**Before the**

**FEDERAL COMMUNICATIONS COMMISSION**

**Washington, D.C. 20554**

In the Matter of )

)

Applications of America Online, Inc. ) File No.
\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_

and Time Warner Inc. for )

Transfers of Control )

To: The Commission

**PUBLIC INTEREST STATEMENT**

**AMERICA ONLINE, INC.** **TIME WARNER INC.**

George Vradenburg, III Timothy A. Boggs

Jill A. Lesser Catherine R. Nolan

Steven N. Teplitz **Time Warner Inc.**

**America Online, Inc.** 800 Connecticut Avenue, N.W.

1101 Connecticut Avenue, N.W. Suite 800

Suite 400 Washington, D.C. 20006

Washington, D.C. 20036 (202) 451-9224

\(202\) 533-7878

Aaron I. Fleischman

Richard E. Wiley Arthur H. Harding

Peter D. Ross Christopher G. Wood

Wayne D. Johnsen Fleischman and Walsh, L.L.P.

Wiley Rein & Fielding 1400 Sixteenth Street, N.W., Suite 600

1776 K Street, N.W. Washington, D.C. 20036

Washington, D.C. 20006 (202) 939-7900

\(202\) 719-7000

John R. Wilner

Bryan Cave, L.L.P.

700 13^th^ Street, N.W.

Washington, D.C. 20005

\(202\) 508-6041

February 11, 2000

**EXECUTIVE SUMMARY**

The merger of America Online, Inc. ("AOL") and Time Warner Inc. ("Time
Warner") should receive the Commission's enthusiastic and expeditious
approval. Each company brings valuable resources and expertise to the
table. AOL has built a business on making the Internet
consumer-friendly, transforming the way individuals communicate, shop,
invest, and learn. Time Warner is known for its high quality content and
technologically advanced cable systems. Together, our two companies will
hasten and enhance the broadband future, making real and immediate the
promise of ready access to next-generation multimedia content and
powerful e-commerce applications. As a result, consumers will have
increased options for high-speed broadband Internet access and new means
to receive new forms of content.

There can be no reasonable doubt that the marriage of AOL and Time
Warner will advance the public interest. Not only is the AOL Time Warner
Inc. ("AOL Time Warner") merger fully consistent with all FCC rules and
policies, including the FCC media ownership and concentration rules, and
thus requires no rule waivers, but the merger will have only
pro-competitive effects.

While each company provides a multitude of services and products, they
operate in largely separate spheres. Unlike other recent mergers, AOL
and Time Warner simply do not compete to any appreciable extent. Where
there are any overlaps \-- as in the provision of certain
Internet-related services \-- the presence of thousands of other
competitors and our commitment to ensuring multiple ISP entry assure
that there is no risk of unilateral or coordinated anticompetitive
conduct. Likewise, the merger changes nothing of relevance in terms of
impact on the consumers of multichannel video programming service.

Notably, the vertical effects of the merger will be entirely positive.
The merged company will commit to a policy of consumer choice among
multiple ISPs available over broadband networks. Just as we expect that
our services and products will be directly available to subscribers of
other delivery platforms on a commercially reasonable basis, likewise we
intend to offer competing service providers' services on our systems.
The merger therefore will directly advance the Commission's stated goal
of providing expanded consumer choice through marketplace forces.

Our driving vision is to make our content and services available to
consumers through any and all means of access, including cable, DSL,
satellite, and wireless. Nor will we deny our subscriber's ready access
to content from other providers, an approach that has no place in
today's Internet environment.

Simply put, there is no possibility that this merger could "frustrate or
undermine \[the Commission's\] policies." There is consequently no need
for the type of intensive inquiry that the Commission has undertaken
with respect to certain other mergers that, in its view, raised
substantial competitive issues within the Commission's regulatory
concern. Nonetheless, in light of the immense attention already being
given to this transaction, we discuss herein (in section III) the clear
benefits resulting from the merger and explain (in section IV) why there
is no conceivable risk to competition. Accordingly, under whatever
standard is applied in assessing the public interest, the Commission
should rapidly conclude that this application more than satisfies the
requirements of the Communications Act.

ii

[PUBLIC INTEREST STATEMENT]{.underline}

This Public Interest Statement is being filed in connection with a
series of applications seeking the consent of the Federal Communications
Commission ("FCC" or "Commission") to the transfer of control of
Commission authorizations held by (i) Time Warner Inc. ("Time Warner")
and various of its subsidiaries and (ii) America Online, Inc. ("AOL") to
AOL Time Warner Inc. ("AOL Time Warner").[^1] As described more fully
below, under the parties' merger agreement, AOL and Time Warner will
each become subsidiaries of AOL Time Warner, a newly-formed company that
will be owned by the shareholders of both companies. The AOL Time Warner
merger is fully consistent with FCC rules and policies, including the
FCC media ownership and concentration rules, and thus no rule waivers
are necessary. Further, as demonstrated herein, the combined strengths
of these companies will enable AOL Time Warner to build an integrated
media and communications company capable of enhancing consumers' access
to the broadest selection of high-quality content and interactive
services.

