option has
a potentially adverse effect on our business. The burden associated with must
carry may increase substantially if broadcasters proceed with planned conversion
to digital transmission and the FCC determines that cable systems must carry all
analog and digital broadcasts in their entirety. This burden would reduce
capacity available for more popular video programming and new internet and
telecommunication offerings. A rulemaking is now pending at the FCC regarding
the imposition of dual digital and analog must carry.
ACCESS CHANNELS. Local franchising authorities can include
franchise provisions requiring cable operators to set aside certain channels for
public, educational and governmental access programming. Federal law also
requires cable systems to designate a portion of their channel capacity, up to
15% in some cases, for commercial leased access by unaffiliated third parties.
The FCC has adopted rules regulating the terms, conditions and maximum rates a
cable operator may charge for commercial leased access use. We believe that
requests for commercial leased access carriages have been relatively limited. A
new request has been forwarded to the FCC, however, requesting that unaffiliated
Internet service providers be found eligible for commercial leased access.
Although we do not believe such use is in accord with the governing statute, a
contrary ruling could lead to substantial leased activity by Internet service
providers and disrupt our own plans for Internet service.
ACCESS TO PROGRAMMING. To spur the development of independent
cable programmers and competition to incumbent cable operators, the 1992 Cable
Act imposed restrictions on the dealings between cable operators and cable
programmers. Of special significance from a competitive business posture, the
1992 Cable Act precludes video programmers affiliated with cable companies from
favoring their cable operators over new competitors and requires such
programmers to sell their programming to other multichannel video distributors.
This provision limits the ability of vertically integrated cable programmers to
offer exclusive programming arrangements to cable companies. There also has been
interest expressed in further restricting the marketing practices of cable
programmers, including subjecting programmers who are not affiliated with cable
operators to all of the existing program access requirements, and subjecting
terrestrially delivered programming to the program access requirements.
Terrestrially delivered programming is programming delivered other than by
satellite. These changes should not have a dramatic impact on us, but would
limit potential competitive advantages we now enjoy.
INSIDE WIRING; SUBSCRIBER ACCESS. In an order issued in 1997,
the FCC established rules that require an incumbent cable operator upon
expiration of a multiple dwelling unit service contract to sell, abandon, or
remove "home run" wiring that was installed by the cable operator in a multiple
dwelling unit building. These inside wiring rules are expected to assist
building owners in their attempts to replace existing cable operators with new
programming providers who are willing to pay the building owner a higher fee,
where such a fee is permissible. The FCC has also proposed abrogating all
exclusive multiple dwelling unit service agreements held by incumbent operators,
but allowing such contracts when held by new entrants. In another proceeding,
the FCC has preempted restrictions on the deployment of private antenna on
rental property within the exclusive use of a tenant, such as balconies and
patios. This FCC ruling may limit the extent to which we along with multiple
dwelling unit owners may enforce certain aspects of multiple dwelling unit
agreements which otherwise prohibit, for example, placement of digital broadcast
satellite receiver antennae in multiple dwelling unit areas under the exclusive
occupancy of a renter. These developments may make it even more difficult for us
to provide service in multiple dwelling unit complexes.
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OTHER REGULATIONS OF THE FCC. In addition to the FCC
regulations noted above, there are other regulations of the FCC covering such
areas as:
* equal employment opportunity,
* subscriber privacy,
* programming practices, including, among other things,
(1) syndicated program exclusivity, which is a FCC rule which requires
a cable system to delete particular programming offered by a
distant broadcast signal carried on the system which duplicates the
programming for which a local broadcast station has secured
exclusive distribution rights,
(2) network program nonduplication,
(3) local sports blackouts,
(4) indecent programming,
(5) lottery programming,
(6) political programming,
(7) sponsorship identification,
(8) children's programming advertisements, and
(9) closed captioning,
* registration of cable systems and facilities licensing,
* maintenance of various records and public inspection files,
* aeronautical frequency usage,
* lockbox availability,
* antenna structure notification,
* tower marking and lighting,
* consumer protection and customer service standards,
* technical standards,
* consumer electronics equipment compatibility, and
* emergency alert systems.
The FCC recently ruled that cable customers must be allowed to
purchase cable converters from third parties and established a multi-year
phase-in during which security functions, which would remain in the operator's
exclusive control, would be unbundled from basic converter functions, which
could then be satisfied by third party vendors.
The FCC has the authority to enforce its regulations through
the imposition of substantial fines, the issuance of cease and desist orders
and/or the imposition of other administrative sanctions, such as the revocation
of FCC licenses needed to operate certain transmission facilities used in
connection with cable operations.
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COPYRIGHT. Cable television systems are subject to federal
copyright licensing covering carriage of television and radio broadcast signals.
In exchange for filing certain reports and contributing a percentage of their
revenues to a federal copyright royalty pool, that varies depending on the size
of the system, the number of distant broadcast television signals carried, and
the location of the cable system, cable operators can obtain blanket permission
to retransmit copyrighted material included in broadcast signals. The possible
modification or elimination of this compulsory copyright license is the subject
of continuing legislative review and could adversely affect our ability to
obtain desired broadcast programming. We cannot predict the outcome of this
legislative activity. Copyright clearances for nonbroadcast programming services
are arranged through private negotiations.
Cable operators distribute locally originated programming and
advertising that use music controlled by the two principal major music
performing rights organizations, the American Society of Composers, Authors and
Publishers and Broadcast Music, Inc. The cable industry has had a long series of
negotiations and adjudications with both organizations. A prior voluntarily
negotiated agreement with Broadcast Music has now expired, and is subject to
further proceedings. The governing rate court recently set retroactive and
prospective cable industry rates for American Society of Composers music based
on the previously negotiated Broadcast Music rate. Although we cannot predict
the ultimate outcome of these industry proceedings or the amount of any license
fees we may be required to pay for past and future use of association-controlled
music, we do not believe such license fees will be significant to our business
and operations.
STATE AND LOCAL REGULATION. Cable television systems generally
are operated pursuant to nonexclusive franchises granted by a municipality or
other state or local government entity in order to cross public rights-of-way.
Federal law now prohibits local franchising authorities from granting exclusive
franchises or from unreasonably refusing to award additional franchises. Cable
franchises generally are granted for fixed terms and in many cases include
monetary penalties for non-compliance and may be terminable if the franchisee
failed to comply with material provisions.
The specific terms and conditions of franchises vary
materially between jurisdictions. Each franchise generally contains provisions
governing cable operations, service rates, franchising fees, system construction
and maintenance obligations, system channel capacity, design and technical
performance, customer service standards, and indemnification protections. A
number of states, including Connecticut, subject cable systems to the
jurisdiction of centralized state governmental agencies, some of which impose
regulation of a character similar to that of a public utility. Although local
franchising authorities have considerable discretion in establishing franchise
terms, there are certain federal limitations. For example, local franchising
authorities cannot insist on franchise fees exceeding 5% of the system's gross
cable-related revenues, cannot dictate the particular technology used by the
system, and cannot specify video programming other than identifying broad
categories of programming.
Federal law contains renewal procedures designed to protect
incumbent franchisees against arbitrary denials of renewal. Even if a franchise
is renewed, the local franchising authority may seek to impose new and more
onerous requirements such as significant upgrades in facilities and service or
increased franchise fees as a condition of renewal. Similarly, if a local
franchising authority's consent is required for the purchase or sale of a cable
system or franchise, such local franchising authority may attempt to impose more
burdensome or onerous franchise requirements in connection with a request for
consent. Historically, most franchises have been renewed for and consents
granted to cable operators that have provided satisfactory services and have
complied with the terms of their franchise.
Under the 1996 Telecommunications Act, cable operators are not
required to obtain franchises for the provision of telecommunications services,
and local franchising authorities are prohibited from limiting, restricting, or
conditioning the provision of such services. In addition, local franchising
authorities may not require a cable operator to provide any telecommunications
service or facilities, other than institutional networks under certain
circumstances, as a condition of an initial franchise grant, a franchise
renewal, or a franchise transfer. The 1996 Telecommunications Act also provides
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that franchising fees are limited to an operator's cable-related revenues and do
not apply to revenues that a cable operator derives from providing new
telecommunications services.
Item 2. PROPERTIES
We own or lease parcels of real property for signal reception
sites (antenna towers and headends), microwave facilities and business offices,
and own or lease our service vehicles. We believe that our properties, both
owned and leased, are in good condition and are suitable and adequate for our
business operations.
We own substantially all of the assets related to our cable
television operations, including our program production equipment, headend
(towers, antennas, electronic equipment and satellite earth stations), cable
plant (distribution equipment, amplifiers, customer drops and hardware),
converters, test equipment and tools and maintenance equipment.
Item 3. LEGAL PROCEEDINGS
We are periodically a party to various legal proceedings.
These legal proceedings are ordinary and routine litigation proceedings that are
incidental to our business. Except for the item noted below, management believes
that the outcome of all pending legal proceedings will not, in the aggregate,
have a material adverse effect on our financial condition.
In the state of Illinois, customers have filed a punitive
class action lawsuit on behalf of all persons residing in the state who are or
were customers of the partnership's cable television service, and who have been
charged a fee for delinquent payment of their cable bill. The action challenges
the legality of the processing fee and seeks declaratory judgment, injunctive
relief and unspecified damages. At present, the partnership is not able to
project the outcome of the action. All of the partnership's basic subscribers
reside in Illinois where the claim has been filed.
Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None.
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PART II
Item 5. MARKET FOR THE REGISTRANT'S EQUITY SECURITIES AND RELATED
SECURITY HOLDER MATTERS
Liquidity
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While our equity securities, which consist of units of limited
partnership interests, are publicly held, there is no established public trading
market for the units and we do not expect that a market will develop. The
approximate number of equity security holders of record was 960 as of December
31, 1999. In addition to restrictions on the transferability of units contained
in our partnership agreement, the transferability of units may be affected by
restrictions on resales imposed by federal or state law.
Distributions
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The amended partnership agreement generally provides that all
cash distributions (as defined) be allocated 1% to the general partners and 99%
to the limited partners until the limited partners have received aggregate cash
distributions equal to their original capital contributions ("Capital Payback").
The partnership agreement also provides that all partnership profits, gains,
operational losses, and credits (all as defined) be allocated 1% to the general
partners and 99% to the limited partners until the limited partners have been
allocated net profits equal to the amount of cash flow required for Capital
Payback. After the limited partners have received cash flow equal to their
initial investments, the general partners will receive a 1% allocation of cash
flow from sale or liquidation of a system until the limited partners have
received an annual simple interest return of at least 18% of their initial
investments less any distributions from previous system sales and cash
distributions from operations after Capital Payback. Thereafter, the respective
allocations will be made 15% to the general partners and 85% to the limited
partners. Any losses from system sales or exchanges shall be allocated first to
all partners having positive capital account balances (based on their respective
capital accounts) until all such accounts are reduced to zero and thereafter to
the corporate general partner. All allocations to individual limited partners
will be based on their respective limited partnership ownership interests.
Upon the disposition of substantially all of the partnership's
assets, gains shall be allocated first to the limited partners having negative
capital account balances until their capital accounts are increased to zero,
next equally among the general partners until their capital accounts are
increased to zero, and thereafter as outlined in the preceding paragraph. Upon
dissolution of the partnership, any negative capital account balances remaining
after all allocations and distributions are made must be funded by the
respective partners.
The policy of the corporate general partner (although there is
no contractual obligation to do so) is to cause the partnership to make cash
distributions on a quarterly basis throughout the operational life of the
partnership, assuming the availability of sufficient cash flow from partnership
operations. The amount of such distributions, if any, will vary from quarter to
quarter depending upon our results of operations and the corporate general
partner's determination of whether otherwise available funds are needed for the
partnership's ongoing working capital and other liquidity requirements.
We began making periodic cash distributions to limited
partners from operations during 1986, and distributed an aggregate of $374,200
($12.50 per unit) to limited partners in each year during 1997, 1998 and 1999.
The Partnership will continue to determine the Partnership's ability to pay
distributions on a quarter-by-quarter basis.
Our ability to pay distributions, the actual level of
distributions and the continuance of distributions will depend on a number of
factors, including: the amount of cash flow from operations, projected capital
expenditures, provision for contingent liabilities, regulatory or legislative
developments governing the cable television industry, and growth in customers.
Some of these factors are beyond our control and consequently, we cannot make
assurances regarding the level or timing of future distributions.
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Item 6. SELECTED FINANCIAL DATA
Set forth below is selected financial data of the partnership
for the five years ended December 31, 1999. This data should be read in
conjunction with the partnership's financial statements included in Item 8
hereof and "Management's Discussion and Analysis of Financial Condition and
Results of Operations" included in Item 7.
