[]{#__RefHeading___Toc531751905 .anchor}Before the

[]{#__RefHeading___Toc531751906 .anchor}Federal Communications
Commission

[]{#__RefHeading___Toc531751907 .anchor}Washington, D.C. 20554

+----------------------------------+---+------------------------------+
| In the Matter of                 | * | CS Docket No.99-251          |
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| Applications for Consent to the  | ) |                              |
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| Transfer of Control of Licenses  | * |                              |
| and                              |   |                              |
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| Section 214 Authorizations from  | * |                              |
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| MediaOne Group, Inc.,            | * |                              |
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| Transferor,                      |   |                              |
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| AT&T Corp.                       | * |                              |
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[]{#__RefHeading___Toc531751908 .anchor}MEMORANDUM OPINION AND ORDER

**Adopted: June 5, 2000 Released: June 6, 2000**

By the Commission: Chairman Kennard issuing a statement; Commissioner
Furchtgott-Roth concurring in part, dissenting in part and issuing a
statement; Commissioner Powell concurring and issuing a statement; and
Commissioner Tristani concurring and issuing a statement.

**Table of Contents**

[Paragraph]{.underline}

Before the [1](#__RefHeading___Toc531751905)

Federal Communications Commission [1](#__RefHeading___Toc531751906)

Washington, D.C. 20554 [1](#__RefHeading___Toc531751907)

MEMORANDUM OPINION AND ORDER [1](#__RefHeading___Toc531751908)

I. Introduction [3](#introduction)

II\. PUBLIC INTEREST FRAMEWORK [5](#public-interest-framework)

III\. BACKGROUND [8](#background)

A. The Applicants [8](#the-applicants)

B. The Merger Transaction and the Application to Transfer Licenses
[17](#the-merger-transaction-and-the-application-to-transfer-licenses)

IV\. ANALYSIS OF POTENTIAL PUBLIC INTEREST HARMS
[19](#analysis-of-potential-public-interest-harms)

A. Video Programming [19](#video-programming)

1\. Diversity and Competition in Video Program Purchasing
[20](#diversity-and-competition-in-video-program-purchasing)

2\. Program Access Issues [37](#program-access-issues)

3\. Channel Occupancy Limits [40](#channel-occupancy-limits)

4\. Arguments That the Cable Rules Apply to Internet Access Services
[40](#arguments-that-the-cable-rules-apply-to-internet-access-services)

5\. Electronic Programming Guides [41](#electronic-programming-guides)

6\. MVPD Competition [43](#mvpd-competition)

B. Cable Equipment [44](#cable-equipment)

C. Broadband Internet Services [46](#broadband-internet-services)

1\. Background [46](#background-1)

2\. Discussion [49](#discussion)

3\. Findings. [51](#findings.)

D. Local Exchange and Exchange Access Service
[58](#local-exchange-and-exchange-access-service)

E. Mobile Telephone Service [61](#mobile-telephone-service)

F. Bundling [62](#bundling)

G. Universal Service/Deployment [64](#universal-servicedeployment)

V. ANALYSIS OF POTENTIAL PUBLIC INTEREST BENEFITS
[68](#analysis-of-potential-public-interest-benefits)

A. MediaOne [71](#mediaone)

B. AT&T [73](#att)

C. Joint Venture and Other Contractual Arrangements
[74](#joint-venture-and-other-contractual-arrangements)

D. Applicants' Deployment Projections
[76](#applicants-deployment-projections)

VI\. PROCEDURAL MATTERS [77](#procedural-matters)

VII\. CONCLUSION [79](#conclusion)

VIII\. ORDERING CLAUSES [80](#ordering-clauses)

APPENDIX B [83](#__RefHeading___Toc531751939)

II\. SAFEGUARDS [84](#safeguards)

Merger Conditions [91](#merger-conditions)

Protecting and Promoting Competition and Diversity
[92](#protecting-and-promoting-competition-and-diversity)

An Open Access Commitment [92](#an-open-access-commitment)

FCC's Merger Review Framework [92](#fccs-merger-review-framework)

Statement of Commissioner Harold W. Furchtgott-Roth,
[95](#statement-of-commissioner-harold-w.-furchtgott-roth)

Concurring In Part and Dissenting In Part
[95](#concurring-in-part-and-dissenting-in-part)

CONCURRING STATEMENT OF [97](#__RefHeading___Toc531751947)

CONCURRING STATEMENT OF COMMISSIONER GLORIA TRISTANI
[99](#__RefHeading___Toc531751948)

Appendix A -- List of Commenters

Appendix B -- Safeguards Relating to Video Programming

# Introduction

1.  In this Order, we consider the joint application ("Application")
    filed by MediaOne Group, Inc. ("MediaOne") and AT&T Corp. ("AT&T")
    (collectively the "Applicants" or "AT&T-MediaOne")[^1] for approval
    to transfer control to AT&T of certain licenses and authorizations
    controlled by MediaOne and its affiliates and subsidiaries, pursuant
    to Sections 214(a) and 310(d) of the Communications Act of 1934, as
    amended ("Communications Act").[^2] To obtain Commission approval of
    their Application, the Applicants must demonstrate that their
    proposed transaction will serve the public interest, convenience,
    and necessity.[^3] In this regard, we must weigh the potential
    public interest harms of the proposed merger against the potential
    public interest benefits to ensure that the Applicants have shown
    that, on balance, the benefits outweigh the harms.[^4]

2.  We review this merger in the context of an unprecedented convergence
    of communications services, including a trend toward consolidation
    in communications industries generally and the cable industry in
    particular. Cable companies are upgrading their systems to provide a
    full range of video, data, and voice services. In this proceeding,
    the Applicants contend that the proposed merger will allow them to
    provide local telephony and new services more quickly and
    effectively in order to compete directly with incumbent local
    telephone exchange carriers ("ILECs"). In contrast, many commenters
    argue that the merger would create a web of relationships that will
    allow the Applicants to dominate communications conduits through
    their cable infrastructure and dominate media content through their
    vertical integration with content providers. In the proposed merger,
    the nation's largest cable operator, AT&T, would acquire the
    nation's fourth largest cable operator, MediaOne, which holds a
    25.5% interest in the nation's second largest cable operator, Time
    Warner Entertainment, LP ("TWE").[^5]

3.  The merged firm's attributable ownership interests in cable systems
    serving approximately 51.3% of the nation's cable subscribers and a
    significant number of video programming networks, raises concerns
    that the merged company will be able to exercise excessive market
    power in the purchase of video programming.[^6] Commenters opposing
    the merger argue that the merged entity will have the power to
    determine which video programming networks are successful, thereby
    limiting the diversity of programming available to viewers. In
    addition, commenters argue that the merged entity will be able to
    command excessively large discounts or exclusive contracts from
    programming networks, thereby hindering competition from alternative
    providers of multichannel video service. We find that the proposed
    merger violates the Commission's cable horizontal ownership
    rules,[^7] which are designed to address threats to diversity and
    competition in the video programming marketplace.

4.  Accordingly, as a non-severable condition to our grant of the
    Application, we will give the Applicants a period of 12 months from
    the effective date of the horizontal ownership rules, May 19, 2000
    to (a) divest their interests in TWE, (b) terminate their
    involvement in TWE's video programming activities (pursuant to the
    limited partnership exemption and the officers/directors attribution
    waiver provisions of the cable ownership attribution rules), or (c)
    divest their interests in other cable systems, such that they will
    have attributable ownership interests in cable systems serving no
    more than 30% of MVPD subscribers nationwide. We also will require
    the merged firm to file with the Cable Services Bureau, within six
    months from the closing of the merger, a written document specifying
    which of the foregoing three compliance options it has elected to
    pursue. If the merged firm is not in compliance by the May 19, 2001
    deadline, then we will require it to place into an irrevocable trust
    for the purpose of sale the assets that it must divest pursuant to
    the compliance option that it elected in the foregoing filing to
    come into compliance with the 30% limit. We also will adopt the
    Applicants' proposal that, 60 days before the expiration of the
    12-month period, May 19, 2001, the Applicants shall file with the
    Cable Services Bureau a written document (a) stating that it will be
    in compliance by the May 19, 2001 deadline, or (b) stating that it
    will not be in compliance and describing the irrevocable trust
    arrangement that it will establish by the May 19, 2001 deadline for
    the sale of any assets that it must be divest in order to effectuate
    the compliance option it had elected. In addition to the above
    conditions, we will mitigate the potential harm to the diversity of
    programming and competition during the compliance period by imposing
    interim conditions on the merged entity. The merged firm must abide
    by the interim conditions and their enforcement mechanisms, attached
    hereto as Appendix B, until such time as it has taken the foregoing
    compliance action.

5.  In the broadband arena, the merged firm will be able to provide
    high-speed Internet access over a vast cable infrastructure. The
    merged firm also would have major ownership interests in the
    nation's two largest cable broadband Internet service providers
    ("ISPs"), Excite@Home and Road Runner. Excite@Home and Road Runner
    are the exclusive ISPs serving broadband subscribers over the cable
    systems of AT&T, MediaOne, TWE, Cox Communications, Inc., and
    Comcast Corporation, among others. Commenters raise concerns that
    the Applicants, through their cable infrastructure and ownership of
    Excite@Home and Road Runner, will dominate the provision of
    broadband Internet services and threaten the openness and diversity
    of broadband Internet content, software applications, and network
    architecture. We note that the Department of Justice has entered a
    proposed consent decree with the Applicants, pursuant to which the
    merged entity will divest its interests in Road Runner.[^8] Given
    the nascency of broadband Internet services, we find in this Order
    that growing competition from alternative broadband access
    providers, the Applicants' commitment to give unaffiliated ISPs
    direct access to the Applicants' cable systems, and the terms of
    Applicants' proposed consent decree with the Department of Justice
    requiring the divestiture of Road Runner make it unlikely that the
    merged firm would be able to dominate and threaten the openness and
    diversity of the Internet. Accordingly, we decline to impose
    conditions in this regard. Nevertheless, we will scrutinize
    broadband developments closely and review our policies if
    competition fails to grow as expected, especially if the merged firm
    fails to fulfill its commitment to open its cable systems or
    otherwise threatens the openness and diversity of the Internet.

6.  In this Order, we also consider whether the proposed merger would
    result in the violation of any other Commission rules or federal
    communications policies. In this regard, the Applicants have
    adjusted the programming services of four cable systems in order to
    avoid potential violation of the Commission's channel occupancy
    rules,[^9] and MediaOne has reduced its ownership in Time Warner
    Telecom ("TWT") in order to avoid a potential violation of Section
    652(b) of the Communications Act.[^10]

7.  After reviewing the record in this proceeding and the arguments of
    the Applicants and commenters,[^11] we conclude that the potential
    public interest benefits, on balance, outweigh the potential public
    interest harms of the merger. We find that the merger is likely to
    benefit consumers by enhancing the merged entity's ability to
    compete more effectively with incumbent local exchange companies
    ("LECs") in providing facilities-based local telephony and other new
    services to residential customers. Accordingly, subject to the
    conditions discussed herein to mitigate the potential public
    interest harms, we conclude that approval of the Application to
    transfer control of Commission licenses and authorizations from
    MediaOne to AT&T will serve the public interest, convenience, and
    necessity.

# PUBLIC INTEREST FRAMEWORK

8.  Before the Commission can approve the transfer of control of
    authorizations and licenses connected with the proposed merger under
    Sections 214(a) and 310(d) of the Communications Act,[^12] we must
    weigh the potential public interest harms of the merger against the
    potential public interest benefits to ensure that, on balance, the
    transfer of MediaOne's licenses and authorizations to AT&T serves
    the public interest, convenience and necessity.[^13]

9.  The Applicants bear the burden of proving that the transfer will
    advance the public interest.[^14] In applying this public interest
    test, the Commission considers four overriding questions: (1)
    whether the transaction would result in a violation of the
    Communications Act or any other applicable statutory
    provision;[^15] (2) whether the transaction would result in a
    violation of Commission rules;[^16] (3) whether the transaction
    would substantially frustrate or impair the Commission's
    implementation or enforcement of the Communications Act, or would
    interfere with the objectives of the Communications Act and other
    statutes;[^17] and (4) whether the transaction promises to yield
    affirmative public interest benefits.[^18]

10. The Commission's analysis of public interest benefits and harms
    includes, among other things, consideration of the possible
    competitive effects of the transfer.[^19] Our public interest
    analysis is not, however, limited by traditional antitrust
    principles.[^20] In the telecommunications and cable industries for
    which we have statutory responsibility, as in most others,
    competition is shaped not only by antitrust rules, but also by the
    regulatory policies that govern the interactions of industry
    players.[^21] An antitrust analysis -- such as that undertaken by
    the Department of Justice in this case -- focuses on whether a
    proposed merger will reduce existing competition. Our public
    interest analysis, however, also requires us to determine whether
    the merger violates our rules, or otherwise would frustrate our
    implementation or enforcement of the Communications Act and federal
    communications policy.[^22] As we stated in *Bell Atlantic-NYNEX*,
    "\[t\]he 1996 Act set a clear national policy that competition
    leading to deregulation, rather than continued regulation of
    dominant firms, shall be the preferred means for protecting
    consumers."[^23] In addition to considering whether the merger will
    reduce existing competition, therefore, we also must focus on
    whether the merger will accelerate the decline of market power by
    dominant firms in the relevant communications markets.[^24]

11. We conduct our public interest review against the backdrop of the
    "broad aims of the Communications Act," which include, among other
    things, the implementation of Congress' pro-competitive,
    deregulatory national policy framework designed to open all
    communications markets to competition; the preservation and
    advancement of universal service; and the acceleration of private
    sector deployment of advanced services.[^25] Our public interest
    analysis may also entail assessing whether the merger will affect
    the quality and diversity of communications services[^26] or will
    result in the provision of new or additional services to
    consumers.[^27] In making these assessments, the Commission uses its
    expertise to consider the trends within, and needs of, the
    communications industry as well as Congress' preference for
    competitive market structures and outcomes.[^28]

12. Following passage of the Telecommunications Act of 1996 ("1996
    Act"),[^29] local communications markets have been undergoing a
    transition to competitive markets, so a transaction may have
    predictable yet dramatic consequences for competition over time even
    if the immediate effect is more modest. Therefore, when a
    transaction is likely to affect local communications markets, our
    statutory obligation requires us to assess future as well as current
    market conditions. In doing so, the Commission may rely upon its
    specialized judgment and expertise to render informed predictions
    about future market conditions and the likelihood of success of
    individual market participants.[^30]

13. Where necessary, the Commission can attach conditions to a transfer
    of licenses and authorizations in order to ensure that the public
    interest is served by the transaction.[^31] As noted in *AT&T-TCI*,
    many transfer applications on their face show that the transaction
    would yield affirmative public interest benefits and would neither
    violate the Communications Act or Commission rules, nor frustrate or
    undermine federal communications policies and enforcement of the
    Communications Act.[^32] Such cases do not require extensive review.
    This is not the case with respect to the merger of AT&T and
    MediaOne. We analyze the potential public interest harms and
    benefits of this proposed merger in the next sections. We limit our
    analysis to those issues that have been raised by the parties to the
    proceeding and those additional issues that may significantly affect
    the public interest.[^33]

# BACKGROUND 

## The Applicants 

14. ***AT&T***. AT&T is the nation's largest provider of domestic and
    international long distance telephone service.[^34] In March 1999,
    AT&T acquired Tele-Communications, Inc. ("TCI") to integrate its
    telecommunications business with TCI's cable networks in order to
    build facilities-based local residential communications networks
    where TCI operated cable systems.[^35] As a result of its
    acquisition of TCI, AT&T is currently the nation's largest cable
    operator with a total of 18,959,000 owned and attributable
    subscribers.[^36] AT&T also provides other communications services,
    including local telephone, wireless mobile telephone, and Internet
    access services.[^37] AT&T's revenues from communications services
    totaled \$59.6 billion in 1999, of which \$25.1 billion were derived
    from business services, \$22.0 billion from residential local, long
    distance, and narrowband Internet access services, \$7.6 billion
    from wireless mobile telephone services, and \$4.9 billion from
    cable and broadband services including broadband Internet
    access.[^38]

15. At the time of its merger with AT&T, TCI was principally a cable
    operator, although it held a variety of interests through its three
    business groups: TCI Communications, Liberty Media Group and TCI
    Ventures Group.[^39] The cable systems formerly owned and operated
    by TCI Communications are now owned and operated by AT&T Broadband &
    Internet Services ("AT&T BIS").[^40] Liberty Media Group, the
    programming and content arm of TCI, and TCI Ventures Group, the
    international and miscellaneous holdings arm of TCI, were combined
    to form a single group called Liberty Media Group ("Liberty").[^41]
    AT&T wholly owns Liberty through its 100% ownership of the
    outstanding capital stock of Liberty Media Corporation ("LMC"), for
    which it issued two classes of Liberty tracking stock, Liberty Group
    A and Liberty Group B, in order to track Liberty's performance.[^42]
    Liberty tracking stock is held by the shareholders that held
    TCI-Liberty tracking stock and TCI Ventures tracking stock prior to
    the AT&T-TCI merger, as well as others that have purchased these
    publicly traded shares subsequent to that merger.[^43]

16. *Cable Systems and MVPD Services*. Many of AT&T's cable television
    subscribers are served by systems owned and operated directly by
    AT&T; however, many are also served by systems that are owned in
    part by other cable operators. For example, AT&T has a 33% equity
    and 8.9% voting interest in Cablevision Systems Corporation
    ("Cablevision"), and it has the right to nominate two Cablevision
    directors.[^44] In addition, AT&T owns a 50% interest in two cable
    partnerships with Time Warner Cable: Kansas City Cable and Texas
    Cable Partners, LP.[^45]

17. AT&T generally divides its interests in cable systems into three
    categories: (1) owned and operated systems \-- AT&T owns 100% of
    these systems; (2) consolidated systems \-- AT&T's interest in these
    systems is greater than 50% but less than 100%; and (3)
    non-consolidated systems \-- AT&T has an interest of 50% or less in
    these systems. As of April 2000, AT&T owned-and-operated systems
    provided service to approximately 10.6 million subscribers, AT&T
    consolidated systems provided service to approximately 485,000
    subscribers, and AT&T non-consolidated systems provided service to
    approximately 7.4 million subscribers, for a total of 18,959,000
    subscribers through all three categories of cable systems.[^46] In
    total, AT&T has attributable ownership interests in cable systems
    serving 28.3% of the 67.1 million cable subscribers nationwide and
    23.0% of the 82.36 million subscribers to multichannel video
    programming distribution ("MVPD")[^47] services nationwide.[^48]

18. *Video Programming Networks*. AT&T BIS holds all of AT&T's video
    programming interests, such as AT&T's wholly owned subsidiary
    Liberty Media Group and AT&T's programming interests held through
    interests in other cable operators, such as Cablevision. These
    programming entities deliver a wide range of video programming to
    their subscribers, including local broadcast stations; national,
    regional, and local cable programming services; premium movie and
    pay-per-view services; and sports programming services to homes and
    businesses nationwide.[^49]

19. Through its interest in Liberty, AT&T holds interests in numerous
    national, international, and regional programming networks.[^50]
    Liberty's programming interests include a 100% interest in the
    Encore Media Group, which operates video programming networks such
    as Encore, MOVIEplex, Starz!, and many others.[^51] Liberty holds a
    49% interest in Discovery Communications, Inc., which operates cable
    networks such as the Discovery Channel, The Learning Channel, and
    Animal Planet, and holds minority interests in numerous other
    programmers.[^52] Liberty owns approximately nine percent of the
    common stock, with less than one percent voting rights, of Time
    Warner Inc., which in turn owns 74.49% of Time Warner Entertainment
    ("TWE"), which owns substantial programming assets.[^53] In
    addition, Liberty holds interests in a number of foreign programming
    service providers, including Flextech P.L.C. in the United Kingdom
    and Jupiter Programming Co., Ltd., in Japan.[^54]

20. In addition, AT&T has a 33% direct interest in iNDEMAND (formerly
    Viewer's Choice),[^55] which purchases the broadcast rights for
    special events and sells them to other MVPDs for carriage.[^56] AT&T
    also holds programming interests through its direct interest in
    Cablevision. AT&T has a 33% equity and 8.9% voting interest in
    Cablevision and has the right to appoint two directors to
    Cablevision's board.[^57] Cablevision in turn has a 75% ownership
    interest in Rainbow Media Holdings, Inc. ("Rainbow").[^58] Rainbow
    owns seven national programming networks and, in partnership with
    FOX Sports Net New York ("Fox"), owns several regional sports
    networks.[^59] Rainbow's programming interests include American
    Movie Classics, Independent Film Channel, Bravo, and Much
    Music.[^60] Rainbow's programming interests in partnership with Fox
    include Madison Square Garden Network, Fox Sports Chicago, Fox
    Sports New England, and Madison Square Garden Metro Guide.[^61]

21. *Internet Services*. When it acquired TCI, AT&T acquired an interest
    in At Home Corporation ("@Home"), which provides content-enriched,
    high-speed Internet access service over the cable television
    infrastructure.[^62] On May 28, 1999, \@Home merged with Excite,
    Inc.[^63] The newly merged company is now called Excite@Home. AT&T
    holds a 74% voting interest in Excite@Home.[^64] The Excite@Home
    service allows subscribers to connect their personal computers via
    cable modems to a high-speed network developed and managed by
    Excite@Home, and obtain access to the public Internet and other
    online content.[^65] AT&T plans to begin offering Excite@Home
    through set top boxes this summer and fall offering a scaled-down
    version and a full-service version.[^66] Excite@Home is the
    exclusive provider of cable high-speed Internet access service over
    the cable systems of AT&T, Comcast, Cox, Cablevision, Shaw, and
    other cable operators.[^67] Excite@Home is the nation's largest
    cable high-speed Internet access service provider, serving
    approximately 1.5 million subscribers in the United States as of
    April 2000.[^68] AT&T also provides narrowband Internet access
    service to approximately 1.8 million customers through its wholly
    owned subsidiary AT&T WorldNet Service ("AT&T WorldNet").[^69]

22. *Local Telephone Service*. In addition to providing long distance
    telephone services, AT&T also provides local exchange services. As
    of July 1999, AT&T had approximately 200,000 resale customers and
    approximately 15,000 cable telephony customers via the cable
    facilities it acquired in 1999 from TCI.[^70] As of May 2000, AT&T
    provides local telephone service to more than 555,000 resale,
    unbundled network elements platform ("UNE-P"),[^71] cable telephony,
    fixed wireless, and MDU customers nationwide.[^72] AT&T plans to use
    its wireless spectrum to deliver local exchange service through a
    fixed wireless system in certain areas where it does not intend to
    have a cable presence.[^73] AT&T has a fixed wireless trial underway
    in Dallas, Texas and offers service commercially to residential
    customers in Fort Worth, Texas.[^74] AT&T plans to offer fixed
    wireless local exchange service commercially in two additional
    markets by the end of 2000.[^75] Finally, on March 31, 2000, an
    AT&T-led consortium announced that it will acquire a 39% voting
    stake in Net2Phone, the leading provider of Internet Protocol ("IP")
    telephony and other web-based communications services.[^76] AT&T
    Chairman Michael Armstrong said that AT&T, together with Net2Phone,
    will develop the next generation of voice-enhanced web-based
    communications services and create a standard in IP telephony.[^77]

23. AT&T also offers local exchange service to business customers
    through its wholly owned subsidiary Teleport Communications Group
    ("Teleport"), which it acquired in 1998. AT&T acquired Teleport to
    expand its offering of local exchange and exchange access services
    for businesses.[^78] At the time of its acquisition by AT&T,
    Teleport was the nation's largest competitive local exchange carrier
    ("CLEC") and had initiated the development of local telephone
    networks in 83 metropolitan areas in 28 states throughout the United
    States.[^79] From these operations, through which it served
    primarily the business market, Teleport had earned revenues of
    \$494.3 million in 1997.[^80] AT&T's total business and residential
    local exchange operations (including the formerly separate Teleport)
    yielded \$901 million in revenues in 1998,[^81] and \$10.5 billion
    in revenues in 1999.[^82]

24. *Mobile Telephone Service*. In addition to the foregoing wireline
    services, AT&T provides wireless mobile telephone services through
    its ownership and operation of AT&T Wireless Services Inc. ("AT&T
    Wireless").[^83] AT&T Wireless operates and holds interests in
    commercial mobile radio service ("CMRS") systems in 26 of the 30
    largest service areas in the United States.[^84] In 1999, AT&T
    Wireless generated revenues of approximately \$7.6 billion from a
    client base of 12.2 million.[^85]

25. ***MediaOne***. MediaOne is principally a cable operator, though it
    holds a variety of other interests, including a direct interest in
    high-speed Internet access provider Road Runner and direct interests
    in nine video programmers.[^86] In addition, through its cable
    systems, MediaOne provides local telephone service on a limited
    basis,[^87] and holds a 4.9% passive equity interest in wireless
    telecommunications provider Vodafone Air Touch.[^88] MediaOne's
    combined revenues were approximately \$2.9 billion in 1998 and \$2.7
    billion in 1999.[^89]

26. *Cable Systems and MVPD Services.* As of April 2000 MediaOne's
    domestic owned-and-operated cable television systems provided
    service to approximately 5 million subscribers.[^90] MediaOne also
    has a 25.51% interest in TWE, which provides cable service through
    its subsidiary Time Warner Cable. The remaining 74.49% interest in
    TWE is held by Time Warner, Inc. ("TWI"). Under the TWE partnership
    agreement, MediaOne had co-management rights over Time Warner Cable
    and standard limited partner rights over TWE.[^91] However, when
    MediaOne sent TWE notice that it was intending to merge with AT&T
    and was thus terminating the non-competition provisions of the TWE
    limited partnership agreement, MediaOne's co-management rights over
    TWE Cable were terminated.[^92] Nevertheless, MediaOne retains veto
    rights over important TWE partnership decisions.[^93] Applicants
    represent that after the merger \"AT&T will have no right or ability
    to participate in the management of the TWE cable systems.\"[^94] As
    of March 2000, TWE's cable systems served approximately 12.6 million
    subscribers nationwide.[^95] Counting MediaOne's owned-and-operated
    systems together with the TWE systems in which MediaOne holds a
    25.51% interest, MediaOne holds interests in cable systems that
    serve approximately 17.6 million subscribers, or 26.2% of cable
    subscribers and 21.4% of MVPD subscribers nationwide.[^96]

27. *Video Programming Networks.* MediaOne holds direct ownership
    interests in seven national programming networks and two regional
    networks.[^97] Those programmers include Food Network, Sunshine
    Network, Music Choice, E! Entertainment Television, Speedvision,
    Outdoor Life, iNDEMAND, New England News Network, and Fox Sports New
    England.[^98] MediaOne owns an 11% direct interest in iNDEMAND
    (previously Viewer's Choice).[^99] MediaOne also holds interests in
    video programmers through its 25.51% partnership interest in TWE,
    which holds large ownership interests in major cable networks
    including Home Box Office, Turner Network Television, Cable News
    Network, Cartoon Network, Cinemax, Comedy Central, and the WB
    broadcast network.[^100]

28. *Internet Services*. MediaOne holds an approximate 34.67% interest
    in the content-enriched, cable high-speed Internet access provider
    Road Runner.[^101] After Excite@Home, Road Runner is the second
    largest provider of cable high-speed Internet access services in the
    United States.[^102] Road Runner is the exclusive provider of this
    service over the cable systems of MediaOne, Time Warner, and other
    cable operators with which Road Runner has exclusive contracts. As
    of April 2000, approximately 730,000 households nationwide purchased
    Road Runner services.[^103]

29. *Local Telephone Service*. In 1998 and early 1999, MediaOne began
    offering facilities-based local exchange service to residential
    customers in seven metropolitan areas: Atlanta, Georgia; Los
    Angeles, California; Jacksonville and Pompano Beach, Florida;
    Boston, Massachusetts; Detroit, Michigan; and Richmond,
    Virginia.[^104] As of July 1999, MediaOne had approximately 26,000
    local telephony customers nationwide with an overall penetration
    rate of less than three percent of the homes that it had upgraded to
    provide local exchange service.[^105] As of May 2000, MediaOne has
    approximately 100,000 local cable telephone customers,[^106]
    representing an overall penetration rate of approximately 4%.[^107]
    In addition, MediaOne also holds an approximate 6% equity and 7.7%
    voting interest in Time Warner Telecom ("TWT"), a CLEC that provides
    local exchange and exchange access service primarily to large
    business customers in urban areas.[^108] TWT serves approximately 20
    cities, including four cities in New York; three cities in North
    Carolina; four cities in Texas; two cities in Florida; two cities in
    Ohio; and several other cities.[^109]

## The Merger Transaction and the Application to Transfer Licenses

30. *Proposed Transaction*. On May 6, 1999, AT&T announced its intent to
    merge with MediaOne.[^110] Under the terms of the agreement, AT&T
    will acquire all shares of MediaOne.[^111] MediaOne's shareholders
    will have the option to convert their shares into cash, shares in
    AT&T, or a combination of both, based on each shareholder's
    election.[^112] Through the merger, AT&T plans to integrate its
    communications businesses with MediaOne's cable networks and build
    on AT&T's multi-billion dollar acquisition of TCI to foster new
    facilities-based competition in the provision of local telephone
    service.[^113] The Applicants believe that the integration of their
    networks also will increase consumers' access to a wide array of
    packaged and a la carte services, including video and
    content-enriched high speed Internet access.[^114] The Applicants
    contend that the merger will combine AT&T's strong brand name and
    communications expertise with MediaOne's "last mile" cable
    facilities and cable telephony expertise, thereby expanding and
    accelerating the merged entity's ability to compete with ILECs in
    providing communications services to residential customers.[^115]

31. The proposed merger would join the nation's first, second, and
    fourth largest cable operators. AT&T, the nation's largest cable
    operator with 28.3% of all cable subscribers nationwide, would
    acquire MediaOne, the nation's fourth largest cable operator with
    7.5% of all cable subscribers.[^116] In addition, AT&T would acquire
    MediaOne's 25.5% interest in TWE, the nation's second largest cable
    operator with 18.9% of all cable subscribers.[^117] After the
    merger, AT&T would have attributable ownership interests in cable
    systems that serve 51.3% of the nation's 67.1 million cable
    subscribers.[^118] Of the nation's total 82.36 million television
    households that subscribe to MVPD service, the merged firm would
    serve 34.4 million or 41.8% of them. [^119]

32. Shortly before entering into the merger agreement, AT&T also entered
    into a letter agreement with Comcast Corporation ("Comcast"), which
    contemplates an exchange between AT&T and Comcast of certain cable
    systems.[^120] Upon consummation of AT&T's proposed merger with
    MediaOne, and the fulfillment of certain other conditions, Comcast
    and AT&T will transfer certain cable systems to one another.[^121]
    In addition, after the filing of the Application, AT&T sold all of
    its interest in Lenfest Communications, Inc. to Comcast.[^122]

33. *Federal Review*. In addition to Commission review, the proposed
    merger is also subject to review by the Department of Justice
    ("DOJ").[^123] On May 25, the Department of Justice announced a
    consent decree with AT&T under which AT&T would be required to
    divest MediaOne\'s interest in Road Runner by December 31, 2001.
    Under the consent decree, AT&T also must obtain prior approval from
    DOJ before entering into certain types of arrangements with AOL or
    Time Warner that involve residential broadband Internet
    service.[^124]

34. *Local Franchising Authority Review*. Applicants have completed
    initial regulatory filings with approximately 512 local franchising
    authorities.[^125] Pursuant to Section 617 of the Communications
    Act, local franchising authorities with jurisdiction to review such
    transfers or sales of cable systems have 120 days from the date of
    Applicants' request for a franchise transfer to render a
    decision.[^126] Of the 512 local franchising authorities that have
    received Applicants' franchise transfer requests, 506 approved the
    requested franchise transfers without conditions.[^127] Two denied
    the request.[^128] Six franchise authorities approved the transfer
    but imposed Internet access provisions.[^129] In three of those six
    locales, the Internet access provisions were struck down.[^130]
    Appeals are still pending in the remaining cases.[^131]

# ANALYSIS OF POTENTIAL PUBLIC INTEREST HARMS

35. Parties opposing the merger have alleged that the combination of
    AT&T and MediaOne may harm the public interest with respect to the
    provision of various services. We address below the effects of the
    merger on only those services that may be affected adversely by the
    merger, based on commenters' allegations and our own analysis.
    Specifically, we examine the merger's potential effects on (1) video
    programming, (2) cable equipment, (3) broadband Internet
    services, (4) local exchange and exchange access service, and (5)
    mobile telephone service. We also address concerns related to (6)
    the bundling of services and (7) the deployment of services.[^132]

## Video Programming

36. In this section, we consider the proposed merger's impact on video
    programming sold by program networks to MVPDs, who then deliver the
    networks via their distribution systems to their subscribers'
    television sets. MVPDs include cable, direct broadcast satellite
    ("DBS"), multichannel multipoint distribution services ("MMDS"), and
    satellite master antenna television ("SMATV") providers.[^133] The
    relevant services offered by MVPDs using different distribution
    technologies are sometimes not perfect substitutes for each other
    (*e.g*., DBS providers currently may not offer any or may offer only
    a select number of local broadcast channels in certain areas, which
    cable, MMDS, and SMATV systems are able to offer).[^134]
    Subscribers, however, can combine services (*e.g*., by using an
    antenna to receive broadcast programming over the air when
    subscribing to DBS services) to obtain services equivalent to those
    provided by other MVPDs.