# I. DESCRIPTION OF THE PARTIES

As demonstrated below, the AOL Time Warner merger is not a horizontal
merger involving a combination of entities each holding significant FCC
licenses. Rather, this merger brings together two firms that operate in
largely separate spheres.

***[AOL]{.underline}*:** Founded in 1985, AOL is a worldwide provider of
interactive services, Web brands, Internet technologies, and electronic
commerce services. AOL has two major lines of business: Interactive
Online Services and Enterprise Solutions.

AOL's Interactive Online Services business is comprised of the
Interactive Services Group, the Interactive Properties Group and the AOL
International Group. The Interactive Services Group develops and
operates branded interactive services. AOL currently serves more than 23
million members worldwide through the Company's flagship AOL service (an
Internet online service serving more than 21 million members) and
CompuServe (another Internet online service serving more than two
million customers). The Interactive Services Group also includes
(i) AOL's Netscape Netcenter, an Internet portal serving 20 million
registered users; (ii) the AOL.com Internet portal; and (iii) the
Netscape Communicator client software, including the Netscape Navigator
browser.

The Company's Interactive Properties Group consists of an array of
branded properties that operate across multiple services and platforms,
including: Digital City, Inc., a local content network and community
guide on the Internet; ICQ, a communications portal providing instant
communications as well as chat technology; MovieFone, Inc., a movie
guide and ticketing service provided both through interactive telephony
and online; and the company's Internet music brands, Spinner.com, Winamp
and SHOUTcast, which provide online music services.

In addition, the AOL International Group oversees the AOL and CompuServe
services and joint ventures outside the United States (including in
Australia, Austria, Canada, France, Germany, Japan, the Netherlands,
Sweden, and Switzerland), as well as the Netscape Online service in the
United Kingdom. Globally, members are able to access these services in
more than 100 countries.

AOL's second major line of business, Enterprise Solutions, consists
primarily of the Netscape Enterprise Group, which provides businesses
with a range of software products, technical support, consulting and
training services. These products and services enable businesses and
users to share information, manage networks, and facilitate electronic
commerce.

AOL also has entered into a number of ventures with other companies
serving a broad range of Internet and related industries. For example,
to accelerate the growth of electronic commerce, AOL entered into a
strategic alliance with Sun Microsystems, Inc. to develop and market
client software and network application and server software for
electronic commerce, extended communities and connectivity. Similarly,
AOL made a strategic investment in General Motors Corporation designed
to enhance the ability of Hughes Electronics Corporation to develop and
market integrated digital entertainment and Internet services through
Hughes' DirecTV direct broadcast satellite service and DirecPC
satellite-based broadband Internet delivery system, as well as to market
AOL TV interactive television and AOL-Plus services. AOL also has made
strategic investments in Internet-related companies such as Oxygen
Media, iVillage, The Knot, Liberate Technologies, Multex, Net2Phone,
Preview Travel and Talk.com.

***[Time Warner]{.underline}**:* Time Warner is a worldwide media and
entertainment company. Time Warner's principal business objective is to
create and distribute branded information and entertainment throughout
the world. Time Warner classifies its business interests into the
following fundamental areas:

 cable networks, consisting principally of interests in cable
television programming, including WTBS Superstation, TNT, Cartoon
Network, CNN News Group and Home Box Office;

 publishing, consisting principally of interests in magazine publishing
and direct marketing, including Time, People, Sports Illustrated, Warner
Books and Time Life Inc.;

 music, consisting principally of interests in recorded music and music
publishing, including Warner Music Group and its labels Atlantic,
Elektra, Rhino, Sire, Warner Bros. Records and Warner Music
International;[^2]

 filmed entertainment, consisting principally of interests in filmed
entertainment, television production and television broadcasting,
including Warner Bros., New Line Cinema and the WB Network;

 cable, consisting principally of interests in cable television
systems, including Time Warner Cable; and

 digital media, consisting principally of interests in Internet-related
and digital media businesses.

# II DESCRIPTION OF TRANSACTION

Pursuant to an Agreement and Plan of Merger ("Agreement") dated as of
January 10, 2000, AOL and Time Warner plan to merge in a stock-for-stock
transaction. AOL and Time Warner each will merge with subsidiaries of a
newly formed holding company, AOL Time Warner. As a result of the
mergers, both AOL and Time Warner will become wholly owned subsidiaries
of AOL Time Warner. Upon consummation of the merger, the ultimate
ownership and control of various entities holding FCC licenses will be
transferred from Time Warner and AOL to the new AOL Time Warner. The
applications filed concurrently herewith seek FCC consent to that
transfer. There will be no change in any of the legal entities holding
any FCC licenses, and thus all affected licenses will remain in their
current names. The structure of the transaction is graphically depicted
on Attachment 2.