<TABLE>
<CAPTION>
Year Ended December 31,
------------------------------------------------------------------------------------
OPERATIONS STATEMENT DATA 1995 1996 1997 1998 1999
-------------- ------------- -------------- ------------- --------------
<S> <C> <C> <C> <C> <C>
Revenues $ 2,603,700 $ 2,797,500 $ 2,994,500 $ 3,158,400 $ 3,200,400
Costs and expenses (1,390,900) (1,525,400) (1,567,100) (1,743,300) (1,842,500)
Depreciation and amortization (694,200) (310,600) (326,000) (466,700) (472,400)
-------------- ------------- -------------- ------------- --------------
Operating income 518,600 961,500 1,101,400 948,400 885,500
Interest expense (9,000) (9,100) (1,600) (15,100) (19,400)
Interest income 109,000 118,000 128,800 81,900 93,900
Gain on sale of cable assets - 2,700 - - -
-------------- ------------- -------------- ------------- --------------
Net income $ 618,600 $ 1,073,100 $ 1,228,600 $ 1,015,200 $ 960,000
============== ============= ============== ============= ==============
Distributions to partners $ 378,000 $ 378,000 $ 378,000 $ 378,000 $ 378,000
============== ============= ============== ============= ==============
Per unit of limited
partnership interest:
Net income $ 20.46 $ 35.49 $ 40.63 $ 33.57 $ 31.75
============== ============= ============== ============= ==============
Distributions $ 12.50 $ 12.50 $ 12.50 $ 12.50 $ 12.50
============== ============= ============== ============= ==============
OTHER OPERATING DATA
Net cash provided by operating
activities $ 1,173,000 $ 1,446,400 $ 1,505,100 $ 1,397,200 $ 1,339,700
Net cash used in investing activities (465,200) (876,100) (2,198,400) (806,800) (643,000)
Net cash used in financing activities (378,000) (378,000) (378,000) (378,000) (378,000)
EBITDA (1) 1,212,800 1,272,100 1,427,400 1,415,100 1,357,900
EBITDA to revenues 46.6% 45.5% 47.7% 44.8% 42.4%
Capital expenditures $ 408,200 $ 869,300 $ 2,182,700 $ 794,100 $ 627,900
As of December 31,
------------------------------------------------------------------------------------
BALANCE SHEET DATA 1995 1996 1997 1998 1999
-------------- ------------- -------------- ------------- --------------
Total assets $ 4,118,200 $ 4,918,400 $ 6,015,100 $ 6,555,700 $ 7,096,500
General partners' deficit (35,700) (28,800) (20,300) (13,900) (8,100)
Limited partners' capital 3,855,300 4,543,500 5,385,600 6,016,400 6,592,600
- ----------
</TABLE>
(1) EBITDA is calculated as operating income before depreciation and
amortization. Based on our experience in the cable television industry, we
believe that EBITDA and related measures of cash flow serve as important
financial analysis tools for measuring and comparing cable television companies
in several areas, such as liquidity, operating performance and leverage. EBITDA
is not a measurement determined under generally accepted accounting principles
("GAAP") and does not represent cash generated from operating activities in
accordance with GAAP. You should not consider EBITDA as an alternative to net
income as an indicator of financial performance or as an alternative to cash
flows as a measure of liquidity. In addition, our definition of EBITDA may not
be identical to similarly titled measures used by other companies.
-19-
<PAGE>
Item 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
Introduction
- ------------
The 1992 Cable Act required the Federal Communications
Commission to, among other things, implement extensive regulation of the rates
charged by cable television systems for basic and programming service tiers,
installation, and customer premises equipment leasing. Compliance with those
rate regulations has had a negative impact on our revenues and cash flow. The
1996 Telecommunications Act substantially changed the competitive and regulatory
environment for cable television and telecommunications service providers. Among
other changes, the 1996 Telecommunications Act ended the regulation of cable
programming service tier rates on March 31, 1999. There can be no assurance as
to what, if any, further action may be taken by the FCC, Congress or any other
regulatory authority or court, or their effect on our business. Accordingly, our
historical financial results as described below are not necessarily indicative
of future performance.
This annual report includes certain forward-looking statements
regarding, among other things, our future results of operations, regulatory
requirements, competition, capital needs and general business conditions
applicable to the partnership. Such forward-looking statements involve risks and
uncertainties including, without limitation, the uncertainty of legislative and
regulatory changes and the rapid developments in the competitive environment
facing cable television operators such as the partnership, as discussed more
fully elsewhere in this Report.
RESULTS OF OPERATIONS
1999 Compared to 1998
Our revenues increased from $3,158,400 to $3,200,400, or by
1.3%, for the year ended December 31, 1999 compared to 1998. Of the $42,000
increase, $71,200 was due to increases in regulated service rates we implemented
in 1999. The increase was partially offset by a $15,500 decrease due to
decreases in the number of subscriptions for basic service and a $13,700
decrease in other revenue producing items. As of December 31, 1999, we had
approximately 7,100 basic subscribers and 1,400 premium service units.
Our service costs increased from $902,700 to $987,100, or by
9.3%, for the year ended December 31, 1999 compared to 1998. Service costs
represent costs directly attributable to providing cable services to customers.
The increase was primarily due to increases in programming fees. Programming
expense increased primarily due to increases in rates charged by program
suppliers and due to channel additions in our Taylorville, Illinois cable
system.
Our general and administrative expenses increased from
$343,300 to $359,700, or by 4.8%, for the year ended December 31, 1999 compared
to 1998, primarily due to increases in insurance premiums and customer billing
expenses.
Our management fees and reimbursed expenses decreased from
$497,300 to $495,700, or by less than 1.0%, for the year ended December 31, 1999
compared to 1998. Management fees increased in direct relation to increased
revenues as described above. Reimbursed expenses decreased due to lower
allocated personnel costs.
Our depreciation and amortization expense increased from
$466,700 to $472,400, or by 1.2%, for the year ended December 31, 1999 compared
to 1998, primarily due to the rebuild of our plant in Taylorville, Illinois.
Depreciation expense increased as portions of the system rebuild were placed
into service.
-20-
<PAGE>
Our operating income decreased from $948,400 to $885,500, or
by 6.6%, for the year ended December 31, 1999 compared to 1998, primarily due to
increases in programming fees and insurance premiums as described above.
Our interest income, net of interest expense, increased from
$66,800 to $74,500, or by 11.5%, for the year ended December 31, 1999 compared
to 1998, primarily due to higher average cash balances available for investment.
Due to the factors described above, our net income decreased
from $1,015,200 to $960,000, or by 5.4%, for the year ended December 31, 1999
compared to 1998.
EBITDA is calculated as operating income before depreciation
and amortization. See footnote 1 to "Selected Financial Data." EBITDA as a
percentage of revenues decreased from 44.8% during 1998 to 42.4% in 1999. The
decrease was primarily caused by higher programming fees and insurance premiums
as described above. EBITDA decreased from $1,415,100 to $1,357,900, or by 4.0%,
as a result.
1998 Compared to 1997
Our revenues increased from $2,994,500 to $3,158,400, or by
5.5%, for the year ended December 31, 1998 compared to 1997. Of the $163,900
increase, $112,500 was due to increases in regulated service rates that we
implemented in 1997, $48,100 was due to increases in other revenue producing
items, including charges for franchise fees that the Partnership is permitted to
pass through to its customers, and $3,300 was due to increases in the number of
subscriptions for basic service. As of December 31, 1998, we had approximately
7,100 basic subscribers and 1,400 premium service units.
Our service costs increased from $846,300 to $902,700, or by
6.7%, for the year ended December 31, 1998 compared to 1997. Service costs
represent costs directly attributable to providing cable services to customers.
The increase was primarily due to increases in programming fees. Programming
expense increased primarily due to increases in rates charged by program
suppliers.
Our general and administrative expenses increased from
$248,000 to $343,300, or by 38.4%, for the year ended December 31, 1998 compared
to 1997, primarily due to increases in marketing costs, audit fees and bad debt
expense.
Management fees and reimbursed expenses increased from
$472,800 to $497,300, or by 5.2%, for the year ended December 31, 1998 compared
to 1997. Management fees increased in direct relation to increased revenues as
described above. Reimbursed expenses increased due to higher allocated personnel
costs resulting from staff additions.
Depreciation and amortization expense increased from $326,000
to $466,700, or by 43.2%, for the year ended December 31, 1998 compared to 1997,
primarily due to the rebuild of our plant in Taylorville, Illinois. Depreciation
expense increased as portions of the system rebuild were placed into service.
Our operating income decreased from $1,101,400 to $948,400, or
by 13.9%, for the year ended December 31, 1998 compared to 1997, principally due
to increases in depreciation expense and programming fees as described above.
Our interest income, net of interest expense, decreased from
$127,200 to $66,800, or by 47.5%, for the year ended December 31, 1998 compared
to 1997, primarily due to lower average cash balances available for investment.
Due to the factors described above, our net income decreased
from $1,228,600 to $1,015,200, or by 17.4%, for the year ended December 31, 1998
compared to 1997.
-21-
<PAGE>
EBITDA is calculated as operating income before depreciation
and amortization. See footnote 1 to "Selected Financial Data." EBITDA as a
percentage of revenues decreased from 47.7% during 1997 to 44.8% in 1998. The
decrease was primarily caused by higher programming fees and marketing expenses
as described above. EBITDA decreased from $1,427,400 to $1,415,100, or by less
than 1.0%, as a result.
Distributions to Partners
Partnership operations generated income exclusive of
depreciation and amortization of $1,554,600, $1,481,900 and $1,453,200 in 1997,
1998 and 1999, respectively. As provided in the partnership agreement,
distributions to partners are funded from such amounts after providing for
working capital and other liquidity requirements, including debt service and
capital expenditures not otherwise funded by borrowings. In each of 1997, 1998
and 1999, the partnership paid distributions of $378,000 to its partners.
LIQUIDITY AND CAPITAL RESOURCES
Our primary objective, having invested net offering proceeds
in cable television systems, is to distribute to our partners all available cash
flow from operations and proceeds from the sale of cable systems, if any, after
providing for expenses and capital requirements relating to the expansion,
improvement and upgrade of its cable systems.
In accordance with the partnership agreement, the corporate
general partner has implemented a plan for liquidating the partnership. In
connection with that strategy, the corporate general partner has entered into an
agreement with a cable broker to market the partnership's cable systems to third
parties. Should the partnership receive offers from third parties for such
assets, the corporate general partner will prepare a proxy for submission to the
limited partners for the purpose of approving or disapproving such sale. Should
such a sale be approved, the corporate general partner will proceed to liquidate
the partnership following the settlement of all final liabilities of the
partnership. We can give no assurance, however, that we will be able to generate
a sale of the partnership's cable assets.
At December 31, 1999, the partnership had no debt outstanding.
The partnership relies upon cash flow from operations to meet operating
requirements and fund necessary capital expenditures. Although the partnership
currently has a significant cash balance, there can be no assurance that the
partnership's cash flow will be adequate to meet its future liquidity
requirements. The partnership has completed the rebuild of its Taylorville,
Illinois and neighboring communities cable system at a total cost of
approximately $3.5 million under a provision of its franchise agreement. Rebuild
construction costs approximated $144,000 during the year ended December 31,
1999. Other capital expenditures in 1999 included approximately $223,300 for the
improvement and upgrade of other assets. The partnership also upgraded its
system in the community of Gillespie, Illinois under a provision of its
franchise agreement. Expenditures for the digital upgrade were approximately
$118,000. Additionally, we will upgrade our cable system in Litchfield, Illinois
in 2000 at an estimated cost of approximately $1.0 million, which is required to
be completed by January, 2001 under a provision of the franchise agreement.
Other capital expenditures budgeted for 2000 total approximately $552,100 for
the improvement and upgrade of other assets. As a result of these planned
capital expenditures, the partnership intends, if possible, to maintain cash
reserves.
On September 30, 1997, Enstar Finance Company, LLC ("EFC"), a
subsidiary of the corporate general partner, obtained a secured bank facility of
$35 million from two agent banks in order to obtain funds that would in turn be
advanced to us and certain of the other partnerships managed by the corporate
general partner. Our maximum loan commitment was approximately $799,600 through
November 12, 1999. After that date, we have no commitment available under the
EFC facility, which was reduced to $15 million.
We paid distributions totaling $378,000 during the year ended
December 31, 1999, and expect to continue to pay distributions at this level
during 2000. There can, however, be no assurances regarding the level, timing or
continuation of future distributions.
-22-
<PAGE>
Beginning in August 1997, the corporate general partner
elected to self-insure our cable distribution plant and subscriber connections
against property damage as well as possible business interruptions caused by
such damage. The decision to self-insure was made due to significant increases
in the cost of insurance coverage and decreases in the amount of insurance
coverage available.
In October 1998, Falcon Communications, L.P. reinstated third
party insurance coverage for all of the cable television properties owned or
managed by it to cover damage to cable distribution plant and subscriber
connections and against business interruptions resulting from such damage. This
coverage is subject to a significant annual deductible which applies to all of
the cable television properties owned or formerly managed by FCLP through
November 12, 1999, and currently managed by Charter, including those of the
partnership.
All of our subscribers are served by our system in
Taylorville, Illinois and neighboring communities. Significant damage to the
system due to seasonal weather conditions or other events could have a material
adverse effect on our liquidity and cash flows. We continue to purchase
insurance coverage in amounts our management views as appropriate for all other
property, liability, automobile, workers' compensation and other types of
insurable risks.
We have not experienced any system failures or other
disruptions caused by Year 2000 problems since January 1, 2000 through the date
of this report, and do not anticipate that we will encounter any Year 2000
problems going forward. We spent approximately $50,300 in the fourth quarter of
1999 to complete our preparation for the arrival of January 1, 2000 with respect
to the Year 2000 date change. Such costs will not be incurred in the future.
1999 vs. 1998
Our operating activities provided $57,500 less cash in 1999
than in 1998. Changes in receivables, prepaid expenses and other assets used
$63,400 more cash in 1999 due to differences in the timing of receivable
collections and in the payment of prepaid expenses. We used $55,400 less cash to
pay liabilities owed to affiliates and third party creditors in 1999 than in
1998 due to differences in the timing of payments.
We used $163,400 less cash in investing activities during 1999
than in 1998, due to a $166,200 decrease in expenditures for tangible assets
partially offset by a $2,800 increase in spending for intangible assets.
1998 vs. 1997
Our operating activities provided $107,900 less cash in 1998
than in 1997. We used $342,700 more cash to pay liabilities owed to affiliates
and third party creditors in 1998 than in 1997 due to differences in the timing
of payments. Changes in receivables, prepaid expenses and other assets used
$307,500 less cash in 1998 due to differences in the timing of receivable
collections and in the payment of prepaid expenses.
We used $1,391,600 less cash in investing activities during
1998 than in 1997, due to a $1,388,600 decrease in expenditures for tangible
assets and a $3,000 decrease in spending for intangible assets.
Inflation
- ---------
Certain of our expenses, such as those for wages and benefits,
equipment repair and replacement, and billing and marketing generally increase
with inflation. However, we do not believe that our financial results have been,
or will be, adversely affected by inflation in a material way, provided that we
are able to increase our service rates periodically, of which there can be no
assurance. See "Legislation and Regulation."
-23-
<PAGE>0
Item 7(A). QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
We are not exposed to material market risks associated with
financial instruments.
Item 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The financial statements and related financial information
required to be filed hereunder are indexed on Page F-1.
Item 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING
AND FINANCIAL DISCLOSURE
None.