37. Companies that own programming networks produce their own
    programming and/or acquire programming produced by others, then
    package this programming for sale to MVPDs. As discussed above,
    AT&T, MediaOne, and TWE have ownership interests in a large number
    of programming networks, such as American Movie Classics, Cinemax,
    Home Box Office, and Comedy Central, among others. AT&T, MediaOne,
    TWE, and other MVPDs also purchase video programming and deliver it
    on their distribution networks (*e.g.*, cable or DBS) to their
    subscribers.

38. The proposed merger would combine AT&T and MediaOne, which itself
    has a 25.5% ownership interest in the TWE partnership. AT&T, TWE,
    and MediaOne are respectively the nation's first, second, and fourth
    largest cable companies. Post-merger, AT&T would have attributable
    ownership interests in cable systems serving 51.3% of cable
    subscribers and 41.8% of MVPD subscribers nationwide.[^135] We
    analyze below the effects of the merger on the provision of (a)
    video programming and (b) electronic programming guides ("EPGs")
    used in advanced cable set-top boxes to direct subscribers to such
    programming. We also examine the application of the Commission's
    horizontal ownership rules,[^136] program access rules[^137] and
    channel occupancy rules[^138] to the merged entity's provision of
    video programming and Internet services. We conclude that the merger
    will violate the cable horizontal ownership rules and accordingly
    order the Applicants to take compliance steps as a condition of this
    Order. With regard to the remaining video and EPG contentions, we
    find that the merger will not violate any other Commission rule or
    the Communications Act, nor frustrate the implementation of the
    Communications Act or its goals.

### 1. Diversity and Competition in Video Program Purchasing {#diversity-and-competition-in-video-program-purchasing .unnumbered}

39. Commenters have raised two types of potential harm that may arise
    due to the merged firm's increased subscribership. First, the merged
    firm may exercise excessive power in the purchase of video
    programming, allowing it to threaten the launch and survival of new
    and unaffiliated programmers. The result would be a diminishment of
    the diversity and number of media voices available to the
    public.[^139]Second, because the merged firm will purchase
    programming for a significantly larger subscriber pool than would
    either Applicant acting alone, the merged entity may be able to
    negotiate large programming discounts and exclusive contracts with
    video programmers. Such action, some commenters argue, would hinder
    competition from the Applicants' smaller MVPD competitors (*e.g.,*
    DBS providers and cable overbuilders), who would be unable to offer
    the same programming choices and/or competitive prices.[^140]

40. In applying the four-prong public interest test, we find that the
    merger will violate the cable horizontal ownership statute and
    rules, which establish limits on a cable operator's size in order to
    prevent it from threatening diversity and competition in the
    provision of video programming.[^141] Accordingly, as a condition to
    our grant of the Application, we will require the Applicants, within
    12 months from the effective date of the horizontal ownership rules,
    May 19, 2000, to (a) divest their interests in TWE, (b) terminate
    their involvement in TWE's video programming activities (pursuant to
    the limited partnership exemption and the officers/directors
    attribution waiver provisions of the cable ownership attribution
    rules), or (c) divest their interests in other cable systems, such
    that they will have attributable ownership interests in cable
    systems serving no more than 30% of MVPD subscribers nationwide. We
    find that this divestiture requirement, together with other interim
    conditions and enforcement mechanisms discussed below, will mitigate
    sufficiently the merger's potential to frustrate or impair the
    Commission's implementation or enforcement of the Communications Act
    and its objectives.

#### The Merged Firm's Cable Ownership Interests

41. As a preliminary matter, we must determine the extent of the merged
    firm's cable ownership interests. In the horizontal ownership limits
    statute, Congress directed the Commission to establish limits on the
    number of cable subscribers "a person is authorized to reach through
    cable systems owned by such person, ***or*** in which such person
    has ***an attributable interest*** . . .."[^142] Our cable ownership
    attribution rules define what constitutes an "attributable" interest
    such that the holder of the interest should be subject to the
    horizontal ownership limit:[^143]

    The attribution rules seek to identify those corporate, financial,
    partnership, ownership and other business relationships that confer
    on their holders a degree of ownership or other economic interest,
    or influence or control over an entity engaged in the provision of
    communications services such that the holders should be subject to
    the Commission's regulation.[^144]

42. Under the Commission's cable ownership attribution rules, the merged
    entity will have attributable ownership interests in cable systems
    serving approximately 41.8% of MVPD subscribers nationwide.
    Approximately 15.3% of the merged entity's subscribership base will
    derive from its attributable interest in TWE.[^145] TWE will be
    attributable to the merged firm in two ways. First, under our
    attribution rules, a company that appoints a director or officer to
    a company or partnership, or shares common directors or officers, is
    deemed to have an attributable interest in that entity.[^146] This
    rule is based on the economic reality that a director or officer has
    the power to direct the operations of the entity.[^147] Accordingly,
    if the merged firm appoints directors to the TWE board of directors
    or management committee, or shares common directors and officers
    with TWE, then TWE is attributable to the merged firm.

43. Second, our cable ownership attribution rules provide that all
    partnership interests are attributable because, unlike a corporate
    shareholder, a limited partner may influence or control the
    operations of the partnership even if its percentage equity interest
    is very small.[^148] In this case, the merged entity's 25.5%
    partnership interest representing an investment estimated to be
    worth some \$14 to \$18 billion in TWE clearly give it an
    attributable interest.[^149] The consent of the merged entity will
    be required for many major decisions of the TWE partnership.[^150]
    AT&T has emphasized that its partnership interest and multi-billion
    dollar investment in TWE will create "an aligning of interests"
    between AT&T and TWE that will facilitate AT&T's provision of local
    telephony service over the TWE cable systems.[^151] Nothing in the
    record suggests that this alignment of AT&T and TWE's economic
    interests will not extend to coordination in the video programming
    arena.[^152] However, as discussed below, the cable ownership
    attribution rules permit AT&T to maintain its partnership interest
    in TWE and to appoint or share common directors and officers without
    attribution of ownership, if AT&T has no involvement in the
    partnership's video programming activities.[^153]

##### Waiver of Attribution of Directors and Officers

44. As discussed above, any directors or officers (or the equivalent
    thereof) that the merged entity appoints to a TWE board or
    management committee renders TWE attributable to the merged
    firm.[^154] In addition, if the merged firm and TWE share any common
    directors and officers, then TWE is attributable to the merged
    firm.[^155] In order to avoid this attribution rule, the Applicants
    may request that the Commission waive attribution for any TWE
    director or officer, if his or her duties and responsibilities are
    wholly unrelated to TWE's video programming activities.[^156] In
    addition, if the merged entity and TWE share common directors and
    officers, the Applicants may seek a waiver from attribution for
    those directors and officers if their responsibilities are wholly
    unrelated to both AT&T's and TWE's video programming
    activities.[^157]

##### The Insulated Limited Partnership Exemption

45. The Applicants may render their partnership interest nonattributable
    as follows: Under the insulated limited partnership ("ILP")
    exemption, a limited partnership interest shall not be attributed to
    a partner that "is not materially involved, directly or indirectly,
    in the management or operation of the video-programming related
    activities of the partnership and the relevant entity so
    certifies."[^158] In order to satisfy this standard, the limited
    partner may not engage in the following seven activities (the "ILP
    test"):

> \(1\) The limited partner cannot act as an employee of the partnership
> if his or her functions, directly or indirectly, relate to the video
> programming enterprises of the company;
>
> \(2\) the limited partner may not serve, in any material capacity, as
> an independent contractor or agent with respect to the partnership\'s
> video programming enterprises;
>
> \(3\) the limited partner may not communicate with the licensee or
> general partners on matters pertaining to the day‑to‑day operations of
> its video programming business;
>
> \(4\) the rights of the limited partner to vote on the admission of
> additional general partners must be subject to the power of the
> general partner to veto any such admissions;

\(5\) the limited partner may not vote to remove a general partner
except where the general partner is subject to bankruptcy proceedings,
is adjudicated incompetent by a court of competent jurisdiction, or is
removed for cause as determined by a neutral arbiter;

\(6\) the limited partner may not perform any services for the
partnership materially relating to its video programming activities,
except that a limited partner may make loans to or act as a surety for
the business; and

> \(7\) the limited partner may not become actively involved in the
> management or operation of the video programming businesses of the
> partnership.[^159]

To take advantage of the ILP exemption, the limited partner must file
with the Commission a certification, with supporting facts, stating that
it is not involved in these seven activities.[^160]

46. The cable ownership attribution rules preclude insulation where a
    limited partner sells video programming to the partnership, based on
    the recognition that such sales relationships provide the limited
    partner added capability and incentive to influence the
    partnership's video programming choices. This preclusion was in
    effect at the time the proposed merger was announced and remains in
    effect today. The attribution rules adopted in 1993 permitted
    insulation where the limited partner did not provide "services for
    the partnership materially relating to its *media
    activities*."[^161] The rules specifically stated the criteria for
    insulation under this standard:

    The criteria which would assure adequate insulation for purposes of
    this certification are described in the Memorandum and Order in MM
    Docket No. 83-46, FCC 85-252 (released June 24, 1985) \["*1984
    Attribution Order on Reconsideration*"\] as modified on
    reconsideration in the Memorandum Opinion and Order in MM Docket No.
    83-46, FCC 86-410 (released November 28, 1986) \["*1984 Attribution
    Order on Further Reconsideration*"\].[^162]

47. The *1984 Attribution Order on Reconsideration* explains that an
    insulated limited partner may not perform any services that
    materially relate to a cable operator's media activities.[^163]
    Again in the *1984 Attribution Order on Further Reconsideration*,
    the Commission stated that "an exempt limited partner should not
    perform any services to the limited partnership relating, in any
    material respect, to its media activities."[^164] Given that a cable
    operator's core media activity is the provision of video
    programming, there can be no service more material to a cable
    operator's video programming than the sale of programming to the
    cable operator. Because video programming is at the heart of "media
    activities," the Commission in 1989 held that an investor could not
    shield its investment from attribution if it sold video programming
    to the investment.[^165] Last year, the Commission noted that the
    sale of video programming was a service materially relating to media
    activities under the parallel broadcast attribution rule.[^166]

48. In the 1999 *Attribution Order*, we replaced the term "media
    activities" with the term "video-programming related activities" and
    required the limited partner to certify that it does not provide any
    service materially related to the partnership's video-programming
    activities.[^167] We amended the rule in order to allow a limited
    partner to insulate its partnership interest even if it participates
    in the partnership's other media activities, including the provision
    of telephony services, so long as it is not materially involved in
    the partnership's video-programming related activities.[^168] We
    emphasized that our amendment to the ILP rule would not permit a
    limited partner to insulate itself if it provided services
    materially related to the limited partnership's video programming
    activities.[^169] Therefore, the new rule maintains the 1993 rule's
    prohibition against the insulated limited partner's sale of video
    programming to the partnership.

49. As discussed above in Section III, AT&T and MediaOne hold
    attributable interests in numerous programming affiliates, including
    among others, Encore, Bravo, Discovery, New England Sports, BET,
    American Movie Classics, and STARZ! These affiliates in turn sell
    their programming to TWE.[^170] The Applicants' sale of programming,
    via its attributable programming affiliates, to TWE is a service for
    TWE "materially relating to its video programming activities" and
    provide the Applicants with the added capability and incentive to
    influence TWE's video programming choices.[^171] Accordingly, the
    merged firm will be deemed materially involved in TWE's
    video-programming activities, precluding application of the
    insulated limited partnership exemption. The merged firm thus will
    have attributable ownership interests in cable systems serving
    approximately 41.8% of MVPD subscribers nationwide.

#### The Merged Firm's Video Programming Purchasing Power

50. Having determined the merged firm's ownership interests and
    subscribership base, we next consider how this subscribership base
    translates into the ability to affect competition and diversity in
    the delivery of video programming to consumers. As discussed above,
    MVPDs purchase video programming and deliver it on their
    distribution networks (*e.g.*, cable or DBS) to their subscribers.
    Each MVPD negotiates license fees with programming networks for the
    right to carry the networks on the MVPD's distribution systems. The
    license fees are based, in part, on the MVPD's total subscriber
    numbers. In addition, the network often grants the MVPD a portion of
    the network's advertising time, which the MVPD in turn sells to its
    own advertisers for advertising revenue. Large MVPDs, such as AT&T,
    MediaOne, and TWE, are likely to purchase programming networks for
    delivery to their entire nationwide subscribership. Programmers
    attempt to reach subscribers on a regional or national basis to
    increase the value of their programming to advertisers.

51. Start-up video programmers need to reach a critical level of
    subscribership quickly in order to achieve long-term financial
    viability.[^172] Video programmers' need for a large number of
    subscribers confers on AT&T, MediaOne, and TWE, which have access to
    a large number of subscribers, significant bargaining power.[^173]
    Because cable operators purchase programming based on the number of
    subscribers they serve, we found in the *Horizontal Third Report and
    Order* that the number of subscribers served by a cable operator
    most accurately reflects that cable operator's purchasing market
    power.[^174] The Commission also recognized that measuring the
    market in terms of cable subscribers alone is inappropriate.[^175]
    DBS operators and other MVPDs purchase video programming for their
    subscribers from the same market and thus directly affect a cable
    operator's market power. Consequently, a cable operator's purchasing
    power should be measured in terms of the percentage of all MVPD
    subscribers that it serves.[^176] Under this MVPD subscriber
    standard, which we use in our cable horizontal ownership rules and
    in our analysis below, the merged firm would have attributable
    ownership interests in cable systems serving approximately 34.4
    million, or 41.8%, of the nation's 82.36 million MVPD
    subscribers.[^177]

#### Potential Harm to Competition and Diversity in Video Programming 

52. In Section 613(f)(1)(A) of the Communications Act, Congress directed
    the Commission to establish limits on a cable operator's size,
    because Congress was concerned that concentration in cable system
    ownership might harm competition and diversity in video
    programming.[^178] Pursuant to this statutory directive, the
    Commission enacted the cable horizontal ownership rules, which
    provide that no cable operator may serve more than 30% of MVPD
    subscribers nationwide.[^179] The Commission voluntarily stayed the
    horizontal ownership rules pending the United States Court of
    Appeals for the District of Columbia Circuit's ("D.C. Circuit")
    consideration of a constitutional challenge to Section
    613(f)(1)(A).[^180] The D.C. Circuit upheld the constitutionality of
    the statute on May 19, 2000, on which date the Commission's
    voluntary stay was automatically lifted and the horizontal ownership
    rules became immediately effective.[^181] In the *Reconsideration of
    the Horizontal Third Report and Order*, we stated that parties in
    violation of the rules on the date of the court's decision must come
    into compliance with the rules within 180 days thereafter.[^182] The
    merged entity's attributable ownership interest in cable systems
    serving 41.8% of the nation's MVPD subscribers clearly would violate
    the 30% horizontal ownership limit. We discuss below our horizontal
    ownership rules and their application to the merged entity.

53. Section 613(f)(2)(A) directs the Commission to set a horizontal
    ownership limit which would ensure that

    \[N\]o cable operator or [group of cable operators]{.underline} can
    unfairly impede, either because of the size of any individual
    operator or because of joint actions by [a group of
    operators]{.underline} of sufficient size, the flow of video
    programming from the video programmer to the consumer. . . [^183]

54. Pursuant to this directive, we found in the *Horizontal Third Report
    and Order* that, if a cable operator, by itself or in concert with
    others, can determine the success or failure of a new programming
    service, then we must conclude that it has excessive purchasing
    power in the video programming market.[^184]

55. As noted above, programming networks generally need to reach a large
    number of subscribers fairly quickly in order to achieve long term
    financial viability. In the *Horizontal Third Report and Order*, we
    found that 15 million subscribers, or close to 20% of MVPD
    subscribers nationwide, is the minimum number necessary to give a
    video programmer a reasonable chance of long-term success. In
    setting the horizontal limit, we also analyzed the new programmer's
    probable rate of success in reaching subscribers through MVPDs that
    do not flatly deny it carriage. We found that, on average, a new
    video programming network is likely to capture approximately 50% of
    the subscribers that are available to it.[^185] Accordingly, we
    concluded that approximately 40% of the market needs to be available
    to a new video programming network to give it a reasonable chance of
    reaching the 15 million subscribers (or 20% of the market) it needs
    for long-term success. To ensure that, even if two cable operators
    collectively deny carriage to a new programmer, at least 40% of MVPD
    subscribers nationwide would still remain available to the
    programmer, we determined in the *Horizontal Third Report and Order*
    that a 30% horizontal limit was appropriate.[^186]

56. We note that some commenters argue that the Commission should use
    its public interest authority to require the Applicants to divest
    TWE instead of permitting the Applicants to choose alternative
    methods to comply with the horizontal rules.[^187] MAP argues that
    the merger of "interests in the first, second, and fourth largest
    cable MSOs, and in many of the most popular cable program services,
    substantially threatens the viability of emerging cable
    programmers."[^188] In enacting the Section 613(f)(2)(A) directive
    for the Commission to adopt a horizontal limit that would protect
    against the threat that "joint actions by a group of operators"
    would impede the flow of video programming to the consumer, Congress
    recognized a significant likelihood that cable operators would
    coordinate their program purchasing decisions.[^189] Because cable
    operators generally do not compete against each other in their
    respective franchise areas, they may incur no loss from carrying the
    same programming networks and have little economic disincentive for
    coordinated action. There is instead the potential for cable
    operators to gain by carrying the same programming networks in order
    to spread the costs of such programming over a larger subscriber
    base. Coordination in purchasing could increase cable operators'
    ability to get exclusive contracts with unaffiliated networks, to
    the detriment of alternative MVPDs (such as DBS) seeking to compete
    against the incumbent cable operators.

57. The concern about coordinated action reflected in the horizontal
    ownership rules only becomes stronger in light of recent
    consolidation in the MVPD industry.[^190] In 1999 alone, in addition
    to the proposed merger between AT&T and MediaOne, other announced
    mergers and acquisitions include those between Adelphia
    Communications, Century Communications, and FrontierVision; between
    Comcast, Jones Intercable, Prime Cable (Maryland), and Lenfest
    Communications; and between Cox Communications, Media General, Prime
    Cable (Las Vegas), and TCA Cable. Vulcan Ventures acquired Marcus
    Cable and Charter Communications (which previously had acquired
    Falcon) in 1998 and purchased control in numerous MSOs in 1999,
    including Fanch Communications, Avalon, Greater Media, Helcion,
    Renaissance, and Rifkin. Concentrated markets are more prone to
    collusive outcomes than are competitive markets.[^191]

58. We agree with commenters that the merged entity presents an
    especially potent force in the video programming market because
    AT&T, MediaOne, and TWE are the industry leaders both in their
    operation of cable systems and their ownership of video programming
    networks.[^192] Beside being the first, second and fourth largest
    MVPDs nationwide, AT&T, TWE, and MediaOne also have ownership
    interests in a significant number of video programming networks
    (including, among others discussed in Section III above, TWE's HBO,
    Comedy Central, CNN, TNT, Cartoon Network, Cinemax, and the WB
    broadcast network; Liberty's Encore, Starz!, Discovery Channel,
    Telemundo Network, BET, USA Networks, and the Learning Channel;
    Cablevision's Bravo, American Movie Classics, and the Independent
    Film Channel; and MediaOne's Golf Channel and Speedvision). TWE owns
    100% of three of the top six program networks by number of
    subscribers, and AT&T owns 49% of one of the top six program
    networks.[^193] In addition, AT&T and TWE together own 100% of four
    of the top six premium networks.[^194] Not only will the merged
    entity have attributable interests in a vast number of programming
    networks, including many of the networks with the largest number of
    subscribers nationwide, but new networks will reduce their chances
    for long-term success if they do not meet the terms and preferences
    of the merged firm. The combination of these two factors makes the
    merged entity a potentially powerful gatekeeper that could affect
    the diversity of video programming delivered to consumers.

59. We believe these potential harms are sufficiently mitigated by
    compliance with Section 613(f)(1)(A) and the horizontal ownership
    rules. Accordingly, as a condition to our grant of the Application,
    we will require the Applicants to (a) divest their interests in TWE,
    or (b) terminate their involvement in TWE's video programming
    activities pursuant to the limited partnership exemption and the
    officers/directors attribution waiver provisions of the cable
    ownership attribution rules, or (c) divest their interests in other
    cable systems, such that the merged firm will have attributable
    ownership interests in cable systems serving no more than 30% of
    MVPD subscribers nationwide. We discuss below the compliance period,
    interim conditions, and enforcement mechanisms that we are adopting
    pursuant to this condition to our grant of the Application.

##### Applicants' Arguments regarding Lack of Potential Harm

60. The Applicants make four arguments that, they contend, demonstrate
    that their post-merger size will not threaten competition and
    diversity in the provision of multichannel video-programming,
    notwithstanding the findings of the *Horizontal Third Report and
    Order* supporting our 30% horizontal ownership limit. The Applicants
    do not request a waiver of the horizontal ownership rules based on
    the particular characteristics of this merger; thus, they are
    required to abide by the rule. Nonetheless, in the interest of a
    complete record, we will address the Applicants' four arguments.

61. First, the Applicants argue that increased competition from other
    MVPDs, particularly DBS, diminishes the Applicants' program
    purchasing power because video programmers will be able to obtain
    carriage on other MVPDs.[^195] Although we agree that non-cable
    MVPDs limit the Applicants' market power, we already have considered
    this factor in our analysis supporting the horizontal ownership
    rules and found that basing our ownership limit on the number of
    total MVPD subscribers, rather than cable subscribers alone,
    adequately accounts for video programmers' ability to obtain
    carriage from other MVPDs. No merger-specific facts suggest that
    other MVPDs will have such greater effect on the market behavior of
    the parties to this transaction that the general rule should not
    apply.

62. Second, the Applicants argue that the expanded channel capacity of
    their cable systems will permit them to carry more programmers and
    therefore diminish their ability to harm programmers.[^196] In the
    *Horizontal Third Report and Order*, we found that this argument had
    little merit because, among other reasons, the growth rate of new
    programmers rapidly outpaces the growth of new channels[^197] and an
    increase in sheer number of channels cannot be assumed to indicate
    an increase in the diversity of channels.

63. Third, the Applicants argue that other Commission rules, such as
    program access, program carriage, must carry, leased access, and the
    channel occupancy rules foreclose their ability to exert excessive
    programming market power.[^198] While those rules are important,
    they are complements rather than substitutes to the horizontal
    ownership rules. Just as Congress and this Commission found
    reasonable horizontal limits to be necessary despite the existence
    of those other rules, those other rules do not eliminate the need to
    apply the horizontal ownership limit in this case.

64. Fourth, apparently arguing that the merged firm should be able to
    serve 35% of the nation's MVPD subscribers, the Applicants claim
    that that the Department of Justice has "effectively established a
    'safe harbor' against monopsony power challenges when the
    \[purchaser\] firms in question account for less than 35% of total
    purchases."[^199] The Applicants claim that the Department of
    Justice created this safe harbor by disposing of such matters
    through what the Applicants contend are "routine Business Review"
    letters.[^200] However, the Department of Justice does not "conduct
    business reviews for proposed mergers."[^201] Rather, the Department
    of Justice issues business review letters when business entities
    seek to ascertain the Antitrust Division's enforcement intentions
    with respect to "potential civil, non-merger, conduct."[^202]
    Moreover, the three business review letters that the Applicants cite
    involve concerted action by numerous unaffiliated purchasers rather
    than a single entity or affiliated entities, and thus are factually
    dissimilar to the proposed merger.[^203] In any event, the
    Department of Justice's business review letters cannot negate the
    Commission's rules nor our merger analysis, which is guided by
    different public interest principles.

##### Applicants' Waiver Request and the Compliance Conditions

65. The Applicants request that the Commission waive the cable
    horizontal ownership and ownership attribution rules for 18 months,
    at the end of which period the Applicants would come into compliance
    with the rules in effect at that time.[^204] The Commission's rules
    may be waived for good cause shown.[^205] A waiver is appropriate
    only if the applicant shows that (1) special circumstances warrant a
    deviation from the general rule and (2) a deviation from the rule
    would better serve the public interest underlying the rule's
    promulgation.[^206] Commission rules are presumed valid, and "an
    applicant for waiver faces a high hurdle even at the starting
    gate."[^207] For the reasons set forth below, we find that the
    Applicants have not shown good cause for an 18-month waiver of our
    ownership rules. Based on the complexity of the business
    arrangements involved and the many varied interests which the
    Applicants must divest to ensure compliance, however, we find it
    appropriate to grant the Applicants a period of 12 months from the
    effective date of our horizontal ownership rules, May 19, 2000, to
    effectuate the divestitures required by our current horizontal
    ownership rules, subject to certain interim conditions and
    enforcement measures.

66. As the first ground for their waiver request, the Applicants
    previously argued that the nature of their interests in TWE and
    programming affiliates such as Liberty and Rainbow does not grant
    them sufficient control over the day-to-day operations of these
    entities to implicate the public interest concerns of the cable
    ownership attribution rules. The Commission has thoroughly
    considered and rejected these specific arguments in the cable
    ownership attribution rulemaking proceeding.[^208] In that
    rulemaking proceeding, the Applicants expressly argued that the
    Commission should apply an "actual control test" and should not deem
    their interests in Liberty, Rainbow, and TWE to confer influence or
    control on the Applicants.[^209] The Commission rejected these
    arguments in adopting the revised ownership attribution rules.
    [^210] A "waiver applicant traditionally has a heavy burden to
    demonstrate that the arguments advanced in support of the waiver
    request are substantially different from those that have been
    carefully considered at the rulemaking stage."[^211] The Applicants
    are merely repeating here the arguments and facts that they
    presented in the rulemaking proceeding.[^212] The Applicants have
    not shown how a waiver based on these arguments, which were rejected
    in the *Attribution* rulemaking proceeding, would serve the public
    interests underlying the ownership attribution rules rather than
    undermining the integrity of the rules.

67. Second, the Applicants argue that an 18-month waiver of the
    horizontal ownership and ownership attribution rules would better
    serve the public interest than strict adherence to the rules because
    of the public benefits that the Applicants argue the merger will
    bring.[^213] As a preliminary matter, the Applicants have not
    demonstrated why their claimed local telephony public interest
    benefits will be obtainable if they have 18 months in which to
    divest, but not if they have a shorter period for divestiture. More
    importantly, the waiver standard requires the Applicants to
    demonstrate that deviation from the cable horizontal ownership and
    ownership attribution rules would better serve the public interest
    underlying these rules, and the Applicants have failed to satisfy
    this burden of proof.[^214] The attribution rules are designed to
    identify investments and other interests that confer on their
    holders influence or control. The Applicants' claimed local
    telephony public benefits cannot negate the harm to video
    programming competition and diversity that would result from the
    merged entity's influence or control over the nation's first,
    second, and fourth largest cable operators. Moreover, the Commission
    considered the Applicants' arguments regarding the benefits of
    clustering, economies of scale, and competition with LECs when it
    adopted the cable attribution rules.[^215] The Applicants have
    presented no new arguments in this regard. Accordingly, we cannot
    grant the Applicants' request that the Commission waive the cable
    horizontal ownership and ownership attribution rules for 18 months
    and allow the Applicants to come into compliance with those rules in
    effect at the end of that period.

68. In June 1998, long before the Applicants' merger negotiations, the
    Commission had put the industry on notice that parties in violation
    of the horizontal ownership rules at the time our voluntary stay is
    lifted would be required to comply with the rules within sixty days
    after the lifting of the stay.[^216] We specifically warned
    "particular parties that are now entering into business arrangements
    that would violate the rules but for the existence of the stay,
    \[that they\] should be well aware of the existence of the rules and
    thus have a full opportunity to comply with them."[^217] Thus, at
    the time of the Applicants' merger negotiations in 1999, the
    Applicants were on notice that they should not enter into any
    transaction that would be difficult for them to divest within 60
    days after the stay was lifted, and they assumed the risk that they
    would be forced to divest within 60 days if and when the stay is
    lifted. In the *Horizontal Third Report and Order* which we adopted
    in October 1999, three months after the filing of the Application,
    the Commission decided that 180 days was a more reasonable timeframe
    for divestitures after the stay was lifted.[^218]

69. The Commission has allowed divestiture periods of more than 180 days
    in similar situations, however, where parties were required to
    divest properties in order to comply with Commission rules. Indeed,
    the Commission has granted parties a period of 12 months in order to
    comply with our ownership rules in a number of instances involving
    complex business transactions, most recently in granting the license
    transfer applications attendant to the merger of CBS and
    Viacom.[^219]

70. In this case, all three of the divestiture options available to the
    Applicants involve complex business transactions. For example, one
    means for the Applicants to divest their interest in TWE is to
    activate their registration rights under the TWE Limited Partnership
    Agreement and sell their interest in a public offering. However,
    under the terms of the TWE Limited Partnership Agreement, the
    Applicants cannot start this process until January 2001, and they
    will have to follow a series of complex procedures (including an
    assessment by investment bankers) to effectuate a public
    offering.[^220] Alternatively, if the Applicants choose to cease
    involvement in TWE's video programming activities and make TWE
    non-attributable pursuant to the insulated limited partnership
    exemption and directors/officers attribution waiver provisions,
    among other steps to assure non-involvement, Applicants would have
    to divest a variety of video programming network ownership
    interests, including AT&T's attributable interests in Liberty and
    Rainbow. The Applicants have emphasized, in particular, the
    complicated corporate procedures and tax issues involved in the
    spin-off of Liberty.[^221] Finally, if the Applicants choose to
    retain an attributable interest in TWE and instead divest their
    ownership interests in other cable systems, they will have to divest
    from a large number of cable systems, serving approximately 11.8% of
    MVPD subscribers nationwide, in order to comply with the 30%
    ownership limit. Consistent with our precedents, we find that the
    complexity of these transactions supports the granting of a 12-month
    period for the Applicants to effectuate the necessary divestitures.
    There is no support in the record, however, for going beyond a
    12-month period to give the Applicants 18 months to divest their
    attributable ownership interests in order to come into compliance
    with the 30% horizontal ownership limit.

71. Accordingly, as a non-severable condition to our grant of the
    Application, we will give the Applicants a period of 12 months from
    the effective date of the horizontal ownership rules, May 19, 2000
    to (a) divest their interests in TWE, (b) terminate their
    involvement in TWE's video programming activities (pursuant to the
    limited partnership exemption and the officers/directors attribution
    waiver provisions of the cable ownership attribution rules), or (c)
    divest their interests in other cable systems, such that they will
    have attributable ownership interests in cable systems serving no
    more than 30% of MVPD subscribers nationwide. We also will require
    the merged firm to file with the Cable Services Bureau, within six
    months from the closing of the merger, a written document specifying
    which of the foregoing three compliance options it has elected to
    pursue. If the merged firm is not in compliance by the May 19, 2001
    deadline, then we will require it to place into an irrevocable trust
    for the purpose of sale the assets that it must divest pursuant to
    the compliance option that it elected in the foregoing filing to
    come into compliance with the 30% limit. We also will adopt the
    Applicants' proposal that, 60 days before the expiration of the
    12-month period, May 19, 2001, the Applicants shall file with the
    Cable Services Bureau a written document (a) stating that it will be
    in compliance by the May 19, 2001 deadline, or (b) stating that it
    will not be in compliance and describing the irrevocable trust
    arrangement that it will establish by the May 19, 2001 deadline for
    the sale of any assets that it must be divest in order to effectuate
    the compliance option it had elected.

72. In addition to the above conditions, we will mitigate the potential
    harm to the diversity of programming and competition during the
    compliance period by imposing interim conditions on the merged
    entity. We adopt in this Order the Applicants' proposed interim
    conditions, subject to certain modifications to fit our divestiture
    requirements. The interim conditions and their enforcement
    mechanisms are attached hereto as Appendix B. The Applicants'
    proposed interim conditions and enforcement mechanisms fall far
    short of the insulated limited partnership exemption and
    directors/officers waiver provisions of the cable ownership
    attribution rules that would establish their non-involvement in
    TWE's video-programming activities. We deem them sufficient,
    however, to limit the merged firm's involvement in TWE's video
    programming activities solely during the period granted by the
    Commission for compliance with this Order and as a condition for
    granting the Applicants 12 months from the effective date of our
    horizontal rules to come into compliance.[^222] The merged firm must
    abide by the interim conditions specified in Appendix B until such
    time as it has taken the foregoing compliance action.

