My operator says this transaction is a simple pro forma restructuring. Every proposed transfer should be carefully reviewed to assure, at a minimum, that the transaction will not affect the community's rights under the franchise, or result in a waiver of claims and past non-compliance problems. The community should review even a pro forma transfer to ensure that it will not have a negative impact on the quality of service or the franchisee's ability to fulfill its franchise obligations. Moreover, a waiver of authority to deny a transfer could create a precedent for a later transfer. And it will deprive a community of a substantial opportunity to understand the true nature and financial capability of the operator.
Transfers can have a significant and adverse effect on franchise renewal.
A transfer can cut off a local franchising authority's ability to consider the transferor's performance once the transaction is consummated. If a local franchising authority is limited in evaluating the transferee's past performance, it is much more difficult to deny renewal. Consequently, before approving any transfer, a municipality should require the transferee to commit, in writing, to assume all of the transferor's obligations and liabilities, known and unknown. For instance, a franchising authority could impose any applicable penalties, require the payment of liquidated damages, or revoke the franchise. Finally, a cable operator could seek monetary damages from the local franchising authority.