Under the terms of the Agreement, Time Warner and AOL stock will be
converted to AOL Time Warner stock at fixed exchange ratios. Upon
consummation of the merger, current Time Warner shareholders will
receive 45% of the stock of AOL Time Warner, and current AOL
shareholders will receive 55%, each on a fully diluted basis. Stephen M.
Case will serve as a Chairman, Gerald M. Levin will serve as Chief
Executive Officer, Ted Turner will serve as Vice Chairman, Richard
Parsons and Robert Pittman will serve as Co-Chief Operating Officers and
J. Michael Kelly will serve as Chief Financial Officer of AOL Time
Warner. The initial Board of Directors of AOL Time Warner will consist
of sixteen members, eight of whom will be designated by Time Warner and
eight by AOL.

# III THE MERGER OF AOL AND TIME WARNER WILL GREATLY BENEFIT CONSUMERS

As set forth below, the merger of AOL and Time Warner \-- widely
heralded as a ground-breaking marriage of new and traditional media \--
will result in significant benefits for consumers and thereby advance
important public policy goals. In particular, the combination of the
parties' strengths in providing consumer-friendly Internet services and
a rich array of content of all types means that the merged company will
be able to bring wholly new interactive services and products to the
marketplace more quickly than either could do apart. In addition, the
parties expect and intend that this transaction will move the
marketplace to resolve the ongoing debate concerning open access on
cable broadband systems.

## A0 The FCC's Public Interest Standard

Under sections 214 and 310 of the Communications Act, the Commission
must approve transfers of licenses and authorizations upon a finding
that the "public interest" would be served thereby. For the vast
majority of proposed transfers \-- those that "could not frustrate or
undermine \[its\] policies" \-- the Commission concludes that "no
inquiry is necessary."[^3] Rather, once it has satisfied itself that the
transferee is financially and legally qualified, such transfers are
routinely approved.

For certain mergers, however, the Commission has applied a standard
first articulated in the *Bell Atlantic/NYNEX* decision.[^4] Under that
standard, the Commission considers whether "the merger violates our
rules, or would otherwise frustrate our implementation or enforcement of
the Communications Act and federal communications policy."[^5] In such
cases, the Commission "weigh\[s\] any potential competitive harms and
benefits to determine whether the proposed transaction would promote the
public interest."[^6]

The Applicants respectfully submit that this merger falls comfortably
within the vast majority of transfer applications that are filed with
the Commission and routinely approved for several reasons, principally
because the merger plainly "could not frustrate or undermine \[the
Commission's\] policies."

[First]{.underline}, the Applicants' assets and businesses are almost
entirely complementary, as shown in section I above. There is therefore
no loss of actual or potential competition and no inconsistency with the
Act's pro-competitive goals.

[Second]{.underline}, in the only service areas where there may be
either any horizontal overlap or vertical relationship between AOL's and
Time Warner's businesses, there is no appreciable prospect of any
competitive harm:

>  AOL and Time Warner each provide Internet access services. There are
> thousands of competitors in this field, however, and the merged
> company will have no ability or incentive to raise prices or restrict
> output. Currently, Road Runner has exclusive rights to offer Internet
> access service over certain Time Warner cable systems. Thus, as
> explained herein, the merged company's commitment to provide access
> will further expand the opportunities for competing Internet Service
> Providers ("ISPs") to serve Time Warner's cable subscribers.
>
>  AOL and Time Warner both provide content over the Internet. In doing
> so, of course, they compete against legions of other content
> providers, many of whom offer their products over a multitude of
> delivery platforms other than the Internet. Consequently, there is no
> conceivable way that the merged company could reduce the availability
> or diversity of content. To the contrary, as explained below, the
> Applicants intend to provide their customers the broadest possible
> array of appealing content, regardless of the source.[^7]
>
>  Time Warner is a major cable system operator, but AOL is not a
> multichannel video programming distributor. AOL's minority interest in
> the ultimate parent of DirecTV is not attributable, and AOL has no
> role in controlling or influencing DirecTV's marketing, pricing, or
> business strategies. Moreover, AOL's investment in Hughes demonstrates
> its dedication to a multiple platform data delivery strategy that
> maximizes competition and consumer choice.

[Third]{.underline}, the merger will directly and substantially advance
the Commission's policy goal of maximizing consumer choice on broadband
cable networks through the marketplace. As explained in section III.C,
just as the merged company will expect that its content and services
will be available directly to subscribers of other next-generation
platforms, so too will it embrace choice on its own cable systems.

Notwithstanding the utter absence of potential competitive or consumer
harm resulting from their merger, AOL and Time Warner recognize that a
transaction of this size inevitably will attract scrutiny and interest
from both the Commission and the public at large. Consequently, while
the Applicants do not believe that an expansive inquiry is either
necessary or appropriate, we will demonstrate herein that our merger
nevertheless readily satisfies even the *Bell* *Atlantic/NYNEX*
standard.[^8]

Specifically, as we show in the remainder of section III, our merger
will directly produce substantial and wide-ranging benefits to the
public. In section IV, we explain why the merger will have no
deleterious effect on competition in the provision of Internet services
or multi-channel video programming services. The public interest
calculus is therefore clear: our merger easily meets whatever standard
the Commission employs in discharging its obligations under sections 214
and 310 of the Act.