73. The foregoing conditions will bring the merged firm into compliance
    with Section 613(f)(1)(A) and our cable horizontal ownership rules,
    thereby satisfying the first two prongs of our public interest test.
    Finally, under the third prong of our public interest test, we
    conclude that the Applicants' compliance with the above divestiture
    requirements also will ensure that the merger will not frustrate nor
    impair the Commission's implementation of the Communications Act and
    its objectives with regard to the promotion of competition and
    diversity in the provision of video programming.[^223]

#### Compliance With the Horizontal Ownership Certification Provision

74. Consumers Union raises two procedural arguments to deny the merger
    and a collateral, but substantively related, request for forfeiture.
    First, Consumers Union argues that the Application is procedurally
    defective and should be dismissed because it does not contain a
    cable horizontal ownership certification pursuant to Section
    76.503(c) of the Commission's rules,[^224] which was in effect at
    the time the Application was filed.[^225] The horizontal
    certification provision in effect at that time required cable
    operators that reach 20% or more of homes passed nationwide to
    certify, prior to acquiring additional systems, the percentage
    change in ownership resulting from such acquisition.[^226] Consumers
    Union argues that the former Section 76.503 required that the
    horizontal certification be made at the same time that applications
    for transfers of licenses are filed with the Commission.[^227]
    Second, Consumers Union filed a request with the Commission
    ("Consumers Union Forfeiture Request") under Section 1.41 of the
    Commission's rules[^228] requesting that the Commission initiate a
    forfeiture proceeding based on allegations that AT&T has made
    material misrepresentations to, and failed to be candid with, the
    Commission regarding AT&T's filing practices under Section
    76.503(c), that AT&T has filed its certifications late, and that
    AT&T has failed to report in its certifications sufficient
    information for the Commission to assess the impact of the reported
    transactions.[^229] Third, Consumers Union filed a supplemental
    pleading in this proceeding to argue that the Commission should deny
    the Application on the grounds that the facts alleged in the
    Consumers Union Forfeiture Request demonstrate that AT&T does not
    have the requisite character to hold Commission licenses.[^230]

75. AT&T disagrees with Consumers Union's interpretation of the former
    Section 76.503(c) and argues that this provision required only that
    AT&T file the certification prior to closing a transaction, not at
    the time it filed its Application in this proceeding or applications
    for transfers relating to other transactions.[^231] While AT&T
    admits that some of its Section 76.503(c) letters were filed after
    transactions had closed, AT&T states that pre-closure filing was not
    always possible because, in some instances, AT&T and its predecessor
    TCI were unable to obtain cable homes passed information from the
    systems they were acquiring prior to closing.[^232]

76. *Findings*. In the *Horizontal Third Report and Order*, we revised
    the horizontal certification provision to require information on the
    number of cable subscribers, a more readily accessible number than
    cable homes passed, and to clarify that certifications must be filed
    concurrently with applications for transfers of licenses.[^233] This
    new certification requirement went into effect on February 9,
    2000.[^234] In the future, applications for transfers of licenses by
    cable operators serving 20% or more of the MVPD market will be
    rejected if not accompanied by the new Section 76.503(g)
    certification. However, former Section 76.503(c) did not specify
    that certifications be filed concurrently with applications for
    license transfers. Under these circumstances, and given the
    extensive homes passed and subscriber information provided in the
    Application, we find that AT&T's representations to the Commission
    with regard to its interpretation of the rules and its filing
    practices do not indicate bad character that would justify denying
    the Application. Consumers Union's motions to dismiss are therefore
    denied. However, given that the former rule clearly required that
    certifications be filed prior to closing, on delegated authority,
    the Cable Services Bureau granted the Consumers Union Forfeiture
    Request in part and issued a Notice of Apparent Liability to AT&T
    for apparent violations of former Section 76.503(c).[^235]

### Program Access Issues

77. The program access rules are designed to prevent vertically
    integrated programming suppliers from favoring affiliated cable
    operators over unaffiliated MVPDs in the sale of satellite-delivered
    programming.[^236] Commenters request that the Commission apply the
    program access rules to AT&T's affiliated programming that is
    delivered terrestrially and prohibit AT&T from entering into
    exclusive contracts with unaffiliated networks.[^237] Commenters
    argue that AT&T's increased size will give it the ability to force
    unaffiliated programmers to enter into low-cost and/or exclusive
    carriage agreements with AT&T, thereby denying competing MVPDs and
    their customers access to popular programming.[^238] In addition,
    commenters argue that the merger would increase the possibility that
    AT&T will migrate affiliated programming from satellite to
    terrestrial delivery so that it will not be required to give
    competing MVPDs access to this programming.[^239] The commenters
    argue that AT&T has the ready means to migrate programming to
    terrestrial delivery because AT&T possesses a coast-to-coast fiber
    optic network.[^240] Commenters add that the merger will increase
    AT&T's size so that it can cluster more systems, which would further
    facilitate the terrestrial delivery of programming, especially
    regional programming.[^241] The commenters argue that AT&T's
    purported ability to lock up unaffiliated programming through
    exclusive contracts and to shield terrestrially delivered affiliated
    programming from the program access rules will substantially impair
    the ability of other MVPDs to compete.[^242]

78. Several commenters also request that the Commission reaffirm that
    Liberty's programming is subject to the program access rules.[^243]
    Ameritech requests that, if AT&T divests its interests in Liberty,
    Liberty be subject to the program access rules for five years
    thereafter.[^244] In addition, Ameritech requests that the
    Commission require AT&T to offer affiliated programming to all MVPDs
    on the same terms, conditions, and prices that the programming is
    provided to AT&T cable systems and affiliates.[^245]

79. *Findings*. The program access rules apply to cable operators and to
    programming vendors that are affiliated with cable operators and
    deliver video programming via satellite to a cable operator.[^246]
    The Commission adopted these rules pursuant to Section 628 of the
    Communications Act,[^247] through which Congress sought to minimize
    the incentive and ability of vertically integrated programming
    suppliers to favor affiliated cable operators over nonaffiliated
    cable operators or other MVPDs in the sale of satellite cable and
    satellite broadcast programming.[^248] Among other restrictions, the
    rules prohibit any cable operator that has an attributable
    interest[^249] in a satellite cable programming vendor from
    improperly influencing the decisions of the vendor with respect to
    the sale or delivery, including prices, terms, and conditions of
    sale or delivery, of satellite cable programming or satellite
    broadcast programming to any unaffiliated MVPD.[^250] The rules also
    prohibit vertically integrated satellite programming distributors
    from discriminating in the prices or terms and conditions of sale of
    satellite-delivered programming to cable operators and other
    MVPDs.[^251] In addition, cable operators generally are prohibited
    from entering into exclusive distribution arrangements with
    affiliated programming vendors.[^252]

80. For the reasons stated in the *Program Access Order*, we decline to
    apply the program access rules or equivalent restrictions to
    terrestrially delivered programming distributed by the merged
    company.[^253] We recognize, however, that the integration of
    MediaOne's cable systems and content with AT&T\'s coast‑to‑coast
    fiber optic network may provide the merged entity with the ability
    and the cost and quality incentives to migrate video programming
    from satellite to terrestrial delivery. Such a migration could have
    a substantial impact on the ability of alternative MVPDs to compete
    in the marketplace. As we indicated in the *Program Access Order*
    and the *AT&T-TCI Order*, we remain aware of the potential for this
    type of migration and the possible need to address it in the
    future.[^254] As we stated in *AT&T-TCI*, if it appears that the
    movement of programming from satellite to terrestrial delivery is
    frustrating the pro‑competitive purposes of Section 628, we will so
    notify Congress.

81. We further decline to condition the merger on the imposition of
    anti-exclusivity restrictions that are not required by the program
    access rules. If parties believe any existing exclusivity agreements
    violate the program access rules, the program access complaint
    process is the appropriate forum in which to resolve any such
    grievance.[^255] Commenters have not alleged that existing
    exclusivity arrangements are unlawful, and we do not find that this
    merger provides a basis for the Commission to declare unlawful
    AT&T\'s future exclusivity agreements to the extent that they
    conform to current rules.[^256]

82. We also reject Ameritech's proposal that the Commission mandate the
    sale of AT&T's affiliated programming on certain prices, terms, and
    conditions. Neither the merger nor the Commission\'s rules provide
    any basis for the imposition of a mandate that AT&T price its
    programming at any particular level, provided the pricing is not
    unlawfully discriminatory.[^257]

83. We reaffirm that the program access rules apply to Liberty by virtue
    of AT&T's ownership interest in Liberty and its directors on
    Liberty's board.[^258] However, we find no basis in the rules to
    subject Liberty to the program access rules if AT&T divests its
    interest in Liberty and Liberty is no longer affiliated with a cable
    operator. In short, we find that it would be inappropriate to apply
    to non-vertically integrated cable operators and programming vendors
    program access rules that were adopted to address anticompetitive
    harms arising from vertical integration.

### Channel Occupancy Limits

84. The Commission's channel occupancy rule provides that a cable
    operator may not devote more than 40% of its activated channels to
    the carriage of affiliated programming networks.[^259] Bell Atlantic
    argues that, given the number of cable networks in which AT&T and
    MediaOne have attributable interests, the merged entity will be in
    violation of this rule.[^260] Bell Atlantic requests that the
    Commission require the Applicants to provide a market-by-market
    disclosure of their channel line-ups and demonstrate that they will
    not violate the channel occupancy rule.[^261]

85. In response to the Commission's request, the Applicants reviewed the
    channel line-ups on their systems and determined that the proposed
    merger would cause channel occupancy rule violations in four systems
    in Decatur, Illinois; Battle Creek, Minnesota; Minot, North Dakota;
    and Westport, West Virginia. [^262] However, AT&T states that it has
    adjusted the channel line-ups in all four systems such that there
    will be no channel occupancy violations when the merger
    closes.[^263] Accordingly, the proposed merger will not result in
    any violation of the channel occupancy rules.

### Arguments That the Cable Rules Apply to Internet Access Services

86. Some commenters argue that the merged firm's carriage of Excite@Home
    and Road Runner will cause it to violate the program carriage and
    the channel occupancy rules. These rules, however, apply solely to
    the carriage of video programming.[^264] As we found in *IVI*, ISP
    Internet access services, similar to those services provided by
    Excite@Home and Road Runner, do not constitute "video programming"
    as that term is defined in the statute and the Commission's rules
    and orders.[^265] In *IVI*, the Commission did not decide whether a
    service that comprises only video programming delivered over the
    Internet would constitute "video programming" as that term is used
    in the Commission's rules and the Communications Act.[^266] However,
    Excite@Home and Road Runner are not services comprised only of video
    programming. Thus, we disagree with commenters' contentions that
    AT&T and MediaOne are in violation of the program carriage rules by
    denying carriage to unaffiliated ISPs and by AT&T's decision to
    limit Internet video-streaming provided by ISPs and carried over its
    cable systems to ten minutes.[^267] For the same reason, we reject
    Bell Atlantic's argument that the merged firm's provision of
    Internet services through its affiliates Road Runner and Excite@Home
    should count towards the channel occupancy limits.[^268]

### Electronic Programming Guides

87. In this section, we examine the proposed merger's potential impact
    on the use of EPGs. We find that the proposed merger will not
    violate the Communications Act or any Commission rules as they may
    pertain to EPGs, nor will it frustrate the implementation of the
    Communications Act or its goals. Thus, the merger will not result in
    public interest harms with respect to EPGs.

88. EPGs are on-screen directories of programming delivered through
    advanced set-top boxes. These programming guides are interactive,
    with searching and sorting capabilities that take viewers directly
    to video programming listed on the screen. The purchasers of EPGs
    are MVPDs such as cable operators and DBS operators, as well as
    subscribers. Liberty currently owns a 44% share of EPG provider TV
    Guide, Inc., which in turn owns Prevue Guide, another EPG
    provider.[^269] AT&T has a ten-year contract with TV Guide, Inc.
    under which TV Guide will provide the exclusive EPG for AT&T
    systems.[^270]

89. Commenters argue that the proposed merger poses three types of harms
    with regard to EPGs. First, commenters argue that AT&T will harm
    unaffiliated video programming networks and interactive service
    providers (collectively "content providers") by using EPGs to steer
    subscribers toward affiliated content providers and away from
    unaffiliated content providers.[^271] Second, commenters argue that
    AT&T will harm unaffiliated EPG providers by selecting
    AT&T-affiliated EPGs for its cable systems. Third, commenters argue
    that AT&T will lock EPG providers into exclusive contracts and
    thereby prevent such EPGs from dealing with other MVPDs.[^272] While
    we find that AT&T's compliance with the video programming conditions
    discussed above will mitigate the possibility of these three alleged
    harms, we find also that the record here does not demonstrate that
    special requirements should be placed on AT&T in this regard. In a
    rulemaking proceeding of general applicability, the Commission has
    committed to monitor the EPG market to determine whether Commission
    action is necessary.

90. We find that our requirement that AT&T reduce its attributable cable
    system ownership interests will circumscribe AT&T's purported
    ability to harm unaffiliated content providers, [^273] unaffiliated
    EPGs, and other MVPDs because AT&T, post-divestiture, will serve a
    smaller share of the MVPD market. The video programming conditions
    will limit the number of MVPD subscribers for whom AT&T may select
    an EPG. To the extent that AT&T may steer its own subscribers away
    from unaffiliated content providers via AT&T's own EPG, we note that
    the divestiture requirement limits AT&T's size and ensures that
    other MVPDs will provide sufficient alternative outlets for
    unaffiliated content providers.

91. With regard to unaffiliated EPG providers who would like access to
    AT&T's cable systems, the record does not demonstrate that AT&T will
    exercise undue influence in a purported EPG marketplace by using
    only one EPG. Because AT&T's horizontal size will be limited as a
    result of this Order, unaffiliated EPGs will have access to more
    MVPD subscribers that are not affiliated with AT&T. Moreover, the
    limited evidence presented in this record appears to demonstrate
    that even AT&T's own subscribers will have access to alternatives to
    TV Guide.[^274]

92. The record also does not demonstrate that the proposed merger will
    enable AT&T to prevent EPG providers from serving other MVPDs. TV
    Guide is free under its ten-year contract with AT&T to offer its EPG
    to other MVPDs. We find insufficient grounds to conclude that AT&T
    will lock EPG providers into exclusive contracts.[^275]

93. The commenters have not demonstrated that special requirements
    should be placed on AT&T alone in its selection and use of EPGs.
    Under our general rulemaking authority, in order to promote consumer
    choice, we have committed to "monitor developments with respect to
    the availability of electronic programming guides to determine
    whether any action is appropriate in the future."[^276] Therefore,
    to the extent that evidence accrues that demonstrates the necessity
    of Commission action in the EPG market, we will consider it at that
    time. We also note that, to the extent that commenters are concerned
    that cable operators may steer viewers away from broadcast
    programming via EPGs, we have requested comment in the digital must
    carry proceeding on "whether any rules are necessary to ensure fair
    competition between electronic programming guides controlled by
    cable operators and those that are controlled by
    broadcasters."[^277]

### MVPD Competition

94. BellSouth argues that the merger will eliminate current and future
    MVPD competition between AT&T and MediaOne in local areas where the
    Applicants have overlapping or adjacent cable franchise areas.[^278]
    BellSouth contends that, in the absence of the proposed merger, AT&T
    and MediaOne would build over ("overbuild") each other's cable
    systems, thereby offering consumers in those areas two MVPD cable
    choices.[^279] However, we find no evidence in the record to suggest
    that AT&T and MediaOne would overbuild each other's cable systems
    such that the proposed merger would diminish competition in these
    local areas.

95. AT&T and MediaOne own small overbuilt systems in only two areas.
    First, in 1993, one of AT&T's predecessors acquired a system in
    Fayetteville, Georgia, which overbuilt in part a system of one of
    MediaOne's predecessors. As of February 21, 2000, AT&T's and
    MediaOne's Fayetteville overbuilt systems passed 975 homes in
    common, and AT&T served 447 subscribers.[^280] Second, in 1991,
    AT&T's predecessor acquired a system in Powder Springs, Georgia,
    which overbuilt in part a system of one of MediaOne's predecessors.
    As of February 21, 2000, AT&T's and MediaOne's Powder Springs
    overbuilt systems passed 1,931 homes in common, and AT&T served 152
    subscribers.[^281] Since the initial acquisition of the Fayetteville
    and Powder Springs overbuilt systems, the system owners have not
    constructed anymore overbuilds, and there is no evidence to suggest
    that AT&T and MediaOne would overbuild one another absent the
    merger.[^282] AT&T and MediaOne hold overlapping franchise authority
    in 13 other areas, but have no overbuilds in these areas.[^283]
    There is no evidence that they would overbuild each other in these
    areas absent the merger. We find that the proposed merger is
    unlikely to diminish MVPD competition between the Applicants to a
    degree that would warrant the denial of the Application or the
    imposition of conditions.

## Cable Equipment

96. In this section, we consider the proposed merger's potential public
    interest harms with respect to cable equipment. This equipment is
    the hardware that cable companies use to deliver services to the
    home. It includes cable modems, cable telephony equipment, and
    set-top boxes that deliver a range of services to the subscriber.
    The Bell telephone companies argue that AT&T's size will enable it
    to favor affiliates to the detriment of unaffiliated cable equipment
    manufacturers, deny cable competitors access to cable equipment, and
    exercise excessive market power against equipment manufacturers in
    general.[^284] Commenters also argue that AT&T will be able to
    dictate set-top box architecture, thereby reducing innovation and
    consumer choice.[^285] These commenters request that the Commission
    deny the merger or prohibit AT&T from entering into exclusive,
    proprietary agreements with hardware and software manufacturers of
    cable equipment.[^286]

97. *Findings.* We find that the proposed merger will not result in any
    violation of the Communications Act or the Commission's rules as
    they pertain to cable equipment, nor will the merger frustrate the
    Commission's implementation of statutory goals or policies. The
    Commission's rules regarding navigation devices,[^287] as discussed
    below, alleviate concerns regarding competition in the production
    and sale of set-top boxes and modems. We do not find that this
    merger warrants the imposition of special restrictions on AT&T apart
    from these rules. As we stated in the *Navigation Devices Order*, we
    will monitor the market to determine whether the navigation devices
    rules should be amended to counter future anticompetitive
    conduct.[^288]

98. Section 629 of the Communications Act charged the Commission with
    ensuring the commercial availability of "navigation devices" --
    equipment which is used to access video programming and other
    services provided by MVPDs -- to consumers from retailers and
    manufacturers not affiliated with an MVPD.[^289] Section 629
    directed the Commission to:

> adopt regulations to assure the commercial availability, to consumers
> of multichannel video programming and other services offered over
> multichannel video programming systems, of converter boxes,
> interactive communications equipment, and other equipment
> \[collectively "navigation devices"\] used by consumers to access
> multichannel video programming and other services offered over
> multichannel video programming systems, from manufacturers, retailers,
> and other vendors not affiliated with any multichannel video
> programming distributor.[^290]

99. Pursuant to this directive, the Commission adopted rules requiring
    MVPDs to provide, upon request, technical information concerning
    interface parameters that are needed to produce navigation devices
    that will operate with their video distribution systems.[^291]
    Subscribers have the right to attach any compatible navigation
    device to an MVPD system, and MVPDs are prohibited from taking
    actions that would prevent unaffiliated retailers or manufacturers
    from making and selling compatible navigation devices.[^292] We
    found that "competition in the navigation equipment market is
    central toward encouraging innovation in equipment and services, and
    toward bringing more choice to a broader range of consumers at
    better prices."[^293]

100. The rules adopted in the *Navigation Devices Order* address the
     commenters' concerns that AT&T will exercise excessive market power
     in the purchase and provision of cable equipment. Under these
     rules, any manufacturer may produce and sell navigation devices for
     AT&T's systems directly to AT&T's subscribers, which AT&T cannot
     prohibit.[^294] We note that AT&T may increase its influence in
     this market by purchasing very large numbers of navigation devices
     that it leases to its subscribers, pursuant to the Commission's
     rate rules.[^295] However, by requiring MVPDs to grant all
     equipment manufacturers an opportunity to sell equipment to the
     MVPDs' subscribers, the navigation devices rules limit MVPDs'
     ability to exercise excessive market power and dominate the
     equipment market.

101. In this regard, we note that cable modems are commercially
     available from a variety of sources. CableLabs has developed
     industry-wide standards in its DOCSIS project and has already
     certified the modems of over a dozen manufacturers for retail
     sale.[^296] AT&T's cable Internet customers accordingly may buy
     modems from retailers, rather than rent them from AT&T. The
     navigation devices rules thus also ameliorate concerns that AT&T
     will favor affiliated manufacturers or direct its affiliates to do
     business together as some commenters contend.[^297] Moreover, we
     note that the merged firm would not have significant interests in
     any cable equipment manufacturer.[^298] Accordingly, we find that
     the merger will not create public interest harms with respect to
     cable equipment.

## Broadband Internet Services 

102. In this section, we consider the allegations of certain commenters
     that the proposed merger will result in public interest harms in
     the provision of broadband Internet services to residential
     customers. We note that, in order to address the merger's potential
     anti-competitive impact on the provision of these services, the
     Justice Department has entered into a proposed consent decree with
     AT&T. [^299] Among other provisions discussed below, the proposed
     consent decree requires the merged entity to divest its interest in
     the broadband cable ISP Road Runner no later than December 31,
     2001, and to obtain prior approval from the Justice Department
     before entering into certain types of agreements with Time Warner
     or with AOL relating to the provision of broadband services.[^300]
     We apply our public interest test to the facts of the proposed
     transaction as modified by the proposed consent decree. We find
     that the merger will not violate any provision of the
     Communications Act or Commission rules as they may pertain to the
     provision of broadband Internet services to residential customers.
     We further conclude that the proposed merger will not frustrate the
     implementation of the Communications Act and its goals as they
     pertain to the promotion of competition and diversity in the
     provision of these services.

### Background

103. *Internet Access Generally.* We have previously described the
     Internet as \"a loose interconnection of . . . tens of thousands of
     networks that communicate using the Internet protocol (IP).\"[^301]
     The Internet supports the delivery of a range of services, such as
     the World Wide Web ("Web"), e-mail, and file transfer protocol
     (\"FTP\"). With these services, customers are able to use their
     computers to communicate with other computer users and engage in
     sophisticated interaction, including on-line banking, electronic
     commerce, and video and audio file distribution.[^302] We
     previously identified and described five types of entities involved
     in Internet services: (1) end users; (2) access providers; (3)
     application providers; (4) content providers; and (5) backbone
     providers.[^303] As discussed below, some service providers,
     including the Applicants, now serve a combination of these
     functions.

104. *Narrowband Internet Access Services*. Most residential and small
     business consumers currently receive Internet access at a
     relatively slow speed, typically 28-53 kilobits per second, via
     traditional \"dial-up\'\' telephone connections. With dial-up
     Internet access services, customers must pay two separate entities.
     First, customers must pay for the underlying transport service -- a
     traditional local telephone connection provided by LECs. Second,
     customers must pay an Internet service provider (ISP) separately,
     typically \$20 or less per month, for unlimited access to the
     Internet.[^304] In dial-up access arrangements, customers use
     modems located in their computers that are connected to
     twisted-pair copper telephone lines. The customer\'s computer
     communicates with the ISP\'s computer using voice-grade analog
     signals transmitted via standard telephone lines, much as fax
     machines communicate using telephone lines.[^305]

105. AT&T's dial-up ISP, WorldNet, is one of the largest providers of
     dial-up residential Internet access service that does not bundle
     proprietary content with its Internet access.[^306] MediaOne does
     not provide dial-up Internet access service. Therefore, the merger
     is unlikely to have an adverse effect on competition and diversity
     in the provision of narrowband Internet access services.

106. *Broadband Internet Access Services.* There are several different
     technological means by which consumers may obtain broadband
     (high-speed) access to the Internet.[^307] As of April 2000,
     approximately 2 million Americans used cable modems for broadband
     Internet access, offering speeds that range up to one to ten Mbps
     depending on the upgrade status of the cable system and the amount
     of traffic on the shared line.[^308] As of year-end 1999,
     approximately 340,000 Americans obtained high-speed access through
     digital subscriber line ("DSL") technology.[^309] DSL is provided
     by telephone companies (ILECs and CLECs alike) and offers speeds
     anywhere from 144 Kbps to well over 1.5 Mbps, depending on the
     local loop and the type of DSL technology used. In addition,
     various companies are, or will be in the near to middle term,
     offering broadband Internet access using a variety of wireless
     technologies, including fixed wireless and satellite.

107. AT&T and MediaOne each provide to households passed by their cable
     systems Internet services that combine (a) broadband transport
     through their cable systems and (b) Internet access and proprietary
     content through their affiliated ISPs. MediaOne and Time Warner
     (through TWE, TWE-A/N, and TWI) together hold an 80% ownership
     interest in Road Runner, and Road Runner is their exclusive cable
     broadband ISP.[^310] Various cable operators, including AT&T,
     Comcast, Cox Communications, Cablevision Systems and Shaw
     Cablesystems, hold ownership interests in Excite@Home, and
     Excite@Home is their exclusive cable broadband ISP. By virtue of a
     transaction with its cable partners, AT&T recently increased its
     voting stock interest in Excite@Home from about 57% to 74% and
     assumed full control of the management of Excite@Home.[^311]
     Excite@Home and Road Runner also have exclusive contracts with
     other cable operators throughout the country and abroad.[^312]
     Excite@Home is the nation's largest cable broadband ISP and
     currently has more than 1.5 million subscribers; Road Runner is the
     second largest cable broadband ISP and has approximately 730,000
     subscribers.[^313]

108. Some commenters[^314] have raised concerns regarding the merger's
     impact on the provision of a related category of services, which
     AT&T refers to as "interactive television services and
     content."[^315] These interactive television services include (but
     are not limited to) the provision of electronic commerce
     (shopping), electronic banking, video-on-demand, limited or
     full-service Internet access, and hyperlinking, all delivered to
     the consumer's television set via the cable set-top box. Applicants
     have not yet deployed interactive television services in the mass
     market but plan to deliver such services to the consumer through an
     advanced digital set top box, utilizing TVGuide as the EPG.[^316]
     The digital set-top box may also incorporate a cable modem,
     providing the consumer with full Internet access either on the
     television screen or on the personal computer.[^317]

109. Because Applicants' interactive television offering will include
     broadband access to the Internet, those interactive services may
     compete with broadband Internet services delivered over the home
     computer. The merged entity will require its customers who access
     the Internet through the digital set-top box to utilize Excite@Home
     or Road Runner as their ISP until the termination of its exclusive
     contracts with these affiliated ISPs.[^318] Thus, the merged firm's
     provision of broadband Internet access and interactive services
     through the set-top box will augment its provision of broadband
     Internet access through the cable modem. Below, we analyze the
     merger's potential impact on competition and diversity in the
     provision of broadband Internet access, whether provided through
     the cable modem or the set-top box.

### Discussion

110. The Application indicates that the merged firm would have ownership
     interests in the two largest cable ISPs, Excite@Home and Road
     Runner, and cable systems with last-mile facilities reaching nearly
     63% of homes passed by cable nationwide.[^319] Commenters argue
     that these ownership interests will give the merged entity
     dominance over the provision of broadband Internet services,
     thereby threatening competition and diversity in the provision of
     Internet services, content, applications, and architecture. They
     observe that Excite@Home and Road Runner are the exclusive ISPs for
     cable modem users served by the majority of cable systems
     nationwide, including those of AT&T and MediaOne, and that
     unaffiliated ISPs currently are denied "open access" to provide
     broadband services over these cable systems. The issues raised by
     commenters generally fall into the following categories: broadband
     Internet content, broadband Internet applications and software, and
     "open/forced access."

111. *Broadband Internet Content.* Some commenters argue that the merged
     firm will control such a large portion of the broadband customer
     base that it could gain *de facto* power to dictate what content,
     products, and services are available to broadband customers
     generally, and at what price.[^320] When a consumer accesses the
     Internet through the broadband cable line, the first Web page the
     consumer sees is the home page of the cable operator's exclusive
     ISP. To view an alternative web page or Internet portal offered by
     ISPs not affiliated with the cable operators, the consumer must
     reconfigure his or her Internet access device or Web browser to go
     through the unaffiliated ISP, to which the customer must subscribe
     at an additional cost.

112. Excite@Home and Road Runner, together with the cable operator,
     determine the content that is placed on their home pages. In
     addition, both Excite@Home and Road Runner use "caching"
     technology, a technology that places certain content at regional
     distribution centers to allow faster access by their
     customers.[^321] Excite@Home and Road Runner cache (a) the content
     most often accessed by customers as determined by mathematical
     algorithms, and (b) the content for which content providers have
     negotiated for preferred caching. Commenters raise concerns that
     the merged firm could use its control over the Excite@Home and Road
     Runner home pages and caching technology to discriminate against
     unaffiliated providers, both in terms of pricing and access to
     consumers. Commenters argue that the merged entity could use
     caching technology to slow down, limit or block consumers' access
     to unaffiliated broadband content.[^322] They also argue that,
     given Excite@Home and Road Runner's dominance in the provision of
     broadband Internet access, the merged firm could charge monopoly
     rents to content providers for the right to receive favorable
     caching on Excite@Home and Road Runner networks, or to be linked to
     the affiliated ISPs' home pages.[^323]

113. *Broadband Internet Applications and Software.* Several commenters,
     particularly GTE, argue that the Applicants will have both the
     incentive and the ability to implement proprietary network
     management and software protocols, designed to render software and
     content written for their systems incompatible with competing
     systems.[^324] Commenters argue that the merged entity will use the
     market power of Excite@Home and Road Runner to force applications
     developers to incorporate proprietary protocols into their software
     architecture so that new applications cannot work on competing
     broadband technologies such as DSL.

114. *"Open/Forced Access."* A number of commenters have urged us to
     address the perceived competitive harms by imposing an "open
     access" requirement.[^325] By "open access," commenters refer to a
     proposed requirement that cable operators allow independent,
     unaffiliated ISPs to interconnect with their proprietary cable
     networks for the purpose of offering broadband Internet access and
     services to consumers. Opponents to such a regulatory requirement
     refer to it as "forced access."

115. Proponents of "open/forced access" argue that the Applicants'
     offering of cable broadband transport bundled with their affiliated
     ISPs' Internet access service and content threatens to alter
     fundamentally the open nature of the Internet, replacing its open
     architecture with a closed model derived from the cable television
     industry.[^326] These parties believe that the merged entity will
     integrate vertically into related markets such as broadband
     Internet content, software, and equipment.[^327] They contend that
     the merged firm is likely to impose a proprietary architectural
     standard so as to favor affiliated product and service providers,
     foreclose effective competition among broadband Internet service
     providers, and undermine the incentive toward innovation in
     broadband content and applications.[^328] Several commenters also
     argue that AT&T should be subject to an "open/forced access"
     requirement as a matter of "regulatory parity," because ILECs
     offering DSL services are required by law to provide access to
     competing providers.[^329]

### Findings.

116. We find it unnecessary to determine in this proceeding whether a
     distinct broadband Internet access market exists, notwithstanding
     the rigorous debate on the record between the Applicants and
     commenters on this issue of market definition. We agree with
     commenters that the proposed merger conceivably could undermine
     competition and diversity in the emerging broadband Internet arena,
     *if* customers did not have the ability to choose among viable,
     alternative broadband Internet access providers or ISPs. However,
     we find that those harms will be avoided if: (a) consumers can
     choose among various alternative broadband access providers, such
     as DSL, wireless, and satellite; or (b) unaffiliated ISPs are
     permitted access to the merged firm's cable network. As discussed
     below, we find that there is significant actual and potential
     competition from both alternative broadband providers and from
     unaffiliated ISPs that may gain access to the merged firm's cable
     systems. Moreover, we find that the Justice Department's proposed
     consent decree with AT&T, requiring it to divest its interest in
     Road Runner and to obtain prior approval from the Justice
     Department before entering into certain agreements with Time Warner
     and AOL, already has addressed the potential harms from a
     combination of Road Runner and Excite@Home.

117. *Alternative Providers.* With regard to choice among broadband
     access providers, there is evidence that ILECs, CLECs, and other
     competitive providers are aggressively rolling out alternative
     broadband technologies, notwithstanding cable's early lead in the
     nascent broadband area.[^330] ISPs lacking direct access to provide
     broadband services over cable systems are entering into alliances
     with alternative broadband providers, thereby accelerating the
     deployment of these technologies.[^331] Currently, those
     alternative technologies are attracting new subscribers at an
     exponential rate, and prices for these new services appear to be
     falling.[^332] In fact, DSL sales are currently growing at a more
     rapid rate than cable modem sales.[^333] Largely in response to
     cable modem rollout, the Bell Operating Companies ("BOCs") and GTE
     have launched major initiatives to accelerate their deployment of
     DSL.[^334] Similarly, the CLECs are aggressively deploying DSL
     technology.[^335] We expect that our recent "line-sharing" rule
     permitting competitive carriers to obtain access to the
     high-frequency portion of the local loop from the incumbent LECs
     will further spur the deployment of DSL broadband services.[^336]

118. Fixed wireless broadband technology also holds promise for the
     future. Presently, Teligent, Inc.[^337] and WinStar Communications,
     Inc.[^338] offer a variety of broadband services to small and
     medium-sized businesses in several metropolitan markets, and have
     plans to further deploy their services to several new markets
     throughout the country. In the upcoming months, several new fixed
     wireless systems plan to offer broadband access through either
     local multipoint distribution service (LMDS) or multichannel
     multipoint distribution service (MMDS) technologies. MCI and
     Sprint, for example, are acquiring struggling licensees and
     re-deploying their spectrum to provide broadband services.[^339] In
     general, although wireless technology is limited by slower upstream
     speed as compared to cable and DSL,[^340] analysts remain
     optimistic regarding wireless technology as a competitive broadband
     provider.[^341]

119. Satellite-delivered broadband services also may become viable
     broadband alternatives in the future, although they currently do
     not offer high-speed access in the upstream direction.[^342] The
     Spaceway network, expected to be operational in 2002, will utilize
     16 satellites to provide "bandwidth-on-demand" -- the ability to
     transmit and receive voice, video and data at any time from any
     location -- at speeds of up to 6 Mbps.[^343] Teledesic plans to
     utilize 288 satellites in low earth orbit to provide two-way
     digital transmission of voice, data and video at low costs,
     regardless of location. The company is spending \$9 billion on its
     "Internet-in-the-Sky" project, which will provide consumers with
     broadband Internet service beginning in 2003.[^344] In short, the
     next few years promise significant growth in competition from
     alternative broadband access providers.

