#  March 6, 2000

Arthur H. Harding, Esq.

Fleischman and Walsh, LLP

1400 Sixteenth Street, N.W., Suite 6000

Washington, DC 20036

Peter D. Ross, Esq.

Wiley Rein & Fielding

1776 K Street, N.W.

Washington, D.C. 20006

Re: AOL/Time Warner Application for Consent to Transfer of Control,

## CS Docket No. 00-30

Dear Mr. Harding and Mr. Ross:

As you will recall, Commission staff met with you on February 9, 2000,
to discuss the proposed merger of AOL and Time Warner. I understand that
the staff emphasized the need for your application to include
substantive information and arguments to support your claim that the
merger will benefit the public, so that the public comment process and
Commission review will operate efficiently. An initial review of the
application reveals that you need to provide additional information and
supporting arguments.

I understand that you acknowledged at the February 9 meeting that your
application is likely to engender extensive public interest and
comments. Neither commenters in this proceeding nor Commission staff can
provide an informed evaluation of the application without relevant
information and arguments from the applicants. Failure to produce the
materials until the reply comment stage would necessitate an additional
comment cycle, with a concomitant waste of resources and time by the
Commission and all the parties. In order to assist the Commission in
reviewing the transfer of control applications in an efficient and
expeditious manner, therefore, please amend the application by providing
the relevant information and arguments as described below. Once an
adequate application is filed, we will issue a public notice seeking
comment on your application.

As an initial matter, the application should provide specific
information regarding the applicants' assets and lines of business,
including the applicants' and other owners' percentages of ownership
interests and rights in these properties. In this connection, I would
note, as an example of your failure to provide relevant information, the
application's treatment of AOL's interest in broadcast satellite
service. You note that "AOL made a strategic investment in General
Motors," which owns DirecTV, and argue that "there is simply no risk
that AOL's limited interest in General Motors Corporation, when combined
with Time Warner's cable system ownership, could adversely affect
consumers." App. 3, 17. That may well be correct. But in the absence of
any information concerning the extent of AOL's interest in GM, neither
we nor commenters can intelligently evaluate that claim. We would urge
you to look closely at your application to remedy similar failures to
provide relevant information.

With regard to analysis of the proposed merger's competitive impact, we
understand that you wish to reserve the right to argue that certain
issues are irrelevant to the Commission's analysis under the public
interest standard. However, the application should include
fully-developed arguments and information to substantiate those specific
assertions that the applicants have made regarding the potential
benefits and lack of potential harms from the proposed merger. We have a
number of specific suggestions in this regard, and would ask you to look
closely at your application to identify others.

-   A key issue is whether there are separate markets for narrowband and
    broadband last-mile conduits. In footnotes 19 and 20 of your
    application, you seem to assume that these are not separate markets,
    since you say that "Road Runner currently provides Internet access
    to 555,000 customers, a *de minimus* \[*sic*\] fraction of U.S.
    Internet users." At other places in your application, however, you
    highlight the distinctions between broadband and narrowband access,
    and contend that "\[t\]he merger will also act as a catalyst for the
    development of the next generation of multi-media interactive
    services." App. 11. Please explain your position on this important
    market definition issue.

-   The application states that "AOL and Time Warner mutually commit to
    further the Commission's vision of a marketplace solution whereby
    consumers have the choice of multiple ISPs over broadband cable
    systems," but adds that "there are significant details surrounding
    the implementation of a multiple ISP approach over cable systems
    which need to be worked out." App. 15. Plainly, there will be
    significant comment on this open access issue, and we think everyone
    would be better served if you provided more specificity sooner
    rather than later. The Memorandum of Understanding filed last week
    is a useful step in this direction.

-   You state that "AOL Time Warner has no rational economic incentive
    to limit the distribution of the AOL service," even "within its
    cable services areas." App. 13. Further explanation of that
    assertion would be useful.

-   You assert that the merger will result in numerous public benefits,
    such as ensuring "that the merged company's new, high-quality
    content and interactive services are widely accessible and
    attractive to all potential users" and expanding "Internet
    communication, interactivity, and convenience to devices beyond the
    personal computer." App. 12, 13. It is difficult to evaluate such
    claims without supporting explanations.

-   You state that the claimed benefits cannot be achieved without the
    merger because "joint ventures or even looser cooperative
    arrangements inevitably founder." App. 14. In light of the examples
    of joint ventures and strategic alliances (such as the recently
    announced joint initiatives to provide wireless internet service)
    please explain further why the proposed merger, rather than some
    "looser cooperative agreement" is necessary to achieve the benefits
    here.

Thank you for your prompt attention to this matter. Please provide your
revised application to the Cable Services Bureau. If you have any
questions, please do not hesitate to contact To-Quyen Truong in the
Bureau (418-7200) or Jim Bird in the Office of General Counsel
(418-1700).

Sincerely,

Christopher J. Wright

General Counsel

cc: Deborah Lathen

James Bird

To-Quyen Truong