ORDINANCE No. 182462

Amend and extend telecommunications franchise granted to Pacific Fiber Link, LLC, now known as 360networks (USA), inc (Ordinance; amend Ordinance No. 172864)

The City of Portland ordains:

Section 1. The Council finds:

1.  On November 12, 1998, the City Council approved Ordinance No. 172864, granting a franchise to Pacific Fiber Link, LLC, to use designated City streets to provide telecommunications services as a point-to-point telecommunications provider.

2.  360networks (USA), inc. (“360networks”) claims to act as a successor to Pacific Fiber Link, with common corporate affiliates asserting that these corporate relationships are within the meaning of Section 15.1 of Ordinance No. 172864.

3.  By an order dated May 3, 2007, the Oregon Public Utility Commission (“OPUC”) issued a certificate of authority to 360networks to offer telecommunications services as a competitive telecommunications provider. In re 360networks (USA) inc., Order 07-174, CP 1363 (May 3, 2007). 360networks has asked that the City amend its franchise to provide general authority to use the City streets, in keeping with its modified authority to provide telecommunications service under the OPUC’s 2007 Order, in accordance with Section 19.9 of Ordinance No. 172864.

4.  Staff of the Office of Cable Communications and Franchise Management recommend to the City Council that it would be in the mutual interest of the City and 360networks to amend the franchise to modify the grant of authority to use the City streets, together with related franchise provisions, in light of the services authorized under the OPUC’s 2007 order. Furthermore, Cable staff recommends that the term of Ordinance No. 172864 be extended to allow for the timely development of a renewal telecommunications franchise between the parties.

NOW, THEREFORE, the Council directs:

a.  Section 1.1(A) of Ordinance No. 172864 is amended to read as follows:

(A) The City of Portland, does hereby grant to 360networks (USA), inc., a Nevada corporation qualified to do business in the State of Oregon, and to 360networks (USA), inc.’s successors and assigns, as approved by the City of Portland under Section 15 of this Franchise, a franchise to construct, operate and maintain a telecommunications system, with all necessary Facilities, in, under, and over the surface of the City of Portland’s Streets. 360networks (USA), inc. intends to use its Telecommunications System to provide Telecommunications Services. To the extent that 360networks (USA), inc.’s use of its Telecommunications System changes, the City of Portland may reopen this Franchise pursuant to the provisions of Franchise Sections 17 or 19.9.

b.  Section 2.8 of Ordinance Number 172864 is amended to read as follows:

2.8 “Minimum Annual Franchise Fee” shall mean $14,000 in the year beginning January 1, 2008, and shall increase by $1,000 annually.

c.  Section 2.13 of Ordinance Number 172864 is amended to read as follows:

2.13 “Telecommunications Services” means:

a.  Services interconnecting interexchange carriers, competitive carriers, and/or wholesale telecommunications providers for the purpose of voice, video, or data transmission.

b.  Services connecting interexchange carriers and/or competitive carriers to telephone companies providing local exchange services for the purpose of voice, video, or data transmission.

c.  Services connecting interexchange carriers or competitive carriers to any entity, other than another interexchange carrier, competitive carrier, or telephone company that provides local exchange services, for the purpose of voice, video, or data transmission.

d.  Services interconnecting any entities, other than interexchange carriers, competitive carriers, or telephone companies providing local exchange services, for the purpose of voice, video, or data transmission.

e.  This Franchise does not authorize the Grantee to operate as a telecommunications provider. The Grantee represents that it has applied for and received all necessary regulatory authority.

f.  Nothing in this Franchise shall preclude the Grantee from entering into a contract for the use of any portion of its Telecommunications System with any Person or other entity for any services, whether specified herein or not, provided that said Person or entity is another Franchisee, licensee, or permittee and has assumed responsibility for obtaining any required authority from the City.

d.  Section 2.14 of Ordinance Number 172864 is amended to read as follows:

2.14 “Telecommunications System” means all wires, cables, ducts, conduits, vaults, poles, Optical Fiber and other necessary Facilities owned or used by the Grantee for the purpose of providing Telecommunications Services and located in, under and above City Streets, excluding ducts, conduits and vaults leased from another City franchisee, licensee or permittee.

e.  Ordinance Number 172864 is amended by inserting a new Section 2.16 to read as follows:

2.16 “Gross Revenues” shall mean any and all gross revenues derived by Grantee for the provision of any and all products, services or charges, originating or terminating in Portland, Oregon or billed to a circuit, switch or address in Portland, Oregon, including revenues from dedicated private networks.

f.  Section 3 of Ordinance Number 172864 is replaced and will read:

Section 3.  COMPENSATION AND AUDITING:

A.  Amount of compensation.

1.  As compensation for the benefits and privileges under this Franchise and in consideration of permission to use the Streets of the City, the Grantee shall pay as a Franchise fee to the City, through the duration of this Franchise, the greater of either:

a.  The Minimum Annual Franchise Fee; or,

b.  An amount equal to five percent (5%) of the Grantee's Gross Revenues. However, revenues derived from the sale of facilities and subject to Section 3(A)(2), shall be excluded from the Gross Revenues calculation of franchise fees under this Subsection 3(A)(1).

2.  Additional Compensation. As additional compensation to the amounts set forth in Section 3(A)(1):

a.  In the event Grantee sells any portion of its Telecommunications System, Grantee shall pay a one-time Franchise fee to the City of one percent (1%) of the sales price.

b.  The calculation of the one percent (1%) franchise fee on sales shall be based on the sale price of the Portland, Oregon portion of the Telecommunications System or the minimum annual fee of $10,000, whichever is greater. The calculations of the one percent franchise fee on sales revenues shall be calculated under the following formula:

Franchise fee = (.01) x Ts x (Fp÷Ft), where:

Ts = Total sales price for the facility(ies);

Fp = the length of the facilities sold located within the City, expressed in fiber-miles; and,

Ft = the total length of the facilities sold, expressed in fiber-miles.

An illustrative example of this calculation would be as follows: Out of a fiber optic bundle of twenty four (24) fibers in a forty mile loop, Grantee sells two (2) fibers to a purchaser for a total sales price of five hundred thousand dollars ($500,000). Ten miles of the fiber optic loop are located within the City of Portland. The calculation would be as follows: Franchise fee = (.01) X $500,000 X (2 x 10) ÷ (2 x 40) = $1,250.

B.  Franchise Fee Payments.

1.  Grantee's Minimum Annual Franchise Fee payable under Section 3(A)(1) shall be paid to the City annually following the effective date of this Franchise. Each annual payment of the Grantee's Minimum Annual Franchise Fee shall be paid on or before the forty-fifth (45th) day following December 31st.

2.  The Gross Revenue based Franchise fee payable under Section 3(A)(1), together with Franchise fees based upon revenues from sales under Section 3(A)(2), shall be computed and paid as follows:

a.  For the period January 1, 2008 through December 31, 2008 the payment shall be due on or before February 14, 2009;

b.  For all periods after December 31, 2008: on or before the forty-fifth (45th) day following each calendar year quarter period (January 1 through March 31, April 1 through June 30, July 1 through September 30, and October 1 through December 31) during the term of this Franchise.

3.  Franchise fee payments not received by the City on or before the due date shall be assessed interest based on the average prime interest rate set by the City’s bank on December 31st of the previous year, plus 300 basis points (3%). At no time shall the annual interest rate be reduced to less than 12%.

C.  Reports. Each payment shall be accompanied by a written report to the City, verified by an officer or other authorized representative of Grantee, containing an accurate statement in summarized form, as well as in detail, of Grantee's Gross Revenues, together with Franchise fees based upon revenues from sales, IRUs and leases under Section 3(A) and the computation basis and method. Such reports shall be in a form satisfactory to the City.