120. *Access by Unaffiliated ISPs.* In addition to the foregoing
     industry developments, the Applicants have committed to open their
     cable modem platform to unaffiliated ISPs as soon as AT&T's
     exclusive contract with Excite@Home expires in June 2002 and
     MediaOne's exclusive contract with Road Runner expires in
     December 2001. On December 6, 1999, following meetings with other
     interested parties, AT&T and MindSpring (an unaffiliated,
     nationwide ISP)[^345] sent a joint letter to Commission Chairman
     William Kennard setting forth an agreement in principle pursuant to
     which AT&T committed to provide unaffiliated ISPs access to its
     cable systems following the expiration of its exclusive arrangement
     with Excite@Home in 2002. AT&T General Counsel Jim Cicconi has
     stated that the commitments made in the December 6, 1999 letter
     also will apply in MediaOne territories, such that Road Runner will
     no longer be the exclusive ISP for MediaOne cable subscribers
     following the expiration of MediaOne's exclusive contract with Road
     Runner.[^346] In that letter, AT&T stated its agreement to adhere
     to various principles of "openness" in order to offer its
     customers:[^347]

-   A choice of ISPs;

-   The ability to exercise the consumer's choice of ISP without having
    to pay twice for both that ISP and the cable-affiliated ISP;

-   A choice of Internet connections at different speeds, at reasonable
    and appropriate prices;

-   Direct access to all content available on the World Wide Web without
    any AT&T-imposed charge to the consumer for such content;

-   The continued ability to customize the customer's "start page" and
    other aspects of their Internet experience; and,

-   The functionality of the customer's chosen ISP comparable to that
    which such ISP has on competing broadband systems, subject to any
    technical constraints particular to and imposed on all ISPs using
    AT&T's cable system to deliver high-speed Internet access.

121. To achieve the foregoing objectives, AT&T and MediaOne have also
     agreed to negotiate, upon the expiration of their exclusive
     arrangements with Excite@Home and Road Runner, private contracts
     with multiple ISPs in order to offer those ISPs reasonably
     comparable access prices, the opportunity to market and bill
     consumers directly, and the opportunity to differentiate service
     offerings and to maintain brand recognition in all such offerings.
     In addition, AT&T has committed to allowing unaffiliated ISPs using
     its cable systems to obtain Internet backbone capacity from AT&T's
     own service, if they so choose.[^348] Finally, AT&T has committed
     to facilitating maximum access by its customers to any content of
     their choosing, including streaming video.[^349] We expect the
     Applicants to adhere to the foregoing commitments and therefore are
     hopeful that the merged firm and unaffiliated ISPs together will be
     able to resolve the technical and business issues associated with
     providing these ISPs direct access to the cable infrastructure to
     offer broadband services, without the imposition of a
     government-mandated model.[^350]

122. *Justice Department Proposed Consent Decree.* We also consider the
     impact of the proposed consent decree between the Justice
     Department and AT&T, which addresses the potential anti-competitive
     effects from a combination of the nation's two largest cable
     broadband ISPs, Road Runner and Excite@Home, under the merged
     entity's influence or control. [^351] The proposed consent decree
     requires the merged entity to divest its interest in Road Runner no
     later than December 31, 2001, and to exit the joint venture prior
     to that date if the other relevant owners of Road Runner agree to
     an earlier departure.[^352] In addition, the proposed consent
     decree requires the merged firm to obtain prior approval from the
     Justice Department before entering into certain types of agreements
     with Time Warner or with AOL, which has a pending merger agreement
     with Time Warner. That requirement, which would remain in place for
     two years after the merged firm exits Road Runner, would apply to
     any agreement that proposes joint provision of a residential
     broadband service or any agreement that would prevent either party
     from offering a residential broadband service to customers in any
     geographic region. It also would apply to agreements that would
     prevent the inclusion of any content in a cable modem service
     offered by either party, or that would prevent either party from
     providing preferential treatment to content provided by
     others.[^353] The proposed consent decree thus assures that Road
     Runner and Excite@Home will not coordinate their actions to the
     detriment of consumers.

123. Given the nascent condition of the broadband industry and the
     foregoing promises of competition, we find it premature to conclude
     that the proposed merger poses a sufficient threat to competition
     and diversity in the provision of broadband Internet services,
     content, applications, or architecture to justify denial of the
     merger or the imposition of conditions to supplement the Justice
     Department's proposed consent decree. We find that the proposed
     consent decree adequately addresses commenters' concern that a
     combination of Excite@Home and Road Runner would have both the
     ability and the incentive to discriminate against unaffiliated
     content providers and/or to leverage proprietary software protocols
     to favor networks owned by or affiliated with the merged entity.
     Although some possibility of harm may remain, we find that there is
     an equal or greater probability that growing competition from
     alternative access providers and unaffiliated ISPs will prevent
     such perceived harms. The evidence of growing competition from both
     alternative broadband providers and unaffiliated ISPs gaining
     access to cable and other broadband networks indicates that any
     action taken by the merged firm to disfavor unaffiliated broadband
     content and applications providers is likely to threaten the
     networks' ability to attract and retain customers. In light of
     industry trends toward both horizontal and vertical integration,
     however, we will monitor industry developments closely through our
     ongoing examination of the deployment of advanced services pursuant
     to Section 706 of the 1996 Act[^354] and the Cable Services
     Bureau's monitoring of cable operators' provision of broadband
     services in particular.[^355] We are committed to reviewing our
     policies if competition does not grow as expected.

124. We agree with commenters that the imposition of proprietary
     architecture and protocols for broadband Internet applications
     would pose a serious threat to the openness, diversity, and
     innovation of the Internet and the development of competition in
     the provision of broadband services. There is little doubt that
     over the next few years, as more and more customers purchase
     broadband Internet connections, the development of Internet
     applications and content specific to broadband will accelerate
     rapidly.[^356] It is important that, to the extent possible, those
     broadband applications and content have the ability to interface
     with the full range of competing broadband technologies.

125. In our monitoring of broadband developments, we have seen no
     evidence of cable operators imposing proprietary protocols.
     According to the Applicants, "both AT&T and MediaOne have used open
     standards in their broadband systems."[^357] The Applicants argue
     that, as "nascent" service providers in an Internet arena still
     dominated by established narrowband providers, they have "neither
     the incentive nor the ability to change course and impose
     proprietary standards in the future."[^358] Commenters have
     provided no evidence to the contrary. Given the increasingly rapid
     deployment of alternative broadband technologies, we cannot
     conclude that the merged firm will have sufficient bargaining power
     in this emerging field to give it the incentive and the ability to
     establish proprietary interfaces for new broadband software
     applications. If the merged entity imposes proprietary protocols,
     providers of applications and content tailored to those protocols
     will be forced to forego alternative broadband outlets such as DSL.
     Were the merged firm to attempt such a strategy, it is more likely
     than not that software developers could find adequate outlets in
     alternative broadband providers to discipline the merged firm's
     anti-competitive action.

126. We also decline to impose an "open/forced access" requirement on
     the merged firm's cable systems as a condition of this merger based
     on arguments regarding alleged disparate regulatory treatment of
     cable operators and telephone companies offering broadband Internet
     access.[^359] As we noted in our *Amicus Brief* to the U.S. Court
     of Appeals for the Ninth Circuit, the Commission has not determined
     whether Internet access via cable system facilities should be
     classified as a "cable service" subject to Title VI of the Act, or
     as a "telecommunications" or "information service" subject to Title
     II.[^360] There may well come a time when it will be necessary and
     useful from a policy perspective for the Commission to make these
     legal determinations. However, those legal determinations would
     have industry-wide application, as well as legal and practical
     implications that extend far beyond the contours of this particular
     merger. Our review of this merger does not provide an appropriate
     forum for a determination of the legal status of cable broadband
     Internet access services.

127. We find insufficient evidence to support the imposition of an
     "open/forced access" requirement on the merged entity at this time,
     given the potential for competition from alternative broadband
     providers and the potential for unaffiliated ISPs to gain direct
     access to provide broadband services over the cable infrastructure.
     We remain concerned, however, that the recent trend toward both
     horizontal and vertical consolidation in the broadband services
     industry has the potential to threaten the openness, competition,
     and innovation of the Internet and the diversity of media voices
     that are available to Americans.[^361]

128. Therefore, although we decline to impose "open/forced" access on
     the Applicants as a condition of the proposed merger, we will
     continue to aggressively monitor broadband developments and the
     steps taken by the merged entity to provide unaffiliated ISPs with
     direct access to its cable systems.[^362] We are cognizant of the
     merged firm's incentives and ability to use its control of the
     Excite@Home home page and "caching" technology to negotiate
     exclusive content agreements in order to disadvantage alternative
     broadband providers.[^363] We will review our "hands-off" policy if
     competition fails to grow as expected, especially if we find signs
     of the following possible market failures: (a) if competition from
     alternative broadband providers (such as DSL, satellite, and
     wireless) does not develop as anticipated; (b) if the merged firm
     fails to fulfill expeditiously its commitment to open its systems
     to unaffiliated ISPs, either by limiting access to a few large
     ISPs, through pricing or other contractual terms, or by utilizing
     technology that would make an open access regime difficult or
     costly to implement; or (c) if the merged firm successfully enters
     into exclusive agreements with broadband Internet content or
     applications providers so as to disadvantage competing broadband
     providers.

## Local Exchange and Exchange Access Service

129. In this section, we consider the merger's potential public interest
     harms with respect to the provision of local exchange and exchange
     access service (*i.e.*, local telephone service).[^364] The
     proposed merger would not violate any provision of the
     Communications Act or the Commission's rules with respect to these
     services. Accordingly, we proceed to the next step of examining
     whether the merger would hinder competition in the provision of
     these services and thereby frustrate the implementation of the
     pro-competitive goals of the 1996 Act. We conclude that the merger
     would not harm the development of competition in the provision of
     local exchange and exchange access service.

130. AT&T's acquisition of MediaOne will eliminate a competitor in
     markets where both AT&T and MediaOne are now providing service or
     would be likely to provide service absent the merger. Thus, we
     first ask whether AT&T already serves, or absent the merger, would
     serve some of the same markets as MediaOne such that the merger
     would eliminate an actual or potential competitor in the provision
     of local exchange and exchange access service. If so, we must
     determine whether the merger will inhibit the development of
     competition in the provision of these services.

131. MediaOne, as a cable operator, is most likely to provide local
     telephony services to residential and small business customers
     passed by its cable systems. There is no evidence in the record
     that MediaOne currently provides or plans to target large business
     customers not passed by its cable systems, and Applicants state
     that MediaOne "has never been or even sought to be a significant
     provider of telephony services to business customers."[^365] The
     proposed merger therefore will not eliminate in MediaOne a uniquely
     qualified potential competitor that possesses scarce assets or
     capabilities with respect to the provision of local telephone
     service to larger business customers. Although MediaOne owns a
     minority interest in the competitive LEC TWT, which provides local
     telephony services to larger businesses in some franchise areas
     served by AT&T, MediaOne recently relinquished all management
     rights and reduced its equity and voting interests in TWT to less
     than 10%.[^366] To the extent AT&T will acquire a passive minority
     interest in TWT, we believe the larger business market is
     sufficiently competitive that AT&T's acquisition of this interest
     will not harm competition.[^367] Accordingly, our examination of
     competitive concerns will focus on local exchange and exchange
     access services provided to residential and small business
     customers.

132. AT&T provides local telephone service to more than 555,000
     customers throughout the United States.[^368] Approximately 60,000
     of these customers are served through AT&T's own cable system
     facilities.[^369] AT&T's cable telephony service is available in
     Fremont and San Jose, California; Arlington Heights, Illinois;
     Dallas, Texas; and Hartford, Connecticut.[^370] AT&T also provides
     facilities-based local telephone service on a trial basis in
     Dallas, Texas, and commercially to residential customers in Fort
     Worth, Texas using fixed wireless facilities.[^371] AT&T plans to
     offer service commercially in two additional markets by year-end
     2000.[^372] AT&T has stated that its fixed wireless initiative is
     designed to allow it to provide local telephone service on a
     facilities basis in areas where it does not own cable
     facilities.[^373]

133. MediaOne provides facilities-based local telephone service using
     its cable system facilities to approximately 100,000 local
     telephone service customers.[^374] The service is available in
     Atlanta, Georgia; Boston, Massachusetts; Jacksonville and Pompano
     Beach, Florida; Detroit, Michigan; Los Angeles, California; and
     Richmond, Virginia.[^375] According to the Applicants, MediaOne
     serves less than 4% of the homes that are passed by its cable
     facilities that have been upgraded to provide telephone
     service.[^376]

134. AT&T and MediaOne currently compete with each other in only one
     market in suburban Atlanta, where AT&T provides resold local
     telephone service and MediaOne provides facilities-based
     service.[^377] When the Application was filed, MediaOne served
     approximately 5,000 customers (less than 3% of the market) in this
     service area.[^378] According to AT&T, its "Georgia market efforts
     never advanced beyond the readiness testing phase," and its local
     telephony resale plans "were suspended indefinitely in
     October/November 1997."[^379] AT&T states that "service continued
     to be provided to the then-existing base until those customers
     opted to cancel or terminate their service, \[and the\] embedded
     base that remains today includes only a few thousand
     customers."[^380]

135. *Findings*. We recognize that MediaOne's "second wire" into the
     home might permit it in the long term to become a sustained and
     effective competitor for residential telephone service in its
     franchise areas even absent the merger. We do not believe it
     likely, however, that MediaOne would be a potential competitor in
     markets outside of its local franchise areas that AT&T either now
     serves or would be likely to serve. Our previous findings are that
     cable operators such as MediaOne lack the telecommunications
     brand-name reputation and expertise to be "most significant market
     participants" for purposes of competitive analysis in markets
     outside of the cable operators' local franchise areas.[^381]

136. Unlike MediaOne, however, AT&T does have the capability to be a
     "most significant market participant" in the mass market.
     Specifically, the Commission has held previously that AT&T is one
     of only a few firms that currently possesses the experience, brand
     name, assets, and financial resources that are essential for
     effective entry into the retail residential local exchange and
     exchange access markets.[^382] AT&T has announced a fixed wireless
     initiative to provide local exchange service in areas where it does
     not intend to have a cable presence.[^383] There is no evidence in
     the record, however, that AT&T has specific business plans to
     provide local exchange service to mass market customers in
     specific, identified MediaOne franchise areas. Thus, it is unclear
     whether and when AT&T would deploy a fixed wireless system and
     offer local exchange service on a mass market basis in MediaOne's
     franchise areas if AT&T did not merge with MediaOne. We conclude,
     based on the record before us, that the proposed merger will not
     harm the development of competition for local exchange and exchange
     access service provided to residential and small business
     consumers. As described in the potential public interest benefits
     section below, we find that AT&T and MediaOne acting independently
     would not be able to offer facilities-based local telephone service
     as efficiently or as effectively as they could through their
     proposed merger.

## Mobile Telephone Service

137. We determine that the merger will not result in violation of the
     Communications Act or Commission rules with respect to mobile
     telephone service and that it will not frustrate the Commission's
     implementation of the Communications Act or Commission policies.
     Accordingly, we find that the merger presents no public interest
     harms with respect to this service.

138. The Applicants state that, through their respective interests in
     AT&T Wireless and Vodafone AirTouch Plc ("Vodafone"), the merged
     entity will have interests in both channel blocks in 37 cellular
     service areas.[^384] AT&T owns and operates AT&T Wireless Services,
     Inc., which has a controlling interest in one of the two cellular
     channel blocks in these service areas.[^385] MediaOne gained an
     interest in Vodafone of approximately 4.9 percent when Vodafone
     acquired AirTouch Communications, Inc., in which MediaOne held a
     passive interest.[^386] MediaOne's interest in Vodafone therefore
     is a minority, non-controlling interest that is not attributable
     for purposes of our cellular cross-ownership rules.

139. Under Commission rules in force when the Application was filed, a
     party that had a controlling interest in a license for one cellular
     channel block was prohibited from having any direct or indirect
     ownership interest in licensees for the other cellular channel
     block in an overlapping cellular service area ("CGSA").[^387] In
     September 1999, however, the Commission revised its cellular
     cross-ownership rule in recognition of broad advances in
     competition within the mobile telephony sector.[^388] Specifically,
     the rule now allows a party with a controlling, or otherwise
     attributable, interest in one of the cellular licensees to have a
     non-controlling, or otherwise non-attributable, ownership interest
     of up to five percent in the other cellular licensee in the
     CGSA.[^389] Hence, we determine that the proposed merger will not
     result in violation of our cellular cross-ownership rule. In
     addition, because MediaOne itself does not provide mobile telephone
     service, and its interest in affiliated providers of this service
     is not attributable under Commission rules, we find that the merger
     will not result in any other public interest harms with respect to
     the provision of mobile telephone service.

## Bundling 

140. Several commenters raise concerns that the merged firm will have
     the ability and incentive to engage in anticompetitive bundling
     strategies.[^390] They allege that the merged entity may condition
     the purchase of one service on the purchase of another service in a
     manner that injures competitors and consumers. To prevent such
     harm, the parties ask the Commission to approve the merger on the
     condition that the merged firm refrain from such bundling practices
     and instead offer each of its services (local and long distance
     telephone, cable, and Internet) on a stand-alone basis.

141. While the Applicants state that the merged entity will offer
     packages of bundled services, there is no evidence that it will
     condition the purchase of one service on the purchase of another.
     Indeed, the Applicants have committed to offering their local phone
     service, long distance phone service, MVPD service, and Internet
     service each on a stand-alone basis, in addition to offering
     bundled packages of services.[^391] As we stated in the *AT&T-TCI
     Order*, a blanket condition prohibiting bundling of any form could
     have the unintended effect of denying consumers substantial
     benefits.[^392] The merged firm may well have lower costs in
     billing and servicing customers that subscribe to several of its
     offerings.[^393] In such a case, the merged firm could pass its
     cost savings to consumers in the form of lower prices. Purchasing
     the package of bundled services thus could be cheaper than the sum
     of purchasing each of the bundled services on a stand-alone basis.

142. Even if the merged firm decided to condition the purchase of one
     service on the purchase of another, it could inflict competitive
     harm only if it had sufficient market power in the provision of one
     of the bundled services.[^394] So long as the merged firm lacks
     such market power, consumers will not be harmed, because they have
     the ability to choose from a number of alternative providers for
     each of these services. As discussed in our analysis of the
     relevant services above, AT&T will not gain such power in any
     market through its merger with MediaOne.

143. Various commenters argue that the Applicants will exploit their
     alleged dominance of local MVPD markets to pursue anticompetitive
     bundling strategies. Ameritech and EchoStar contend that the
     horizontal reach of the merged entity will allow Applicants to
     require purchasers of its cable television service also to purchase
     its telephony and Internet services.[^395] Although cable
     television continues to be the dominant technology for the delivery
     of video programming in the MVPD marketplace, its market share
     continues to decline.[^396] In the *1999 Cable Competition Report*,
     we found that the rate of growth for non-cable MVPD subscribers was
     substantially greater than the rate of growth for cable
     subscribers.[^397] Moreover, the potential harm alleged by the
     commenters is not specific to the merger. If we were to accept
     *arguendo* these commenters' contention that the Applicants (and
     other cable operators) enjoy a monopoly in their local MVPD
     markets, then, even without the merger, AT&T and MediaOne each
     already would have the ability to require buyers of MVPD service to
     buy telephony and Internet services in their respective markets.
     Commenters have not alleged that either AT&T or MediaOne have
     engaged in such practices. As the Commission recognized in the
     *AT&T-TCI Order*, the merger is not the cause of this alleged
     competitive threat, and the merger license transfer proceeding thus
     is not the appropriate forum to address this issue.[^398] We will
     continue to rely on competition or, in its absence, the antitrust
     laws, to protect against this danger, just as we did before the
     merger.[^399] If parties allege that the merged firm has engaged in
     any anticompetitive bundling tactics or that it has failed to offer
     each service on a stand-alone basis, the Commission will address
     such conduct at that time as a separate enforcement matter.

##  Universal Service/Deployment

144. TAP and SBC seek Commission denial of the requested license
     transfers between AT&T and MediaOne based on allegations that
     MediaOne has engaged in discriminatory deployment of new services
     ("redlining") and will continue to do so post-merger.[^400] After
     reviewing MediaOne's deployment data, however, TAP conceded at the
     February 4, 1999, public forum on this merger that there exists no
     evidence of actual discrimination by MediaOne.[^401] After
     extensive investigation of SBC's and TAP's allegations, we find no
     evidence that MediaOne engaged in discriminatory deployment in the
     past or that the merged firm will engage in such a practice in the
     future.

145. TAP asserts that discriminatory deployment violates the
     Communications Act and subverts the public interest.[^402] The
     Commission is deeply committed to the goal of delivering the
     potential of broadband to all Americans, regardless of their race,
     ethnicity, or income level. Recognizing the importance of TAP's and
     SBC's allegations of discriminatory deployment, we requested
     extensive deployment data from the Applicants and carefully
     investigated the matter. TAP's allegations rest on maps it created
     to illustrate the upgrade of MediaOne systems with respect to
     various ethnic, minority, and low-income communities in Los
     Angeles, California, and Richmond, Virginia.[^403] Based on these
     maps, TAP asserts that MediaOne engaged in systematic
     discrimination in its deployment of cable plant upgrades and
     broadband service offerings. These maps purport to show that
     MediaOne actively decided not to provide service to certain areas
     with high concentrations of minority populations.[^404]

146. We determine that TAP has alleged sufficient facts for the
     Commission to consider, as a factor in its public interest
     determination, whether the proposed merger would aggravate a
     situation where either of the merging parties deployed facilities
     in a discriminatory manner.[^405] We conclude that such actions
     would be contrary to the purpose of the Communications Act[^406]
     and the fundamental goal of the 1996 Act to bring communications
     services "to all Americans."[^407]

147. Before we are required to designate an issue for evidentiary
     hearing to examine whether the merger is not in the public
     interest, however, we must find that the specific claims of those
     parties opposing the application raise substantial and material
     questions of fact.[^408] In reaching this determination, the
     Commission may consider "the entire record, weighing the
     petitioner's evidence against facts offered in rebuttal."[^409]

148. The Commission staff requested that MediaOne provide additional
     information to address the redlining allegations. After a thorough
     review of this information, we find no evidence that MediaOne
     upgraded and deployed its new and advanced services in a
     discriminatory manner. First, many of the communities that MediaOne
     allegedly "redlined" are not within its franchise areas, and
     therefore, could not be upgraded by the company.[^410] Second,
     TAP's maps depict the availability of the Excite@Home service in
     various localities in order to make the inference that only
     affluent or non-ethnic areas received this particular high-speed
     Internet service. Excite@Home's service areas are irrelevant to the
     determination whether MediaOne has redlined minority communities
     because MediaOne does not offer this service and has no control
     over its deployment.[^411] Third, TAP's methodology understates the
     extent of MediaOne's deployment and, in some cases, excludes a
     number of communities currently receiving broadband Internet
     services.[^412] In determining whether a specific area received
     broadband services, TAP compared ZIP code data with MediaOne's
     website information.[^413] This methodology, however, does not
     fully capture the extent of MediaOne's broadband deployment. Cable
     franchise areas do not correlate with ZIP code boundaries, and
     MediaOne's website does not contain all relevant and current
     deployment information. [^414]

149. Commission staff further requested that MediaOne produce its own
     maps and demographic data to illustrate in detail its franchise
     areas, the condition of upgrades in these areas, and the
     availability of broadband services, as well as average household
     income levels and ethnic composition (white, black, and
     Hispanic).[^415] Based on our review of this data, we find no
     correlation between MediaOne's deployment and race, ethnicity, and
     income-levels. While it appears that certain ethnic-minority and
     low-income communities were not completely upgraded at a given
     date, there were several white and affluent communities that were
     similarly situated.[^416] The inverse also appeared to be true:
     certain ethnic minority communities were offered broadband services
     well before the predominantly white and affluent communities.[^417]
     When presented with this new data, TAP conceded at the Cable
     Services Bureau's February 4, 2000 public forum in this proceeding
     that there is no evidence of discriminatory deployment by
     MediaOne.[^418]

150. MediaOne's upgrade and deployment schedule appears to be a function
     of resource constraints, engineering, and competitive pressures.
     Cable system upgrades that transform a one-way video network to a
     two-way broadband network are complex and time-consuming projects
     that require enormous capital expenditures, a skilled labor-force,
     and available supply of advanced equipment. Due to these
     constraints, cable operators cannot upgrade all of their systems
     simultaneously. Instead, cable system upgrades are a multiyear and
     multiphase endeavor, whereby the operator upgrades certain systems
     and offers new services on an incremental basis. Cable operators
     generally upgrade their systems based on engineering factors, such
     as the state of the current plant (capacity, hub and line
     conditions, two-way capability) and system clusters.[^419] Based on
     the record before us, we find that MediaOne's upgrades and
     deployment do not reflect any discrimination on the basis of race,
     ethnicity, or income levels.

151. TAP also argues that, in low-income and minority areas where
     MediaOne did provide service, the product was inferior and the
     service quality was poor when compared to the affluent non-minority
     areas.[^420] The anecdotes of customer complaints gleaned by TAP
     from periodicals,[^421] however, do not provide sufficient evidence
     to suggest that these experiences and complaints are unique to
     MediaOne's minority or low-income subscribers.

152. The record evidence does not raise substantial and material
     questions of fact regarding whether applicants either have engaged
     in or will engage in discriminatory conduct by avoiding minority
     communities in their deployment of facilities.[^422] The record
     does not contain any evidence that MediaOne treated low-income and
     minority communities in a discriminatory fashion. For these
     reasons, we are not persuaded that the merger threatens our
     universal service goal that all Americans share in the benefits of
     broadband deployment. Thus, we decline to deny the merger on these
     grounds or impose any condition concerning the merged firm's
     upgrade schedule and deployment plans.[^423]

153. Los Angeles County asks the Commission to require AT&T to adopt
     MediaOne's social contract obligations or to impose similar
     obligations on the merged firm as a condition of approving the
     merger.[^424] Among other things, the social contract requires
     MediaOne to rebuild and upgrade its cable systems, create a
     streamlined (or "lifeline") basic service tier, and provide free
     cable connections and Internet service (where otherwise available)
     to schools in the communities that are covered by the social
     contract.[^425] The social contract provisions generally apply to a
     cable operator that acquires MediaOne systems only if the acquiring
     operator elects to adopt the social contract.[^426] The social
     contract ends on December 31, 2000.[^427] We decline to require
     AT&T to adopt the MediaOne social contract as a condition of our
     approval of the Application. Such a requirement would go beyond the
     provisions of the social contract, and Los Angeles County has not
     provided reasons why such a measure would be necessary or
     appropriate.[^428] Moreover, AT&T has notified the Commission that
     it agrees to be bound by MediaOne's social contract
     obligations.[^429] Thus, AT&T will be bound by MediaOne's social
     contract.

# ANALYSIS OF POTENTIAL PUBLIC INTEREST BENEFITS

154. In addition to assessing the potential public interest harms from
     the merger, we must consider whether the merger is likely to
     produce any public interest benefits.[^430] We employ a balancing
     test to determine whether the potential public interest benefits
     outweigh the potential public interest harms. In *SBC-Ameritech*,
     we noted that "as the harms to the public interest become greater
     and more certain, the degree and certainty of the public interest
     benefits must also increase commensurately in order for us to find
     that the transaction on balance serves the public interest."[^431]
     Our analysis focuses on demonstrable and verifiable public interest
     benefits that could not be achieved if there were no merger.[^432]
     Public interest benefits may include merger-specific cost saving
     efficiencies and beneficial conditions proffered by the Applicants
     or by other parties, or imposed by the Commission.[^433]

155. The Applicants claim the merger will produce public benefits in the
     provision of local telephony, broadband Internet, and digital cable
     service that outweigh any conceivable public interest harms.[^434]
     The Applicants attempt to quantify the estimated benefits from the
     merger and contend that "a conservative estimate of potential
     savings for consumers from the increased competition exceeds \$600
     million per year, or \$3.7 billion in net present value."[^435]
     This estimate is based on the assumption that the merger will
     accelerate deployment and competition in the provision of
     facilities-based local telephony and new services.[^436]

156. The Applicants have not produced a post-merger deployment plan, to
     be measured against AT&T's and MediaOne's independent pre-merger
     deployment plans, in order to demonstrate the extent to which the
     merger actually will accelerate deployment and competition in the
     provision of local telephony and other new services. The Applicants
     instead provide a narrative description of the manner in which the
     merger will combine (1) AT&T's strong brand name,
     telecommunications expertise, experience and resources in marketing
     and customer care, experience in obtaining interconnection and
     other agreements with ILECs, and head start in developing IP
     telephony, with (2) MediaOne's upgraded cable network and technical
     expertise in deploying circuit-switched local telephony services
     over cable facilities.[^437] The Applicants assert that their
     complementary assets and resources will bring local competition "to
     millions of customers in service areas where AT&T currently has no
     facilities, hasten MediaOne's deployment of IP telephony, and allow
     AT&T to offer service in a limited number of its own territories
     more quickly by building on MediaOne's upgraded system."[^438] They
     maintain that this combination of complementary assets means that
     "true facilities-based competition will be provided faster and more
     effectively than either company could manage alone."[^439]

157. The Applicants further contend that joint venture agreements and
     other contractual arrangements will not produce the same
     efficiencies as the proposed merger, stating that a joint venture
     would be "much less efficient than full integration."[^440] They
     maintain that it is extremely difficult for a cable company that
     owns facilities potentially capable of providing multiple existing
     and future services, and a telephone company that wants to use
     those facilities to compete with offerings of an ILEC, to agree in
     advance on limits on the services that the telephone company will
     offer, the amount of cable bandwidth it may use, and the
     calculation of returns to the joint venture.[^441] AT&T asserts
     that the outcomes of its joint venture negotiations are extremely
     unpredictable given the dynamic and rapidly evolving technology and
     markets involved.[^442] In these circumstances, AT&T contends that
     it will be difficult and time-consuming to hammer out commercial
     arrangements satisfactory to both parties, particularly given the
     large initial investments involved.[^443] Applicants argue further
     that the rollout of telephony, Internet, and other new services
     over cable networks requires large contract-specific
     investments.[^444] Once made, these investments are sunk.[^445]
     They cannot be re-deployed elsewhere or recovered upon termination
     of the project.[^446] Thus, Applicants maintain, joint venture
     agreements and other contractual arrangements are far less
     efficient and attractive than an outright merger.[^447]

158. AT&T contends that it has been unable to consummate any joint
     ventures, and that a merger is the best way to obtain the
     complementary resources necessary to maximize its competitive
     potential.[^448] The Applicants state that AT&T and MediaOne
     attempted to form a joint venture, but ultimately determined that a
     full merger was the best way to obtain the complementary resources
     necessary to maximize their competitive potential. AT&T maintains
     that its ability to deploy telephony and other services on a broad
     scale over its facilities and those of MediaOne is critical to the
     success of its efforts to consummate joint ventures with other
     unaffiliated cable companies in the future.[^449] For example,
     AT&T's Senior Vice-President for Telephony Ventures and Broadband
     and Internet Services alleges that the cable companies with which
     he has had discussions have stressed the importance of AT&T
     demonstrating the value of its brand, experience, and expertise in
     providing telephony services over its own cable facilities if they
     are to be convinced that the risks associated with a joint venture
     in this dynamic market are worth taking.[^450]

159. Many commenters acknowledge the public interest benefits from the
     creation of a facilities-based provider of local exchange and
     exchange access services that competes directly with the incumbent
     LECs.[^451] Some commenters argue, however, that the
     pro-competitive benefits asserted by the Applicants are
     speculative, unsupported by any economic analysis, and can be
     achieved readily without the merger.[^452] They also argue that
     Applicants fail to substantiate their claims beyond a general
     reference to economic efficiencies and to AT&T's branding,
     reputation, and marketing expertise.[^453] These commenters contend
     that the merger is unnecessary to increase competition because AT&T
     and MediaOne could offer cable telephony just as effectively if
     they remain independent or if they combine their respective
     resources through a joint venture or contractual arrangement short
     of merger.[^454] Finally, some commenters argue that there is no
     legitimate public interest justification for the merger because it
     will give AT&T unprecedented dominant market power.[^455]

160. *Findings*. We recognize that, were they not to merge, MediaOne and
     AT&T, acting independently or in contractual arrangements with each
     other and other service providers, may achieve some of the same
     public benefits promised by the merger. We find, however, that the
     merger is likely to accelerate competition among providers of local
     telephony, video, and broadband services in the service areas of
     MediaOne, AT&T, and other cable operators with whom the merged
     entity may enter telephony joint ventures or other contractual
     arrangements. Given the requirements and commitments discussed
     above to mitigate the potential harms from the merger, we conclude
     that, on balance, the potential public benefits offered by the
     merger of AT&T and MediaOne outweigh the potential harms.