-24-
<PAGE>
PART III
Item 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The general partners of the partnership may be considered, for
certain purposes, the functional equivalents of directors and executive
officers. The corporate general partner is Enstar Communications Corporation,
and Robert T. Graff, Jr. is the Individual General Partner. As part of Falcon
Cablevision's September 30, 1988 acquisition of the corporate general partner,
Falcon Cablevision received an option to acquire Mr. Graff's interest as
Individual General Partner of the partnership and other affiliated cable limited
partnerships that he previously co-sponsored with the corporate general partner,
and Mr. Graff received the right to cause Falcon Cablevision to acquire such
interests. These arrangements were modified and extended in an amendment dated
September 10, 1993 pursuant to which, among other things, the corporate general
partner obtained the option to acquire Mr. Graff's interest in lieu of the
purchase right described above which had been previously granted to Falcon
Cablevision. Since its incorporation in Georgia in 1982, the corporate general
partner has been engaged in the cable/telecommunications business, both as a
general partner of 15 limited partnerships formed to own and operate cable
television systems and through a wholly-owned operating subsidiary. As of
December 31, 1999, the corporate general partner managed cable television
systems serving approximately 81,100 basic subscribers.
Following the acquisition of the corporate general partner in
November 1999 by a Charter Communications-controlled entity, the directors and
executive officers of the corporate general partner have been changed to the
persons named below all of whom have their principal employment in a comparable
position with Charter Communications, Inc.:
<TABLE>
<CAPTION>
NAME POSITION
- ---- --------
<S> <C>
Jerald L. Kent Director, President and Chief Executive Officer
David G. Barford Senior Vice President of Operations - Western Division
Mary Pat Blake Senior Vice President - Marketing and Programming
Eric A. Freesmeier Senior Vice President - Administration
Thomas R. Jokerst Senior Vice President - Advanced Technology Development
Kent D. Kalkwarf Senior Vice President and Chief Financial Officer
Ralph G. Kelly Senior Vice President - Treasurer
David L. McCall Senior Vice President of Operations - Eastern Division
John C. Pietri Senior Vice President - Engineering
Michael E. Riddle Senior Vice President and Chief Information Officer
Steven A. Schumm Executive Vice President, Assistant to the President
Curtis S. Shaw Senior Vice President, General Counsel and Secretary
Steven E. Silva Senior Vice President - Corporate Development and Technology
</TABLE>
Except for Mr. Riddle, our executive officers were appointed
to their position following our formation in July 1999, and became employees of
Charter Communications, Inc., upon completion of our initial public offering.
Prior to that time, they were employees of Charter Investment, Inc. All of our
executive officers simultaneously serve in the same capacity with Charter
Investment, Inc.
JERALD L. KENT, 43 Director, President and Chief Executive Officer. Mr. Kent
co-founded Charter Communications Investment, Inc. in 1993. Mr. Kent was
executive vice president and chief financial officer of Cencom Cable Associates,
Inc. Mr. Kent, a certified public accountant, attained the position of tax
manager with Arthur Andersen LLP. Mr. Kent received a bachelor's degree and
M.B.A. from Washington University.
-25-
<PAGE>
DAVID G. BARFORD, 41 Senior Vice President of Operations - Western Division.
Prior to joining Charter Communications Investment, Inc. in 1995, Mr. Barford
held various senior marketing and operating roles during nine years at Comcast
Cable Communications, Inc. He received a B.A. from California State University,
Fullerton, and an M.B.A. from National University.
MARY PAT BLAKE, 44 Senior Vice President - Marketing and Programming. Prior to
joining Charter Communications Investment, Inc. in 1995, Ms. Blake was active in
the emerging business sector and formed Blake Investments, Inc. in 1993. She has
18 years of experience with senior management responsibilities in marketing,
sales, finance, systems, and general management. Ms. Blake received a B.S. from
the University of Minnesota and an M.B.A. from the Harvard Business School.
ERIC A. FREESMEIER, 46 Senior Vice President - Administration. From 1986 until
joining Charter Investment, Inc. in 1998, Mr. Freesmeier served in various
executive management positions at Edison Brothers Stores, Inc. Earlier he held
management and executive positions at Montgomery Ward. Mr. Freesmeier holds
bachelor's degrees from the University of Iowa and a master's degree from
Northwestern University's Kellogg Graduate School of Management.
THOMAS R. JOKERST, 50 Senior Vice President - Advanced Technology Development.
Mr. Jokerst joined Charter Investment, Inc. in 1994. Previously he served as a
vice president of Cable Television Laboratories and as a regional director of
engineering for Continental Cablevision. He is a graduate of Ranken Technical
Institute and of Southern Illinois University.
KENT D. KALKWARF, 40 Senior Vice President and Chief Financial Officer. Prior to
joining Charter Investment, Inc. in 1995, Mr. Kalkwarf was employed for 13 years
by Arthur Andersen LLP where he attained the position of senior tax manager. He
has extensive experience in cable, real estate, and international tax issues.
Mr. Kalkwarf has a B.S. from Illinois Wesleyan University and is a certified
public accountant.
RALPH G. KELLY, 43 Senior Vice President - Treasurer. Prior to joining Charter
Investment, Inc. in 1993, Mr. Kelly was controller and then treasurer of Cencom
Cable Associates. He left Charter in 1994, to become chief financial officer of
CableMaxx, Inc., and returned in 1996. Mr. Kelly received his bachelor's degree
in accounting from the University of Missouri - Columbia and his M.B.A. from
Saint Louis University.
DAVID L. MCCALL, 44 Senior Vice President of Operations - Eastern Division.
Prior to joining Charter Investment, Inc. in 1995, Mr. McCall was associated
with Crown Cable and its predecessor company, Cencom Cable Associates, Inc. from
1983 to 1994. Earlier he was system manager of Coaxial Cable Developers. Mr.
McCall has served as a director of the South Carolina Cable Television
Association for the past 10 years.
JOHN C. PIETRI, 50 Senior Vice President - Engineering. Prior to joining Charter
Investment, Inc. in 1998, Mr. Pietri was with Marcus Cable for eight years, most
recently serving as senior vice president and chief technical officer. Earlier
he was in operations with West Marc Communications and Minnesota Utility
Contracting. Mr. Pietri attended the University of Wisconsin-Oshkosh.
MICHAEL E. RIDDLE, 41 Senior Vice President and Chief Information Officer. Prior
to joining Charter Investment, Inc. in 1999, Mr. Riddle was director, applied
technologies of Cox Communications for four years. Prior to that, he held
technical and management positions during four years at Southwestern Bell and
its subsidiaries. Mr. Riddle attended Fort Hays State University.
STEVEN A. SCHUMM, 47 Executive Vice President and Assistant to the President.
Prior to joining Charter Investment, Inc. in 1998, Mr. Schumm was managing
partner of the St. Louis office of Ernst & Young LLP, where he was a partner for
14 of 24 years. He served as one of 10 members of the firm's National Tax
Committee. Mr. Schumm earned a B.S. degree from Saint Louis University.
CURTIS S. SHAW, 51 Senior Vice President, General Counsel and Secretary. Prior
to joining Charter Investment, Inc. in 1997, Mr. Shaw served as corporate
counsel to NYNEX since 1988. He has over 25 years of experience as a corporate
lawyer, specializing in mergers and acquisitions, joint ventures, public
offerings, financings, and federal securities and antitrust law. Mr. Shaw
received a B.A. from Trinity College and a J.D. from Columbia University School
of Law.
-26-
<PAGE>
STEVEN E. SILVA, 40 Senior Vice President - Corporate Development and
Technology. From 1983 until joining Charter Investment, Inc. in 1995, Mr. Silva
served in various management positions at U.S. Computer Services, Inc. He is a
member of the board of directors of High Speed Access Corp.
The sole director of the corporate general partner is elected
to a one-year term at the annual shareholder meeting to serve until the next
annual shareholder meeting and thereafter until his respective successor is
elected and qualified. Officers are appointed by and serve at the discretion of
the directors of the corporate general partner.
Item 11. EXECUTIVE COMPENSATION
Management Fee
- --------------
The partnership has a management agreement with Enstar Cable
Corporation, a wholly owned subsidiary of the corporate general partner,
pursuant to which Enstar Cable manages our systems and provides all operational
support for our activities. For these services, Enstar Cable receives a
management fee of 5% of our gross revenues, excluding revenues from the sale of
cable television systems or franchises, calculated and paid monthly. In
addition, we reimburse Enstar Cable for operating expenses incurred by Enstar
Cable in the day-to-day operation of our cable systems. The management agreement
also requires us to indemnify Enstar Cable (including its officers, employees,
agents and shareholders) against loss or expense, absent negligence or
deliberate breach by Enstar Cable of the management agreement. The management
agreement is terminable by the partnership upon 60 days written notice to Enstar
Cable. Enstar Cable had, prior to November 12, 1999, engaged Falcon
Communications, L.P. to provide management services for us and paid Falcon
Communications, L.P. a portion of the management fees it received in
consideration of such services and reimbursed Falcon Communications, L.P. for
expenses incurred by Falcon Communications, L.P. on its behalf. Subsequent to
November 12, 1999, Charter, as successor-by-merger to Falcon Communications,
L.P., has provided such services and received such payments. Additionally, we
receive system operating management services from affiliates of Enstar Cable in
lieu of directly employing personnel to perform those services. We reimburse the
affiliates for our allocable share of their operating costs. The corporate
general partner also performs supervisory and administrative services for the
partnership, for which it is reimbursed.
For the fiscal year ended December 31, 1999, Enstar Cable
charged us management fees of approximately $160,000 and reimbursed expenses of
$335,700. We also reimbursed affiliates approximately $18,200 for system
operating management services. In addition, programming services were purchased
through Falcon Communications, L.P. and, subsequent to November 12, 1999,
through Charter. We paid Falcon Communications, L.P. and Charter approximately
$780,800 for these programming services for fiscal year 1999.
Participation in Distributions
- ------------------------------
The general partners are entitled to share in distributions
from, and profit and losses in, the partnership. See Item 5., "Market for
Registrant's Equity Securities and Related Security Holder Matters."
-27-
<PAGE>
Item 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
As of March 3, 2000, the only persons known by the Partnership
to own beneficially or that may be deemed to own beneficially more than 5% of
the units were:
<TABLE>
<CAPTION>
Name and Address Amount and Nature of Percent
Title of Class of Beneficial Owner Beneficial Ownership of Class
- ------------------------------------- ------------------------------------- --------------------------- -----------
<S> <C> <C>
Units of Limited Partnership Everest Cable Investors LLC 1,545.5(1) 5.2%
Interest 199 South Los Robles Ave.,
Suite 440
Pasadena, CA 91101
</TABLE>
(1) As reported to us by our transfer agent, Gemisys Corporation.
The corporate general partner is a wholly-owned subsidiary of
Charter Communications Holding Company, LLC. Charter Communications Holding
Company, LLC, through a subsidiary, owns a 100% interest in CC VII. As of March
30, 2000, Charter Communications Holding Company, LLC was beneficially
controlled by Paul G. Allen through his ownership and control of Charter
Communications, Inc., Charter Investment, Inc. and Vulcan Cable III, Inc.
Item 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Conflicts of Interest
- ---------------------
On November 12, 1999, Charter acquired ownership of Enstar
Communications Corporation from Falcon Holding Group, L.P. and assumed the
management services operations of Falcon Communications, L.P. Charter now
manages the operations of the partnerships of which Enstar Communications
Corporation is the corporate general partner, including the partnership.
Commencing November 13, 1999, Charter began receiving management fees and
reimbursed expenses which had previously been paid by the corporate general
partner to Falcon Communications, L.P.
The partnership relies upon the corporate general partner and
certain of its affiliates to provide general management services, system
operating services, supervisory and administrative services and programming. See
Item 11., "Executive Compensation" and Item 7., "Management's Discussion and
Analysis of Financial Condition and Results of Operations." The executive
officers of the corporate general partner have their personal employment with
Charter Communications, Inc., and, as a result, are involved in the management
of other cable ventures. Charter expects to continue to enter into other cable
ventures. These affiliations subject Charter and the corporate general partner
and their management to conflicts of interest. These conflicts of interest
relate to the time and services that management will devote to the partnership's
affairs.
Fiduciary Responsibility and Indemnification of the General Partners
- --------------------------------------------------------------------
A general partner is accountable to a limited partnership as a
fiduciary and consequently must exercise good faith and integrity in handling
partnership affairs. Where the question has arisen, some courts have held that a
limited partner may institute legal action on his own behalf and on behalf of
all other similarly situated limited partners (a class action) to recover
damages for a breach of fiduciary duty by a general partner, or on behalf of the
partnership (a partnership derivative action) to recover damages from third
parties. Section 14-9-1001 of the Georgia Revised Uniform Limited Partnership
Act also allows a partner to maintain a partnership derivative action if general
partners with authority to do so have refused to bring the action or if an
effort to cause those general partners to bring the action is not likely to
succeed. Some cases decided by federal courts have recognized the right of a
-28-
<PAGE>
limited partner to bring such actions under the Securities and Exchange
Commission's Rule 10b-5 for recovery of damages resulting from a breach of
fiduciary duty by a general partner involving fraud, deception or manipulation
in connection with the limited partner's purchase or sale of partnership units.
The partnership agreement provides that the general partners
will be indemnified by the Partnership for acts performed within the scope of
their authority under the partnership agreement if the general partners (i)
acted in good faith and in a manner that it reasonably believed to be in, or not
opposed to, the best interests of the Partnership and the partners, and (ii) had
no reasonable grounds to believe that their conduct was negligent. In addition,
the partnership agreement provides that the General Partners will not be liable
to the Partnership or its limited partners for errors in judgment or other acts
or omissions not amounting to negligence or misconduct. Therefore, limited
partners will have a more limited right of action than they would have absent
such provisions. In addition, we maintain, at our expense and in such reasonable
amounts as the corporate general partner determines, a liability insurance
policy which insures the corporate general partner, Charter and its affiliates
(which include CC VII), officers and directors and persons determined by the
corporate general partner, against liabilities which they may incur with respect
to claims made against them for wrongful or allegedly wrongful acts, including
certain errors, misstatements, misleading statements, omissions, neglect or
breaches of duty. To the extent that the exculpatory provisions purport to
include indemnification for liabilities arising under the Securities Act of
1933, it is the opinion of the Securities and Exchange Commission that such
indemnification is contrary to public policy and therefore unenforceable.