## B0 Together AOL and Time Warner Will Spur The Rapid Development of the Next Generation of Broadband Services and Content 

The marriage of AOL and Time Warner will help make tangible \-- in a way
finally meaningful to consumers \-- the long-abstract visions for
next-generation technology as an unparalleled source of information,
entertainment, communications, and e-commerce opportunities for the
21^st^ century. Together, AOL and Time Warner will have the experience,
the incentive, and the resources necessary to develop an array of
exciting new services and products in an unpredictable and
risk-intensive marketplace.

In their joint announcement of the merger, leaders of the two companies
made plain that the rapid development of new services and products will
be the paramount goal of the new company. As AOL Chairman and CEO Steve
Case explained, "\[b\]y joining forces with Time Warner, we will
fundamentally change the way people get information, communicate with
others, buy products and are entertained \-- providing far-reaching
benefits to our customers and shareholders."[^9] Time Warner Chairman
and CEO Gerald Levin noted that "\[t\]he digital revolution has already
begun to create unprecedented and instantaneous access to every form of
media and to unleash immense possibilities for economic growth, human
understanding and creative expression. AOL Time Warner will lead this
transformation, improving the lives of consumers worldwide."[^10]

AOL and Time Warner firmly agree that the Internet of the future must be
more than a faster version of the Internet of today. Rather, if
broadband is to gain widespread acceptance, it must give consumers
exciting and new \-- yet still easy to use \-- forms of the content and
services that they either value today or hope to find tomorrow. That's
why this merger offers consumers so much: it will generate new, enticing
next-generation products and services as a natural by-product of the
melding of the two companies' cultures and expertise.

>  AOL has been the leading proponent (and most successful
> practitioner) of making the online world easy for, and relevant to,
> consumers who are *not* computer experts. The company has led the way
> in transforming the web from the narrow realm of "early adopter"
> technologists into a true mass market medium, providing millions of
> people from all walks of life with their first online experience. This
> was true when the World Wide Web offered only text and
> slow-to-materialize graphics, and it will remain true in a broadband
> future promising ubiquitously available, full-motion video and
> high-fidelity music.
>
>  Time Warner has a proven track record in producing high quality,
> widely popular content across all traditional media, including print,
> audio, and video, as well as a commitment to rolling out
> next-generation services for its cable subscribers. This merger will
> accelerate the digital transformation of Time Warner and thereby give
> its creative and content businesses the widest possible canvas.

Post-merger, the combined AOL Time Warner will be well-positioned to
deliver unprecedented consumer value across rapidly converging media
platforms, thereby taking full advantage of the emergence of the
Internet and the ongoing digital revolution. The merged company will do
so by building on the highly regarded content library and brands of Time
Warner to develop top quality multimedia content and consumer services
made exciting and easy to enjoy through AOL's proven ability to bring
the wonders of the Internet to everyday people.

Significantly, AOL Time Warner will be able to maximize the potential of
broadband technology to deliver next-generation branded content at the
highest possible speed. Indeed, the combination of AOL and Time Warner
will accelerate the transformation of broadband from potential to
reality, giving consumers increased options for high-speed Internet
access and new means to receive the content they want and need. The
merger will also act as a catalyst for the development of the next
generation of multi-media interactive services.

The combination of AOL and Time Warner assets will create new and
enhanced opportunities for domestic and international growth in
interactive, rich media forms of entertainment, news, online services,
publishing, music, film distribution, and the delivery of a whole host
of exciting communications and information services. Of particular note,
the parties will maximize a renowned resource of journalistic talent,
technology, and expertise, thereby transforming how consumers access and
use news content. In so doing, of course, the merged entity has every
incentive to safeguard zealously Time Warner's reputation in the
marketplace for the quality and integrity of its creative and
journalistic product.

AOL Time Warner will remain committed to closing the digital divide.
Anyone with even a passing acquaintance with the problems our inner-city
schools face and the burdens shouldered by overworked, underpaid
teachers knows that the digital divide presents a crucial challenge to
the government and private sectors alike. AOL and Time Warner will work
together to provide parents, teachers and schools with unprecedented
tools and content for educating the nation's youth and bringing the
digital revolution to every child and into every home and school. The
synergies resulting from the combination of AOL and Time Warner are
certain to hasten the deployment of broadband, interactive networks and
thereby make substantial progress in closing the digital divide.

AOL Time Warner also has every incentive to draw on its Internet
marketing and technological expertise to ensure that the merged
company's new, high-quality content and interactive services are widely
accessible and attractive to all potential users. Likewise, AOL Time
Warner will actively promote its services by providing its customers,
wherever they are located, with the highest quality, most diverse, and
most relevant content possible, regardless of source and via a
multiplicity of platforms.[^11] The merger of AOL and Time Warner will
also expand Internet communication, interactivity, and convenience to
devices beyond the personal computer, such as the television, the
wireless telephone, personal organizers, and other companion devices.