## MediaOne

161. Through this merger, MediaOne will gain access to AT&T's
     established telephony brand name, reputation, expertise, and
     telecommunications facilities. As a result, post-merger MediaOne is
     likely to achieve greater local telephony penetration and will be
     able to provide new services more effectively, both on a bundled
     and stand-alone basis in competition with the ILECs.[^456]

162. We recognize that MediaOne's independent deployment experience
     indicates a significant potential for success in the local
     telephony market even if there were no merger. Since 1995, MediaOne
     has invested about \$4.1 billion in upgrading its traditional,
     one-way, analog cable plant to two-way, high-speed, digital
     facilities.[^457] This upgrade will be 70% complete by year-end
     1999 and 90% complete by year-end 2000.[^458] Among cable
     companies, MediaOne has been relatively aggressive in upgrading its
     network and offering new services. The fact that MediaOne has low
     penetration rates at present may simply reflect the difficulties
     faced by any new entrant in the local telephony market, rather than
     a lack of expertise or customer acceptance. We note in this regard
     that the Applicants themselves have stated that their ability,
     post-merger, to use MediaOne's expertise in system upgrade,
     deployment, and marketing of local telephony services will increase
     the speed and success of local telephony offerings in AT&T's
     service areas.[^459]

163. Nevertheless, the Applicants have provided evidence that, in
     MediaOne's franchise areas, AT&T local telephony service will
     provide a greater competitive challenge to the ILECs. First, the
     Applicants' market studies indicate that consumers are far more
     likely to purchase local telephony services from AT&T, based on the
     strength of AT&T's brand name, than from a cable operator, and that
     consumers believe AT&T has far greater telecommunications expertise
     than MediaOne.[^460] The Applicants state that a lack of (a) brand
     name recognition, (b) consumer acceptance of cable-provided
     telephony, and (c) technical and marketing expertise have hampered
     MediaOne's success in the local telephony business. In areas where
     it offers local exchange service, MediaOne's market share is less
     than 4%.[^461]

164. Second, AT&T and MediaOne will share telephony switches and
     transport, thereby ensuring that these facilities are utilized more
     efficiently.[^462] The Applicants will interconnect the MediaOne
     network with the switches and local facilities that AT&T obtained
     through its acquisition of Teleport.[^463] The Applicants also will
     combine and standardize network operations centers, customer
     service centers, and disaster recovery teams, thus giving MediaOne
     the benefit of AT&T's resources and expertise as well as greater
     economies of scale.[^464]

165. Third, MediaOne will benefit from AT&T's bargaining leverage,
     expertise in negotiating interconnection with ILECs, and mechanized
     back-office systems to interface with ILECs' operations support
     systems.[^465] The merger thus is likely to enable MediaOne to
     interconnect with ILECs' networks on better terms and provision
     customer orders more efficiently.

166. Fourth, AT&T appears to be more advanced than MediaOne in its
     research of packet-switched telephony.[^466] Packet-switched
     telephony has the potential to offer significant cost advantages
     and efficiencies to the cable operator in the provision of voice
     over the cable network. Access to AT&T's research and development
     in packet-switched telephony is likely to expedite MediaOne's
     offering of that technology over its cable systems.

167. Finally, the merger will give MediaOne access to AT&T's long
     distance network, enabling the merged company to offer a bundled
     package of local and long distance services in MediaOne's areas
     and, thus, compete more vigorously against the ILECs in the
     provision of telephony services.[^467] Accordingly, although the
     Applicants have stated that they will continue to upgrade systems
     and deploy cable telephony in accordance with MediaOne's current
     schedule, the merged firm is likely to achieve deeper market
     penetration based on an increase in customer acceptance of its
     local telephony offering and the volume of customer orders that it
     can provision in a given period.[^468]

## AT&T

168. The merger's impact on AT&T's rollout of local telephony and other
     new services is likely to be more limited. Applicants state that
     the merger will enable AT&T to cluster some of its systems with
     neighboring MediaOne systems and obtain substantial capital and
     operational cost savings from the sharing of facilities.[^469] The
     Applicants offer no evidence, however, that their current clusters,
     already very large, are not sufficient in size to provide the
     economies of scale necessary to efficient provision of local
     telephony and other new services. As to areas where AT&T currently
     lacks cable systems, AT&T owns numerous Teleport switches in major
     metropolitan areas throughout the United States that provide the
     building blocks to construct new telephone networks.[^470] In
     addition, AT&T's recently announced fixed wireless initiative
     provides an alternative means to offer local telephone
     service.[^471] AT&T's extensive resources and incentives for
     independent deployment suggest that it would find alternative means
     to provide local telephony competition outside of its cable
     franchise areas, both independently and in conjunction with other
     cable operators, even if it did not merge with MediaOne.

169. There is evidence, however, that the merger may facilitate AT&T's
     offering of local telephony and other new services to customers. As
     a result of the proposed merger, AT&T will gain MediaOne's
     expertise in the provision of circuit-switched local telephony
     service over cable networks. AT&T has identified MediaOne personnel
     with upgrade, deployment, and marketing expertise that will enable
     AT&T to improve the efficiency of its deployment of
     circuit-switched telephony over AT&T cable systems until
     packet-switched telephony can be deployed on those systems.[^472]
     AT&T also will be able to use the headend facilities of neighboring
     MediaOne systems in some areas where the MediaOne system is already
     upgraded.[^473] Consequently, the merger is likely to increase
     AT&T's efficiency in providing local telephony and other new
     services in competition with the ILECs.

## Joint Venture and Other Contractual Arrangements

170. Having found that the combination of AT&T's and MediaOne's assets
     will offer public interest benefits, especially in the provision of
     local telephony services, we next consider whether similar benefits
     can be achieved through joint venture or other contractual
     arrangements. We find that the merger is likely to facilitate the
     delivery of these benefits to consumers.

171. We recognize that the provision of local telephony services over
     the cable infrastructure does not hinge on AT&T's acquisition of
     ownership interests in the MediaOne and TWE cable systems. AT&T
     recently entered a series of contractual arrangements with Insight
     Communications ("Insight"), Cablevision, Time Warner, and Comcast
     to offer AT&T-branded local and long distance telephony services
     together with these cable operators' MVPD and Internet
     services.[^474]

172. AT&T's joint operating agreement with Insight provides that AT&T
     will be the local exchange carrier of record and will provide
     telephony services to customers using its brand name. The services
     will be provided through use of Insight's cable infrastructure and
     AT&T's switching, transport, and long distance services. AT&T will
     install and maintain the needed switching equipment. In addition to
     AT&T's regional and national marketing efforts, Insight will market
     and bill the services as AT&T's agent, both separately and bundled
     with Insight's MVPD and Internet services. AT&T will compensate
     Insight for use of the local loops, installation and maintenance
     services at customers' residences, and sales to customers.[^475]

173. AT&T's agreements with Cablevision and Time Warner, entered in
     February and March 2000 respectively, provide for joint marketing
     of AT&T-branded telephony service and these companies' cable
     services.[^476] AT&T also previously signed a letter of intent with
     Time Warner in February 1999 to establish a joint venture to
     provide local telephony service using the Time Warner cable
     systems.[^477] In addition, "Comcast has agreed to offer
     AT&T-branded telephony in all of its markets on an expedited basis,
     as soon as AT&T has concluded separate telephony agreements with at
     least two other non-AT&T-affiliated multiple system operators.
     Comcast will be entitled to the most favorable terms AT&T has
     reached with any of those cable operators."[^478]

174. The foregoing contractual arrangements, which combine AT&T's
     telecommunications brand name and expertise with the cable
     operators' infrastructure, promise many of the same potential
     benefits as a merger and also provide a model to facilitate AT&T's
     negotiation of contractual arrangements with other cable
     operators.[^479] Furthermore, the value of the cable infrastructure
     for the delivery of local telephony services is now well
     recognized.[^480] The incentive to extract maximum value from their
     cable assets makes it likely that cable operators nationwide will
     seek to provide local telephony services over their cable systems,
     whether in conjunction with AT&T, other competitive LECs, or
     independently.[^481] We are not persuaded that the proposed merger
     is the only means to assure widespread, effective local telephony
     deployment by AT&T and other cable operators.

175. Nevertheless, we accord some weight to the Applicants' argument
     that a joint venture that contemplates the provision of telephony
     services by one party (AT&T) over the facilities of another cable
     operator raises complex problems at both the contract negotiation
     and implementation stages. Such complex issues as the allocation of
     bandwidth to telephony services versus traditional video services,
     and the services to be covered by the joint venture in light of
     dynamic and rapidly evolving technology and market developments,
     make arms-length negotiations arduous. AT&T's merger with MediaOne
     will create an alignment of the parties' economic interests that
     will reduce the areas of friction between the two companies and
     facilitate the development of telephony solutions. AT&T's
     achievement of a successful telephony rollout over the merged
     firm's cable infrastructure may serve as a cable telephony model
     that would make it easier for AT&T to negotiate and implement joint
     ventures and other contractual arrangements with cable operators in
     which it has no ownership interest.[^482] Consequently, while the
     proposed merger is not the only route to local telephony deployment
     by cable operators, it is likely to hasten market penetration,
     including joint venture efforts, and increase cable operators'
     ability to compete effectively with the incumbent LECs.

## Applicants' Deployment Projections

176. In the course of the *AT&T-TCI* proceeding, AT&T submitted to the
     Commission certain information regarding its plans for upgrade of
     the TCI cable systems and its projections for deployment of new
     broadband and local telephony services.[^483] AT&T cautioned,
     however, that it might fall short of these deployment projections
     as a result of a variety of factors, including unanticipated
     facilities problems, switch availability and capacity, geographic
     and economic challenges, changes in franchising agreements, labor
     availability, municipal authorizations, etc.[^484]

177. As part of the instant proceeding, AT&T filed revised upgrade and
     deployment projections in October 1999 and March 2000, which
     indicated that, for most of the markets identified, AT&T was
     substantially successful in meeting projections filed in the
     *AT&T-TCI* proceeding.[^485] AT&T's track record in meeting its
     upgrade and deployment projections supports our finding that,
     although the instant merger between AT&T and MediaOne may not
     provide benefits on the scale projected by the Applicants, it is
     likely to have a positive impact on deployment of telephony and
     other new services.

178. Consequently, we find that the merger will create an entity that
     has the ability and the incentives to expand its operations and
     provide facilities-based competition against the incumbent LECs
     more effectively than either party alone could. AT&T repeatedly has
     assured the Commission that it intends to provide residential local
     exchange service in the near future.[^486] AT&T and MediaOne have
     submitted independent deployment schedules to the Commission
     outlining their individual plans to deliver local exchange and
     exchange access services.[^487] In addition to these assurances, we
     believe the merger itself provides AT&T and MediaOne strong
     incentives to follow through on their announced plans. The
     substantial premium paid for TCI and now MediaOne is predicated on
     AT&T's ability to generate new revenue streams from the upgraded
     cable plant.[^488] By acquiring these cable systems, AT&T has made
     a significant investment to diversify its asset base from assets
     comprised entirely of long distance voice to assets that offer
     local voice connectivity and broadband capability to nearly
     one-third of consumers in the United States.[^489] For AT&T to make
     a reasonable economic return on its investment, it will need to
     generate significant revenues from the provision of local
     telephony, among other services.[^490] Market forces and the desire
     to meet investor expectations provide ample incentives for AT&T to
     maximize utilization of its network facilities and deliver all
     possible new services. Considering the assets and capabilities of
     AT&T and MediaOne, we believe that the Applicants will execute a
     full and expeditious rollout of telephony and broadband Internet
     services to make this merger profitable. Based on the foregoing
     considerations, we find that the merger is more likely than not to
     yield public interest benefits for consumers.

# PROCEDURAL MATTERS

179. Consumers Union filed a motion to consolidate our review of the
     instant merger and the pending AOL-Time Warner merger.[^491]
     Consumers Union asserts that the motion to consolidate was
     necessitated by AT&T's and MediaOne's initial refusal to certify
     Time Warner cable system subscribership figures, and to provide
     certain information about the TWE limited partnership
     agreement.[^492] Citing *Ashbacker Radio Corp. v. FCC*, MAP also
     argues that it would be contrary to the public interest and
     administratively inefficient to consider the two pending
     applications independently, because the grant of either application
     may preclude grant of the other.[^493] Consumers Union contends
     that the Commission must regard the applications as mutually
     exclusive and consider them together.[^494] Finally, Consumers
     Union argues that consolidation is necessary because the
     AT&T-MediaOne merger would fundamentally change the nature of the
     relevant markets and of the applicants in the AOL-Time Warner
     merger.[^495] Based on our review of Consumer Union's arguments and
     the Applicants' opposition, we conclude that consolidation of the
     two proceedings is unnecessary.

180. In their opposition to the Consumers Union motion, AT&T and
     MediaOne state that they have already provided the Commission with
     the subscriber and TWE partnership information Consumers Union
     claims is missing.[^496] They also argue that Consumers Union's
     claim of mutual exclusivity and its reliance on *Ashbacker* is
     misplaced and that Consumers Union's proposal to consider the two
     mergers simultaneously is unlawful and unworkable.[^497]

181. Under *Ashbacker*, applications are "mutually exclusive" and thus
     subject to simultaneous consideration by the Commission only where
     "the grant of one application would require the denial of the
     other."[^498] In *Ashbacker*, for example, two applicants were
     seeking to use the same spectrum to operate their respective
     broadcast stations, so that one application could not be approved
     without necessarily depriving the other applicant of a
     hearing.[^499] Consumers Union has not established that the
     Commission's grant of the AT&T-MediaOne and AOL-Time Warner license
     transfer applications are mutually exclusive as a matter of law,
     such that approval of one application would necessarily preclude
     approval of the second application. AT&T's delay in providing
     information regarding subscribers and the TWE partnership agreement
     is not sufficient reason to consolidate the two merger
     proceedings.[^500] Finally, we have already addressed the threat of
     anticompetitive effects from coordinated action between the merged
     entity and other large industry players in the MVPD industry in
     light of recent consolidation activities,[^501] as well as the
     recent trend toward both horizontal and vertical consolidation in
     the Internet and broadband services industry.[^502]

182. In addition, we note that Consumers Union filed in this proceeding
     a petition for declaratory ruling concerning the Commission *ex
     parte* rules[^503] and Applicants' compliance with those
     rules.[^504] We do not, at this time, address the merits of the
     questions that were raised in that petition, which was addressed to
     the General Counsel for initial consideration. Nonetheless, we
     observe that the Commission, in its decision-making process with
     respect to this matter, has relied on no information or arguments
     that have not been made part of the record of this proceeding.

# CONCLUSION

183. For all of the foregoing reasons, we conclude that the Applicants
     have carried their burden of showing that, on balance, the proposed
     merger will serve the public interest, convenience, and necessity,
     subject to the conditions specified in this Order. To avoid
     potential harm to competition and diversity in video programming in
     particular, and as a non-severable condition of our approval of the
     Application, the Applicants must reduce their attributable cable
     system ownership interests such that the merged firm will serve no
     more than 30% of all MVPD subscribers nationwide by May 19,
     2001.[^505] In addition, with respect to broadband Internet
     services, Applicants have entered into a consent decree with the
     Department of Justice. As discussed above, the consent decree would
     require, among other things, that AT&T divest its interest in Road
     Runner by December 31, 2001. Applicants have further committed to
     provide unaffiliated ISPs with direct access to the merged firm's
     cable systems. On the potential harms side of our public interest
     balancing test, we find that the conditions set forth in this
     Order, the requirements of the DOJ consent decree, and the industry
     developments discussed herein (including in particular developing
     competition from alternative broadband Internet access providers)
     sufficiently mitigate the potential for competitive harms from the
     merger. On the potential benefits side, we are satisfied that the
     combination of the Applicants' complementary assets and
     capabilities will allow them to compete more effectively against
     incumbent LECs in the provision of local telephony and new services
     than they could alone or through contractual arrangements.
     Accordingly, we conclude that the positive public interest benefits
     promised by this merger are sufficient to support the Commission's
     approval of AT&T's and MediaOne's Application, under the public
     interest balancing test of Sections 214(a) and 310(d) of the
     Communications Act, subject to the conditions specified in this
     Order. The Commission will issue a public notice listing the
     specific license and authorization transfers granted by this Order.

# ORDERING CLAUSES

184. Accordingly, having reviewed the Application and the record in this
     matter, IT IS ORDERED, pursuant to Sections 4(i) and (j), 214(a),
     214(c), 309, and 310(d) of the Communications Act of 1934, as
     amended, 47 U.S.C. §§ 154(i), 154(j), 214(a), 214(c), 309, 310(d),
     that the Application filed by AT&T Corp. and MediaOne Group, Inc.
     IS GRANTED subject to the conditions stated below.

185. IT IS FURTHER ORDERED, pursuant to Sections 4(i) and (j), 214(a),
     214(c), 309, and 310(d) of the Communications Act of 1934, as
     amended, 47 U.S.C. §§ 154(i), 154(j), 214(a), 214(c), 309, 310(d),
     that the above grant shall include authority for AT&T to acquire
     control of:

a\) any authorization issued to MediaOne, its subsidiaries, or its
affiliates during the Commission\'s consideration of the Application and
the period required for consummation of the merger transaction following
approval;

b\) construction permits held by licensees involved in this transfer
that matured into licenses during the Commission's consideration of the
Application or that mature into licenses after closing of the merger
transaction and that may have been omitted from the transfer of control
Application; and

c\) applications filed by such licensees and that are pending at the
time of consummation of the proposed transfer of control.[^506]

186. IT IS FURTHER ORDERED that this grant IS CONDITIONED on our
     requirement (the "Video Condition") that the Applicants, by May 19,
     2001, either (a) divest their interests in TWE, (b) terminate their
     involvement in TWE's video programming activities (pursuant to the
     limited partnership exemption and the officers/directors
     attribution waiver provisions of the cable ownership attribution
     rules, 47 C.F.R. § 76.503 n.2), or (c) divest their interests in
     other cable systems, such that they will have attributable
     ownership interests in cable systems serving no more than 30% of
     MVPD subscribers nationwide.

187. IT IS FURTHER ORDERED that this grant IS CONDITIONED on our
     requirement that AT&T shall file with the Cable Services Bureau,
     within six months after the merger's closing, a written document
     stating which one of the three compliance options specified in the
     Video Condition it has elected. AT&T shall complete its divestiture
     of the elected assets by May 19, 2001.

188. IT IS FURTHER ORDERED that this grant IS CONDITIONED on our
     requirement that, if the Applicants have not complied with the
     Video Condition by the May 19, 2001 deadline, then, on May 19,
     2001, the Applicants shall place into an irrevocable trust for the
     purpose of sale the assets that it must divest in order to
     effectuate the Video Condition compliance option it has elected
     pursuant to paragraph 187 above.

189. IT IS FURTHER ORDERED that this grant IS CONDITIONED on our
     requirement that 60 days before May 19, 2001, the Applicants shall
     file a written document with the Cable Services Bureau (a) stating
     that it will be in compliance by the May 19, 2001 deadline, or (b)
     stating that it will not be in compliance and describing the
     irrevocable trust arrangement that it will establish by the May 19,
     2001 deadline for the sale of the assets that it must divest in
     order to effectuate the Video Condition compliance option it has
     elected pursuant to paragraph 187 above.

190. IT IS FURTHER ORDERED that this grant IS CONDITIONED on our
     requirement that AT&T and MediaOne shall comply with the conditions
     set forth in Appendix B, until the Applicants have (a) divested
     their interests in TWE, (b) terminated their involvement in TWE's
     video programming activities (pursuant to the limited partnership
     exemption and the officers/directors attribution waiver provisions
     of the cable ownership attribution rules, 47 C.F.R. § 76.503 n.2),
     or (c) divested their interests in other cable systems, such that
     they will have attributable ownership interests in cable systems
     serving no more than 30% of MVPD subscribers nationwide.

191. IT IS FURTHER ORDERED that compliance with all conditions imposed
     herein is a non-severable condition of the grant of the
     Application.

192. IT IS FURTHER ORDERED that all references to AT&T and MediaOne in
     this Order shall also refer to their respective officers,
     directors, and employees, as well as to any affiliated companies,
     and their officers, directors, and employees.

193. IT IS FURTHER ORDERED, pursuant to Sections 4(i) and (j), 214(a),
     214(c), 309, and 310(d) of the Communications Act of 1934, as
     amended, 47 U.S.C. §§ 154(i), 154(j), 214(a), 214(c), 309, 310(d),
     that the Motion to Dismiss and the Petition To Dismiss or Deny
     filed by the Consumers Union, Consumer Federation of America, and
     Media Access Project; the Petition of SBC Communications, Inc. to
     Deny Application; Bell Atlantic Corporation's Petition to Deny the
     Application; the Petition of GTE Service Corporation, GTE
     Internetworking, and GTE Media Ventures, Inc. to Deny Application,
     or in the Alternative, to Condition the Merger; the Petition of U S
     WEST To Deny Applications or To Condition Any Grant; and the
     requests of any party requesting similar relief, ARE DENIED.

194. IT IS FURTHER ORDERED, pursuant to Sections 4(i) and (j), 214(a),
     214(c), 309, and 310(d) of the Communications Act of 1934, as
     amended, 47 U.S.C. §§ 154(i), 154(j), 214(a), 214(c), 309, 310(d),
     that the Motion to Consolidate filed by the Media Access Project on
     behalf of Consumers Union, the Consumer Federation of America, and
     the Center for Media Education IS DENIED.

195. IT IS FURTHER ORDERED that the Request by Consumers Union, Consumer
     Federation of America, and Media Access Project to transfer its
     Complaint Against AT&T Corp. and Tele-Communications, Inc. from the
     Cable Services Bureau to the Enforcement Bureau dated April 14,
     2000 IS DISMISSED AS MOOT.

196. IT IS FURTHER ORDERED that this Memorandum Opinion and Order SHALL
     BE EFFECTIVE upon release, in accordance with Section 1.103 of the
     Commission\'s rules, 47 C.F.R. § 1.103.

FEDERAL COMMUNICATIONS COMMISSION

Magalie Roman Salas

Secretary

**APPENDIX A**

**List of Commenters**

AcQuarulo, Giacomo

Alliance for Public Technology ("APT")

Ameritech New Media, Inc. ("Ameritech")

America OnLine, Inc. ("AOL")

Bell Atlantic Corporation ("Bell Atlantic")

BellSouth Corporation ("BellSouth")

Brewer, Patricia J.

BroadSoft, Inc. ("BroadSoft")

Chamber of Commerce of Northwest Connecticut

Consumers Union, Consumer Federation of America, and Media Access
Project ("Consumers Union")

Detroit Urban League

DirecTV, Inc. ("DirecTV")

EchoStar Satellite Corporation ("EchoStar")

Global Wireless Consumers Alliance ("Global")

Greater New Haven Chamber of Commerce

GTE Service Corporation ("GTE")

MCI WorldCom, Inc. ("MCI WorldCom")

MindSpring Enterprises, Inc. ("MindSpring")

National Cable Television Association ("NCTA")

openNET Coalition ("openNET")

Qwest Communications Corporation ("Qwest")

SBC Communications, Inc. ("SBC")

Seren Innovations, Inc. ("Seren")

Sprint Corporation ("Sprint")

Telecommunications Advocacy Project ("TAP")

Telecommunications Resellers Association ("TRA")

U S West

Wireless Communications Association International, Inc. ("WCA")

[]{#__RefHeading___Toc531751939 .anchor}APPENDIX B

#  {#section .unnumbered}

**[SAFEGUARDS RELATING TO VIDEO PROGRAMMING\
]{.underline}**

**I. BACKGROUND AND DEFINITIONS**

1\. As a condition of exercising the grant of the merger application,
AT&T shall, during the Compliance Period, comply with the following
enumerated safeguards. These safeguards shall become effective at the
Merger Closing Date. The safeguards shall be null and void if AT&T and
MediaOne do not merge and there is no Merger Closing Date.

2\. For purposes of this document only, the following definitions shall
apply:

> a\) \"**AT&T**\" means AT&T Corp., all of its wholly owned
> subsidiaries, and any entities controlled by AT&T Corp. AT&T shall not
> include Liberty Media Corp.
>
> b\) \"**Cablevision**\" means Cablevision Systems Corp.
>
> c\) "**Compliance Action**" means that AT&T has complied with the
> Order by (1) divesting its interest in TWE, (2) terminating its
> involvement in the Video-Programming activities of TWE such that TWE
> is no longer attributable to AT&T under the Commission's cable
> ownership attribution rules, 47 C.F.R. § 76.503 n.2, or (3) divesting
> its interests in other cable systems such that, including subscribers
> served by TWE, AT&T serves no more than 30% of all multichannel video
> programming distribution system subscribers in the United States.
>
> d\) "**Compliance Deadline**" means May 19, 2001.
>
> e\) \"**Compliance Period**\" means the period of time commencing on
> the Merger Closing Date and continuing until AT&T has taken the
> Compliance Action.
>
> f\) \"**Corporate Compliance Officer**\" means an employee of AT&T
> appointed pursuant to paragraph 16 below who shall be responsible for
> overseeing AT&T\'s compliance with these safeguards.
>
> g\) \"**Liberty**\" means Liberty Media Corp.
>
> h\) \"**MediaOne**\" means MediaOne Group, Inc.
>
> i\) \"**MediaOne** **Video Programming Interests**\" means those Video
> Programming entities in which MediaOne has an attributable interest,
> specifically E! (including Style), Food Network - TVFN, Fox Sports New
> England, iN DEMAND (previously Viewer\'s Choice), Music Choice, New
> England Cable News, Outdoor Life, Speedvision, and Sunshine Network.

j)  \"**Merger Closing Date**\" means the day on which, pursuant to
    their merger agreement, AT&T and MediaOne cause a certificate of
    merger to be executed, acknowledged, and filed with the appropriate
    state.

k)  **"Order"** means the Commission order to which this Appendix is
    attached.

l)  \"**Rainbow**\" means Rainbow Media Sports Holdings, Inc., a
    majority-owned subsidiary of Cablevision Systems Corp.

m)  \"**TWE**\" means Time Warner Entertainment Company, LP.

n)  \"**Video Programming**\" means video programming as defined in\
    47 U.S.C. § 522(20) and the Commission\'s implementing regulations
    as of January 1, 2000.

# SAFEGUARDS

**SAFEGUARDS RELATING TO TWE**

3\. No officer or director of AT&T shall also be an officer or director
of TWE. AT&T may appoint an employee (who is not an officer or director
of AT&T) to the TWE Board of Directors, provided that such employee is
not involved in the Video Programming activities of AT&T.

4\. No officer, director, or employee of AT&T shall, directly or
indirectly, influence or attempt to influence, or otherwise participate
in, the management or operation of the Video Programming activities of
TWE. In particular, no member of the TWE Board of Directors appointed by
AT&T shall be involved in the following matters:

> a\) the decisions of TWE regarding which Video Programming services
> are purchased for or carried on TWE's cable systems;
>
> b\) negotiation of the prices paid by TWE for Video Programming
> carried on TWE's cable systems;
>
> c\) setting the schedule for rollout of Video Programming by TWE\'s
> cable systems;
>
> d\) marketing by TWE of Video Programming carried on TWE's cable
> systems;
>
> e\) setting the budget for the Video Programming operations of TWE\'s
> cable systems (except that AT&T may be involved in setting the overall
> TWE budget for Video Programming operations provided that AT&T\'s
> access to TWE budget information does not include information
> concerning individual budget components of TWE\'s Video Programming
> operations, e.g., personnel, overhead, marketing, and program
> purchasing);
>
> f\) selecting the electronic programming guide used by TWE\'s cable
> systems;
>
> g\) the hiring, firing, or supervising of TWE employees directly
> involved in the Video Programming activities of TWE's cable systems;
> or
>
> h\) assessing the performance of any Video Programming service carried
> by TWE's cable systems.

5.  AT&T may not receive information from TWE regarding the price,
    terms, and conditions which TWE negotiates for the carriage of Video
    Programming on the TWE cable systems, nor provide information to TWE
    regarding the price, terms, and conditions which AT&T negotiates for
    the carriage of Video Programming on the AT&T cable systems. AT&T
    may not obtain from any Video Programming vendor a volume discount
    or other favorable terms and conditions as a result of TWE\'s
    purchase of Video Programming for, or carriage on, TWE\'s cable
    systems.

**SAFEGUARDS RELATING TO LIBERTY**

6\. To the extent that there is a director, officer, or employee of
Liberty that also is a director or officer of AT&T ("Joint Director or
Officer"), the following safeguards shall apply:

a\) The Joint Director or Officer may not, directly or indirectly,
influence or attempt to influence, or otherwise participate in, matters
relating to the Video Programming activities of AT&T, including the
following:

> 1\) the decisions of AT&T regarding which Video Programming services
> are purchased for or carried on AT&T's cable systems;
>
> 2\) negotiation of the prices paid by AT&T for Video Programming
> carried on AT&T's cable systems;
>
> 3\) setting the schedule for rollout of Video Programming by AT&T\'s
> cable systems;
>
> 4\) marketing by AT&T of Video Programming carried on AT&T's cable
> systems;
>
> 5\) setting the budget for the Video Programming operations of AT&T\'s
> cable systems (except that the Joint Director or Officer may be
> involved in setting the overall AT&T budget for Video Programming
> operations provided that the Joint Director or Officer\'s access to
> AT&T budget information does not include information concerning
> individual budget components of AT&T\'s Video Programming operations,
> e.g., personnel, overhead, marketing, and program purchasing);
>
> 6\) selecting the electronic programming guide used by AT&T\'s cable
> systems;
>
> 7\) the hiring, firing, or supervising of AT&T employees directly
> involved in the Video Programming activities of AT&T's cable systems;
> or
>
> 8\) assessing the performance of any Video Programming service carried
> by AT&T's cable systems.

b\) AT&T shall take all necessary steps to ensure that the Joint
Director or Officer does not participate in, or have access to
information, documents, or other materials of any kind concerning, the
Video Programming related activities of AT&T\'s cable systems; and

c\) No employee, officer, or director of AT&T may communicate with the
Joint Director or Officer concerning the Video Programming related
activities of Liberty or the Video Programming related activities of
AT&T\'s cable systems.

7\. AT&T shall take the following actions with respect to any
individuals whom AT&T appointed to the Liberty Board of Directors prior
to the Merger Closing Date:

a\) within 14 days of the Merger Closing Date, AT&T shall submit to the
Cable Services Bureau the names of individuals who are not directors,
officers, or employees of AT&T and whom AT&T proposes to appoint to the
Liberty Board of Directors;

b\) upon approval by the Cable Services Bureau of these proposed new
directors, AT&T will remove the current directors it has appointed to
the Liberty Board of Directors and replace them with the directors
approved by the Cable Services Bureau; and

c\) in the event that the Cable Services Bureau notifies AT&T in writing
that it does not approve one or all of the proposed new directors, AT&T
will submit to the Cable Services Bureau the name of a new proposed
director (or directors) within 14 days of such notice. Upon approval by
the Cable Services Bureau of the alternative new director(s), AT&T will
remove the current director(s) it has appointed to the Liberty Board of
Directors and replace such director(s) with the alternative new
director(s) approved by the Cable Services Bureau.

8\. If, for whatever reason, a Liberty director approved by the Cable
Services Bureau and appointed by AT&T pursuant to the previous paragraph
may no longer serve on the Liberty Board of Directors, AT&T shall,
within 14 days of learning that such director may no longer serve on the
Liberty Board of Directors, submit to the Cable Services Bureau the name
of an individual it proposes to appoint as a replacement to the Liberty
Board of Directors. AT&T shall appoint such replacement director
pursuant to the terms for appointing directors described in the previous
paragraph.

9\. The Liberty directors approved by the Cable Services Bureau and
appointed by AT&T will have duties and obligations common to corporate
directors. However, such directors shall only communicate with AT&T
regarding matters of waste of corporate assets, mismanagement, or fraud.

**SAFEGUARDS RELATING TO CABLEVISION AND RAINBOW**

10\. AT&T shall take all necessary steps to ensure that any directors it
appoints to the Cablevision Board of Directors are recused from any and
all involvement in the management or operation of Rainbow.

11. No employee, officer, or director of AT&T shall, directly or
    indirectly, influence or attempt to influence, or otherwise
    participate in, the management or operation of Rainbow.

**SAFEGUARDS RELATING TO iN DEMAND AND**

**THE MEDIAONE VIDEO PROGRAMMING INTERESTS**

12\. AT&T shall have no role in the management or operation of iN DEMAND
or the MediaOne Video Programming Interests during the Compliance
Period. AT&T shall instruct its representatives serving on the Boards of
Directors or management committees of iN DEMAND and the MediaOne Video
Programming Interests not to attend any Board or other management
committee meetings, receive any materials or other information, or
otherwise have any contact with iN DEMAND or the MediaOne Video
Programming Interests during the Compliance Period.

13\. No officer, director, or employee of AT&T shall, directly or
indirectly, influence or attempt to influence, or otherwise participate
in, the management or operation of iN DEMAND or the MediaOne Video
Programming Interests.

14\. Notwithstanding the previous two paragraphs, AT&T may file with the
Cable Services Bureau a written request to participate in matters that
would have a significant impact on iN DEMAND or the MediaOne Video
Programming Interests but which are not directly related to the Video
Programming activities of iN DEMAND or the MediaOne Video Programming
Interests. If the Bureau does not deny the request within 14 days of
receipt of the request, the request shall be deemed granted. In the
event such request is granted (either by issuance of an order granting
the request or by a failure to deny the request within 14 days), AT&T\'s
ability to participate in iN DEMAND or the MediaOne Video Programming
Interests shall be limited to the specific matters that are the subject
of the request.