D.  Acceptance of Payment and Recomputation.

1.  No acceptance of any payment by Grantee shall be construed as an accord that the amount paid is, in fact, the correct amount, nor shall any acceptance of payments be construed as a release of any claim the City may have for further or additional sums payable. All amounts paid under Section 3 shall be subject to confirmation and recomputation by the City, provided that such audit and computation is completed within five (5) years of the date any audited and recomputed payment is due. If no such audit or financial review is conducted within the five (5) year period, then any claim that the City might have had for additional compensation shall be forever waived and relinquished. The Grantee agrees to reimburse the City for:

a.  The reasonable costs of such confirmation if the City's recomputation discloses that the Grantee has paid 95% or less of the Franchise fees owing for the period at issue upon receipt of an invoice from the City showing such costs were actually incurred and directly related to the audit.

b.  One-half of the reasonable costs of such confirmation if the City's recomputation discloses that the Grantee had paid more than 95% but less than 98% of the Franchise fees owing for the period at issue.

c.  The City's costs which may be reimbursed under this Section 3(F) shall not exceed $5,000.00 per audit or financial review.

d.  If the City determines that Grantee made any underpayment, and that the underpayment exceeded 5% of the amount due, Grantee shall pay interest compounded at the rate of one percent (1%) over the existing prime rate as set by the bank with which the City contracts for its banking services, compounded monthly. Interest shall be due on the entire underpayment from the date on which payment was due until the date on which full payment is received.

E.  If the Grantee disputes the City's determination of underpayment, the Grantee shall place the disputed amount in an escrow account until final resolution.

F.  The City and its agents and representatives shall have authority to arrange for and conduct reviews of the relevant financial obligations payable hereunder. The City may determine the scope of review in each instance. All amounts paid by Grantee shall be subject to review by the City, provided that such review be completed within five (5) years from the date payment was due. City requests for reviews shall be in writing. If Grantee has not provided copies of all information reasonably within the scope of the review to the City within 30 days from the date of the written request, Grantee shall provide access within the Portland metropolitan region, during normal business hours, upon 48 hours prior written notice. If the City requests in writing that the Grantee provide, or cause to be provided, copies of any information reasonably within the scope of the review, and the Grantee fails within 30 days of receipt of the request to provide, or cause to be provided, such information, then the five (5) year period shall be extended by one day for each day or part thereof beyond 30 days that Grantee fails to provide, or fails to cause to be provided, such requested information.

g.  Section 9.4 of Ordinance Number 172864 is amended to read:

9.4 City agrees to waive any claims to franchise fees under Section 3(A)(2) during the term of this Franchise, in exchange for Grantee constructing its Telecommunications System past the Development Building (1900 SW 4th Avenue) and providing ducts to the City under this Section 9 of the Franchise.

h.  Ordinance Number 172864 is hereby amended to extend the term of the Franchise continuously and without interruption, through December 31, 2009.

i.  All other terms and conditions of the Franchise shall remain the same and unchanged.

j.  On or before thirty (30) days after this ordinance becomes effective, 360networks (USA), inc. shall file in the Office of the Auditor of the City of Portland a written acceptance of this ordinance, executed by a duly authorized officer of 360networks (USA), inc., meeting the approval of the City Attorney. Any failure on the part of 360networks (USA), inc. to file such written acceptance within such time shall be deemed an abandonment and rejection of this ordinance, and this ordinance shall thereupon be null and void. Such acceptance shall be unqualified and shall be construed to be an acceptance of all the terms contained in this ordinance.

Passed by the Council: January 07, 2009  Gary Blackmer

             Auditor of the City of Portland

Commissioner Dan Saltzman          By /s/ Susan Parsons

DSoloos/BWalters              Deputy

December 17, 2008

BACKING SHEET INFORMATION

AGENDA NO. 1789-2008, 11-2009

ACTION TAKEN:

DEC 24 2008 PASSED TO SECOND READING JAN 07 2009 9:30 A.M.

ORDINANCE/RESOLUTION/COUNCIL DOCUMENT NO. 182462