Similarly, AOL and Time Warner clearly recognize that the interests of
the merged entity would hardly be served if consumers were able to
obtain Time Warner's content and services only over cable systems.
Accordingly, this merger will in no way undermine the "AOL Anywhere"
mission to reach consumers over the widest possible array of delivery
systems. Time Warner's cable systems reach less than 20 percent of the
nation's homes passed by cable, and more than 35 percent of the homes
passed by Time Warner's systems choose not to subscribe. Given these
facts, AOL Time Warner has no rational economic incentive to limit the
distribution of the AOL service and will need use of alternative means
\-- including unaffiliated cable systems, DSL, satellite, and wireless
\-- to make its services available as widely as possible, including
within its cable services areas.

Indeed, it is well understood that consumer interest in innovative and
enticing online offerings will inevitably have a direct, positive impact
on broadband penetration and deployment across platforms. By driving
consumer demand through user-friendly access to broadly appealing
innovations in online offerings, AOL Time Warner will help to fuel the
broadband penetration and deployment that forward-looking policymakers
have sought to promote.[^12] Such a speedy roll-out will ultimately
serve U.S. competitive interests as well.[^13]

AOL and Time Warner both believe that they can deliver these benefits to
the marketplace more quickly as a merged entity than either could do on
its own. Although the development of broadband products and services
already is a consuming goal for scores of providers and would-be
entrants, the risks in this new marketplace remain high. As most
observers of the marketplace understand, joint ventures or even looser
cooperative arrangements inevitably founder as each participant seeks to
shift risks to the other. While no one can reliably predict what
services or applications will succeed in the broadband future, AOL Time
Warner, by internalizing the substantial risks of trying to develop
innovative products that consumers want, will enhance the chances for
success \-- all to the benefit of the consumer.

Without a doubt, these goals dovetail with service in the public
interest. Because they also serve the parties' joint business
objectives, the Commission can be assured that the merged entity has
appropriate incentives to adhere to them.

## C0 The Merger Will Lead to a Marketplace Solution to the "Open Access" Issue

The Commission has been very clear that its vision for cable "open
access" had two fundamental components: one, choice among multiple ISPs
should be provided; and, two, that result should be accomplished in the
marketplace. In the absence of progress in the marketplace, AOL in
earlier proceedings urged a more pro-active Commission approach. With
this merger, however, AOL and Time Warner are now joining together to
solve this issue in the marketplace. And in so doing, the parties seek
to ensure that recent marketplace movements will indeed be driven home.

With this transaction, 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. The firm
commitment embraced by AOL Time Warner to implement a technical and
economic model whereby multiple ISPs can be made available over a cable
system's broadband infrastructure has emanated from an historic
confluence of market forces, technological advances and consumer demand.

To be sure, there are significant details surrounding the implementation
of a multiple ISP approach over cable systems which need to be worked
out. Legitimate technological hurdles must \-- and will \-- be overcome.
Existing contractual relationships need to be accounted for. But AOL and
Time Warner have embarked on an irreversible process of achieving
solutions to these problems. Not only will these solutions be
implemented on Time Warner's systems, but AOL and Time Warner expect
that this merger will also lead other companies operating broadband
platforms to provide consumers with real choice.

In short, AOL Time Warner is committed to maximizing diversity of
content and consumer choice on the Internet. This commitment reflects
the undeniable fact that consumer demand has and will continue to drive
the Internet phenomenon. As Chairman Kennard has noted, "Those early
adopters who are going to migrate from the narrowband world to the
broadband world grew up in a culture of openness on the Internet. They
are going to insist that they have that same culture of openness in the
broadband world."[^14]

Given what this merger means for achieving the desired marketplace
solution, the Commission can gain new confidence in its reliance on the
marketplace to achieve these goals.[^15] Granting this merger will
enable AOL Time Warner to fulfill that goal and to set the standard that
others will be compelled \-- by market forces \-- to follow.

# IV THE MERGER OF AOL AND TIME WARNER WILL CREATE NO ADVERSE COMPETITIVE EFFECTS

In striking contrast to the substantial benefits flowing from the
merger, there is no credible risk that the merged company could impede
competition. First, this merger is, like the FCC found in AT&T/TCI,
virtually devoid of any horizontal consequences. Simply put, while AOL
and Time Warner each provides a broad array of services, they compete
almost entirely in non-overlapping lines of business. Moreover, to the
extent there is any overlap in the provision of Internet-related
services, the Commission found just last year that "there are a large
number of firms providing Internet access services in nearly all
geographic markets in the United States, and these markets are quite
competitive today."[^16] With respect to multichannel video programming
distribution, 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. Finally, as
explained clear in section III, the vertical effects of this merger will
be entirely positive.