15. The safeguards in the preceding three paragraphs shall terminate
    immediately to the extent that iN DEMAND or any of the MediaOne
    Video Programming Interests no longer sell programming to TWE.

**III. ENSURING COMPLIANCE WITH AND ENFORCEMENT OF THESE SAFEGUARDS**

> 16\. Corporate Compliance Officer

a\) AT&T shall appoint a Corporate Compliance Officer to oversee AT&T's
implementation of and compliance with these safeguards; to monitor
AT&T\'s compliance program; to ensure that payments due under these
safeguards are timely made; and to consult with the Chief of the Cable
Services Bureau and other appropriate individuals as the Chief deems
necessary on an on-going basis regarding AT&T's compliance with these
safeguards. The Corporate Compliance Officer shall provide to the
independent auditor (described in the next paragraph) copies of all
documents regarding compliance that AT&T provides to the Commission and
consult with the independent auditor regarding AT&T's compliance with
these safeguards. The audit committee of AT&T's Board of Directors shall
oversee the Corporate Compliance Officer's fulfillment of these
responsibilities. The requirements of this subparagraph shall remain in
effect until all other safeguards set out herein have expired or
terminated.

b\) The Corporate Compliance Officer shall notify the independent
auditor and the Chief of the Cable Services Bureau immediately upon
discovering a material failure on the part of AT&T to comply with any of
the safeguards described herein.

c\) Not later than 60 days after the Merger Closing Date, AT&T shall
submit to the Cable Services Bureau a plan for compliance with these
safeguards. The compliance plan shall be afforded confidential treatment
in accordance with the Commission's normal processes and procedures. A
letter providing notice of the filing shall be filed the same day with
the Secretary of the Commission for the public record.

d\) The Corporate Compliance Officer shall designate AT&T\'s corporate
secretary to attend AT&T Board of Directors meetings on his or her
behalf and to carry out the duties of the Corporate Compliance Officer
during such meetings. The Corporate Compliance Officer shall meet with
the corporate secretary prior to AT&T Board of Directors meetings to
review the safeguards described herein, and after AT&T Board of
Directors meetings to ensure that the safeguards were adhered to during
the meetings.

e\) The Corporate Compliance Officer shall meet with AT&T\'s appointees
to the TWE Board of Directors prior to TWE Board of Directors meetings
to review the safeguards described herein, and after TWE Board of
Directors meetings to ensure that the safeguards were adhered to during
the meetings.

> 17\. Independent Auditor

a\) Within 30 days of the Merger Closing Date, AT&T shall, at its own
expense, engage an independent auditor to conduct an examination
resulting in a positive opinion (with any exceptions noted) regarding
AT&T\'s compliance with these safeguards during the Compliance Period.
The engagement shall be supervised by persons licensed to provide public
accounting services and shall be conducted in accordance with the
relevant standards of the American Institute of Certified Public
Accountants (\"AICPA\"). The independent auditor shall be acceptable to
the Chief of the Cable Services Bureau. The independent auditor shall
file a report regarding AT&T\'s compliance with the safeguards described
herein every 6 months from the Merger Closing Date until the end of the
Compliance Period.

b\) The independent auditor shall have access to books, records, and
operations of AT&T, and key AT&T personnel, which are necessary to
fulfill the audit requirements of this section. The independent auditor
shall notify AT&T\'s Corporate Compliance Officer of any inability to
obtain such access.

c\) The independent auditor may verify AT&T\'s compliance with these
safeguards through contacts with the Commission, or with TWE, Liberty,
Cablevision, Rainbow, iN DEMAND, or the MediaOne Video Programming
Interests.

d\) The independent auditor shall notify the Corporate Compliance
Officer and the Chief of the Cable Services Bureau immediately upon
discovering a material failure on the part of AT&T to comply with any of
the safeguards described herein.

e\) The independent auditor\'s reports shall include a discussion of the
scope of the work conducted, a statement regarding AT&T\'s compliance or
non-compliance with these safeguards, and a description of any
limitations imposed on the auditor in the course of its review by AT&T,
or other circumstances that might affect the auditor\'s opinion. The
independent auditor\'s report shall be made publicly available, except
for any confidential material it may include.

f\) For 6 months following submission of the final audit report, the
Commission shall have access to the working papers and supporting
materials of the independent auditor at a location in Washington, D.C.
that is selected by AT&T and the independent auditor. Copying of the
working papers and supporting materials by the Cable Services Bureau
shall be allowed but shall be limited to copies required to verify
compliance with and to enforce these safeguards. Any copies made by the
Cable Services Bureau shall be returned to AT&T by the Cable Services
Bureau no later than 12 months after the submission of the final audit
report. The Cable Services Bureau\'s review and/or copying of the
working papers and supporting materials shall be kept confidential
pursuant to the Commission\'s rules and procedures.

> 18\. Enforcement

a)  The specific enforcement mechanisms established by these safeguards
    do not abrogate, supersede, limit, or otherwise replace the
    Commission\'s powers under the Communications Act. Compliance or
    non-compliance with these safeguards by AT&T does not in itself
    constitute compliance or non-compliance with any federal, state, or
    local law or regulation, except AT&T\'s obligation to comply with
    these safeguards.

b\) Penalties During the Compliance Period

1\) If the Chief of the Cable Services Bureau issues a written
determination that during the Compliance Period a failure to comply with
one or more of these safeguards has occurred, the Bureau Chief may, at
his or her discretion, impose penalties as follows:

\(i\) for the first failure, a forfeiture not to exceed \$100,000; and

\(ii\) for additional failures, forfeitures not to exceed \$250,000 per
each such failure.

2\) If the Chief of the Cable Services Bureau issues a written
determination that during the Compliance Period there has been a
continuing failure to comply with one of the safeguards described
herein, then the Chief may, at his or her discretion, impose the
penalties described in the previous subparagraph (if such penalties have
not previously been imposed for such failures), plus the following
additional penalties:

\(i\) a maximum of \$10,000 per day from the start of such continuing
failure (such starting date to be determined by the Chief of the Cable
Services Bureau); and

\(ii\) to the extent that AT&T does not file with the Cable Services
Bureau within 5 business days of receiving the written determination of
a continuing failure a document providing adequate assurance, as
determined by the Cable Services Bureau, that such continuing failure
has been cured, a maximum of \$100,000 per day for each day beyond the 5
day cure period.

c\) In determining the appropriateness and extent of any penalties
imposed pursuant to these safeguards, the Chief of the Cable Services
Bureau shall take into account the materiality of the failure to comply
with such safeguards, and the good faith efforts and reasonable
commercial diligence of AT&T in attempting to comply with such
safeguards. Any determination by the Chief of the Cable Services Bureau
pursuant to the safeguards described herein is appealable by AT&T to the
Commission.

d\) AT&T shall be strictly obligated to make the payments for failure to
comply as required by these safeguards, and no showing of a willful
violation shall be necessary in order to enforce such payments. AT&T
shall not be liable for any payments, however, if the Chief of the Cable
Services Bureau grants a waiver request filed by AT&T in which AT&T will
have the burden of proof to demonstrate that the failure to meet a
safeguard was caused by a *force majeure* event or an Act of God. If the
Chief of the Cable Services Bureau refuses to grant a waiver, AT&T may
appeal that decision to the Commission.

e\) AT&T shall make payments due under these safeguards within 10
business days of a determination by the Chief of the Cable Services
Bureau or the Commission that payment is due. If the Commission has not
taken an action to designate or administer a fund in order for AT&T to
make a payment required under these safeguards, AT&T shall make its
payment into an interest bearing escrow account pending such action. If
AT&T\'s obligation to make a payment is disputed by AT&T, AT&T shall
make the disputed payment into an interest bearing escrow account within
10 business days of the date the payment was due. Within 10 business
days of making a payment of a disputed amount into escrow, AT&T shall
file with the Cable Services Bureau a verified statement of the grounds
on which payment is not required. Subject to rights of rehearing and
appeal, the escrowed payments (including any accrued interest) shall be
returned to AT&T or paid to the appropriate fund in accordance with the
final and non‑appealable Commission or judicial order resolving the
dispute.

f\) Enforcement Mechanisms related to Compliance Action

1\) No later than 6 months after the Merger Closing Date, AT&T shall
file a written document with the Cable Services Bureau to identify which
of the three options specified under the Compliance Action it has
elected to pursue.

2\) No later than 60 days before the Compliance Deadline, AT&T shall
file a written document with the Cable Services Bureau stating that:

\(i\) AT&T will take the Compliance Action by the Compliance Deadline;
or

\(ii\) AT&T will not take the Compliance Action by the Compliance
Deadline. In this event, AT&T also will describe the extent to which it
will not be in compliance with the Order, identify the assets (including
cable system interests and/or Video Programming interests) that it must
divest in order to effectuate the Compliance Action option that it has
elected pursuant to subparagraph 18(f)(1), and submit a proposed
irrevocable trust agreement for the purpose of sale of these assets
pursuant to the next subparagraph.

3\) If AT&T has not taken the Compliance Action by the Compliance
Deadline, then, on the Compliance Deadline, AT&T shall transfer into an
irrevocable trust for the purpose of sale the assets AT&T designated
pursuant to subparagraph 18(g)(2)(ii).

STATEMENT OF CHAIRMAN WILLIAM E. KENNARD

*In the Matter of Applications for Consent to the Transfer of Control of
Licenses*

*and Section 214 Authorizations from MediaOne Group, Inc. to AT&T Corp*

*(CS Docket No. 99-251)*

My approval of this merger is a conditioned approval. I rely on the
specific commitments and concessions made by AT&T, detailed conditions
that will require AT&T to divest significant portions of its cable
holdings, as well as the strict compliance deadlines and enforcement
mechanisms we adopt today. This decision strikes the appropriate balance
between promoting competition in local telephone service and protecting
competition in cable and high-speed Internet service.

Under Section 310(d) of the Communications Act, when presented with an
application to transfer licenses, we must determine whether the
application serves the public interest, convenience, and necessity.
Therefore, with the able assistance of the Cable Services Bureau, we
undertook a careful, thorough, and deliberate assessment of the
potential public interest harms and benefits of this transaction.

# Merger Conditions {#merger-conditions .unnumbered}

AT&T's application, as originally filed, was inconsistent with the
public interest and presented significant diversity and competition
concerns. As proposed, AT&T-MediaOne would have served 34.4 million
consumers or 51.3 percent of cable subscribers nationwide (41.8 percent
of subscribers to multichannel video programming distributors). However,
the merger we approve today looks very different from the application
initially presented to us by the parties.

First, AT&T has made meaningful *commitments* and *concessions*. It has
already completed all necessary steps to comply with our channel
occupancy rules. MediaOne has reduced its ownership in Time Warner's
local telephony subsidiary. In December 1999, AT&T also committed to
provide non-discriminatory access to unaffiliated Internet service
providers, and more recently, AT&T has promised that non-discriminatory
principles will also apply in MediaOne territories. Finally,
AT&T-MediaOne must also divest its interests in broadband ISP Road
Runner, as part of the proposed consent decree with the Department of
Justice.

Second, we impose specific, non-severable *conditions* on the merger
that will prevent the merged entity from serving as a gatekeeper in the
video programming market. This condition addresses one of my most
serious concerns about the original merger applicationAT&T's proposal
to serve more than half of all cable subscribers [and]{.underline}
maintain influence over much of the nation's most popular cable
television programming.

Therefore, as an express condition of our approval, AT&T must comply
with our 30 percent horizontal ownership rule by May 19, 2001, twelve
months from the date the U.S. Court of Appeals for the D.C. Circuit
upheld the constitutionality of the statute which authorizes our
horizontal ownership rule. Within six months after closing its merger
with MediaOne, AT&T must make an irrevocable election among three
divestiture options. AT&T must also comply with specific interim
conditions and enforcement mechanisms designed to protect the public
interest while the merged entities complete these divestitures.

We expressly reject AT&T's argument that our horizontal ownership and
attribution rules should not apply to its union with MediaOne. We also
deny its request to grant the merged entity flexibility to comply with
whatever horizontal ownership rules are in effect in 18 months. Neither
of these options would have served the public interest.

# Protecting and Promoting Competition and Diversity {#protecting-and-promoting-competition-and-diversity .unnumbered}

During our review of this merger, a number of commenters urged the
Commission to go beyond its horizontal ownership rules and direct AT&T
to divest specific cable holdings. These arguments, however, failed to
identify specific harms that would not be sufficiently mitigated by a
strict application of our current rules, given the state of the
marketplace as it exists today.

As outlined above, our current horizontal limits impose constraints on
AT&T that will preserve the competitiveness and diversity of the video
programming market, while allowing the economies of scale and
significant investment necessary to foster the deployment of new and
advanced services to American consumers. Our horizontal limits ensure
that AT&T's acquisition of MediaOne will prevent iteither on its own or
in collusion with other partiesfrom foreclosing meaningful
opportunities for new video programmers to enter the market. Therefore,
while AT&T can invest in developing competitive telephone and broadband
alternatives beyond the 30 percent subscriber limit, it cannot provide
video services to those consumers, even as a wholesaler of popular video
content.

I look forward to seeing the benefits of competition in the local
telephony marketplace that AT&T has argued will result from its merger
with MediaOne. I will be following with keen interest AT&T-MediaOne's
efforts in this regard, and I daresay, so will the American people.

# An Open Access Commitment {#an-open-access-commitment .unnumbered}

Some parties have urged us to impose an "open access" condition on the
merged entity. We have declined to do so here. As I have noted
previously, the development and deployment of high-speed, broadband
Internet access is vitally important to the nation as it will deliver
the next generation of Internet services to Americans. Consumers should
have a choice among alternative broadband providers. I believe that
there are powerful marketplace incentives to ensure that consumers have
such choices. Therefore, I have consistently advocated that we allow the
nascent broadband marketplace a chance to develop before imposing a
government-ordered regime.

I have been encouraged by voluntary commitments by AT&T and other cable
operators to open their systems so as to accommodate consumer choice.
Indeed, AT&T has made these commitments to the FCC on the record in this
proceeding, including the commitment that they will not restrict video
streaming. Notwithstanding these commitments, however, we have yet to
see a fully developed and functioning system that provides broadband
service alternatives to consumers. Therefore, my continued support for
the Commission's vigilant restraint policy ultimately depends on how
AT&T fulfills its voluntary commitments in the broadband arena.

# FCC's Merger Review Framework {#fccs-merger-review-framework .unnumbered}

Finally, an important issue has been raised about the relationship
between the Commission's rules and the public interest standard embodied
in sections 214(a) and 310(d)) of the Communications Act. I write
separately today to clarify the public interest framework we applied
here and to emphasize the critical importance and continued relevance of
the Commission's mandate to balance specific public interest harms and
benefits.

As the Commission has gained more experience reviewing merger-related
applications, we have in recent years articulated our approach to the
public interest standard in terms of the four questions outlined in the
text of the Commission's decision in this case: (1) whether the
transaction would result in a violation of the Communications Act or any
other applicable statutory provision; (2) whether the transaction would
result in a violation of Commission rules; (3) whether the transaction
would substantially frustrate or impair the Commission's implementation
or enforcement of the Communications Act, or would interfere with the
objectives of the Communications Act and other statutes; and (4) whether
the transaction promises to yield affirmative public interest benefits.

This four-part public interest framework is not new and clarifies the
Commission's historical approach to applying the public interest
standard. The fact that a particular case does not expressly recite the
test does not mean that it is inconsistent with this framework.

I understand that critics of this framework are concerned that it may
not give adequate weight to the Commission's rules. They note that it
was originally articulated in cases involving common carriers and
recommend that we apply a different, less flexible standard where the
Commission has adopted many specific and prophylactic rules. I disagree.
The four-part framework takes appropriate account of the Commission's
rules, and, like the public interest standard it implements, is properly
applied to our decisions.

The relationship between the Commission's rules and the public interest
standard was eloquently described by Judge Harold Leventhal over thirty
years ago in a seminal case reversing the FCC for not giving adequate
attention to an application for a waiver of one of its rules:

> "The Commission is charged with administration in the 'public
> interest.' That an agency may discharge its responsibilities by
> promulgating rules of general application which, in the overall
> perspective, establish the 'public interest' for a broad range of
> situations, does not relieve it of an obligation to seek out the
> 'public interest' in particular, individualized cases." *WAIT Radio v.
> FCC, 418 F.2d 1153, 1157 (D.C. Cir. 1969).*

Rules are important and are not to be departed from lightly. Our public
interest framework acknowledges this by directing us to first ask
questions about consistency with the Communications Act and our rules.
But, under the public interest standard, when circumstances that were
not considered in the original rulemaking arise, they properly may call
either for waiver of the rule or for the imposition of additional
requirements not imposed by the rule.

In the case before us, for example, both the applicants (in their
request for additional time to come into compliance with the cable
horizontal ownership rules) and the opponents (in their requests for
additional conditions) ask the Commission to depart from a strict
application of the its rules. Under the circumstances of this case, the
Commission determines, on the one hand, that a limited departure from
the rule's requirements is warranted to allow the applicants a
commercially reasonable period of time to come into compliance with the
horizontal ownership rule. On the other hand, the record does not reveal
public interest harms not sufficiently mitigated by the existing rules
that would require the imposition of additional conditions.

The Commission's decision in this case, with its balanced consideration
and response to the requests from the opposing parties to depart from
our rules, seems the best answer to the concern that the four-part
public interest framework would create too much uncertainty about when
the agency might depart from its rules. By contrast, alternate
approaches would either over-emphasize the rigidity of our rules or
allow too little priority to the Commission's "obligation to seek out
the 'public interest' in particular, individualized cases." *WAIT Radio,
418 F.2d at 1157.*

I, therefore, fully support the reasoning and outcome of this case.

In the Matter of Applications for Consent to the Transfer of Control of
Licenses and Section 214 Authorizations from Media One Group, Inc.,
Transferor, To AT&T Corp., Transferee, CS Docket No. 99-251

# Statement of Commissioner Harold W. Furchtgott-Roth, {#statement-of-commissioner-harold-w.-furchtgott-roth .unnumbered}

# Concurring In Part and Dissenting In Part {#concurring-in-part-and-dissenting-in-part .unnumbered}

I concur in the approval of Media One's application to transfer certain
licenses and authorizations to AT&T conditioned upon compliance with
extant Commission (FCC) rules and applicable statutory provisions, such
as the cable-telco buyout prohibition. I must dissent, however, from the
importation of the so-called "four-pronged public interest test" from
our common carrier decisions into this new context and also from the
"interim conditions" imposed upon AT&T regarding its interest in Time
Warner Entertainment (TWE).

As I have stated many times, I believe that we should review license
transfer proposals for consistency with the Communications Act and
existing administrative regulations.[^507] Contrary to the language of
this Order, the proper approach to the question of the merged entity's
power in the video programming market is simply to apply the cable
horizontal ownership limits. These rules have an express statutory
basis, and Congress mandated that we adopt them out of the very concerns
that animate the comments on this issue. There should be no "public
interest" overlay that might subject a party to either a less or more
restrictive understanding of horizontal ownership restrictions; if that
were so, then the rules would not be rules at all, and regulated parties
could never ascertain their compliance with our regulations. I do not
deny that section 309 requires a "public interest" finding, but to my
mind that standard is applied and satisfied when specifically applicable
rules are applied and satisfied.

Accordingly, I do not support the public interest framework referenced
throughout this Order. *See, e.g.,* Order at para. 8. The first two
prongs provide that the proposed transfer should not result in a
violation of the Communications Act or other statutory provision or
Commission regulation, which is all well and good. [^508] The remaining
prongs, however, are phrased at such a level of bureaucratic generality
that it is, an initial matter, difficult to grasp what they actually
mean. *See id.* (asking "whether the transaction would substantially
frustrate or impair the Commission's implementation or enforcement of
the Communications Act , or would interfere with the objectives of the
Communications Act and other statutes" and "whether the merger promised
to yield affirmative public benefits"). The Commission's
*implementation* of the Act can only properly depend on what it has been
*authorized to do* under the Act, so I do not see what this adds to the
analysis. "Interfering with an objective" of the Act connotes, I take
it, something other than violating the Act, so this language seems an
express attempt to expand Commission jurisdiction beyond that actually
conferred by Congress. And referring to "public interest benefits,"
without more, as an element of the "public interest test" is wholly
circular. In short, what these prongs seem designed to do, and indeed
allow, is departure from the terms of the Act and our own regulations.
Such departure amounts to a violation of our statutory limits and
unfairly subjects merging parties to unknowable and undefined standards.

For similar reasons, I dissent from the "safeguards" governing AT&T's
relationship with TWE. In implicit recognition of the fact that the
horizontal ownership cap is indifferent as to the video programming
nature of companies with cable subscribers, the Order relies on the
third prong of the above test as the source of its authority for these
conditions. In particular, the Order states the requirements will
"ensure that the merger will not frustrate \[or\] impair the
Commission's implementation of the Communications Act and its objectives
with regard to the promotion of competition and diversity in the
provision of video programming." Order at para. 80. But our "objectives"
with respect to video programming are delineated by section 613. If the
rules promulgated pursuant to that provision do not address AT&T's
ability to keep some of their subscribers in TWE as opposed to
elsewhere, then neither can this Order, whether permanently or on an
interim basis. Indeed, the fact that the Commission declines under the
horizontal cap regulations to mandate divestiture of TWE as an ultimate
matter suggests that it lacks power to do so even temporarily.

\# \# \#

[]{#__RefHeading___Toc531751947 .anchor}CONCURRING STATEMENT OF

COMMISSIONER MICHAEL K. POWELL

*Re: Applications for Consent to the Transfer of Control of Licenses and
Section 214 Authorizations from MediaOne Group, Inc., Transferor, to
AT&T Corp., Transferee.*

I support the Commission's decision today to grant the transfer of
licenses from MediaOne Group, Inc. to AT&T Corp. I concur in the
decision, however, because I am concerned about the manner in which our
public interest authority is applied in the item. Generally, I support
the application of our four-part public interest test in the context of
large and complicated telephone mergers. However, where rules
comprehensively embody our goals and fulfill the public interest
standard without rote application of the four factors, I believe that
simply applying the rule is a better approach. It is the approach we
took recently in our decision to approve the CBS/Viacom[^509] merger,
and I believe it should have been followed here.

The Communications Act states that authorizations made by the Commission
must be made upon a finding that the public interest, convenience and
necessity would be served.[^510] In some circumstances, the Commission
has extrapolated this standard into a four-part public interest
test.[^511] To my mind, the across-the-board application of this
four-part test threatens the benefits that come from clear and concise
rules of government. It is a constant mantra of this Agency that the
public and industry benefit from clear and specific rules and
regulations. For example, we bemoan rule by waiver and strive to make
our rules the final arbiter of issues presented to the Commission. This
was an important goal of ours in revising the cable horizontal ownership
rules last October,[^512] as well as our broadcast ownership rules in
August.[^513] I commend this approach and remain committed to it.

I would argue, however, that importation of the four-part public
interest test as an overlay to the application of specific rules that
already address identified harms makes the rules less clear in a way
that is detrimental to the public interest. In cable and broadcast
regulation, for example, we have an extensive and comprehensive set of
structural rules whose goal is the redress of myriad harms to the public
interest. As the industry prepares to comply with these extensive rules,
and structure business decisions around them, they deserve the benefit
of certainty as to how these rules are going to be applied. The public
deserves the benefits of knowing the ground rules we will use to
evaluate mergers as well.

Rote application of the test implies that even if you were to comply
with the rules specifically designed to address the harms at issue, we
may still find that the activity proposed would "frustrate or impair the
Commission's implementation or enforcement of the Communications Act, or
would interfere with the objectives of the Communications Act or other
statutes." Such an approach, I believe, subsumes the rules and puts too
much weight on our more ambiguous "public interest" authority. That
authority is meant to complement, not override, existing rules. In
addition, it adds a layer of uncertainty that makes the application of
even the clearest of our rules a vague and ambiguous process. In
circumstances where we have a rule that addresses issues raised by a
merger, I would apply the rule and find that the public interest is
satisfied.

As a result, I concur in today's decision.

[]{#__RefHeading___Toc531751948 .anchor}CONCURRING STATEMENT OF
COMMISSIONER GLORIA TRISTANI

In the Matter of Applications for Consent to the Transfer of Control

*Of Licenses and Section 214 Authorizations from MediaOne Group, Inc. to
AT&T Corp.*

As with its approval of the CBS-Viacom merger, the Commission has once
again failed to consider seriously the significant impact that an
AT&T-MediaOne combination could have on the diversity of media voices.
By focusing primarily on technical compliance with our rules, the
Commission has not sufficiently analyzed whether the proposed
transaction will undercut a fundamental purpose of the Communications
Act \-- maintaining independent sources of news and information.[^514]

The importance of television to the democratic process cannot be
overstated. A majority of Americans still rely on television as their
primary source of electoral information.[^515] How information is
presented -- or not presented -- has the power to shape public opinion
and debate. Under today's decision, AT&T could come into compliance with
the horizontal ownership rules by divesting its interest in small cable
systems that lack significant programming assets rather than divesting
its interest in Time Warner Entertainment (TWE) and/or Liberty Media. If
AT&T chooses that course, it will own, or have an attributable interest
in, 22 of 59 (37%) of the basic cable services that have reached the
requisite number of subscribers -- 15 million -- to achieve
viability.[^516] AT&T will also own, or have an attributable interest
in, 3 of the top 4 premium channels (HBO, Cinemax and Starz!).[^517]

This level of concentration should not be looked at in a vacuum. Rather,
it must be examined in the context of the number of independent voices
to which consumers have access on television. The major television
broadcast networks -- ABC/Disney, CBS/Viacom, News Corp./Fox and NBC --
own 18 of the 59 basic cable networks that have reached the 15
million-subscriber mark, and 1 of the top 4 premium services (Showtime).
Thus, when combined with a merged AT&T-MediaOne, five companies will
control 40 of 59 (68%) of the currently viable cable networks, the top
four premium cable channels, as well as all of the major broadcast
networks. Adding Time Warner's non-TWE programming to the mix means that
six companies will control at least 47 of 59 (80%) of today's viable
cable programming services.

Thus, as a result of this merger, five or six large companies may end up
controlling the vast majority of what American see and hear on
television. True, our horizontal rules are designed to ensure that
*theoretically* a new programmer would not need carriage on the largest
cable systems in order to survive, but we cannot ignore the reality of
what Americans are actually watching. This is not simply an academic
exercise, but a matter of critical importance to our democracy. As the
New York Times recently stated:

> The rules that govern concentration in telecommunications are unlike
> antitrust laws. In the bottled water and sneaker markets, mergers are
> allowed unless antitrust authorities can prove that added
> concentration would do harm. If the authorities err, and permit
> excessive consolidation, about all that happens is that the price of
> bottle water rises and innovation slacks off in the design of
> sneakers. But in telecommunications, the threat that concentration
> might shut off sources of information is profound.[^518]

It's time for the FCC to realize that we are not dealing with bottled
water or sneakers, but with the dissemination of news and information
\-- the lifeblood of our democratic way of life. In the past few years,
the number of entities that control what people watch on television has
dwindled to alarming levels. With this decision, the FCC has failed yet
again to stem this crisis and ensure a robust marketplace of ideas.

[^1]: Applications for Consent to the Transfer of Control of Licenses
    and Section 214 Authorizations from MediaOne to AT&T, CS Docket No.
    99-251 (filed July 7 and 15, 1999) ("Application").

[^2]: 47 U.S.C. §§ 214(a), 310(d).

[^3]: *See* 47 U.S.C. §§ 214(a), 310(d). *See also Applications of
    Ameritech Corp., Transferor, and SBC Communications Inc.,
    Transferee, for Consent To Transfer Control of Corporations Holding
    Commission Licenses and Lines Pursuant to Sections 214 and 310(d) of
    the Communications Act and Parts 5, 22, 24, 25, 63, 90, 95, and 101
    of the Commission's Rules,* CC Docket No. 98-141, Memorandum Opinion
    and Order ("*SBC-Ameritech Order*"), 14 FCC Rcd 14712, 14736 ¶ 46
    (1999); *Application of WorldCom, Inc. and MCI Communications
    Corporation for Transfer of Control of MCI Communications
    Corporation to WorldCom, Inc*., CC Docket No. 97-211, Memorandum
    Opinion and Order ("*WorldCom-MCI Order*"), 13 FCC Rcd 18025,
    18026-27, 18030-32 ¶¶ 1, 8-10 (1998); *Applications of NYNEX Corp.
    Transferor, and Bell Atlantic Corp. Transferee, for Consent to
    Transfer Control of NYNEX Corp. and Its Subsidiaries*, File No.
    NSD-L-96-10, Memorandum Opinion and Order ("*Bell Atlantic-NYNEX
    Order*"), 12 FCC Rcd 19985, 19987, 20000-04 ¶¶ 2, 29-32 (1997).

[^4]: *SBC-Ameritech Order*, 14 FCC Rcd at 14736 ¶ 46 (1999);
    *WorldCom-MCI Order*, 13 FCC Rcd at 18031-32 ¶ 10.

[^5]: Counting owned and operated systems alone, MediaOne is the
    nation's fourth largest cable operator. Under the cable ownership
    attribution rules, MediaOne is the nation's second largest cable
    operator because TWE's subscribers are attributable to MediaOne by
    virtue of MediaOne's 25.5% ownership interest in TWE. *See* 47
    C.F.R. § 76.503 n.2. Thus, this merger in fact links the top three
    cable operators, AT&T, MediaOne, and TWE.

    The cable ownership attribution rules, 47 C.F.R. § 76.503 n.2,
    determine whether the size or type of an entity's ownership interest
    in a cable system is such that it confers on the entity the ability
    to influence or control the operations of the cable system or
    creates economic incentives to take actions that concern the
    Commission. *See In re Implementation of the Cable Television
    Consumer Protection and Competition Act of 1992; Implementation of
    Cable Reform Act Provisions of the Telecommunications Act of 1996:
    Review of the Commission's Cable Attribution Rules*, CS Docket Nos.
    98-82, 96-85, Report and Order ("*Attribution Order*"), 14 FCC Rcd
    19014, 19014 ¶ 1 (1999). Thus, the cable ownership attribution rules
    identify ownership interests that raise issues of concern to the
    Commission. *See id.*

[^6]: *See* Section III.B, *infra*.

[^7]: 47 C.F.R. § 76.503.

[^8]: *See United States v. AT&T Corp. and MediaOne Group, Inc.,* Case
    No. 1:00CV01176, Complaint and Proposed Final Judgment (D.D.C.,
    filed May 25, 2000).

[^9]: 47 C.F.R. § 76.504.

[^10]: 47 U.S.C. § 572(b).

[^11]: *See* Appendix A for a list of commenters in this proceeding.

[^12]: 47 U.S.C. §§ 214(a), 310(d).

[^13]: 47 U.S.C. §§ 214(a), 310(d). *See WorldCom-MCI Order*, 13 FCC Rcd
    at 18030 ¶ 8; *Bell Atlantic-NYNEX Order,* 12 FCC Rcd at 20000 ¶ 29.

[^14]: *SBC-Ameritech Order,* 14 FCC Rcd at 14737 ¶ 48; *Applications of
    AT&T Corp. and Tele-Communications, Inc. for Transfer of Control of
    Tele-Communications, Inc. to AT&T Corp.,* CC Docket No. 98-178,
    Memorandum Opinion and Order ("*AT&T-TCI Order*"), 14 FCC Rcd 3160,
    3169-70 ¶ 15 (1999); *see also WorldCom-MCI Order*, 13 FCC Rcd at
    18031 ¶ 10 n.33 (citing 47 U.S.C. § 309(e) (burdens of proceeding
    and proof rest with the applicant)).

[^15]: See *SBC-Ameritech Order*, 14 FCC Rcd at 14737 ¶ 48.

[^16]: *Id*. at ¶ 48.

[^17]: *Id*. at ¶ 48.

[^18]: *Id*. at ¶ 48.

[^19]: *WorldCom-MCI Order,* 13 FCC Rcd at 18030-33 ¶¶ 9-12.

[^20]: *See Satellite Business Systems,* 62 F.C.C. 2d 997, 1069, 1088
    (1977), *aff'd. sub. nom United States v. FCC,* 652 F.2d 72 (D.C.
    Cir. 1980) (*en banc*); *Northeast Utilities Service Co. v. FERC*,
    993 F.2d 937, 947-48 (1^st^ Cir. 1993) (public interest standard
    does not require agencies "to analyze proposed mergers under the
    same standards that the Department of Justice . . . must apply").

[^21]: *AT&T-TCI Order*, 14 FCC Rcd at 3169 ¶ 14.

[^22]: *SBC-Ameritech Order,*14 FCC Rcd at 14739 ¶ 50; *AT&T-TCI Order*,
    14 FCC Rcd at 3168-69 ¶ 14; *WorldCom-MCI Order*, 13 FCC Rcd at
    18030-31 ¶ 9.

[^23]: *See Bell Atlantic-NYNEX Order,* 12 FCC Rcd at 20035 ¶ 95.

[^24]: *Id.*

[^25]: *See* *SBC-Ameritech Order,* 14 FCC Rcd at 14739 ¶ 50;
    *WorldCom-MCI Order*, 13 FCC Rcd at 18030-31 ¶ 9; *see also* 47
    U.S.C §§ 254, 259, 332(c)(7), 706; 1996 Act (Preamble).