-29-
<PAGE>
PART IV
Item 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
(a) 1. Financial Statements
Reference is made to the Index to Financial
Statements on page F-1.
(a) 2. Financial Statement Schedules
Reference is made to the Index to Financial
Statements on page F-1.
(a) 3. Exhibits
Reference is made to the Index to Exhibits
on Page E-1.
(b) Reports on Form 8-K
None.
-30-
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15 (d) of the
Securities Exchange Act of 1934, the Registrant has duly caused this report to
be signed on its behalf by the undersigned, thereunto duly authorized, on March
30, 2000.
ENSTAR INCOME PROGRAM II-1, L.P.
By: Enstar Communications Corporation,
General Partner
By: /s/ Jerald L. Kent
--------------------
Jerald L. Kent
Director, President and
Chief Executive Officer
Pursuant to the requirements of the Securities Exchange Act of
1934, this report has been signed by the following persons on behalf of the
Registrant and in the capacities indicated on the 30th day of March 2000.
<TABLE>
<CAPTION>
Signatures Title(*)
- --------------------------- -----------------------------------------------------
<S> <C>
/s/ Jerald L. Kent Director, President and Chief Executive Officer
- -------------------- (Principal Executive Officer)
Jerald L. Kent
/s/ Kent D. Kalkwarf Senior Vice President and Chief Financial Officer
- -------------------- (Principal Financial Officer and
Kent D. Kalkwarf Principal Accounting Officer)
</TABLE>
(*) Indicates position(s) held with Enstar Communications Corporation, the
Corporate General Partner of the Registrant.
-31-
<PAGE>
INDEX TO FINANCIAL STATEMENTS
PAGE
----
Report of Independent Auditors F-2
Balance Sheets - December 31, 1998 and 1999 F-3
Financial Statements for each of
the three years in the period
ended December 31, 1999:
Statements of Operations F-4
Statements of Partnership Capital (Deficit) F-5
Statements of Cash Flows F-6
Notes to Financial Statements F-7
All schedules have been omitted because they are either not required, not
applicable or the information has otherwise been supplied.
F-1
<PAGE>
REPORT OF INDEPENDENT AUDITORS
Partners
Enstar Income Program II-1, L.P. (A Georgia Limited Partnership)
We have audited the accompanying balance sheets of Enstar Income Program II-1,
L.P. (A Georgia Limited Partnership) as of December 31, 1998 and 1999, and the
related statements of operations, partnership capital (deficit), and cash flows
for each of the three years in the period ended December 31, 1999. These
financial statements are the responsibility of the Partnership's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with auditing standards generally accepted
in the United States. Those standards require that we plan and perform the audit
to obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Enstar Income Program II-1,
L.P. at December 31, 1998 and 1999, and the results of its operations and its
cash flows for each of the three years in the period ended December 31, 1999, in
conformity with accounting principles generally accepted in the United States.
/s/ ERNST & YOUNG LLP
Los Angeles, California
March 24, 2000
F-2
<PAGE>
ENSTAR INCOME PROGRAM II-1, L.P.
BALANCE SHEETS
================================
<TABLE>
<CAPTION>
December 31,
-------------------------------------
1998 1999
----------------- ----------------
ASSETS:
<S> <C> <C>
Cash and cash equivalents $ 1,990,700 $ 2,309,000
Accounts receivable, less allowance of $5,100 and
$2,000 for possible losses 59,800 57,600
Prepaid expenses and other assets 24,100 77,800
Property, plant and equipment, less accumulated
depreciation and amortization 4,414,300 4,585,500
Franchise cost, less accumulated
amortization of $37,000 and $47,900 61,300 65,900
Deferred charges, net 5,500 700
----------------- ----------------
$ 6,555,700 $ 7,096,500
================= ================
LIABILITIES AND PARTNERSHIP CAPITAL
-----------------------------------
LIABILITIES:
Accounts payable $ 283,300 $ 267,200
Due to affiliates 269,900 244,800
----------------- ----------------
TOTAL LIABILITIES 553,200 512,000
----------------- ----------------
COMMITMENTS AND CONTINGENCIES
PARTNERSHIP CAPITAL (DEFICIT):
General partners (13,900) (8,100)
Limited partners 6,016,400 6,592,600
----------------- ----------------
TOTAL PARTNERSHIP CAPITAL 6,002,500 6,584,500
----------------- ----------------
$ 6,555,700 $ 7,096,500
================= ================
</TABLE>
See accompanying notes to financial statements.
F-3
<PAGE>
ENSTAR INCOME PROGRAM II-1, L.P.
STATEMENTS OF OPERATIONS
================================
<TABLE>
<CAPTION>
Year Ended December 31,
-------------------------------------------------
1997 1998 1999
------------- -------------- --------------
<S> <C> <C> <C>
REVENUES $ 2,994,500 $ 3,158,400 $ 3,200,400
------------- -------------- --------------
OPERATING EXPENSES:
Service costs 846,300 902,700 987,100
General and administrative expenses 248,000 343,300 359,700
General Partner management fees
and reimbursed expenses 472,800 497,300 495,700
Depreciation and amortization 326,000 466,700 472,400
------------- -------------- --------------
1,893,100 2,210,000 2,314,900
------------- -------------- --------------
Operating income 1,101,400 948,400 885,500
------------- -------------- --------------
OTHER INCOME (EXPENSE):
Interest expense (1,600) (15,100) (19,400)
Interest income 128,800 81,900 93,900
------------- -------------- --------------
127,200 66,800 74,500
------------- -------------- --------------
NET INCOME $ 1,228,600 $ 1,015,200 $ 960,000
============= ============== ==============
Net income allocated to General Partners $ 12,300 $ 10,200 $ 9,600
============= ============== ==============
Net income allocated to Limited Partners $ 1,216,300 $ 1,005,000 $ 950,400
============= ============== ==============
NET INCOME PER UNIT OF LIMITED
PARTNERSHIP INTEREST $ 40.63 $ 33.57 $ 31.75
============= ============== ==============
WEIGHTED AVERAGE LIMITED
PARTNERSHIP UNITS OUTSTANDING
DURING THE YEAR 29,936 29,936 29,936
============= ============== ==============
</TABLE>
See accompanying notes to financial statements.
F-4
<PAGE>
ENSTAR INCOME PROGRAM II-1, L.P.
STATEMENTS OF PARTNERSHIP CAPITAL (DEFICIT)
================================
<TABLE>
<CAPTION>
General Limited
Partners Partners Total
------------- ------------- -------------
PARTNERSHIP CAPITAL (DEFICIT),
<S> <C> <C> <C>
January 1, 1997 $ (28,800) $ 4,543,500 $ 4,514,700
Distributions to partners (3,800) (374,200) (378,000)
Net income for year 12,300 1,216,300 1,228,600
------------- ------------- -------------
PARTNERSHIP CAPITAL (DEFICIT),
December 31, 1997 (20,300) 5,385,600 5,365,300
Distributions to partners (3,800) (374,200) (378,000)
Net income for year 10,200 1,005,000 1,015,200
------------- ------------- -------------
PARTNERSHIP CAPITAL (DEFICIT),
December 31, 1998 (13,900) 6,016,400 6,002,500
Distributions to partners (3,800) (374,200) (378,000)
Net income for year 9,600 950,400 960,000
------------- ------------- -------------
PARTNERSHIP CAPITAL (DEFICIT),
December 31, 1999 $ (8,100) $ 6,592,600 $ 6,584,500
============= ============= =============
</TABLE>
See accompanying notes to financial statements.
F-5
<PAGE>
ENSTAR INCOME PROGRAM II-1, L.P.
STATEMENTS OF CASH FLOWS
================================
<TABLE>
<CAPTION>
Year Ended December 31,
----------------------------------------------------
1997 1998 1999
--------------- -------------- --------------
Cash flows from operating activities:
<S> <C> <C> <C>
Net income $ 1,228,600 $ 1,015,200 $ 960,000
Adjustments to reconcile net income to
net cash provided by operating activities:
Depreciation and amortization 326,000 466,700 472,400
Increase (decrease) from changes in:
Accounts receivable, prepaid expenses
and other assets (295,600) 11,900 (51,500)
Accounts payable and due to affiliates 246,100 (96,600) (41,200)
--------------- -------------- --------------
Net cash provided by operating activities 1,505,100 1,397,200 1,339,700
--------------- -------------- --------------
Cash flows from investing activities:
Capital expenditures (2,182,700) (794,100) (627,900)
Increase in intangible assets (15,700) (12,700) (15,500)
--------------- -------------- --------------
Net cash used in investing activities (2,198,400) (806,800) (643,400)
--------------- -------------- --------------
Cash flows from financing activities:
Distributions to partners (378,000) (378,000) (378,000)
--------------- -------------- --------------
Net increase (decrease) in cash and cash equivalents (1,071,300) 212,400 318,300
Cash and cash equivalents at beginning of year 2,849,600 1,778,300 1,990,700
--------------- -------------- --------------
Cash and cash equivalents at end of year $ 1,778,300 $ 1,990,700 $ 2,309,000
=============== ============== ==============
</TABLE>
See accompanying notes to financial statements.
F-6
<PAGE>
ENSTAR INCOME PROGRAM II-1, L.P.
NOTES TO FINANCIAL STATEMENTS
================================
NOTE 1 - SUMMARY OF ACCOUNTING POLICIES
FORM OF PRESENTATION
Enstar Income Program II-1, L.P., a Georgia limited
partnership (the "Partnership"), owns and operates cable television systems in
rural areas of Illinois.
The financial statements do not give effect to any assets that
the partners may have outside of their interest in the Partnership, nor to any
obligations, including income taxes of the partners.
CASH EQUIVALENTS
For purposes of the statements of cash flows, the Partnership
considers all highly liquid debt instruments purchased with an initial maturity
of three months or less to be cash equivalents. The carrying value of cash and
cash equivalents approximates fair value due to the short maturity of these
instruments.
The Partnership has no cash equivalents at December 31, 1999.
PROPERTY, PLANT, EQUIPMENT AND DEPRECIATION AND AMORTIZATION
Property, plant and equipment are stated at cost. Direct costs
associated with installations in homes not previously served by cable are
capitalized as part of the distribution system, and reconnects are expensed as
incurred. For financial reporting, depreciation and amortization is computed
using the straight-line method over the following estimated useful lives:
Cable television systems 5-15 years
Vehicles 3 years
Furniture and equipment 5-7 years
Leasehold improvements Life of lease
FRANCHISE COST
The excess of cost over the fair values of tangible assets and
customer lists of cable television systems acquired represents the cost of
franchises. In addition, franchise cost includes capitalized costs incurred in
obtaining new franchises and the renewal of existing franchises. These costs are
amortized using the straight-line method over the lives of the franchises,
ranging up to 15 years. The Partnership periodically evaluates the amortization
periods of these intangible assets to determine whether events or circumstances
warrant revised estimates of useful lives. Costs relating to unsuccessful
franchise applications are charged to expense when it is determined that the
efforts to obtain the franchise will not be successful.
DEFERRED CHARGES
Deferred charges are amortized using the straight-line method
over two years.
F-7
<PAGE>
ENSTAR INCOME PROGRAM II-1, L.P.
NOTES TO FINANCIAL STATEMENTS
================================
NOTE 1 - SUMMARY OF ACCOUNTING POLICIES (Continued)
RECOVERABILITY OF ASSETS
The Partnership assesses on an ongoing basis the
recoverability of intangible and capitalized plant assets based on estimates of
future undiscounted cash flows compared to net book value. If the future
undiscounted cash flow estimate were less than net book value, net book value
would then be reduced to estimated fair value, which would generally approximate
discounted cash flows. The Partnership also evaluates the amortization periods
of intangible assets to determine whether events or circumstances warrant
revised estimates of useful lives.
REVENUE RECOGNITION
Revenues from customer fees, equipment rental and advertising
are recognized in the period that services are delivered. Installation revenue
is recognized in the period the installation services are provided to the extent
of direct selling costs. Any remaining amount is deferred and recognized over
the estimated average period that customers are expected to remain connected to
the cable television system.
INCOME TAXES
As a partnership, Enstar Income Program II-1, L.P. pays no
income taxes. All of the income, gains, losses, deductions and credits of the
Partnership are passed through to its partners. The basis in the Partnership's
assets and liabilities differs for financial and tax reporting purposes. At
December 31, 1999, the book basis of the Partnership's net assets exceeded its
tax basis by $1,766,200.
The accompanying financial statements, which are prepared in
accordance with generally accepted accounting principles, differ from the
financial statements prepared for tax purposes due to the different treatment of
various items as specified in the Internal Revenue Code. The net effect of these
accounting differences is that net income for 1999 in the financial statements
is $468,400 more than tax income of the Partnership for the same period, caused
principally by timing differences in depreciation expense.
ADVERTISING COSTS
All advertising costs are expensed as incurred.
EARNINGS PER UNIT OF LIMITED PARTNERSHIP INTEREST
Earnings and losses have been allocated 99% to the limited
partners and 1% to the general partners. Earnings and losses per unit of limited
partnership interest is based on the weighted average number of units
outstanding during the year. The General Partners do not own units of
partnership interest in the Partnership, but rather hold a participation
interest in the income, losses and distributions of the Partnership.
USE OF ESTIMATES
The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that affect the amounts reported in the financial statements and
accompanying notes. Actual results could differ from those estimates.
F-8
<PAGE>
ENSTAR INCOME PROGRAM II-1, L.P.
NOTES TO FINANCIAL STATEMENTS
================================
NOTE 1 - SUMMARY OF ACCOUNTING POLICIES (Continued)
RECLASSIFICATIONS
Certain prior year amounts have been reclassified to conform
to the 1999 presentation.