**[Internet-related services]{.underline}**. As the Commission is well
aware,[^17] thousands of entities offer Internet access and/or Internet
content across the nation. Some of the largest ISPs include AOL,
EarthLink, AT&T Worldnet, MSN, Bell Atlantic, GTE, SBC, Prodigy, PSINet,
Erols, Covad, and RCN. Many more providers are beginning to emerge, with
the development of wireless and satellite technology to access the
Internet and compete with the current telephone and cable
alternatives.[^18] In addition, the two largest cable companies\-- AT&T
and, with this merger, Time Warner \-- have announced that they
voluntarily will begin to offer opportunities for multiple ISPs once
certain exclusive contractual obligations expire.

Due to the ownership structure and the small size of Road Runner,[^19]
as well as the differences between AOL's and Road Runner's product
offerings, this merger will produce no adverse competitive impact on
Internet access. Any alleged incremental effect on horizontal
concentration would be insignificant. Thousands of ISPs compete
aggressively. Regardless of how the services offered by AOL and Road
Runner are viewed in relation to each other, this merger raises no new
concerns of coordinated anticompetitive behavior. In short, the merger
makes no appreciable competitive change. Further, the company's
commitment to offering multiple ISPs will, in fact, expand opportunities
for unaffiliated ISPs. [^20]

Similarly, there is no tenable argument that this merger would adversely
affect the provision of Internet content.[^21] As the FCC has
recognized, the Internet has created an unparalleled "marketplace of
ideas" \-- a realm of such diverse content and massive audience that no
voice need go unheard. The lack of barriers to creating and distributing
Internet content has allowed this medium to flourish.[^22]

The merging parties each offer original Internet content. However, no
matter how valuable their content could be, the extraordinary numbers of
providers and the incalculable amount of content ensure that combining
the ownership of these assets will have no negative impact on the wealth
of content available over the Internet. Not only are there many other
places on the Internet to obtain comparable content, but there is a
wealth of non-Internet media through which consumers can obtain the same
information as well as adequate substitutes, including print, radio,
television, and movies.

In any event, AOL and Time Warner have every intention *and* economic
interest (1) to make AOL Time Warner content easily accessible to
consumers, and (2) to ensure AOL Time Warner Internet access subscribers
can readily reach any Internet content they desire. As a rich array of
differentiated Internet services and content have flourished in
narrowband, so too are we intent on seeing a flourishing broadband
marketplace.

**[Multichannel Video Programming Distribution ("MVPD")
Services]{.underline}**. The merger of AOL and Time Warner will not
impede competition among MVPDs. Time Warner has both direct and indirect
controlling interests in numerous cable systems.[^23] AOL, despite its
investment in the ultimate parent of DirecTV, General Motors Corporation
("GM"),[^24] is neither an actual nor a potential competitor of Time
Warner. First, AOL's total interest in GM is far too insubstantial to be
deemed attributable under *any* FCC attribution standards. As a result,
AOL has no ability to influence the decision-making of DirecTV in any
way. Second, AOL's investment in GM is *pro*-competitive, in that it is
specifically and exclusively tailored to spur the development of two-way
satellite broadband capability, one of a broad range of broadband
alternatives (*e.g.*, cable, xDSL, etc.) to which the merger parties are
committed.[^25]

# V. PROCESSING PROCEDURES

Given the scope of the underlying transaction, the likelihood that
additional authorizations will be acquired pending the Commission's
consideration of these applications, and in accordance with past
Commission practice with regard to analogous situations,[^26] the
parties hereby request that the grant of the above-referenced
applications include the authority for AOL Time Warner Inc. to acquire
control of:

> 1\. Any authorization issued to any affiliate or subsidiary of Time
> Warner during the Commission's consideration of the transfer of
> control applications and the period required for consummation of the
> transaction following Commission approval;
>
> 2\. Construction permits held by licensees involved in this transfer
> of control that mature into licenses after closing and that may have
> been omitted from the transfer of control applications; and
>
> 3\. Applications that have been filed by such licensees and that are
> pending at the time of consummation of the proposed transfer of
> control.

**VI. CONCLUSION**[]{#__RefHeading___Toc531615826 .anchor}

The instant transfer applications should receive the Commission's
enthusiastic and expeditious approval. The sooner our two companies can
integrate their expertise, diverse strengths, and resources, the sooner
we can make good on the promise of broadband technology as an
unparalleled source of multimedia information and entertainment and a
user-friendly platform for electronic commerce. This incontrovertible
public interest benefit is undiluted by any risks to competition. To the
contrary, the merger will sharpen the competitive edge of companies
supplying a multitude of products and services, stimulating enhanced
innovation and creativity industry-wide.

For these reasons, our merger easily satisfies any public interest
inquiry. The Commission should promptly approve the instant transfer
applications. Undersigned counsel have read the foregoing Public
Interest Statement and to the best of such counsel's knowledge,
information and belief formed after reasonable inquiry, this submission
is well grounded in fact and is warranted by existing law or a good
faith argument for the extension, modification or reversal of existing
law, and is not interposed for any improper purpose.