[^26]: *See* *SBC-Ameritech Order,* 14 FCC Rcd at 14739 ¶ 51 ("\[W\]hen
    a transaction is likely to affect local telecommunications markets,
    our statutory obligation requires us to access future market
    conditions. In doing so, the Commission may rely upon its
    specialized judgment and expertise to render informed predictions
    about future market conditions and the likelihood of success of
    individual market participants.").

[^27]: *See SBC-Ameritech Order,* 14 FCC Rcd at 14739 ¶ 50;
    *WorldCom-MCI Order*, 13 FCC Rcd at 18030-31 ¶ 9; *Applications of
    Teleport Communications Group Inc. and AT&T Corp. for Consent to
    Transfer Control of Corporations Holding Point-to-Point Microwave
    Licenses and Authorizations to Provide International Facilities
    Based and Resold Communications Services,* CC Docket No. 98-24,
    Memorandum Opinion and Order ("*AT&T-Teleport Order*"), 13 FCC Rcd
    15236, 15242-43 ¶ 11 (1998); *Bell Atlantic-NYNEX Order*, 12 FCC Rcd
    at 20063 ¶ 158.

[^28]: *See SBC-Ameritech Order,* 14 FCC Rcd at 14739 ¶ 50;
    *WorldCom-MCI Order,* 13 FCC Rcd at 18030-31 ¶ 9: *Bell
    Atlantic-NYNEX Order*, 12 FCC Rcd at 20003 ¶ 32 ("\[T\]he Commission
    examines whether a proposed license transfer is consistent with the
    policies of the Communications Act, including, among other things,
    the transfer's effect on Commission policies encouraging competition
    and the benefits that would flow from the transfer.").

[^29]: Telecommunications Act of 1996, Pub. L. No. 104-104, 110 Stat. 56
    (1996).

[^30]: *SBC-Ameritech Order*, 14 FCC Rcd at 14739 ¶ 51.

[^31]: *See* 47 C.F.R. § 1.110; *see also WorldCom-MCI Order*, 13 FCC
    Rcd at 18031-32 ¶ 10; *Bell Atlantic-NYNEX Order*, 12 FCC Rcd at
    20001-02 ¶ 30.

[^32]: *See AT&T-TCI Order*, 14 FCC Rcd at 3170 ¶ 16.

[^33]: For this reason, we do not analyze services and markets in which
    the merger is not likely to produce significant public interest
    harms or benefits.

[^34]: Federal Communications Commission, *Statistics of Communications
    Common Carriers* ("*SOCC*") at 7-9 (Common Carrier Bur., Industry
    Analysis Div., rel. Nov. 30, 1999).

[^35]: Application at 8.

[^36]: *See* Application at App. A.; Letter from Douglas G. Garrett,
    Senior Regulatory Counsel, AT&T, to Magalie Roman Salas, Secretary,
    FCC, dated Apr. 7, 2000, Transmittal of Letter from Douglas G.
    Garrett, Senior Regulatory Counsel, AT&T, to Deborah Lathen, Chief,
    FCC Cable Services Bureau, dated Apr. 7, 2000, Attachment (Revised
    Certified Ownership Filing), ("AT&T Apr. 7 Revised Ownership
    Filing"); Letter from Douglas G. Garrett, Senior Regulatory Counsel,
    AT&T, to Deborah Lathen, Chief, FCC Cable Services Bureau, dated
    Mar. 17, 2000, Attachment (Certified Ownership Filing), ("AT&T Mar.
    17 Ownership Filing") at App. A; Letter from Betsy J. Brady, Esq.,
    Vice President, Federal Government Affairs, AT&T, to To-Quyen
    Truong, Associate Chief, FCC Cable Services Bureau, dated Nov. 24,
    1999, Attachment (*Ex Parte* Comments of AT&T Corp. and MediaOne
    Group, Inc.), (\"AT&T Nov. 24 Ownership Filing\") at 10; Letter from
    Douglas G. Garrett, Senior Regulatory Counsel, AT&T, to Magalie
    Roman Salas, Secretary, FCC, dated Dec. 2, 1999 ("Dec. 2 Garrett
    Letter"); Letter from Douglas G. Garrett, Senior Regulatory Counsel,
    AT&T, to Magalie Roman Salas, Secretary, FCC, dated Jan. 19, 2000
    ("Jan. 19 Garrett Letter"). Those subscribers of cable systems owned
    entirely by AT&T (TCI) are considered "owned." Those subscribers of
    cable systems owned in part by AT&T are considered "attributable" to
    AT&T if the systems are attributable to AT&T under the Commission's
    ownership attribution rules, 47 C.F.R. § 76.503 n.2.

[^37]: AT&T provides its services to residential, business, and
    government customers in over 250 countries around the world.
    Application at 6*;* AT&T Corp., *1998 Annual Report* (Mar. 9, 1999)
    ("AT&T 1998 Annual Report") at 30-31; *see also* AT&T Corp., *1997
    Annual Report* (Feb. 24, 1998) ("AT&T 1997 Annual Report") at 2.

[^38]: AT&T Corp., *1999 Annual Report* (Mar. 17, 2000) ("AT&T 1999
    Annual Report") at 14. In 1998 AT&T's revenues from communications
    services totaled \$53.2 billion, of which \$22.9 billion were
    derived from business long distance services, \$22.6 billion from
    residential long distance services, and \$5.4 billion from its
    wireless services. AT&T Corp., *1998 Annual Report* at 32. TCI's
    revenues from domestic cable and communications services totaled
    \$6.0 billion in 1998. Tele-Communications, Inc., *Filing 10-K for
    the Year Ended Dec. 31, 1998* (Mar. 15, 1999) ("TCI 1998 10-K") at
    II-22. Data are as of December 1998 and 1999.

[^39]: Tele-Communications, Inc., *1997 Stockholder Report: To Our
    Shareholders* (Mar. 1998) ("TCI Stockholder Report") at 3 and 5.

[^40]: Letter from Stephen C. Garavito, General Attorney, AT&T, to
    To-Quyen Truong, Associate Chief, FCC Cable Services Bureau, dated
    Aug. 4, 1999 at 1.

[^41]: AT&T Corp., *SEC Form S-4: Proxy Prospectus* (Jan. 8, 1999)
    ("AT&T-TCI Merger Proxy Prospectus") at 1.

[^42]: Application at 10. LMC wholly owns Liberty. While AT&T issues
    tracking stock in Liberty, AT&T wholly owns 100% of the capital
    stock in LMC, Liberty's parent.

[^43]: *Id.* at 10.

[^44]: *Id.* at 12*.*

[^45]: *Id.* at 12-13. Each of these partnerships has a management
    committee with six members, three appointed by Time Warner Cable and
    three by AT&T. *Id.*

[^46]: AT&T has completed its sale of Falcon Communications, LP to
    Charter Communications; Lenfest Communications, Inc., to Comcast;
    and Peak Cablevision, LLC and TCA Cable Partners II to Cox. These
    sales are reflected in the total subscriber count. In addition to
    these completed sales, AT&T has entered into, but has not yet
    completed transactions intended to convert its interest in Bresnan
    Communications to a non-attributable interest. AT&T has other
    transactions pending, but not yet final. Transactions that are not
    yet final are not reflected in total subscriber counts listed above.
    *See* *id* at 6 n.12 and App. A; *see also* AT&T Apr. 7 Revised
    Ownership Filing at 7 n.3; AT&T Mar. 17 Ownership Filing at App. A;
    AT&T Nov. 24 Ownership Filing at App. A; Dec. 2 Garrett Letter; Jan.
    19 Garrett Letter.

[^47]: MVPDs include cable, direct broadcast satellite ("DBS"),
    multichannel multipoint distribution services ("MMDS"), and
    satellite master antenna television ("SMATV") providers. *See Annual
    Assessment of the Status of Competition in the Market for the
    Delivery of Video Programming*, CS Docket No. 99-230, Sixth Annual
    Report ("*1999 Competition Report*"), 15 FCC Rcd 978, 980 ¶ 3
    (generally describing the various types of MVPDs). DBS operators
    provide programming via satellite to subscribers that own or lease
    small-diameter receiving dishes. MMDS providers offer programming
    via microwave facilities (the service is often referred to as
    \"wireless cable service\"). SMATV operators, also known as
    \"private cable operators,\" also frequently use microwave
    facilities to transmit programming to subscribers without crossing
    rights-of-way. SMATV subscribers usually reside in multiple dwelling
    units ("MDUs").

[^48]: *See* AT&T Apr. 7 Revised Ownership Filing; *see also* AT&T Mar.
    17 Ownership Filing at App. A; Paul Kagan Assocs., Inc., *Media
    Index Data Base*, The Kagan Media Index, Jan. 31, 2000 ("Jan. 31
    Kagan Media Index") at 8; *1999 Competition Report,* 15 FCC Rcd at
    1090 Tbl. C-1.

[^49]: Application at 8-9.

[^50]: *Id.* at 9-10; *See also* Liberty Media Corp.,
    http://www.libertymedia.com.

[^51]: *Id.*

[^52]: *Id.* Other Liberty programming interests include: USA Networks;
    Telemundo Network; Telemundo Station Group; BET Holdings II, Inc.;
    QVC, Inc.; Regional Programming Partners; Canales ñ; Court TV;
    MacNeil /Lehrer Productions; TV Guide, Inc.; E! Entertainment
    Television; Style; Odyssey; International Channel; Sunshine Network;
    and Encore Media Group. In a transaction completed on July 15, 1999,
    Liberty sold its interest in Fox/Liberty Networks (which owns
    interests in various regional sports networks and fX, a regional
    cable television network) in exchange for non-voting American
    Depository Receipts of News Corporation. Liberty Media Corp., *News
    Corporation Completes Acquisition of Fox/Liberty Networks And \$1.4
    Billion Share Repurchase From MCI WorldCom* (press release), July
    15, 1999.

[^53]: Application at 9-10. The Commission has held that Liberty's
    ownership of Time Warner stock is non-attributable for purposes of
    the cable horizontal ownership rules. *See Applications of Turner
    Broadcasting System and Time Warner for Consent to Transfer of
    Control,* FCC 96-405, File No.BTCCT-951020KF*, Memorandum Opinion
    and Order,* 11 FCC Rcd 19595, 19602-04, ¶¶ 17-19 (1996).

[^54]: Application at 10. In addition to these programmers, Liberty
    holds interests in MultiThematiques, S.A. (France, Italy, Spain,
    Poland, Germany); Pramer S.C.A. (Argentina); The Premium Movie
    Partnership (Australia); and Torenos y Competencias, S.A.
    (Argentina).

[^55]: Letter from Joan Marsh, Director, Federal Government Affairs,
    AT&T, to Magalie Roman Salas, Secretary, FCC, dated Mar. 17, 2000
    ("Mar. 17 Marsh Letter").

[^56]: AT&T Nov. 24 Ownership Filing at 17.

[^57]: Application at 12*.*

[^58]: *Id.*

[^59]: *Id.*

[^60]: Cablevision Systems Corp., *Filing 10--K for the Year Ended Dec.
    31, 1999*, at 7-8.

[^61]: *Id.* On March 28, 2000, Cablevision Systems Corp., announced the
    creation of a new media partnership between Cablevision's Rainbow
    Media Holdings, Inc. and PRIMEDIA's New York Magazine. The
    partnership combines brands and content to create a New York-focused
    Internet destination providing a one-stop, interactive resource for
    the region. Cablevision Systems Corp., *Cablevision's Rainbow Media
    and PRIMEDIA's NEW YORK Magazine Announce Launch of New York's Most
    Powerful Internet Destination* (press release), Mar. 28, 2000.

[^62]: Application at 14.

[^63]: *See* AtHome Corp., http://www/home.net. Prior to its merger with
    AtHome Corp., Excite.com was a leading Web portal, offering free,
    personalized services, numerous programmed channels of content,
    search technology, Web-based email, instant messaging, chat, and
    online shopping. *Id.*

[^64]: Application at 17. By virtue of a recent transaction with its
    cable partners, AT&T increased its voting stock interest in
    Excite@Home from approximately 57% to 74%. *See* AT&T Corp.,
    *Excite@Home's Principle Cable Partners Extend Distribution
    Arrangements, AT&T Assumes More Prominent Role* (press release),
    Mar. 29, 2000. Other entities holding an ownership interest in
    Excite@Home include Comcast Corp., Cox Communications, Inc.
    Cablevision Systems Corp., and Shaw Cablesystems Ltd. *See* AtHome
    Corp., *Filing 10-K/A for the Year Ended 1998,* at 35.

[^65]: Application at 14; *see* AtHome Corp., *Excite@Home Network:
    Company Information,* http://www.home.net/corp/about.html.

[^66]: *See Excite@Home Prepares to Start Internet TV Service,*
    [Communications Daily,]{.smallcaps} Mar. 31, 2000.

[^67]: *See* AtHome Corp., http://www.home.net.

[^68]: AtHome Corp., *Excite@Home Reports First Quarter 2000 Financial
    and Operating Results* (press release), Apr. 19, 2000. As of
    September 30, 1999, \@Home offered service to 20 million homes in
    the United States and Canada and had approximately 113,000 AT&T
    \@Home subscribers. *See* Kinetic Strategies, *Cable Modem Market
    Stats & Projections*,
    http://www.cabledatacomnews.com/cmic/cmic16.html.

[^69]: AT&T Corp., *AT&T Worldnet Service and Internet Broadcasting
    Systems Sign Marketing Agreement* (press release), Jan. 17, 2000.
    With its acquisition of the IBM Global Network ("IGN"), AT&T also
    obtained approximately 300,000 additional non-corporate billed
    Internet subscribers in the United States. This number includes
    customers of other Internet access providers that use the IGN
    network to provide Internet access to their customers. For purposes
    of the public interest statement, AT&T included all of these
    IGN-based customers in its WorldNet figures. The WorldNet service is
    delivered in the same manner as other narrowband ISPs deliver their
    service, *i.e.*, over the traditional narrowband public switched
    telephone network.

[^70]: Application at 7 and 34. AT&T's pertentage of the total
    residential customers in the U.S. in 1999 was approximately 0.1991%.
    This percentage is derived from dividing AT&T's total residential
    customers, including cable telephony customers (220,000) by the
    total number of residential access lines of reporting local exchange
    companies (approximately 110,447,132). *See* *SOCC*, at 24 Tbl. 2.5
    (1998-1999).

[^71]: AT&T provides residential local telephone service using network
    element combinations obtained from incumbent LECs. This is called
    UNE-P service or unbundled network elements platform.

[^72]: AT&T currently markets and sells local residential telephony in
    13 cities in California, Illinois, Texas, and Colorado. *See* AT&T
    Corp., *AT&T -- MediaOne Combination Will Speed Local Phone
    Competition and Bring High Speed Internet Services to More
    Consumers, AT&T's Cicconi Says* (press release), Feb. 4, 2000;
    AT&T's OneRate New York plan combines local and long distance calls
    on a single bill. As of March 2000, AT&T had 200,000 customers on
    its AT&T OneRate New York plan. In addition, AT&T has begun to
    market local telephone and long distance service to some 600,000
    Time Warner Cable customers in Albany and Syracuse, New York. These
    customers are offered AT&T's OneRate NewYork plan. *See* AT&T Corp.,
    *AT&T and Time Warner Cable Announce Joint Marketing Agreement*
    (press release), Mar. 7, 2000. In addition, AT&T and Insight
    Communications reached an agreement in March 2000 to deliver AT&T
    local telephone service in Insight's service areas. *See* AT&T
    Corp., *Insight Communications and AT&T Reach Agreement in Principle
    to Offer Local Phone Service* (press release), Mar. 16, 2000; *see
    also* Letter from Stephen Garavito, General Attorney, AT&T, to
    To-Quyen Truong, Associate Chief, FCC Cable Services Bureau, dated
    May 24, 2000.

[^73]: Frank J. Governali, *AT&T Corp., Analyst Meeting Hits
    Expectations*, Goldman, Sachs & Co. Investment Research, Dec. 7,
    1999 ("Goldman Sachs Dec.7 AT&T Report") at 3.

[^74]: *See* *id; see also* AT&T Corp., *AT&T Analyst Meeting: AT&T
    Fixed Wireless - Lew Chakrin*, Dec. 6, 1999 ("AT&T Fixed Wireless
    Slides"), http://www.att.com/ir/ep/analyst99/agenda.html*;* Eric
    Strumingher, *AT&T Corp., Analyst Meeting Shows Data Focus*, Paine
    Webber, Dec. 7, 1999 ("Paine Webber Dec. 7 AT&T Report") at 2;
    Letter from Joan Marsh, Director, Federal Government Affairs, AT&T,
    to To-Quyen Truong, Associate Chief, FCC Cable Services Bureau,
    dated Feb. 11, 2000 ("Feb. 11 Marsh Letter"); AT&T Corp., *AT&T
    'Cuts The Cord' To Provide Services Into Homes* (press release),
    Mar. 22, 2000.

[^75]: *See id.*

[^76]: AT&T Corp., *AT&T-Led Consortium to Acquire 39 Percent Voting
    Stake in Net2Phone* (press release), Mar. 31, 2000; [Communications
    Daily]{.smallcaps}, Apr. 3, 2000, at 2-4.

[^77]: *Id.*

[^78]: *AT&T-Teleport Order*, 13 FCC Rcd at 15240 ¶ 8. At the time of
    its acquisition by AT&T, Teleport also provided residential local
    telephone service to approximately 12,000 customers nationwide.
    *AT&T-TCI Order*, 14 FCC Rcd at 3164 ¶ 5.

[^79]: *AT&T-Teleport Order*, 13 FCC Rcd at 15239 ¶ 5.

[^80]: *AT&T-TCI Order*, 14 FCC Rcd at 3162 ¶ 3. At the time of the
    merger, Teleport served 16,500 buildings nationwide. Less than 100
    of these buildings were multiple dwelling units.

[^81]: The 1999 CLEC Report: Chapter 6 Status of the CLEC Industry:
    Network Parameters and Revenue Figures, *Table 14: Company Rank by
    Total Revenue (1998),* New Paradigm Resources Group, Inc., ("1999
    CLEC Report") at 28 of 34. AT&T's percentage of CLEC revenue for
    residential customers is approximately 8.5%. This percentage is
    derived from dividing AT&T's total residential local exchange
    service revenue (\$901,000,000, which includes revenues from the
    formerly separate Teleport) by the total revenue for all CLECs
    (\$10,620,615,854). *See* 1999 CLEC Report, at 28 of 34. In 1997,
    Teleport's total revenues from its local services were \$494.3
    million, or 10.8% of total CLEC revenues (\$4,535,600,000). *See*
    The 1998 CLEC Report: Chapter 2 Status of the CLEC Industry: Network
    Parameters and Revenue Figures, *Table 12: Company Rank by1997 Total
    Revenue,* New Paradigm Resources Group, Inc., at 18 of 22.

[^82]: The 2000 CLEC Report: Chapter 5 Status of the CLEC Industry:
    Network Parameters and Revenue Figures, *Table 14: Company Rank by
    Total Revenue (1999),* New Paradigm Resources Group, Inc., ("2000
    CLEC Report") at 38 of 46. AT&T's 1999 CLEC revenue increased over
    one-thousand percent between 1998 and 1999, while CLEC revenue on a
    whole increased 150%. *See id.* AT&T's percentage of CLEC revenue
    for residential customers in 1999 was approximately 39%. This
    percentage is derived from dividing AT&T's total residential local
    exchange service revenue (\$10,483,200,000 which includes revenues
    from the formerly separate Teleport) by the total revenue for all
    CLECs (\$26,857,733,000). *See id.*

[^83]: *AT&T-TCI Order*, 14 FCC Rcd at 3163 at *¶* 4. On March 28, 2000,
    AT&T filed an amended preliminary prospectus with the Securities and
    Exchange Commission seeking sale of 360 million shares of AT&T
    Wireless Group tracking stock representing approximately 15.6% of
    AT&T's economic interest in the AT&T Wireless Group. AT&T Corp.,
    *AT&T Files Updated Prospectus Relating To AT&T Wireless Group
    Tracking Stock* (press release), Mar. 28, 2000.

[^84]: Application at 38.

[^85]: AT&T Corp., *1999 Annual Report* at 32. In addition, AT&T has
    placed into a trust arrangement, pending sale over a period of time
    approved by the Commission and the Department of Justice,
    approximately 23.8% of the outstanding shares of Sprint PCS Tracking
    Stock. *See AT&T-TCI Order,* 14 FCC Rcd at 3211 ¶ 107.

[^86]: Application at 14, 17.

[^87]: *Id.* at 15.

[^88]: *Id.* at 16; Letter from Sean Lindsay, MediaOne Group, Inc., to
    Pieter van Leeuwen, FCC Wireless Telecommunications Bureau, dated
    Nov. 4, 1999 ("Nov. 24 Lindsay Letter"); Vodafone AirTouch is one of
    the world\'s leading wireless telecommunications companies. The
    company provides a full range of wireless telecommunications
    services, including cellular, broadband personal communications
    (known as PCS), paging and data communications. Vodafone Group
    changed its name to Vodafone AirTouch. *See* Vodafone Airtouch
    Public Limited Company, *Report of Foreign Private Issuer Filing
    6-K*, Sept. 7, 1999, at 2; Since the filing of the Application,
    Vodafone has merged its U.S. wireless interests with those of Bell
    Atlantic and formed Verizon Wireless, further diluting MediaOne's
    stake in Vodafone's U.S. wireless interests. *See In re Applications
    of Vodafone AirTouch, Plc, and Bell Atlantic Corporation*,
    Memorandum Opinion and Order, DA 00-721 (WTB/IB, rel. Mar. 30,
    2000).

[^89]: Application at 14. MediaOne Group, *Filing 10-K for the Year
    Ended December 31, 1999* (2000) ("MediaOne 1999 10-K") at 16. These
    revenues include domestic cable operations and international
    broadband and wireless operations. *Id.*

[^90]: *See* AT&T Apr. 7 Revised Ownership Filing; *see also* AT&T Mar.
    17 Ownership Filing at App. A; AT&T Nov. 24 Ownership Filing at App.
    A; MediaOne Group, *Filing 10-K for the Year Ended 1998*, ("MediaOne
    1998 10-K") at 1-2. MediaOne also holds ownership interests in
    international cable service providers that as of Decemeber 31, 1998,
    passed approximately 2.6 million homes and provided service to
    approximately 993,000 subscribers. Among its international cable
    interests, MediaOne holds a 29.9% interest in Telewest
    Communications PLC, which provides cable and telecommunications
    services in the United Kingdom. *Id.*

[^91]: MediaOne 1998 10-K at 19.

[^92]: AT&T Nov. 24 Ownership Filing at 10 and App. C. MediaOne sent the
    notice to TWE on August 3, 1999. MediaOne's co-management rights
    were terminated the next day. *Id.* Under the TWE partnership
    agreement, Time Warner General and Limited Partners had the right to
    terminate MediaOne\'s co-management rights when MediaOne terminated
    the non-compete clause of the partnership agreement.

[^93]: AT&T Nov. 24 Ownership Filing at 2 n.7. MediaOne has veto rights
    over the following TWE partnership matters: the merger of TWE; the
    sale or transfer of assets constituting more than 10% of TWE assets;
    the expansion of TWE into new lines of business; the specified
    issuances of additional partnership interests; the indemnification
    of any partner or affiliate for liability in excess of
    \$500,000,000; the incurrance of debt for money borrowed above a
    defined ratio; the admission of a new general partner; certain
    acquisitions above the greater of \$750,000,000 or 10% of TWE\'s
    consolidated revenues for its most recent fiscal year; the
    dissolution of TWE; the voluntary bankruptcy of TWE; the amendment
    or modification of the TWE partnership agreement; and the transfer
    or sale of certain major interests in TWE or any sub-partnership
    thereof. *Id.*

[^94]: Application at 16. *See also* AT&T Nov. 24 Ownership filing at
    App. E (\"Declaration of Professor John C. Coffee, Jr\"); Letter
    from Douglas G. Garrett, Senior Regulatory Counsel, AT&T, to Deborah
    Lathen, Chief, FCC Cable Services Bureau, dated Apr. 7, 2000 (\"AT&T
    does not now have and will not have post-merger any role in the
    management or operation of the TWI systems, either directly or
    indirectly through TWE. . . .").

[^95]: AT&T Apr. 7 Revised Ownership Filing. Because TWE manages and
    operates the TWI systems, TWI subscribers are attributable to TWE.
    *See* 47 C.F.R. §§ 76.503 n.2, 76.501 n.1.

[^96]: *See* AT&T Apr. 7 Revised Ownership Filing; *see also* Jan. 31
    Kagan Media Index at 8; *1999 Competition Report,* 15 FCC Rcd at
    1090 Tbl. C-1. Counting owned-and-operated systems alone, MediaOne
    is the nation's fourth largest cable operator. Under the cable
    ownership attribution rules, MediaOne is the nation's second largest
    cable operator because TWE's subscribers are attributable to
    MediaOne by virtue of MediaOne's ownership interest in TWE. *See* 47
    C.F.R. §76.502 n.2.

[^97]: Application at 17.

[^98]: *Id.* MediaOne holds minority interests in Food Network, Sunshine
    Network, Music Choice, E! Entertainment Television, Speedvision,
    Outdoor Life, and Viewer's Choice. MediaOne holds a 50% interest in
    New England News Network and Fox Sports New England, though it
    claims no management rights. *Id.*

[^99]: AT&T Nov. 24 Ownership Filing at 17.

[^100]: Time Warner Entertainment, *Filing 10-K for the Year Ended
    1999*, at I-3 and I-4.

[^101]: Application at 17. The Road Runner joint venture is operated by
    ServiceCo LLC ("ServiceCo"), which is owned by MediaOne, Time
    Warner, Inc. and its affiliates ("TWI"), Time Warner
    Entertainment-Cable ("TWE-Cable"), Compaq, and Microsoft. Compaq and
    Microsoft each hold a 10% interest in ServiceCo. The remaining 80%
    interest in ServiceCo is owned by MediaOne, TWI, TWE-Cable, and Time
    Warner Entertainment-Advance/Newhouse Partnership ("TWE-A/N")
    through Cable HoldCo, a limited liability corporation. The ownership
    of Cable HoldCo is as follows: MediaOne has a 31.38% interest, TWI
    has a 10.7% interest, TWE-Cable has a 24.99% interest, and TWE-A/N
    has a 32.93% interest. TWE owns a 65.3% interest in TWE-A/N.
    Subsequently, MediaOne's total interest in ServiceCo (including its
    proportionate share of the interest held by TWE and TWE-A/N) is
    34.67%.

[^102]: *See* Kinetic Strategies, Cable Internet Service Providers and
    Systems Integrators,
    http://www.cabledatacomnews.com/cmic/cmic5.html.

[^103]: Road Runner, *Road Runner Announces Strong First Quarter* (press
    release), Apr. 12, 2000. As of September 30, 1999, Road Runner was
    available to 12.5 million homes in the United States and Canada and
    had approximately 173,000 MediaOne subscribers. *See* Kintetic
    Strategies, Cable Modem Market Stats & Projections,
    http://www.cabledatacomnews.com/cmic/cmic16.html.

[^104]: Application at 15. MediaOne 1998 10-K at 19.

[^105]: Application at 15 & n. 39. MediaOne does not provide long
    distance telephone service. *Id.*

[^106]: MediaOne Group, Inc., *MediaOne Installs 100,000^th^ U.S.
    Digital Telephone Customer* (press release), May 18, 2000.

[^107]: Letter from Susan M. Eid, Vice President, Federal Relations,
    MediaOne Group, to Magalie Roman Salas, Secretary, FCC, dated May
    25, 2000, Transmittal of Letter from Susan M. Eid to Royce Dickens,
    FCC Cable Services Bureau, dated May 25, 2000 ("May 25 Eid Letter").

[^108]: Letter from Michelle M. Mundt, Mintz, Levin, Cohn, Ferris,
    Glovsky and Popeo, P.C., to Magalie Roman Salas, Secretary, FCC,
    dated May 9, 2000, Transmittal of Letter from Susan M. Eid, Vice
    President, Federal Relations, MediaOne Group, Inc., to To-Quyen
    Truong, Associate Chief, FCC Cable Services Bureau, dated May 9,
    2000 ("May 9 Eid Letter").

[^109]: See Time Warner Telecom,
    http://www.twtelecom.com/TimeWarnerCities.

[^110]: AT&T Corp., *MediaOne Group and AT&T Sign Definitive Merger
    Agreement* (press release), May 6, 1999.

[^111]: Application at 1.

[^112]: *Id.* at 6.

[^113]: *Id.* at 1, 20.

[^114]: *Id.*

[^115]: *Id.* at 18.

[^116]: *See* AT&T Apr. 7 Revised Ownership Filing; *see also* Jan. 31
    Kagan Media Index at 8.

[^117]: *Id.*

[^118]: *Id.*

[^119]: *Id.; see also 1999 Competition Report*, 15 FCC Rcd at 1090 Tbl
    C-1.

[^120]: Application at 6 n. 12.

[^121]: *Id.* Comcast will transfer to AT&T cable systems in Fort
    Lauderdale and Davie, Florida; Sacramento, California; Chesterfield,
    Virginia; Chamblee, Georgia; Chicago, Illinois; Westmoreland,
    Pennsylvania; and the State of Colorado. AT&T will transfer to
    Comcast cable systems in Naples and Fort Myers, Florida; Detroit,
    Michigan; Washington, D.C.; Baltimore and Ocean City, Maryland; the
    State of New Mexico; Philadelphia, Pennsylvania; and other systems
    in Michigan or in Nashville, Tennessee. *Id*.

[^122]: Jan. 19 Garrett Letter.

[^123]: *See United States v. AT&T Corp. and MediaOne Group, Inc.,* Case
    No. 1:00CV01176, Complaint and Proposed Final Judgment (D.D.C.,
    filed May 25, 2000).

[^124]: *Id.*

[^125]: Letter from Joan Marsh, Director, Federal Government Affairs,
    AT&T, to Magalie Roman Salas, Secretary, FCC, dated June 2, 2000
    ("June 2 Marsh Letter"). AT&T and MediaOne were required to seek
    approval for license transfers in connections with the proposed
    merger from a total of 512 out of 665 franchises affected. *Id.* A
    cable operator must obtain local franchising authority approval for
    the transfer or sale of its cable system only if the franchise
    agreement so requires. 47 U.S.C. § 537.

[^126]: 47 U.S.C. § 537; 47 C.F.R. § 76.502.

[^127]: June 2 Marsh Letter

[^128]: *Id.* The two local franchising authorities are Cambridge,
    Massachusetts and Mentor, Ohio. ("As to the Cambridge denial, the
    Massachusetts Department of Telecommunications and Energy recently
    ruled that municipal authorities cannot use the open-access issue to
    block the transfer of cable franchises. The Mentor, OH decision
    remains pending on appeal.") *Id.*

[^129]: *Id.*

[^130]: *Id.* The Massachusetts Department of Telecommunications and
    Energy determined that franchise authorities have no authority under
    Massachusetts regulations to impose access conditions as a part of a
    transfer of control. The Department therefore struck those
    provisions from the North Andover, Massachusetts and Quincy,
    Massachusetts approvals. In addition, a federal court in Virginia
    has ruled that the forced access provisions imposed by the
    authorities in Henrico County, Virginia were invalid under both
    federal and state law. *Id.*

[^131]: *Id.* Appeals are still pending as to decisions rendered in
    Madera County, California (two franchises) and Culver City,
    California.

[^132]: 47 C.F.R. § 76.572.

[^133]: *See 1999 Competition Report*, 15 FCC Rcd at 980 ¶ 3 (generally
    describing the various types of MVPDs) (Section 628(g) of the
    Communications Act, 47 U.S.C. § 548(g), requires the Commission to
    report annually to Congress on the status of competition in markets
    for the delivery of video programming). DBS operators provide
    programming via satellite to subscribers that own or lease
    small-diameter receiving dishes. MMDS providers offer programming
    via microwave facilities (the service is often referred to as
    \"wireless cable service\"). SMATV operators, also known as
    \"private cable operators,\" also frequently use microwave
    facilities to transmit programming to subscribers without crossing
    public rights-of-way. SMATV subscribers usually reside in multiple
    dwelling units ("MDUs").

[^134]: Congress recently enacted a statute permitting DBS providers to
    offer local broadcast channels. See Pub. L. No. 106-113, §1000(9),
    113 Stat. 1501 (enacting S. 1948, including the Satellite Home
    Viewer Improvement Act of 1999 ("SHVIA"), Title I of the
    Intellectual Property and Communications Omnibus Reform Act of 1999,
    relating to copyright licensing and carriage of broadcast signals by
    satellite carriers, codified in scattered sections of 17 and 47
    U.S.C.).

[^135]: *See* Section III.B, *supra*.

[^136]: 47 C.F.R. § 76.503.

[^137]: 47 C.F.R. §§ 76.1000-76.1004.

[^138]: 47 C.F.R. § 76.504.

[^139]: *See* US West Comments at 5-6; TAP Comments at 29-30; GTE
    Comments at 5; WCA Comments at 5; SBC Comments at 21-25; BellSouth
    Reply Comments at 2-3; SBC Reply Comments at 3.