NOTE 2 - PARTNERSHIP MATTERS
The Partnership was formed in 1984 to acquire, construct,
improve, develop and operate cable television systems. The partnership agreement
provides for Enstar Communications Corporation (the "Corporate General Partner")
and Robert T. Graff, Jr. to be the general partners and for the admission of
limited partners through the sale of interests in the Partnership. The
Partnership raised capital of $7,500,000 (the maximum) during 1985.
On September 30, 1998, Falcon Holding Group, L.P. ("FHGLP")
acquired ownership of the Corporate General Partner from Falcon Cablevision.
Simultaneously with the closing of that transaction, FHGLP contributed all of
its existing cable television system operations to Falcon Communications, L.P.
("FCLP"), a California limited partnership and successor to FHGLP. FHGLP served
as the managing partner of FCLP, and the general partner of FHGLP was Falcon
Holding Group, Inc., a California corporation ("FHGI"). On November 12, 1999,
Charter Communications Holding Company, LLC, ("Charter"), acquired the ownership
of FCLP and the Corporate General Partner. The Corporate General Partner,
Charter and affiliated companies are responsible for the day-to-day management
of the Partnership and its operations.
The partnership agreement generally provides that all
partnership profits, gains, losses, credits, and cash distributions (all as
defined) from operations or liquidation be allocated 1% to the general partner
and 99% to the limited partners until the limited partners have received
distributions of cash flow from operations and/or cash flow from sales,
refinancing, or liquidation of systems equal to their initial investment. After
the limited partners have received cash flow equal to their initial investment,
the general partner will only receive a one percent allocation of cash flow from
liquidating a system until the limited partners have received an annual simple
interest return of at least 18% of their initial investment less any
distributions from previous system liquidations. Thereafter, allocations will be
made 15% to the general partner and 85% to the limited partners. All allocations
to individual limited partners will be based on their respective capital
accounts. Upon dissolution of the Partnership, any negative capital account
balances remaining after all allocations and distributions are made must be
funded by the respective partners.
Upon the disposition of substantially all of the Partnership's
assets, gains shall be allocated first to the limited partners having negative
capital account balances until their capital accounts are increased to zero,
next equally among the general partners until their capital accounts are
increased to zero, and thereafter as outlined in the preceding paragraph. Upon
dissolution of the Partnership, any negative capital account balances remaining
after all allocations and distributions are made must be funded by the
respective partners.
The partnership agreement limits the amount of debt the
Partnership may incur.
NOTE 3 - POTENTIAL SALE OF PARTNERSHIP ASSETS
In accordance with the partnership agreement, the Corporate
General Partner has implemented a plan for liquidating the Partnership. In
connection with that strategy, the Corporate General Partner has entered into an
agreement with a cable broker to market the Partnership's cable
systems to third parties. Should the Partnership receive offers from
third parties for such assets, the Corporate General Partner
F-9
<PAGE>
ENSTAR INCOME PROGRAM II-1, L.P.
NOTES TO FINANCIAL STATEMENTS
================================
NOTE 3 - POTENTIAL SALE OF PARTNERSHIP ASSETS (Continued)
will prepare a proxy for submission to the limited partners for the purpose of
approving or disapproving such sale. Should such a sale be approved, the
Corporate General Partner will proceed to liquidate the Partnership following
the settlement of its final liabilities. The financial statements do not reflect
any adjustments that may result from the outcome of this uncertainty. The
Corporate General Partner can give no assurance, however, that it will be able
to generate a sale of the Partnership's cable assets. The financial statements
do not reflect any adjustments that may result from the outcome of this
uncertainty.
NOTE 4 - PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment consist of:
December 31,
-----------------------------------
1998 1999
---------------- ----------------
Cable television systems $ 6,999,500 $ 7,454,500
Vehicles, furniture and equipment,
and leasehold improvements 338,900 474,900
---------------- ----------------
7,338,400 7,929,400
Less accumulated depreciation
and amortization (2,924,100) (3,343,900)
---------------- ----------------
$ 4,414,300 $ 4,585,500
================ ================
NOTE 5 - COMMITMENTS AND CONTINGENCIES
Pole rentals amounted to $26,200, $32,600 and $7,100 in 1997,
1998 and 1999, respectively. Rentals, other than pole rentals, charged to
operations amounted to $4,200, $4,300 and $7,100 in 1997, 1998 and 1999,
respectively. The Partnership is not individually committed under any lease
agreement for building space. A wholly-owned subsidiary of the Corporate General
Partner (the "Manager") provides management services to the Partnership and has
signed lease agreements for regional office space for which the Partnership is
charged its allocable portion.
Other commitments include approximately $1.0 million at
December 31, 1999 to begin an upgrade of the Partnership's Litchfield cable
system. The Partnership expects to complete the project by the required deadline
of January 1, 2001.
The Partnership is subject to regulation by various federal,
state and local government entities. The Cable Television Consumer Protection
and Competition Act of 1992 (the "1992 Cable Act") provides for, among other
things, federal and local regulation of rates charged for basic cable service,
cable programming service tiers ("CPSTs") and equipment and installation
services. Regulations issued in 1993 and significantly amended in 1994 by the
Federal Communications Commission (the "FCC") have resulted in changes in the
rates charged for the Partnership's cable services. The Partnership believes
that compliance with the 1992 Cable Act has had a significant negative impact on
its operations and cash flow. It also believes that any potential future
liabilities for refund claims or other related actions would not be material.
F-10
<PAGE>
ENSTAR INCOME PROGRAM II-1, L.P.
NOTES TO FINANCIAL STATEMENTS
================================
NOTE 5 - COMMITMENTS AND CONTINGENCIES (Continued)
The Telecommunications Act of 1996 (the "1996 Telecom Act") was signed into law
on February 8, 1996. As it pertains to cable television, the 1996 Telecom Act,
among other things, (i) ends the regulation of certain CPSTs in 1999; (ii)
expands the definition of effective competition, the existence of which
displaces rate regulation; (iii) eliminates the restriction against the
ownership and operation of cable systems by telephone companies within their
local exchange service areas; and (iv) liberalizes certain of the FCC's
cross-ownership restrictions.
Beginning in August 1997, the Corporate General Partner
elected to self-insure the Partnership's cable distribution plant and subscriber
connections against property damage as well as possible business interruptions
caused by such damage. The decision to self-insure was made due to significant
increases in the cost of insurance coverage and decreases in the amount of
insurance coverage available.
In October 1998, FCLP reinstated third party insurance
coverage for all of the cable television properties owned or managed by FCLP to
cover damage to cable distribution plant and subscriber connections and against
business interruptions resulting from such damage. This coverage is subject to a
significant annual deductible which applies to all of the cable television
properties formerly owned or managed by FCLP through November 12, 1999, and
currently managed by Charter.
All of the Partnership's subscribers are served by its system
in Taylorville, Illinois and neighboring communities. Significant damage to the
system due to seasonal weather conditions or other events could have a material
adverse effect on the Partnership's liquidity and cash flows. The Partnership
continues to purchase insurance coverage in amounts its management views as
appropriate for all other property, liability, automobile, workers' compensation
and other types of insurable risks.
In the state of Illinois, customers have filed a punitive
class action lawsuit on behalf of all persons residing in the state who are or
were customers of the Partnership's cable television service, and who have been
charged a fee for delinquent payment of their cable bill. The action challenges
the legality of the processing fee and seeks declaratory judgment, injunctive
relief and unspecified damages. At present, the Partnership is not able to
project the outcome of the action. All of the Partnership's basic subscribers
reside in Illinois where the claim has been filed.
NOTE 6 - EMPLOYEE BENEFIT PLAN
The Partnership participates in a cash or deferred profit
sharing plan (the "Profit Sharing Plan") sponsored by a subsidiary of the
Corporate General Partner, which covers substantially all of its employees. The
Profit Sharing Plan provides that each participant may elect to make a
contribution in an amount up to 15% of the participant's annual compensation
which otherwise would have been payable to the participant as salary. Prior to
1999, the Partnership's contribution to the Profit Sharing Plan, as determined
by management, was discretionary but could not exceed 15% of the annual
aggregate compensation (as defined) paid to all participating employees.
Effective January 1, 1999, the Profit Sharing Plan was amended, whereby the
Partnership would make an employer contribution equal to 100% of the first 3%
and 50% of the next 2% of the participants' contributions. A contribution of
$1,300 was made during 1999. There were no contributions charged against
operations for the Profit Sharing Plan in 1997 or 1998.
NOTE 7 - TRANSACTIONS WITH THE GENERAL PARTNERS AND AFFILIATES
The Partnership has a management and service agreement with
the Manager for a monthly management fee of 5% of gross receipts, as defined,
from the operations of the Partnership. Management fee expense was $149,700,
$157,900 and $160,000 during 1997, 1998 and 1999, respectively.
F-11
<PAGE>
ENSTAR INCOME PROGRAM II-1, L.P.
NOTES TO FINANCIAL STATEMENTS
================================
NOTE 7 - TRANSACTIONS WITH THE GENERAL PARTNERS AND AFFILIATES (Continued)
In addition to the monthly management fee, the Partnership
reimburses the Manager for direct expenses incurred on behalf of the Partnership
and for the Partnership's allocable share of operational costs associated with
services provided by the Manager. All cable television properties managed by the
Corporate General Partner and its subsidiaries are charged a proportionate share
of these expenses. Charter and its affiliates provide management services for
the Partnership. Such services were provided by FCLP and its affiliates prior to
November 12, 1999. Corporate office allocations and district office expenses are
charged to the properties served based primarily on the respective percentage of
basic customers or homes passed (dwelling units within a system) within the
designated service areas. The total amount charged to the Partnership for these
services was $323,100, $339,400 and $335,700 during 1997, 1998 and 1999,
respectively.
The Partnership also receives certain system operating
management services from an affiliate of the Corporate General Partner in
addition to the Manager, due to the fact that there are no such employees
directly employed by the Partnership's cable systems. The Partnership reimburses
the affiliate for its allocable share of the affiliate's operational costs. The
total amount charged to the Partnership for these costs approximated $29,400,
$15,700 and $18,200 in 1997, 1998 and 1999, respectively. No management fee is
payable to the affiliate by the Partnership and there is no duplication of
reimbursed expenses and costs paid to the Manager.
Substantially all programming services have been purchased
through FCLP, and since November 12, 1999, have been purchased through Charter.
FCLP charged the Partnership for these costs based on an estimate of what the
Corporate General Partner could negotiate for such programming services for the
15 partnerships managed by the Corporate General Partner as a group. Charter
charges the Partnership for these costs based on its cost. The Partnership
recorded programming fee expense of $609,400, $687,600 and $780,800 in 1997,
1998 and 1999, respectively. Programming fees are included in service costs in
the statements of operations.
The Partnership provides cable television signals to certain
cable systems in neighboring communities which are owned by other partnerships
managed by the Corporate General Partner. Such services are provided without
fee.
NOTE 8 - SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
During the years ended December 31, 1997, 1998 and 1999, cash
paid for interest amounted to $1,600, $15,100 and $19,400, respectively.
F-12
<PAGE>
EXHIBIT INDEX
Exhibit
Number Description
- ------ -----------
3 Second Amended and Restated Agreement of Limited Partnership of Enstar
Income Program II-1, L.P., dated as of August 1, 1988.(3)
10.1 Management Agreement between Enstar Income Program II-1 and Enstar
Cable Corporation.(1)
10.2 Revolving Credit and Term Loan Agreement dated February 28, 1986
between Enstar Income Program II-1 and Rhode Island Hospital Trust
National Bank.(2)
10.3 Franchise ordinance and related documents thereto granting a
non-exclusive community antenna television franchise for the City of
Taylorville, IL.(2)
10.4 Franchise ordinance and related documents thereto granting a
non-exclusive community antenna television franchise for the City of
Litchfield, IL.(2)
10.5 Franchise ordinance and related documents thereto granting a
non-exclusive community antenna television franchise for the City of
Gillespie, IL.(2)
10.6 Franchise ordinance and related documents thereto granting a
non-exclusive community antenna television franchise for the County of
Christian, IL.(2)
10.7 Service agreement between Enstar Communications Corporation, Enstar
Cable Corporation and Falcon Holding Group, Inc. dated as of October 1,
1988.(4)
10.8 Amendment No. 3 to Revolving Credit and Term Loan Agreement dated
February 28, 1986 between Enstar Income Program 1984-1 and Rhode Island
Hospital Trust National Bank, dated October 15, 1990.(5)
10.9 A resolution of the City Council of Taylorville, Illinois extending the
Cable Television Franchise of Enstar Income Program II-1. Passed and
adopted January 4, 1993.(6)
10.10 Ordinance No. 92-9 of the City Council of Gillespie, Illinois
authorizing an extension of the Cable Television Franchise between the
City of Gillespie and Enstar Cable Corporation. Passed and approved
November 9, 1992.(6)
10.11 Ordinance No. 2497 of the City of Taylorville, Illinois extending the
Cable Television Franchise of Enstar Income Program II-1. Passed and
adopted June 14, 1993.(7)
10.12 A resolution of the County Board of Christian County extending the
Cable Television Franchise of Enstar Income Program II-1. Passed and
adopted November 15, 1994.(8)
10.13 A resolution of the City Council of Litchfield, Illinois extending the
Cable Television Franchise of Enstar Income Program II-1. Passed and
adopted December 8, 1994.(8)
10.14 Ordinance No. 94-16 of the City of Gillespie, Illinois granting a
non-exclusive community antenna television system franchise to Enstar
Income Program II-1. Passed and adopted December 12, 1994.(8)
10.15 Franchise agreement between Enstar Income Program II-1, L.P. and the
City of Taylorville, IL.(9)
10.16 Agreement with Respect to Franchise Fees and Reimbursable Fees between
Enstar Income Program II-1, L.P. and the City of Taylorville, IL. (9)
E-1
<PAGE>
EXHIBIT INDEX
Exhibit
Number Description
- ------ -----------
10.17 Franchise ordinance granting a non-exclusive community antenna
television franchise for the City of Taylorville, IL. (9)
10.18 Franchise agreement between Enstar Communications Corporation and
County of Christian, Illinois. (10)
10.19 Franchise ordinance granting a non-exclusive community antenna
television franchise for the City of Litchfield, IL.