Respectfully submitted,

**AMERICA ONLINE, INC.** **TIME WARNER INC.**

George Vradenburg, III Timothy A. Boggs

Jill A. Lesser Catherine R. Nolan

Steven N. Teplitz **Time Warner Inc.**

**America Online, Inc.** 800 Connecticut Avenue, N.W.

1101 Connecticut Avenue, N.W. Suite 800

Suite 400 Washington, D.C. 20006

Washington, D.C. 20036 (202) 451-9224

\(202\) 533-7878

Aaron I. Fleischman

Richard E. Wiley Arthur H. Harding

Peter D. Ross Christopher G. Wood

Wayne D. Johnsen Fleischman and Walsh, L.L.P.

Wiley Rein & Fielding 1400 Sixteenth Street, N.W., Suite 600

1776 K Street, N.W. Washington, D.C. 20036

Washington, D.C. 20006 (202) 939-7900

\(202\) 719-7000

John R. Wilner

Bryan Cave, L.L.P.

700 13^th^ Street, N.W.

Washington, D.C. 20005

\(202\) 508-6041

February 11, 2000

**TABLE OF CONTENTS**

I. DESCRIPTION OF THE PARTIES [1](#i.-description-of-the-parties)

IIA DESCRIPTION OF TRANSACTION [5](#ii-description-of-transaction)

IIIA THE MERGER OF AOL AND TIME WARNER WILL GREATLY BENEFIT CONSUMERS
[6](#iii-the-merger-of-aol-and-time-warner-will-greatly-benefit-consumers)

A0 The FCC's Public Interest Standard
[6](#a0-the-fccs-public-interest-standard)

B0 Together AOL and Time Warner Will Spur The Rapid Development of the
Next Generation of Broadband Services and Content
[10](#b0-together-aol-and-time-warner-will-spur-the-rapid-development-of-the-next-generation-of-broadband-services-and-content)

C0 The Merger Will Lead to a Marketplace Solution to the
[15](#c0-the-merger-will-lead-to-a-marketplace-solution-to-the-open-access-issue)

IVA THE MERGER OF AOL AND TIME WARNER WILL CREATE NO ADVERSE COMPETITIVE
EFFECTS
[17](#iv-the-merger-of-aol-and-time-warner-will-create-no-adverse-competitive-effects)

V. PROCESSING PROCEDURES [23](#v.-processing-procedures)

**VI.** **CONCLUSION** [24](#__RefHeading___Toc531615826)

[^1]: The applications, which cover FCC authorizations for broadcast
    facilities, community antenna relay service ("CARS") facilities,
    transmit/receive earth stations, wireless (including operational
    fixed and common carrier point-to-point microwave facilities),
    business radio stations, aviation services, as well International
    214 authorizations, set forth the legal qualifications of AOL Time
    Warner Inc. *See* Attachment 1.

[^2]: On January 24, 2000, Time Warner and EMI Group plc announced that
    they had signed definitive agreements to combine their recorded
    music and music publishing businesses into a global joint venture to
    be owned equally by Time Warner and EMI Group. The eleven-member
    Warner EMI Music board of directors, controlled by Time Warner, will
    consist of six Time Warner designees and five EMI designees. The
    transaction is subject to certain conditions, including regulatory
    consents and EMI Group shareholder approval, and is expected to be
    completed by the end of 2000.

[^3]: *Application for Consent to the Transfer of Control of Licenses
    and Section 214 Authorizations from Tele-Communications, Inc.,
    Transferor to AT&T Corp., Transferee,* Memorandum Opinion and Order,
    FCC 99-24 (rel. Feb. 18, 1999) ("*AT&T/TCI Order*") at ¶ 16.

[^4]: *Bell Atlantic/NYNEX Order*, 12 FCC Rcd. 19985, 20008-9 (1997). It
    has long been recognized that the Commission's authority to consider
    competitive issues is entirely discretionary. Thus, in practice, the
    Commission has applied its *Bell Atlantic/NYNEX* analytical
    framework selectively.

[^5]: *AT&T/TCI Order* at ¶ 14.

[^6]: *Id*. at ¶ 15.

[^7]: The Applicants also note the Communications Act's direct obstacle
    to any Commission assertion of jurisdiction over issues relating to
    the provision of content over the Internet. *See, e.g.*, 47 U.S.C.
    § 230(b) ("It is the policy of the United States  to preserve the
    vibrant and competitive free market that presently exists for the
    Internet and other interactive computer services, unfettered by
    Federal or State regulation.").

[^8]: By doing so, the Applicants do not waive their rights to challenge
    the Commission's jurisdiction to review this merger in whole or in
    part or to challenge specifically the application of the *Bell
    Atlantic/NYNEX* analysis to this transaction. Indeed, the parties
    understand that the Commission's new *Bell Atlantic/NYNEX* standard
    of review has not specifically been passed upon by any court.

[^9]: Joint AOL Time Warner News Release, "America Online and Time
    Warner Will Merge To Create World's First Internet-Age Media And
    Communications Company," January 10, 2000.