21.1 Subsidiaries: None
27.1 Financial Data Schedule.
FOOTNOTE REFERENCES
-------------------
(1) Incorporated by reference to the exhibits to the Registrant's Annual
Report on Form 10-K, File No. 0-14508 for the fiscal year ended
December 31, 1986.
(2) Incorporated by reference to the exhibits to the Registrant's Annual
Report on Form 10-K, File No. 0-14508 for the fiscal year ended
December 31, 1987.
(3) Incorporated by reference to the exhibits to the Registrant's Annual
Report on Form 10-K, File No. 0-14508 for the fiscal year ended
December 31, 1988.
(4) Incorporated by reference to the exhibits to the Registrant's Annual
Report on Form 10-K, File No. 0-14508 for the fiscal year ended
December 31, 1989.
(5) Incorporated by reference to the exhibits to the Registrant's Annual
Report on Form 10-K, File No. 0-14508 for the fiscal year ended
December 31, 1990.
(6) Incorporated by reference to the exhibits to the Registrant's Annual
Report on Form 10-K, File No. 0-14508 for the fiscal year ended
December 31, 1991.
(7) Incorporated by reference to the exhibits to the Registrant's Quarterly
Report on Form 10-Q, File No. 0-14508 for the quarter ended September
30, 1993.
(8) Incorporated by reference to the exhibits to the Registrant's Annual
Report on Form 10-K, File No. 0-14508 dated December 31, 1994.
(9) Incorporated by reference to the exhibits to the Registrant's Quarterly
Report on Form 10-Q, File No. 0-14508 for the quarter ended September
30, 1995.
(10) Incorporated by reference to the exhibits to the Registrant's Quarterly
Report on Form 10-Q, File No. 0-14508 for the quarter ended September
30, 1997.
E-2
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE BALANCE
SHEET AT DECEMBER 31, 1999, AND THE STATEMENTS OF OPERATIONS FOR THE TWELVE
MONTHS ENDED DECEMBER 31, 1999 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO
SUCH FINANCIAL STATEMENTS.
</LEGEND>
<CIK> 0000757595
<NAME> ENSTAR INCOME PROGRAM II-1, L.P.
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-END> DEC-31-1999
<CASH> 2,309,000
<SECURITIES> 0
<RECEIVABLES> 59,600
<ALLOWANCES> 2,000
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 7,929,400
<DEPRECIATION> 3,343,900
<TOTAL-ASSETS> 7,096,500
<CURRENT-LIABILITIES> 512,000
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 7,096,500
<SALES> 0
<TOTAL-REVENUES> 3,200,400
<CGS> 0
<TOTAL-COSTS> 2,314,900
<OTHER-EXPENSES> (93,900)
<LOSS-PROVISION> 15,200
<INTEREST-EXPENSE> 19,400
<INCOME-PRETAX> 960,000
<INCOME-TAX> 0
<INCOME-CONTINUING> 960,000
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 960,000
<EPS-BASIC> 31.75
<EPS-DILUTED> 0
</TABLE>
Exhibit 10.19
Litchfield, IL
Cable Television Franchise Ordinance
An Ordinance Setting Forth Regulations, Terms and Conditions Under
Which Cable Television Systems Shall Operate in Litchfield, IL and
Granting to Enstar Income Program II-1 a Franchise to Construct,
Operate and Maintain a Cable Television System Within the City.
<PAGE>
TABLE OF CONTENTS
-----------------
TITLE AND PURPOSES OF ORDINANCE...............................................1
DEFINITIONS...................................................................1
FRANCHISE TO OPERATE REQUIRED.................................................3
GRANT OF FRANCHISE............................................................3
FRANCHISE FEES................................................................3
SUBSCRIBER RATES..............................................................4
CUSTOMER SERVICE AND CONSUMER PROTECTION......................................5
INFORMATION PROVIDED BY GRANTEE TO SUBSCRIBERS................................6
TECHNICAL STANDARDS...........................................................7
EXTENSION OF CABLE SERVICE....................................................7
FREE BASIC CABLE SERVICE TO PUBLIC BUILDINGS..................................9
SYSTEM IMPROVEMENTS...........................................................9
INSURANCE....................................................................10
INDEMNIFICATION..............................................................10
FRANCHISE VIOLATIONS: PROCEDURES, NOTICE, AND CURE...........................11
FRANCHISE TERMINATION AND CONTINUITY OF SERVICE..............................12
FORCE MAJEUR.................................................................12
GRANT OF ADDITIONAL FRANCHISE AND COMPETING SERVICE PROVIDERS................13
TRANSFER OR ASSIGNMENT OF FRANCHISE..........................................14
COMPLIANCE WITH STATE AND FEDERAL LAW........................................15
NOTICE TO THE GRANTEE........................................................15
STREET OCCUPANCY.............................................................15
ACCESS TO PUBLIC AND PRIVATE PROPERTY........................................16
NONDISCRIMINATION IN EMPLOYMENT..............................................16
GRANTEE MAY ISSUE RULES......................................................17
SEVERABILITY OF ORDINANCE PROVISIONS.........................................17
EFFECTIVE DATE...............................................................17
<PAGE>
An Ordinance Setting Forth the Regulations, Terms and Conditions Under Which
Cable Television Systems Shall Operate in Litchfield, IL and Granting A
Franchise to Enstar Income Program II-1, Its Successors and Assigns to
Construct, Operate and Maintain a Cable Television System in the City
BE IT ORDAINED by the City Council of Litchfield, IL as follows:
1 TITLE AND PURPOSES OF ORDINANCE
This Ordinance shall be known as the Litchfield Cable Television Franchise
Ordinance. The purposes of this Ordinance are: a) to establish the terms and
conditions under which a cable television system must operate within Litchfield,
IL (which may hereafter be referred to as "City", "Franchising Authority", or
"Grantor"); b) to provide for the payment of a franchise fee to the City for
costs associated with administering and regulating the system; and c) to grant a
cable television franchise to Enstar Income Program II-1 (hereafter referred to
as "Enstar" or "Grantee").
2 DEFINITIONS
For the purposes of this Ordinance the following terms, phrases, words and their
derivations shall have the meaning defined herein, unless the context clearly
indicates that another meaning is intended. 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.
2.1 "CABLE ACT" means The Cable Communications Policy Act of 1984 as
modified by The Cable Television Consumer Protection and
Competition Act of 1992, and the Telecommunications Act of 1996.
2.2 "CABLE TELEVISION SYSTEM" means any non-broadcast facility
consisting of a set of transmission paths and associated signal
reception, transmission and control equipment, that is designed to
distribute to subscribers or other users audio, video and other forms
of communications services via electronic or electrical signals.
2.3 "CHANNEL" is a band of frequencies in the electromagnetic
spectrum, capable of carrying one audio-visual television signal.
2.4 "CITY" means Litchfield, IL in its present form or in any later
reorganized, consolidated, enlarged or reincorporated form, which is
legally authorized to grant a cable television franchise under state
and federal law. The City may also be referred to as "Franchising
Authority" or "Grantor".
Litchfield, IL Cable TV Franchise Ordinance
January 3, 2000
Page 1
<PAGE>
2.5 "ENSTAR" means Enstar Income Program II-1, which may also be
referred to as "Grantee".
2.6 "FCC" means the Federal Communications Commission.
2.7 "FRANCHISE" means the rights granted pursuant to this Ordinance to
construct, own and operate a cable television system along the public
ways in the City, or within specified areas in the City.
2.8 "FRANCHISE AREA" means that portion of the City for which a
franchise is granted under the authority of this Ordinance. If not
otherwise stated in an exhibit to this Ordinance, the Franchise Area
shall be the legal and geographic limits of the City, including all
territory which may be hereafter annexed to the City.
2.9 "FRANCHISING AUTHORITY" means Litchfield, IL, its City Council
acting as the City's duly elected governing body, its lawful successor
or such other person or body duly authorized by the City to grant a
cable television franchise.
2.10 "GRANTEE" means a person or business entity, or its lawful
successor or Assignee, which has been granted a franchise by the City
pursuant to this Ordinance.
2.11 "GROSS SUBSCRIBER RECEIPTS" as the term is used in calculating
franchise fees means revenues actually received by the Grantee from
television and other services (other services include, but are not
limited to, monthly fees charged Subscribers for Basic Service;
monthly fees charged Subscribers for any tier of Cable Service other
than Basic Service; Installation, disconnection and re-connection
fees; leased Channel fees; Converter rentals; advertising revenues;
revenues from home shopping Channels) arising from and attributable to
the operation of a cable system in Litchfield after deducting the
following: a) any fees or assessments levied on subscribers or users
of the system which are collected by the Grantee for payment to a
governmental entity; b) franchise fees paid by the Grantee to the
City; c) state or local sales or property taxes imposed on the Grantee
and paid to a governmental entity; and d) federal copyright fees paid
by the Grantee to the Copyright Tribunal in Washington, DC.
2.12 "NORMAL BUSINESS HOURS" means those hours during which most
similar businesses in the community are open to serve customers.
2.13 "NORMAL OPERATING CONDITIONS" means those service conditions
which are within the control of the Grantee. 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, and severe or unusual weather conditions. Those
conditions which are ordinarily within the control of the Grantee
include, but are not limited to, special promotions, pay-per-view
events rate increases, regular peak or seasonal demand periods, and
maintenance or upgrade of the cable system.
Litchfield, IL Cable TV Franchise Ordinance
January 3, 2000
Page 2
<PAGE>
2.14 "PUBLIC WAY" OR "RIGHT-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, park, parkways, waterways, or other public right-of-way
including public utility easements or rights-of-way and any temporary
or permanent fixtures or improvements located thereon now or hereafter
held by the City which shall entitle the City and the Grantee to the
use thereof for the purpose of installing and maintaining the
Grantee's cable television system.
2.15 "SCHOOL" means any public elementary or secondary school.
2.16 "SERVICE INTERRUPTION" means the loss of picture or sound on one
or more cable channels.
2.17 "SUBSCRIBER" means any person who receives monthly cable
television service provided by the Grantee's cable television system.
3 FRANCHISE TO OPERATE REQUIRED
It shall be unlawful to operate a cable television system within the City unless
a valid franchise has first been obtained from the City pursuant to the terms of
this Ordinance. A franchise granted pursuant to this Ordinance shall authorize
the Grantee to provide cable television services within the City and to charge
subscribers for such services. It shall also authorize and permit the Grantee to
traverse any portion of the City in order to provide service outside the City.
Unless otherwise specified, the Franchise Area shall be the legal boundaries of
the City.
4 GRANT OF FRANCHISE
A non-exclusive franchise is hereby granted to Enstar Income Program II-1 (which
may be referred to herein as "Enstar" or "Grantee") to operate and maintain a
cable television system in the City for a period of ten (10) years commencing on
the date of adoption of this ordinance. Enstar shall have the option to renew
this franchise for an additional term of five (5) years, provided that it is in
substantial compliance with the material terms of this ordinance at the time of
its expiration.
5 FRANCHISE FEES
5.1 The Grantee shall pay a franchise fee which is intended to
compensate the City for all costs which may be associated with
administering or regulating Grantee's cable system. The amount of the
franchise fee shall be five (5%) percent of the Grantee's annual Gross
Subscriber Receipts, as defined herein. Such fee shall be paid on a
quarterly basis. Grantee shall be entitled to list the franchise fee
as a separate line item on monthly bills.
Litchfield, IL Cable TV Franchise Ordinance
January 3, 2000
Page 3
<PAGE>
5.2 Due to federal and local regulations requiring that Grantee notify
cable subscribers at least thirty (30) days prior to the effective
date of any increases in monthly charges on subscriber bills, any
increased franchise fee amounts which may be due to the City shall
begin accruing sixty (60) days following the effective date of this
Ordinance. If the City requires more than thirty (30) days notice to
subscribers of increased rates, then any increased franchise fee
amounts which may be due to the City shall begin accruing sixty (60)
days after the City's required notice period.
5.3 Within 120 days from the end of the fiscal quarter Grantee shall
file a report showing Grantee's Gross Subscriber Receipts for the
calendar year and the amount of franchise fees due to the City. The
Grantee shall have an obligation to maintain financial records of its
Gross Subscriber Receipts and Grantee fee payments for audit purposes
for a period of three years, and the City shall have the right to
audit the Grantee's books at the offices where such books are
maintained.
6 SUBSCRIBER RATES
6.1 All charges to subscribers shall be consistent with a schedule of
fees for services offered and established by the Grantee. Rates shall
be nondiscriminatory in nature and uniform to persons of like classes
under similar circumstances and conditions.
6.2 The Grantee will provide the City with thirty (30) days advance
written notice of any change in rates and charges whenever possible.
6.3 Grantee may offer different or discounted rates at its discretion
for promotional purposes and may establish different rates for
different classes of subscribers where appropriate, such as offering
discounted rates to low income individuals or groups or bulk rates to
multiple unit dwellings.
6.4 Grantee shall inform each new subscriber of all applicable fees
and charges for providing cable television service.
6.5 Grantee may, at its own discretion and in a non-discriminatory
manner, waive, reduce or suspend connection fees, monthly service fees
or other charges on a one time or monthly basis for promotional
purposes.
6.6 Grantee may refuse to provide service to any person because a
prior account with that person remains due and owing.
6.7 A Grantee may offer service which requires advance payment of
periodic service charges.
Litchfield, IL Cable TV Franchise Ordinance
January 3, 2000
Page 4
<PAGE>
6.8 The Grantee shall provide refunds to subscribers in the following
cases:
6.8(a) If the Grantee fails within a reasonable time to commence
service requested by a subscriber, it will refund all deposits or
advance charges that the subscriber has paid in connection with
the request for such service at the request of the subscriber.
6.8(b) If a subscriber terminates any service at any time and has
a credit balance for deposits or unused services, upon request
from the subscriber and upon return of all of Grantee's
equipment, the Grantee will refund the appropriate credit balance
to the subscriber. The subscriber will be responsible for
furnishing the Grantee a proper address to which to mail the
refund.
6.8(c) If any subscriber's cable service is out of order for more
than 48 consecutive hours during the month due to technical
failure, damage, or circumstances within the control of the
Grantee, the Grantee will credit the account of that subscriber
on a pro rata basis upon the subscriber's written request. The
credit will be calculated using the number of twenty-four (24)
hour periods that service is impaired and the number of channels
on which service is impaired as a fraction of the total number of
days in the month that the service impairment occurs and the
total number of channels provided by the system in the absence of
an impairment.
7 CUSTOMER SERVICE AND CONSUMER PROTECTION
7.1 Cable System Office Hours and Telephone Availability
The Grantee will maintain a local, toll-free or collect call telephone
access line which will be available to its subscribers 24 hours per
day, seven days per week. Trained company representatives will be
available to respond to customer telephone inquiries during normal
business hours. After normal business hours, the access line may be
answered by a service or an automated response system, including an
answering machine. Inquiries received after normal business hours must
be responded to by a trained company representative on the next
business day. Customer service center and bill payment locations will
be open at least during normal business hours.
7.2 Installation, Outages and Service Calls
7.2(a) Standard installations will be performed within seven (7)
business days after an order has been placed. "Standard"
installations are those that are located up to 125 feet from the
existing distribution system.
7.2(b) Excluding conditions beyond the control of the Grantee,
the Grantee will begin working on "outages" to cable service
promptly, and in no event shall the response time for calls
received between 7:00 AM and 12:00 Midnight exceed four (4)
hours, except that the Grantee or its employees shall not be
required to perform work past 12:00 Midnight, it shall complete
Litchfield, IL Cable TV Franchise Ordinance
January 3, 2000
Page 5
<PAGE>
work necessary to correct the outage, the following day. The
Grantee must begin actions to correct all other service problems
the next business day after notification of the service problem.
For the purposes of this Agreement, an outage shall be defined as
the cessation of video and/or audio reception on one or more
channels affecting three (3) or more subscribers who receive
service from the same cable, feeder line, or node, or who receive
cable service from the same cable system tap serving a
multi-family dwelling.
7.2(c) The "appointment window" alternatives for installations,
service calls, and other installation activities will be either a
specific time or a four-hour time block during normal business
hours. The Grantee may schedule service calls and other
installation activities outside of normal business hours for the
express convenience of the customer.
7.2(d) If Grantee's representative is running late for an
appointment with a customer and will not be able to keep the
appointment as scheduled, the customer will be contacted. The
appointment will be rescheduled, as necessary, at a time which is
convenient for the customer.
7.2(e) If the Grantee's service representative appears for an
appointment scheduled by a customer within the time period
promised and no one is present at the customer's dwelling to
permit necessary physical access to the dwelling unit, then
Grantee may charge the customer for the service call, up to a
maximum of $25.
8 INFORMATION PROVIDED BY GRANTEE TO SUBSCRIBERS
8.1 The Grantee shall provide written information on each of the
following areas at the time of installation of service, at least
annually to all subscribers, and at any time upon request: products
and services offered; prices and options for programming services and
conditions of subscription to programming and other services;
installation and services maintenance policies; instructions on how to
use the cable service; channel positions of programming carried on the
system; and billing and complaint procedures, including the address
and telephone number of the local franchise authority's cable office.
8.2 Customers will be notified of any changes in rates, programming
services or channel positions thirty (30) days in advance of such
changes if the change is within the control of the Grantee. In
addition, the Grantee shall notify subscribers thirty (30) days in
advance of any significant changes in the other information required
by paragraph (c)(3)(i)(A) of this section. Notwithstanding any other
provision of Part 76, Grantee shall not be required to provide prior
notice of any rate change that is the result of a regulatory fee,
franchise fee, or any other fee, tax, assessment, or charge of any
kind imposed by any Federal agency, State, or Franchising Authority on
the transaction between the Grantee and the subscriber.
8.3 Bills will be clear, concise and understandable. Bills will be
itemized, with itemizations including basic and premium service
Litchfield, IL Cable TV Franchise Ordinance
January 3, 2000
Page 6
<PAGE>
charges and equipment charges. Bills will also clearly delineate all
activity during the billing period, including optional charges,
rebates and credits. In case of a billing dispute, the Grantee must
respond to a written complaint from a subscriber within thirty (30)
days.
8.4 Refund checks will be issued promptly, but no later than either:
the customer's next billing cycle following resolution of the request
or sixty (60) days, or the return of the equipment supplied by the
Grantee if service is terminated.
8.5 Credits for services will be issued no later than the customer's
next billing cycle following the determination that a credit is
warranted.
9 TECHNICAL STANDARDS
9.1 Grantee shall be responsible for insuring that the cable system is
designed, installed, and operated in a manner that fully complies with
Federal Communications Commission (FCC) rules regarding cable
television technical standards. Grantee shall be prepared to show, on
request by an authorized representative of the Commission or the
Franchising Authority, that the system does, in fact, comply with the
rules.
9.2 Grantee shall conduct complete performance tests of the system at
least twice each calendar year (at intervals not to exceed seven
months), and shall maintain the resulting test data on file at the
Grantee's local business office for at least five (5) years. The test
data shall be made available for inspection by the Commission or the
local franchiser, upon request. The performance test shall be directed
at determining the extent to which the system complies with all the
technical standards set forth in ss.76.605(a) of the Commission's
rules.
10 EXTENSION OF CABLE SERVICE
10.1 A Grantee which is not already serving the entire franchise area
shall provide service to all portions of the franchise area reaching a
minimum density of thirty (30) dwelling units per linear strand mile,
as measured from the nearest coaxial cable line, within twelve (12)
months after the grant of a franchise.
10.2 Grantee shall provide aerial or buried drop lines to new
subdivisions within the franchise area at the request of the developer
provided that the developer contracts and agrees with the Grantee to
pay the cost of the extension of the service.
10.3 Grantee shall extend and make cable television service available
to any resident within the franchise area who requests connection at
the standard connection charge if the connection to the resident would
require no more than a standard one hundred and fifty (150) foot
aerial drop or a seventy-five (75) foot buried drop line or extension
from the nearest coaxial feeder cable. With respect to requests for
connection requiring an aerial or buried drop line in excess of the
Litchfield, IL Cable TV Franchise Ordinance
January 3, 2000
Page 7
<PAGE>
maximum standard distance, Grantee shall extend and make available
cable television service to such residents at a connection charge not
to exceed its actual costs for the distance exceeding the standard one
hundred and fifty (150) feet of aerial or seventy-five (75) feet of
underground cable respectively.
10.4 In areas with fewer than thirty (30) residential units per
proposed cable bearing strand mile, Grantee shall offer a cost-sharing
arrangement with residents. A dwelling unit will be counted for this
purpose if its lot fronts a street. The cost-sharing arrangement shall
consist of the following:
10.4(a) At the request of a resident desiring service, Grantee
shall determine the cost of the plant extension required to
provide service to the potential subscriber from the closest
point on the cable system where it is technically feasible. The
cost of construction shall be allocated based on the following
formula:
10.4(a)(1) If a request for extension of service into a
residential area requires the construction of cable plant
which does not pass at least thirty (30) potential
subscribers per proposed cable bearing strand mile, Grantee
and residents who agree to subscribe to cable service will
each bear their proportionate share of construction costs.
For example, if there are five (5) dwelling units per
proposed cable bearing strand mile, Grantee's share will
equal 5/30ths or one sixth (1/6) of the construction cost.
The remaining cost will be shared equally by each
subscriber.
10.4(a)(2) Should additional residents actually subscribe to
cable television service in areas where subscribers have
already paid a proportionate share under the extension cost
sharing formula, subscribers who have previously paid a
proportionate share under the extension formula shall be
reimbursed pro rata for their contribution or a proportional
share thereof. In such case, the pro rata shares shall be
recalculated and each new subscriber shall pay the new pro
rata share, and all subscribers who previously paid a
proportionate share shall receive pro rata refunds. In the
event such subscribers (or prior subscribers) have been
disconnected or have moved and owe the Grantee money which
has not been recovered, Grantee shall have the right to
first apply the refund to amounts owed the Grantee and give
the balance, if any to the subscriber. At such time as there
are thirty (30) potential subscribers per cable bearing
strand mile, the subscribers shall receive their pro rata
share of construction costs. In any event, one (1) year
after the completion of a project, subscribers who have paid
a share of line extension costs are no longer eligible for
refunds, and the amounts paid in construction costs will be
credited to the plant account of Grantee.
10.4(a)(3) Where the density of residential dwelling and
occupied commercial or industrial structures, adverse
terrain, or other factors render extension of the system and
offering of cable service impractical, technically
infeasible or would create an economic hardship, the City
Litchfield, IL Cable TV Franchise Ordinance
January 3, 2000
Page 8
<PAGE>
may, upon petition of the Grantee, either waive the
extension of the system into such areas, or allow the
extension and offer of service on special terms or
conditions which are reasonable and fair to the City, the
Grantee and potential subscribers in such areas.
11 FREE BASIC CABLE SERVICE TO PUBLIC BUILDINGS
Grantee shall provide, without charge, one service outlet activated for basic
subscriber service to each police station, fire station, public school, public
library and the City office. If it is necessary to extend Grantee's trunk or
feeder lines more than two hundred (200) feet solely to provide service to any
such school or public building, the City or the building owner or occupants
shall have the option of either paying Grantee's direct costs for line
extensions in excess of two hundred (200) feet or releasing the Grantee from the
obligation to provide service to such building. Furthermore, Grantee shall be
permitted to recover the direct cost of installing cable service, when requested
to do so, in order to provide: a) more than one outlet, b) inside wiring, or c)
a service outlet requiring more than two hundred (200) feet of drop cable to any
public building.
12 SYSTEM IMPROVEMENTS
12.1 System Upgrade Grantee agrees to upgrade the existing Litchfield
cable TV system on or before January 1, 2001. The upgraded system will
be constructed so as to provide the capability of passing a minimum of
83 channels on an analog and/or digital basis through its trunk and
feeder lines.
12.2 PEG Access
12.2(a) Within ninety (90) days of completion of the upgrade,
Enstar Cable agrees to provide and maintain one Access channel on
its cable system for exclusive Governmental and/or Educational
use.
12.2(b) Within ninety (90) days of completion of the upgrade,
Enstar Cable agrees to provide an audio/visual return path from
the studio located at 1700 North State Street which will allow
the City to cablecast live or taped programming on the Access
channel to all subscribers via the subscriber network.
12.2(c) Enstar agrees to provide to the City two annual PEG
access support payments of $6,000 each, for a total support
payment of $12,000 over the life of this Agreement. The support
payments shall be due upon the first and second year
anniversaries of this Agreement. Grantee shall have the right to
collect the two $6,000 payments from its subscribers on a monthly
pro rata, per subscriber basis, and to identify the amount it
collects on behalf of the City as a line item pass-through on
subscriber's billing statements. No additional payment will be
due during the term of this Agreement.
Litchfield, IL Cable TV Franchise Ordinance
January 3, 2000
Page 9
<PAGE>
12.2(d) Grantee may pass through to subscribers, in their monthly
billing statements, the direct and indirect costs of satisfying
the above franchise requirements that are required by the
franchising authority to support public, educational, and
governmental access channels as allowed by federal law. Such
costs may include the per channel cost of providing PEG access
channels, PEG access programming, and a reasonable allocation for
general and administrative overhead.
12.3 PROGRAMMING
Upon completion of the rebuild Enstar Cable agrees to provide
additional programming options. Enstar Cable agrees to meet with the
City on a periodic basis for the purpose of receiving input into the
determination of specific programming choices. Programming decisions
may be based on the following determining factors: program
availability, signal strength, community needs, and economic
viability. Grantee specifically agrees to consider the following new
programming additions upon completion of the rebuild: University of
Illinois sporting events and Pay-Per-View movie & special event
options.
13 INSURANCE
Within ninety (90) days following the grant of a franchise the Grantee shall
obtain the following insurance policies:
13.1 A general comprehensive liability policy indemnifying, defending
and saving harmless the City, its officers, boards, commissions,
agents or employees from any and all claims by any person whatsoever
on account of injury to or death of a person or persons occasioned by
the operations of the Grantee under the franchise herein granted, or
alleged to have been so caused or occurred, with a minimum liability
of One Million Dollars ($1,000,000) per personal injury, death of any
one person or damage to property and Two Million Dollars ($2,000,000)
for personal injury, death of any two or more persons in any one
occurrence or damage to property.
13.2 All insurance policies called for herein shall be in a form
satisfactory to the City and shall require thirty (30) days written
notice of any cancellation to both the City and the Grantee. The
Grantee shall, in the event of any such cancellation notice, obtain,
pay all premiums for, and file with the City , written evidence of the
issuance of replacement policies within thirty (30) days following
receipt by the City or the Grantee of any notice of cancellation. In
recognition of the foregoing each party agrees to cause their
respective insurance carriers to waive any rights of subrogation.
14 INDEMNIFICATION
The Grantee, by its acceptance of a franchise granted pursuant to this
Ordinance, shall indemnify and hold harmless the City, its officials, boards,
commissions and employees against any and all claims, suits, causes of action,
proceedings, and judgments for damage arising out of the award of a franchise to
Litchfield, IL Cable TV Franchise Ordinance
January 3, 2000
Page 10
<PAGE>
the Grantee and its operation of the cable television system under the
franchise, such indemnification shall include any related attorney fees. These
damages shall include, but not be limited to, penalties arising out of copyright
infringements and damages arising out of any failure by Grantee to secure
consents from the owners, authorized distributors or licensees of programs to be
delivered by the Grantee's cable television system whether or not any act or
omission complained of is authorized, allowed, or prohibited by the franchise.
15 Franchise Violations: Procedures, Notice, and Cure
Before exercising any right of redress available to it under the terms of this
Ordinance, including determination of any penalty assessable under applicable
law, the City shall follow the procedures set forth in this Section.
15.1 The City shall notify Grantee in writing, by Certified Mail, of
any alleged violation, ("Violation Notice") which notice shall include
a detailed description of any alleged violation and a request for cure
of such violation.