[^10]: *Id.*

[^11]: Analysts are predicting that the new company's development of new
    interactive services and products will encourage competitors to move
    more quickly to develop new broadband products and services of their
    own. *See, e.g.,* D. Ian Hopper, "Merger may allow more users to
    taste fruits of broadband," January 10, 2000, available at
    www.news.com. Such analysts believe that this transaction will have
    a positive ripple effect on the speedy emergence of interactive
    services industry-wide.

[^12]: *See, e.g.,* *AT&T-TCI Order* at ¶ 62 (referencing the
    Commission's "goal of encouraging deployment of broadband
    capabilities").

[^13]: *See* U.S. Government Working Group on Electronic Commerce,
    *Towards Digital eQuality*, 2nd Annual Report (December 1999).

[^14]: Remarks of William E. Kennard at the NATOA 19^th^ Annual
    Conference (Sept. 17, 1999), available at ‹www.fcc.gov/kennard›.

[^15]: As Chairman Kennard said recently,

    > \[w\]e should resist the urge to regulate because I think that it
    > is likely that the market will sort this out. You need regulation
    > when market-based incentives are not aligned with the needs of
    > consumers. . . . But I believe that there are market incentives
    > that will drive openness in the broadband world. *Id.*

[^16]: *AT&T-TCI Order* at ¶ 93.

[^17]: The agency concluded that, despite the AT&T and TCI merger's
    opposition to open access, the merger was "unlikely to adversely
    affect the public interest in a competitive market." *Id*. at ¶ 94.

[^18]: While some wireless and satellite providers have already begun to
    offer service, most are expected to enter en masse by this time next
    year \-- easily within the relevant two-year time frame to be
    considered potential competitors for purposes of this merger review.

[^19]: Road Runner is a joint venture among affiliates of Time Warner
    Inc., MediaOne Group, Microsoft Corp., Compaq Corp. and
    Advance/Newhouse. Time Warner's effective ownership share of Road
    Runner is less than 40 percent, and management is shared among the
    partners pursuant to the terms of the operative partnership
    agreement. Moreover, Road Runner currently provides Internet access
    to 555,000 customers, a *de minimus* fraction of U.S. Internet
    users.

[^20]: Road Runner is a joint venture among affiliates of Time Warner
    Inc., MediaOne Group, Microsoft Corp., Compaq Corp. and
    Advance/Newhouse. Time Warner's effective ownership share of Road
    Runner is less than 40 percent, and management is shared among the
    partners pursuant to the terms of the operative partnership
    agreement. Moreover, Road Runner provides Internet access to 555,000
    customers, a *de minimus* fraction of U.S. Internet users.

[^21]: The Commission has never ruled that there is a separate "Internet
    content" market. Indeed, it would be difficult even to arrive at
    such a definition when so much content is generated by users
    themselves. Further, much of the content provided over the Internet
    is or readily could be made available over other delivery platforms
    (such as television, newspapers, radio, and magazines). Thus, any
    horizontal effects of the merger are further diluted. In any event,
    the Commission has never seen fit to exercise \-- and,
    appropriately, has never claimed \-- jurisdiction over content
    supplied over the Internet. *See* n.7, *supra.*

[^22]: As an FCC analysis has stated: "The success of the Internet has
    not been an accidental development. Market forces have driven the
    Internet\'s growth, and the FCC has had an important role to play in
    creating a deregulatory environment in which the Internet could
    flourish." *The FCC and the Unregulation of the Internet*, OPP
    Working Paper Series No. 31 (July 1999). *See*, *e.g.*, *Application
    of WorldCom, Inc. and MCI Communications Corporation for Transfer of
    Control of MCI Communications Corporation to WorldCom, Inc.,* CC
    Docket No. 97-211, FCC 98-225, ¶ 142 (1998) ("We seek not to
    regulate the Internet, but rather to ensure that Internet services,
    which rely on telecommunications transmission capacity, remain
    competitive, accessible, and devoid of entry barriers.")

[^23]: Substantially all of Time Warner's cable systems (which serve
    approximately 13 million customers) are held in Time Warner
    Entertainment Company, L.P. (in which Time Warner has a 74.49%
    interest). A small number of systems, however, are held directly by
    Time Warner Inc. (which serve approximately 1.8 million of Time
    Warner's total subscribers).

[^24]: DirecTV, Inc. is a unit of Hughes Electronics Corporation which,
    in turn, is a unit of General Motors Corporation.

[^25]: In addition, Time Warner faces significant competition from a
    wide range of rival distributors of multichannel video programming
    services in its local franchise areas. These include direct
    broadcast satellite ("DBS") providers, multichannel multipoint
    distribution services ("MMDS"), satellite master antenna television
    ("SMATV") providers, incumbent local exchange carriers ("ILECs"),
    and cable overbuilders, among others. In particular, DBS has been an
    especially significant competitive alternative.

[^26]: *See, e.g., AT&T/TCI* *Order* at ¶ 156.