15.2 Except in the case of a safety hazard posing an imminent danger
to public health and safety, Grantee shall have thirty (30) days from
the date of receipt of such notice to respond in writing, indicating:
(1) that Grantee has cured the alleged violation, providing reasonable
documentation demonstrating that the alleged violation has been cured;
(2) that Grantee has commenced or will commence actions to cure the
alleged violation, but that the alleged violation cannot reasonably be
cured immediately, describing the steps to be to cure the alleged
violation; or (3) that Grantee disagrees with the allegation that a
violation has occurred and contests the Violation Notice, stating the
reasons therefor. Pending the completion of an administrative hearing
which may be held, the City shall not impose penalties upon Grantee.
15.3 Upon receipt of Grantee's response to the Violation Notice, the
City may either accept Grantee's explanation and/or proposed cure, or
if it believes that the violation will not be cured within a
reasonable period of time, the City may schedule an administrative
hearing, affording Grantee due process, and an opportunity to present
evidence. Grantee shall be given at least thirty (30) days written
notice of such a hearing.
15.4 Within thirty (30) days of an administrative hearing, the City
shall issue a written report stating its findings and the reasons
therefor. The City may determine (a) that the alleged violation has
been corrected, or is in the process of being corrected by Grantee,
and that no further action is required; (b) that an extension of the
time or other appropriate relief should be granted until the cure can
be completed; (c) that the problem is beyond Grantee's direct control
and that Grantee is not at fault; or (d) that Grantee has violated one
or more provisions of its franchise and that appropriate action should
be taken by the City.
15.5 In case of an alleged violation(s) of applicable system technical
standards, construction standards, or safety codes, if the alleged
violation does not pose a substantial and immediate safety hazard,
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January 3, 2000
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Grantee shall be allowed a reasonable and sufficient time to complete
any required corrections or repairs to the system. So long as Grantee
demonstrates that it is working diligently and in good faith to
correct any alleged technical violations, the City shall not assess
penalties against the Grantee. A "substantial and immediate safety
hazard" shall be defined as one posing an imminent likelihood of
causing significant bodily injury if not repaired immediately. Grantee
shall not be penalized for other minor violations of the Franchise or
applicable codes, so long as Grantee makes its best efforts to correct
any problem or violation within a reasonable period of time of the
discovery of alleged violation.
15.6 Nothing in this section shall be construed to restrict Grantee's
right to appeal the City's actions to a court of competent
jurisdiction.
16 FRANCHISE TERMINATION AND CONTINUITY OF SERVICE
16.1 In the event of a formal denial of renewal or revocation of a
franchise, which denial or revocation is upheld by final judicial
adjudication of any appeal(s) which may be filed, the Grantee shall
have a period of one (1) year from such final adjudication within
which to transfer or convey the assets of the cable system to another
owner. Approval of such proposed transfer or assignment shall not be
unreasonably withheld by the City.
16.2 In the event the franchise term expires prior to formal action
being taken by the City either to renew the franchise or deny renewal,
the term of this franchise shall automatically be extended until such
time as formal action to renew or deny renewal is taken by the City.
The renewal procedures and criteria contained in Section 626(c) of the
Cable Communications Policy Act of 1984, as amended, shall be followed
by the City and the Grantee.
17 FORCE MAJEUR
In the event the Grantee is prevented or delayed in the performance of any of
its obligations under this Ordinance by reason of flood, fires, hurricanes,
tornadoes, earthquakes or other acts of God, unavoidable casualty,
insurrections, war, riot, sabotage, unavailability of materials or supplies,
vandalism, strikes, boycotts, lockouts, labor disputes, shortage of labor,
unusually severe weather conditions, acts or omissions or delays by utility
companies upon whom Grantee is dependent for pole attachments or easement use,
Grantee is unable to obtain necessary financing or any other event which is
beyond the reasonable control of the Grantee, the Grantee shall have a
reasonable time under the circumstances to perform its obligations under this
Ordinance or to procure a reasonable and comparable substitute for such
obligations. Under such circumstances the Grantee shall not be held in default
or noncompliance with the provisions of the Ordinance nor shall it suffer any
penalty relating thereto.
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January 3, 2000
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18 GRANT OF ADDITIONAL FRANCHISE AND COMPETING SERVICE PROVIDERS
18.1 Application Procedures
18.1(a) An application for a new cable television franchise shall
be submitted to the City in a form specified by or acceptable to
the City, and in accordance with procedures and schedules
established by the City. The City may request such facts and
information as it deems appropriate.
18.1(b) Upon request, any applicant shall furnish to the City a
map of suitable scale, showing all roads and public buildings,
which indicates the areas to be served and the proposed dates of
commencement of service for each area. The proposed service area
shall be subject to approval by the City. If approved, the
service area shall be incorporated into any franchise granted
pursuant to this Ordinance. If no service area is specifically
delineated in a franchise, it shall be considered to be
coterminous with the boundaries of the City.
18.1(c) After receiving an application for a franchise, the City
shall examine the legal, financial, technical and character
qualifications of the applicant. The City may grant one or more
non-exclusive franchises creating a right to construct and
operate a cable television system within the public ways of the
City, subject to the provisions of this Section.
18.1(d) In the event an application is filed proposing to serve a
franchise area which overlaps, in whole or in part, an existing
Grantee's franchise area, a copy of such application shall be
served upon any existing Grantee by the City by registered or
certified mail. Such notice shall be considered a condition
precedent to consideration of the application for a franchise by
the City.
18.2 Competing Service Providers
18.2(a) Any franchise granted by the City shall be non-exclusive.
However, nothing in this ordinance shall be construed to require
it to grant more than one franchise if the City determines, that
granting additional franchises would be detrimental to the public
interest.
18.2(b) In the event a competing service provider commences
operation of a communications facility which offers services
similar to those offered by Grantee, the City shall not require
Grantee to operate under terms or conditions otherwise required
by this Ordinance which are either less favorable or more
burdensome than those under which the competing service provider
must operate. Any franchise which may be granted by the City to a
competing service provider shall require the new Grantee to
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provide cable service to the entire franchise area then served by
the existing Grantee. An existing Grantee may, at its discretion,
comply with the most favorable terms contained in any subsequent
franchise granted by the City.
18.3 Permits for Non-Franchised Entities
The City may issue a license, easement or other permit to a person
other than the Grantee to permit that person to traverse any portion
of the Grantee's franchise area within the City in order to provide
service outside, but not within the City. Such license or easement,
absent a grant of a franchise in accordance with this Ordinance, shall
not authorize nor permit said person to provide cable television
service of any type to any home or place of business within the City
nor render any other service within the City.
19 Transfer or Assignment of Franchise
19.1 A Grantee may transfer or assign its franchise to another entity
(the "Assignee") upon thirty (30) days notice to the City . The
Grantee shall provide to the City a reasonable showing that the
proposed Assignee or Transferee possesses the technical and financial
qualifications to operate the cable TV system properly. The proposed
Transferee or Assignee shall provide the City with a written statement
that it agrees to comply with all material terms of the franchise to
be transferred. The City shall not unreasonably delay or deny the
assignment or transfer of a franchise. The reasonableness of the
City's actions shall be subject to judicial review by a court of
appropriate jurisdiction. The proposed transfer or assignment shall be
deemed approved if no action is taken by the City within sixty (60)
days of the written request for transfer by the Grantee.
19.2 The Grantee may secure financing or an indebtedness by trust,
mortgage, or other instrument of hypothecation of the franchise, in
whole or in part, without requiring the consent of the City. Consent
shall not be required to assign a franchise from one business entity
to another which is operated or managed by the Grantee or any
affiliated entity. In addition, so long as the manager and/or general
partner of the Grantee remains the same, consent shall not be required
to transfer the interests of any limited partner of the Grantee, who
has no day to day operational control of the Grantee or the system.
19.3 A Grantee may transfer or assign its franchise to an affiliated
entity upon thirty (30) days notice to the City. Consent of the City
shall not be required for such an assignment, provided that; a) the
City is provided with a reasonable showing that the proposed Assignee
possesses the technical and financial qualifications to operate the
cable TV system and, b) that the Assignee agrees to comply with the
terms of this Ordinance.
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20 COMPLIANCE WITH STATE AND FEDERAL LAW
The Grantee and the City shall at all times comply with all applicable State and
Federal laws and the applicable rules and regulations of administrative
agencies. If the Federal Communications Commission (FCC) or any other federal or
state governmental body or agency enacts any law or regulation or exercises any
paramount jurisdiction over the subject matter of this Ordinance or any
franchise granted hereunder, the jurisdiction of the City shall cease and no
longer exist to the extent such superseding jurisdiction shall preempt or
preclude the exercise of like jurisdiction by the City. The City and the Grantee
reserve all rights they each may possess under law, unless expressly waived
herein.
21 NOTICE TO GRANTEE
Except as otherwise provided in this Ordinance, the City shall not meet to take
any action involving the Grantee's franchise unless the City has notified the
Grantee by certified mail at least thirty (30) days prior to such meeting, as to
its time, place and purpose. The notice provided for in this section shall be in
addition to, and not in lieu of, any other notice to the Grantee provided for in
this Ordinance. All notices, requests, demands and other communications required
or permitted hereunder shall be in writing and shall be deemed to have been duly
given if mailed by certified mail return receipt requested, addressed to the
Grantee's corporate office as follows:
Enstar Income Program II-1
C/o Charter Communications
12444 Powerscourt Dr. Suite 100
St. Louis, Missouri 63131
Attn: Celeste Vossmeyer
22 STREET OCCUPANCY
22.1 Grantee shall utilize existing poles, conduits and other
facilities whenever possible, but may construct or install new,
different, or additional poles, conduits, or other facilities whether
on the public way or on privately-owned property with the written
approval of the appropriate government authority, and, if necessary
the property owner. Such approval shall not be unreasonably withheld
by the governmental agency.
22.2 All transmission lines, equipment and structures shall be so
installed and located as to cause minimum interference with the rights
and appearance and reasonable convenience of property owners who
adjoin on any public way and at all times shall be kept and maintained
in a safe condition and in good order and repair. The Grantee shall at
all times employ reasonable care and shall use commonly accepted
methods and devices for preventing failures and accidents which are
likely to cause damage, injuries or nuisances to the public.
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22.3 Grantee shall have the authority to trim trees on public property
at its own expense as may be necessary to protect its wires and
facilities, subject to the direction of the City or other appropriate
governmental authority.
22.4 The Franchisee shall, upon reasonable notice, protect or relocate
its cable communications system, or part thereof, from any street,
easement or right of way, as reasonably directed by the Municipality.
However, Grantee shall only be required to place its wiring
underground if all other existing utilities are also required to be
placed underground. Unless an emergency situation exists, for the
purpose of this section and in order to allow the Franchisee to budget
for any required relocation, in the event a public works or public
improvement project is pre-planned in the Municipality's prior year
budget process, "reasonable notice" will be construed as written
notification of no later than October 31 of the prior year, or within
45 days of the conclusion of Municipality's budget process, whichever
allows the Municipality more time. The Grantee shall in all cases have
the right of abandonment of its property. If public funds are
available to any company using such street, easement, or right of way
for the purpose of defraying the cost of the foregoing, such funds
shall also be made available to the Grantee.
23 ACCESS TO PUBLIC AND PRIVATE PROPERTY
23.1 Grantee shall have the right to enter and have access to the
property and premises of the City or that of any subscriber for
purposes of installing cable TV service or recovering and removing
Grantee's property and equipment when a subscriber's service is
terminated and a subscriber refuses to return such equipment to the
Grantee.
23.2 The City shall not permit any person who owns or controls a
residential multiple unit dwelling, trailer park, condominium,
apartment complex, subdivision or other property to interfere with the
right of any tenant, resident or lawful occupant thereof to receive
cable installation, service or maintenance from Grantee, except as
federal or state law shall otherwise require.
23.3 Upon request by Grantee, the City shall promptly exercise any
rights it may have to permit or enable Grantee to obtain or utilize
easements with respect to any residential multiple unit dwelling,
trailer park, condominium, apartment complex, subdivision or other
property as required to facilitate Grantee's use thereof for purposes
of providing system service to the tenants, residents or lawful
occupants thereof. In any such proceeding, the restitution to the
Owner for the amount of space utilized by the system, considering the
enhanced value to the premises resulting from the installation of
cable television facilities, shall be a one-time charge of $1.00 per
dwelling unit.
24 NONDISCRIMINATION IN EMPLOYMENT
The Grantee shall neither refuse to hire nor discharge from employment nor
discriminate against any person in compensation, terms, conditions, or
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privileges of employment because of age, sex, race, color, creed, or national
origin. The Grantee shall insure that employees are treated without regard to
their age, sex, race, color, creed or national origin.
25 GRANTEE MAY ISSUE RULES
The Grantee shall have the authority to issue such rules, regulations, terms and
conditions of its business as shall be reasonably necessary to enable it to
exercise its rights and perform its services under this Ordinance and the Rules
of the FCC, and to assure uninterrupted service to each and all of its
subscribers. Such rules and regulations shall not be deemed to have the force of
law.
26 SEVERABILITY OF ORDINANCE PROVISIONS
If any section of this Ordinance or the franchise, or any portion thereof, is
held invalid or unconstitutional by any court of competent jurisdiction or
administrative agency, such decision shall not affect the validity of the
remaining portions of the Ordinance or franchise.
27 EFFECTIVE DATE
This ordinance shall become effective upon the date of its adoption by the City.
Any failure by the City to follow proper procedures under state or local law in
adopting this Ordinance or granting a franchise shall not abrogate the rights or
obligations of either the Grantee or the City under this Ordinance. If,
following adoption of this Ordinance it is subsequently determined that proper
legal procedures have not been followed by the City, it shall be the
responsibility of the City to rectify any procedural defects and ratify the
terms of this Ordinance.
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January 3, 2000
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PASSED AND APPROVED by the City Council of Litchfield this 10th day of February,
2000.
BY: /s/ William Cornman
--------------------
Title: Mayor
ATTEST: /s/ Marilyn Hartke
-------------------
Title: City Clerk
ACCEPTED BY Enstar Income Program II-1.
BY: /s/ Gene O Knogland
-------------------
Title: Senior V.P. Operations Central Region
ATTEST: /s/ Deanna Porter
-----------------
Title: Executive Assistant
Litchfield, IL Cable TV Franchise Ordinance
January 3, 2000
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