[^140]: *See* Echostar Comments at 8-9; Ameritech Comments at 10-11; MCI
    WorldCom Comments at 4; BellSouth Reply Comments at 5; Seren Reply
    Comments at 1. Ameritech argues that the volume discounts that AT&T
    now receives are anticompetitive and unjustified by cost savings.
    Ameritech Comments at 9. Commenters argue that large cable
    operators, because of their size, have been able to prevent
    unaffiliated programmers from dealing with non-cable MVPDs.
    BellSouth, a multichannel multipoint distribution MVPD, states that
    it has been denied access to unaffiliated programming networks such
    as Fox News, TV Land, and the Game Show Network because they have
    exclusive contracts with cable operators. BellSouth Comments at 6-8.
    Seren, a cable overbuilder, states that it has been placed at a
    competitive disadvantage because AT&T's size has caused the Midwest
    Sports Channel ("MSC"), which carries a 24-hour regional Minnesota
    sports channel, to enter into an exclusive contract with AT&T. See
    Testimony of Peter M. Glass, Vice President and General Counsel,
    Seren Innovations, Inc., FCC Cable Services Bureau AT&T-MediaOne
    Public Forum (Feb. 4, 2000), Tr. at 131 (hereinafter "Glass Public
    Forum Testimony"). WCA argues that the cable operators' purchasing
    power caused Rupert Murdoch to divest his interest in Echostar, a
    satellite MVPD, after cable operators refused to carry Murdoch's
    various Fox networks. WCA Comments at 10.

[^141]: Communications Act, § 613(f)(1)(A); 47 U.S.C. § 533(f)(1)(A); 47
    C.F.R. § 76.504.; *see In re Implementation of Section 11(c) of the
    Cable Television Consumer Protection and Competition Act of 1992:
    Horizontal Ownership Limits*, MM Docket No. 92-264, Third Report and
    Order ("*Horizontal Third Report and Order*"), 14 FCC Rcd 19098,
    19102 ¶ 29 n.21 (1999).

[^142]: Communications Act, § 613(f)(1)(A); 47 U.S.C. § 533(f)(1)(A)
    (emphasis added).

[^143]: *See Attribution Order*, 14 FCC Rcd at 19016 ¶ 1.

[^144]: *Id*., 14 FCC Rcd at 19017 ¶ 2.

[^145]: TWE owns systems that serve 10,856,000 subscribers and operates
    TWI Cable (a subsidiary of Time Warner Inc.), which owns cable
    systems that serve 1,795,000 subscribers, for a total of 12,651,000
    subscribers. TWI Cable subscribers are attributable to TWE because
    TWE has operational control over TWI Cable's systems. *See* 47
    C.F.R. § 76.503 n.2; 47 C.F.R. § 76.501 n.1.

[^146]: 47 C.F.R. § 76.503 n.2(c).

[^147]: 47 C.F.R. § 76.503 n.2(c); 47 C.F.R. § 76.501 n.2(g);
    *Attribution Order*, 14 FCC Rcd at 19041 ¶¶ 66-68.

[^148]: *See Attribution Order*, 14 FCC Rcd at 19039 ¶ 61.

[^149]: *See* Richard Bilotti, Gary Lieberman, Benjamin Swinburne, *4Q99
    Review and 1Q00 Preview: Broadband Big Bang*, Morgan Stanley Dean
    Witter, Jan. 5, 2000, at 93 (MediaOne Group Estimated 2000 Fair
    Market Value -- \$13,869,700,000 interest in TWE).; Chistopher Dixon
    and Catherine Kim, *AOL Time Warner*, Paine Webber Equity Research,
    Mar. 1, 2000.

[^150]: *See* AT&T Nov. 24 Ownership Filing at 2 n.7 (TWE matters
    requiring Applicants' consent include: "the merger of TWE; sale or
    transfer of assets constituting more than 10% of the TWE assets;
    expansion of TWE into new lines of business; specified issuances of
    additional partnerhsip interests; indemnification of any partner or
    affiliate for liability in excess of \$500,000,000; incurrance of
    debt for money borrowed above a defined ratio; admission of a new
    general partner; extension of the corporate services term beyond
    that contemplated in the LPA; certain acquisitions above the greater
    of \$750 million or 10% of TWE's consolidated revenues for its most
    recent fiscal year; cash distributions above the level provided for
    in the LPA; dissolution of TWE; voluntary bankruptcy of TWE;
    amendment or modification of the LPA; and transfer or sale of
    certain major interests in TWE or any sub-partnership thereof.
    Mechanically, these rights are exercised by MediaOne through
    MediaOne's representatives on the TWE Board.").

[^151]: Testimony of James W. Cicconi, General Counsel and Executive
    Vice President Law and Government Affairs, AT&T, FCC Cable Services
    Bureau AT&T-MediaOne Public Forum (Feb. 4, 2000), Tr. at 72-73
    (hereinafter "Cicconi Public Forum Testimony"); Applicants Ownership
    Reply Comments (Dec. 21, 1999) at 18, 24, 30.

[^152]: *See* Testimony of Greg Simon, Co-Director, openNET Coalition,
    FCC Cable Services Bureau AT&T-MediaOne Public Forum (Feb. 4, 2000),
    Tr. at 89-90 (hereinafter "Simon Public Forum Testimony") ("\[AT&T
    stated that\] because of \[AT&T's and Time Warner Inc.'s\] joint
    ownership of TWE through \[AT&T's interest in\] MediaOne, ... \[AT&T
    and Time Warner\] would be able to align their interests with regard
    to rolling out local telephony. And, yet, all of a sudden we're
    asked to believe that they won't align their interests when it comes
    to programming and video services. One could ask why do you spend so
    much money to buy companies you then say you have no influence over
    and you're not going to have any cooperation with.").

[^153]: *See* 47 C.F.R. § 76.503 n.2(b)&(c).

[^154]: *See* 47 C.F.R. § 76.503 n.2(c).

[^155]: *See id.*

[^156]: *See id.*

[^157]: *See id.*

[^158]: *See Attribution Order*, 14 FCC Rcd at 19040 ¶ 64; 47 C.F.R. §
    76.503 n.2(b)(1).

[^159]: *See* 47 C.F.R. § 76.503 n.2(b)(2); *Attribution Order*, 14 FCC
    Rcd at 19040-19041 ¶ 64.

[^160]: *See* 47 C.F.R. § 76.503 n.2(b)(2) ("\[T\]he certification must
    be accompanied by facts, e.g. in the form of documents, affidavits
    or declarations, that demonstrate that these insulation criteria are
    met."); *Attribution Order*, 14 FCC Rcd at 19040-19041 ¶ 64.

[^161]: *See Attribution Order*, 14 FCC Rcd at 19038 ¶ 57 (emphasis
    added).

[^162]: 47 C.F.R. § 76.501 n.2(g)(2).

[^163]: *In re Reexamination of the Commission's Rules and Policies
    Regarding the Attribution of Ownership Interests in Broadcast, Cable
    Television and Newspaper Entities*, MM Docket No. 83-46, Memorandum
    Opinion and Order ("*1984 Attribution Order on Reconsideration*"),
    58 R.R. 604, 607 ¶ 50 (1985) ("\[T\]he limited partnership agreement
    should also bar the exempt limited partner from performing any
    services to the limited partnership materially relating to its media
    activities.").

[^164]: *In re Reexamination of the Commission's Rules and Policies
    Regarding the Attribution of Ownership Interests in Broadcast, Cable
    Television and Newspaper Entities*, MM Docket No. 83-46, Memorandum
    Opinion and Order ("*1984 Attribution Order on Further
    Reconsideration*"), 1 FCC Rcd 802 ¶ 3 (1986).

[^165]: *See Twentieth Century Corp.*, BTCCT-990617KE, BRCT-88120KM, 4
    FCC Rcd 4052, 4054 ¶¶ 15-17 (1989) (although an investor can shield
    its investment from attribution if the investment is placed in a
    trust, the investment is not shielded if the investor sells video
    programming to the investment).

[^166]: *See Regulations Governing Attribution of Broadcast and
    Cable/MDS Interests, Regulation and Policies Affecting Investment in
    the Broadcast Industry and Reexamination of the Commission\'s
    Cross-Interest Policy,* MM Docket Nos. 94-150, 92-51 and 87-154,
    Report and Order ("*Broadcast Attribution Report and Order*"), 14
    FCC Rcd 12559, 12617 ¶ 133 (1999) ("\[A\] contractual arrangement to
    provide programming would be inconsistent with the insulation
    criterion that 'the limited partner may not perform services for the
    partnership materially relating to its media activities.'").

[^167]: *See Attribution Order*, 14 FCC Rcd at 19040 ¶ 64; 47 C.F.R. §
    76.503 n.2(b)(1).

[^168]: *See Attribution Order*, 14 FCC Rcd at 19040 ¶ 63.

[^169]: *Id.*

[^170]: For example, the following AT&T and MediaOne affiliates sell
    their programming to TWE New York City cable systems: Discovery, USA
    Network, E! Entertainment, Fox Sports New York, MSG, MSG 2, BET
    Network, BET on Jazz, Sci-Fi Channel, Bravo, Starz!, the Travel
    Channel, Animal Planet, QVC, and Court TV. *See* U S West Dec. 14
    Reply Comments at 11, Attachment (attaching the channel lineups for
    TWE New York cable systems).

[^171]: *See* 47 C.F.R. § 76.503 n.2(b)(2); *Attribution Order*, 14 FCC
    Rcd at 19040-19041 ¶ 64;

[^172]: *1999 Competition Report*, 15 FCC Rcd at 1056 ¶ 177.

[^173]: *See id.* In addition, the merged entity may coordinate its
    purchasing decisions with other MVPDs, which would further expand
    the merged entity's bargaining power and ability to prevent the
    launch of a new programmer that AT&T, MediaOne, and TWE disfavor.
    *See id.* at ¶ 168. Concentration of ownership among buyers is one
    indicator that coordinated behavior among buyers will be successful.
    *Id.* The seven largest cable operators now serve almost 90% of the
    nation's cable subscribers, and the ten largest MVPDs serve almost
    75% of the nation's MVPD subscribers. *Id.* at ¶ 16, Tbl. C-4.

[^174]: *See Horizontal Third Report and Order*, 14 FCC Rcd at 19108 ¶
    22.

[^175]: *See id.* at ¶¶ 27-31.

[^176]: *See id.* at ¶ 30.

[^177]: *See* Sections III.A and III.B, *supra*.

[^178]: *See* Communications Act, § 613(f)(1)(A); 47 U.S.C. §
    533(f)(1)(A). *See also* 1992 Cable Act, § 2(a)(4); Pub. L. No.
    102-385; 47 U.S.C. § 521 note ("The cable industry has become highly
    concentrated. The potential effects of such concentration are
    barriers to entry for new programmers and a reduction in the number
    of media voices available to consumers."); *Horizontal Third Report
    and Order*, 14 FCC Rcd at 19102-19104, 19113-19114, 19116 ¶¶ 9-14,
    38-39, 43; *Report of the Senate Committee on Commerce, Science and
    Transportation*, S. Rep. 92, 102d Cong., 1^st^ Sess. 34 (1991)
    ("\[L\]arge MSOs \[cable operators\] have the market power to
    determine what programming services can 'make it' on cable.").

[^179]: 47 C.F.R. § 76.503.

[^180]: *See In re Implementation of Section 11(c) of the Cable
    Television Consumer Protection and Competition Act of 1992:
    Horizontal Ownership Limits*, MM Docket No. 92-264, Order on
    Reconsideration of the Third Report and Order ("*Reconsideration of
    the Horizontal Third Report and Order*"), 15 FCC Rcd 1167, 1168 ¶ 6
    (2000).

[^181]: *See id.*, 15 FCC Rcd at 1169 ¶ 8.

[^182]: *See id*.

[^183]: *See* Communications Act, § 613(f)(2)(A), 47 U.S.C. §
    533(f)(2)(A) (emphasis added).

[^184]: *See Horizontal Third Report and Order*, 14 FCC Rcd at
    19114-19116 ¶¶ 39-43.

[^185]: *See id.,* 14 FCC Rcd at 19117-19118 ¶¶ 48-49.

[^186]: *See id.*, 14 FCC Rcd at 19117-19118 ¶¶ 48-54.

[^187]: *See* Letter from Andrew Jay Schwartzman, President and CEO,
    Media Access Project, to Magalie Roman Salas, Secretary, FCC, dated
    May 10, 2000 ("MAP May 10 Letter"); Letter from Andrew Jay
    Schwartzman, President and CEO, Media Access Project, to Magalie
    Roman Salas, Secretary, FCC, dated May 31, 2000 at 1 ("\[I\]t is
    contrary to the public interest to allow AT&T the option of
    restructuring its relationship with Liberty Media instead of
    divesting MediaOne's partnership interest in Time Warner
    Entertainment, LP.").

[^188]: MAP May 10 Letter at 4.

[^189]: *See Horizontal Third Report and Order*, 14 FCC Rcd at 19116 ¶
    43 n.99 (citing 47 U.S.C. § 533(f)(2)(A) (directing the Commission
    to take into account conduct by a single "cable operator or group of
    cable operators")); *see also* *WorldCom-MCI Order*, 13 FCC Rcd at
    18025 ¶ 36 ("In our analysis of the competitive effects of the
    merger, we consider whether the merger will increase the likelihood
    of unilateral anticompetitive conduct by the merged entity or
    coordinated anticompetitive conduct of multiple market
    participants."); *Bell Atlantic-NYNEX Order*, 12 FCC Rcd at 19985 ¶
    121 ("Market performance can also be adversely affected if a merger
    increases the potential for coordinated interaction by firms
    remaining in the post merger market."); *see also 1992 Horizontal
    Guidelines*, 57 Fed. Reg. 41552, 41558 § 2.1 ("Lessening of
    Competition Through Coordinated Interaction").

[^190]: *See 1999 Competition Report,* 15 FCC Rcd at 986 ¶ 16, 1053
    ¶168, 1094 Tbl. C-4 (ten largest MVPDs serve almost 75% of the
    nation's MVPD subscribers)*,* 15 FCC Rcd at 1053-54 ¶ 168 (noting
    that MVPDs may coordinate their purchasing decisions).

[^191]: *See WorldCom-MCI Order*, 13 FCC Rcd at 18025 ¶ 121 ("As the
    number of most significant market participants decreases, all other
    things being equal, the remaining firms are increasingly able to
    arrive at mutually beneficial market equilibria, to the detriment of
    consumers. In general, increased concentration facilitates
    coordinated interaction. . . .").

[^192]: This analysis does not even take into account the programming
    interests of Time Warner, Inc. the general partner of TWE. Time
    Warner, Inc. would also have an incentive to use its relationship
    with the merged entity through TWE to promote its own programming.

[^193]: *See* Paul Kagan Assocs., Inc., *Cable Network Television
    Household Growth*, 1989-1999, Cable Program Investor, Mar. 17, 2000
    at 4-5.

[^194]: *See* Cahners Business Information, *Cablevision- Database:
    Network Subscribers*, http:// www.
    cablevisionmag.com/database/db_pay.asp; *see also* Cahners, Network
    Subscriber Counts, Cablevision Blue Book, Dec. 1999 at 74.

[^195]: Application at 45-54.

[^196]: *Id.* at 50.

[^197]: *Horizontal Third Report and Order*, 14 FCC Rcd at 19104 ¶ 14
    n.33.

[^198]: Application at 59.

[^199]: *Id.* at 56-58.

[^200]: *Id.*

[^201]: Department of Justice Antitrust Handbook at III-126 (3d ed. Feb.
    1998) ("with the exception of a very limited number of health care
    mergers").

[^202]: *Id.* Furthermore, a business review letter would not bind the
    Department of Justice because the letter states only the Antitrust
    Division's enforcement intentions as of the date of the letter, and
    the Division may bring at a later date "whatever action or
    proceeding it subsequently determines is required by the public
    interest." *Id.* at III-130; *see also United States v. Grinnell
    Corp.*, 30 F.R.D. 358, 363 (D.R.I. 1962).

[^203]: *See Business Travel Contractors Corp.*, 1995 DOJBRL LEXIS 9
    (1995) (entity to purchase discount airline tickets on behalf of a
    group of corporations); *IFA Shippers' Ass'n*, 1990 DOJBRL LEXIS 2
    (1990) (shippers form group to purchase volume discounts from ocean
    carriers); *Utilities Service Alliance*, 1996 DOJBRL LEXIS 4 (1996)
    (electric power utilities form alliance to purchase resources).

[^204]: Applicants Dec. 21 Ownership Reply Comments at 35.

[^205]: 47 C.F.R. § 1.3.

[^206]: *Northeast Cellular Telephone Co., LP v. FCC*, 897 F.2d 1164,
    1165 (D.C. Cir. 1990); *United States v. Storer Broadcasting Co.*,
    351 U.S. 192, 205 (1956).

[^207]: *WAIT Radio v. FCC*, 418 F.2d 1153, 1157 (D.C. Cir. 1969),
    *cert. denied*, 409 U.S. 1027 (1972).

[^208]: *Attribution Order*, 14 FCC Rcd at 19029-19031 ¶¶ 33-37
    (rejecting commenters' "day-to-day control" arguments).

[^209]: *See* Letter from Mark C. Rosenblum, Vice President -- Law,
    AT&T, to William E. Kennard, Chairman, FCC, dated Oct. 1, 1999 at 4
    n.4 (incorporating the Applicants Reply Comments from this
    proceeding into the *Attribution* proceeding); Applicants Sept. 17
    Reply Comments at 28-36 (arguing that AT&T's post-merger interests
    in Liberty, Rainbow, and TWE should not confer influence or control
    on AT&T).

[^210]: *See Attribution Order*, 14 FCC Rcd at 19024-19032 ¶¶ 22-39.

[^211]: *In re Federal-State Board on Universal Service: Startec Global
    Communications Corp*, CC Docket No. 96-45, Memorandum Opinion &
    Order ("*Startec*"), FCC 99-75 ¶ 9 n.37 (rel. April 16, 1999)
    (citing *Industrial Broadcasting Co. v. FCC*, 437 F.2d 680, 683
    (D.C. Cir. 1970). *See also Startec*, FCC 99-75 at ¶ 9 n. 38
    ("Generally, the Commission need not re-study a matter and
    reconsider policy every time it receives an application for
    waiver.") (citing *Wait*, 418 F.2d at 1156-57).

[^212]: *See* *Startec*, FCC 99-75 at ¶ 9 (in the rulemaking, the
    Commission considered and rejected the argument that was the
    applicant's reason for a waiver).

[^213]: Applicants Ownership Comments (Dec. 21, 1999) at 35-36.

[^214]: *See Northeastern Cellular*, 897 F.2d at 1166.

[^215]: *See Attribution Order*, 14 FCC Rcd at 19026 ¶ 26 ("AT&T, TCI,
    NCTA and MediaOne argue that the Commission should take into
    account. . . the benefits of clustering and economies of scale. . .
    . They argue that the Commission should consider the benefits of
    enabling cable operators to compete with incumbent local exchange
    carriers.").

[^216]: *In re Implementation of Section 11(c) of the Cable Television
    Consumer Protection and Competition Act of 1992: Horizontal
    Ownership Limits*, MM Docket No. 92-264, Second Memorandum Opinion
    and Order on Reconsideration ("*Horizontal Second Memorandum Opinion
    and Order on Reconsideration*"), 13 FCC Rcd 14462, 14492 ¶ 77
    (1998).

[^217]: *Id.*

[^218]: *See Horizontal Third Report and Order*, 14 FCC Rcd at 19128 ¶
    73.

[^219]: *See CBS/Viacom Transfer of Control Order*, File No.
    BTCCT-19991116ABA, *et al.*, FCC 00-155 at ¶¶ 14-16, 18-22 (rel. May
    3, 2000) (granting 12-month period to comply with broadcast national
    ownership and dual network rule); *In re Applications of Turner
    Broadcasting System, Inc.*, 11 FCC Rcd 19595 ¶ 41 (1996) (granting
    12-month waiver to comply with cable-broadcast cross-ownership
    rule); *Young Broadcasting, Inc*, 11 FCC Rcd. 14632 ¶ 10 (1996)
    (granting 12-month period to comply with broadcast-cable
    cross-ownership rule); *In re Applications of Multimedia, Inc.*, 11
    FCC Rcd. 4883 ¶ 6 (1995) (granting 12-month waiver period to come
    into compliance with multiple ownership rules); *In re Applications
    of Stockholders of CBS, Inc.*, 11 FCC Rcd 3733 ¶ 95 (1995) (granting
    12-month period to come into compliance with national radio and
    television ownership rules).

[^220]: *See* Time Warner Entertainment Company, LP, Agreement of
    Limited Partnership, as amended, art. XIII (Sept. 14, 1993); *see
    also* Letter from Mark Rosenblum, AT&T Vice President -- Law, to
    Magalie Roman Salas, Secretary, FCC, dated May 24, 2000, Transmittal
    of Letter from Mark Rosenblum to Deborah Lathen, Chief, FCC Cable
    Services Bureau, dated May 24, 2000, at 2 ("Rosenblum May 24
    Letter").

[^221]: Rosenblum May 24 Letter at 3-4.

[^222]: *See* Letter from Michael Hammer, Esq., Willkie, Farr &
    Gallagher, to Magalie Roman Salas, Secretary, FCC, dated April 18,
    2000, Attachment (Proposed Safeguards Relating to Video Programming)
    ("AT&T Proposed Video Safeguards"). We believe that extending our
    six month rule compliance period by an additional six months is a
    measured and reasoned response to the particular circumstances
    presented by this case. *See WAIT Radio v. FCC*, 418 F.2d 1153, 1157
    (D.C. Cir. 1969), *cert. denied*, 409 U.S. 1027 (1972). The
    *Horizontal Third Report and Order* voluntarily staying the rule
    pending the Court of Appeals decision found that six months would be
    a reasonable period to come into compliance for those out of
    compliance on the date of the decision without any particularized
    showing. Here applicants will not be out of compliance until the
    merger closes (which may not occur until a judge has found, after a
    60 day period for public comment, that DOJ's proposed consent decree
    requiring AT&T to divest Road Runner is in the public interest
    (*see* Section IV.C *infra*)). Although the parties can certainly
    begin the process necessary to come into compliance prior to
    closing, if they choose to divest TWE, they cannot activate their
    registration rights under the TWE Limited Partnership Agreement in
    order to sell their TWE interest in a public offering until January,
    2001. In addition, if they choose to divest other cable systems, we
    believe it reasonable to give them an additional six months to
    divest cable systems representing approximately 11% of the MVPD
    market. We believe that a twelve month period for compliance with
    the horizontal rules from the date the stay was lifted is reasonable
    under these circumstances, given our further requirements (1) that
    applicants elect their option for compliance within six months of
    closing, thus demonstrating significant progress toward the goal,
    (2) that they make provision for compliance using an irrevocable
    trust if they are unable to complete the final details of
    divestiture themselves by May 19, 2001, and (3) that they comply
    with the interim conditions they have voluntarily proposed that will
    partially mitigate the harms addressed by the horizontal ownership
    rule until they obtain full compliance with the rule. We also note
    that DOJ similarly accommodated contracts governing relations
    between the parties in its consent decree requiring divestiture of
    Road Runner. *See United States v. AT&T Corp. and MediaOne Group,
    Inc.,* Case No. 1:00CV01176, Complaint and Proposed Final Judgment,
    Competitive Impact Statement at 14 (D.D.C., filed May 25, 2000);
    *see also* Section IV.C *infra*.

[^223]: Sections 214(a) and 310(d) of the Communications Act give the
    Commission independent authority to analyze the potential effect
    that the merger will have on the delivery of communications services
    to consumers. The Supreme Court reads the term public interest
    "broadly, to require consideration of all important consequences
    including anticompetitive effects." *Denver & Rio Grande Western
    Railroad v. United States*, 387 U.S. 485, 492 (1967); *see also
    United States v. FCC*, 652 F.2d 72, 94 (D.C. Cir. 1980) (citing
    *Denver*, 387 U.S. at 492-494); *Rogers Radio Communications Servs.,
    Inc. v. FCC*, 593 F.2d 1225, 1230 (D.C. Cir. 1978) ("effect on
    competition \[is\] clearly a proper factor for the Commission to
    consider under the public interest, convenience and necessity
    standard. . . "). For example, in *National Cable Television
    Association v. FCC*, the D.C. Circuit examined what factors the
    Commission must weigh when considering whether to permit a telephone
    company to offer cable services in its telephone service areas as an
    exception to Commission rules banning cross-ownership of cable
    companies and telephone companies. *National Cable Television Ass'n
    v. FCC*, 747 F.2d 1503, 1510 (D.C. Cir. 1984). The court stated that
    the "FCC might well be required to take \[the anticompetitive
    factors underlying the rules\] into account even if it were to
    abandon entirely the cross-ownership rules." *Id.*

[^224]: 47 C.F.R. § 76.503(c).

[^225]: *See* Motion to Dismiss, CS Docket No. 99-251, filed by CU on
    Aug. 17, 1999 ("Consumers Union Motion to Dismiss") at 2. Section
    76.503 has been amended since the Application was filed. *See*
    *Horizontal Third Report and Order*, 14 FCC Rcd at 19134, App. B.
    Prior to the amendment, Section 76.503(c) provided:

    > Prior to acquiring additional cable systems any person or entity
    > holding an attributable interest in cable systems reaching 20
    > percent, or more, of homes passed nationwide must certify to the
    > Commission that no violation of the national subscriber limits
    > prescribed in this section will occur as a result of such
    > acquisition.

    47 C.F.R. § 76.503(c). In light of the stay of enforcement of the
    horizontal ownership rules, the Commission relieved cable operators
    of the Section 76.503(c) requirement that the cable operator certify
    that no violation of the 30% limit will occur as a result of an
    acquisition, and ordered that the certification should specify only
    the incremental change the acquisition makes in terms of the 30%.
    *See Horizontal Second Memorandum Opinion and Order on
    Reconsideration,* 13 FCC Rcd at 14492 ¶ 76.

[^226]: *See* former 47 C.F.R. § 76.503(c).

[^227]: Consumers Union Motion to Dismiss at 1-5.

[^228]: 47 C.F.R. § 1.41

[^229]: *See* Complaint Against AT&T Corp. and Tele-Communications, Inc.
    for Misrepresentation to the Commission, Willful and Repeated
    Violations of 47 C.F.R. § 76.503(c) and for Lack of Candor, filed by
    MAP on Oct. 7, 1999 ("Consumers Union Forfeiture Request") at 1-8,
    attached to Supplement to Petition to Dismiss or Deny, CS Docket No.
    99-251, filed by Consumers Union on Oct. 7, 1999 ("CU Supplement").

[^230]: *See* CU Supplement at 1-8.

[^231]: Opposition of AT&T Corp. and MediaOne Group, Inc. to Motion to
    Dismiss, CS Docket No. 99-251, filed on Aug. 23, 1999 ("Applicants
    Aug. 23 Opposition") at 1-2.

[^232]: Opposition of AT&T Corp. to Consumers Union Forfeiture Request
    (incorporated into the record of this proceeding), filed on Oct. 18,
    1999, at 4.

[^233]: *See Horizontal Third Report and Order*, 14 FCC Rcd at 19134
    App. B, new Section 76.503(g). Section 76.503(g) provides:

    > Prior to acquiring additional multichannel video-programming
    > providers, any cable operator that serves 20% or more of
    > multichannel video-programming subscribers nationwide shall
    > certify to the Commission, concurrent with its applications to the
    > Commission for transfer of licenses at issue in the acquisition,
    > that no violation of the national subscriber limits prescribed in
    > this section will occur as a result of such acquisition.

    47 C.F.R. § 76.503(g).

[^234]: *Horizontal Third Report and Order*, 14 FCC Rcd at 19134 App. B,
    new Section 76.503(g).

[^235]: *See In re AT&T Corp.: Apparent Liability for Forfeiture*,
    NAL/Acct. No. X12000001, Notice of Apparent Liability, DA 00-978
    (CSB rel. May 2, 2000) (finding that AT&T had filed certifications
    late on three separate occasions). Consumers Union also filed a
    request that the Consumers Union Forfeiture Request be transferred
    from the Cables Services Bureau to the Enforcement Bureau for
    consideration. *See* Complaint Against AT&T Corp. and
    Tele-Communications, Inc. for Misrepresentation and Lack of Candor
    to the Commission, Willful and Repeated Violations of 47 C.F.R. §
    76.503(c) (incorporated into the record of this proceeding), filed
    by Consumers Union, Consumer Federation of America and Media Access
    Project on April 14, 2000. In light of the Cable Services Bureau
    action, we deny this request as moot.

[^236]: 47 C.F.R. §§ 76.1000-76.1004.

[^237]: EchoStar Comments at 8-9; WCA Comments at 3; Ameritech Comments
    at 18-19; BellSouth Comments at 9; Seren Reply Comments at 13-14.

[^238]: WCA Comments at 2; EchoStar Comments at 8-9; Ameritech Comments
    at 18-19; BellSouth Reply Comments at 3; Seren Reply Comments at
    1-2. BellSouth states that it does not have access to MSNBC, Fox
    News, TV Land, and the Game Show Network because they are not
    affiliated with cable operators but have exclusive contracts with
    cable operators. BellSouth Comments at 6-8.

[^239]: WCA Comments at 13-15; Ameritech Comments at 13-16.

[^240]: WCA Comments at 13; BellSouth Comments at 8-9.

[^241]: WCA Comments at 15. WCA states that the New England Cable News
    Network recently migrated from satellite to fiber delivery;
    Comcast's Philadelphia sports network is delivered by fiber;
    Cablevision's New York MSG Metro programming is delivered by fiber;
    and the Tribune Company recently migrated nearly 50 Chicago Cubs
    games from WGN to the fiber-delivered Chicago-Land Television
    Network. WCA Comments at 16-17.

[^242]: *See, e.g.,* BellSouth Comments at 9.

[^243]: DIRECTV Comments at 4-5; Ameritech Comments at 19.

[^244]: Ameritech Comments at 19-23.

[^245]: Ameritech Comments at 18-19.

[^246]: 47 C.F.R. §§ 76.1000-76.1004.

[^247]: 47 U.S.C. § 548.

[^248]: 1992 Cable Act § 2(a)(5).

[^249]: The attribution of corporate interests for purposes of the
    program access rules is determined under sections 76.501 and
    76.1000(b) of the Commission\'s rules. *See* 47 C.F.R. §§ 76.501
    n.2., 76.1000(b).

[^250]: 47 C.F.R. § 76.1002(a).

[^251]: 47 C.F.R. § 76.1002(b). This restriction is subject to certain
    limited exceptions. *Id.*

[^252]: 47 C.F.R. § 76.1002(c). Relief may be granted pursuant to a
    Commission determination that specific exclusive arrangements are in
    the public interest. 47 C.F.R. § 76.1002(c)(4). In addition,
    exclusive arrangements entered into prior to June 1, 1990, are
    \"grandfathered,\" or exempt from the exclusivity prohibition,
    provided they were not extended or renewed after October 5, 1992. 47
    C.F.R. § 76.1002(e).

[^253]: *Implementation of the Cable Television Consumer Protection and
    Competition Act of 1992, Petition for Rulemaking of Ameritech New
    Media, Inc. Regarding Development of Competition and Diversity in
    Video Programming Distribution and Carriage*, CS Docket No. 97-248,
    Memorandum Opinion and Order and Notice of Proposed Rulemaking
    (\"*Program Access Order*\"), 12 FCC Rcd 22840, 22861 ¶ 50 (1997).
    As we stated in the *Program Access Order*, there are no indications
    at this time that terrestrial delivery of programming formerly
    delivered by satellite is a significant competitive problem.
    However, if, as a trend, vertically integrated programmers began to
    switch from satellite delivery to terrestrial delivery for the
    purpose of evading the Commission\'s rules, we would \"consider an
    appropriate response to ensure continued access to programming.\"
    *Id.*

[^254]: *Program Access Order*, 12 FCC Rcd at 22861-62 ¶¶ 50-51;
    *AT&T-TCI Order*, 14 FCC Rcd at 3160, 3180 ¶ 37.

[^255]: 47 C.F.R. § 76.1003.

[^256]: *See AT&T-TCI Order*, 14 FCC Rcd at 3160, 3180 ¶ 38.

[^257]: *See id.*, 14 FCC Rcd at 3180 ¶ 39.

[^258]: *See also* *AT&T-TCI Order*, 14 FCC Rcd at 3160, 3179 ¶ 35 n.117
    ("AT&T-TCI acknowledge that the merged firm will be subject to the
    Commission's program access rules.").

[^259]: *See* 47 C.F.R. § 76.504. This restriction applies only to the
    first 75 activated channels. *Id.*

[^260]: Bell Atlantic Comments at 9-12.

[^261]: Bell Atlantic Comments at 12-14.

[^262]: *See* Letter from Douglas G. Garrett, Senior Regulatory Counsel,
    AT&T, to Magalie Roman Salas, Secretary, FCC, dated Mar. 17, 2000,
    Transmittal of Letter from Douglas G. Garrett, Senior Regulatory
    Counsel, AT&T, to Deborah Lathen, Chief, FCC Cable Services Bureau,
    dated Mar. 17, 2000.

[^263]: *Id.*; Letter from Douglas G. Garrett, Senior Regulatory
    Counsel, AT&T, to Magalie Roman Salas, Secretary, FCC, dated May 17,
    2000, Transmittal of letter from Douglas G. Garrett to Royce
    Dickens, Cable Services Bureau, dated May 17, 2000.

[^264]: *See* 47 C.F.R. § 76.504(a) (channel occupancy limits); 47
    C.F.R. § 76.1301(c) (program carriage).

[^265]: *In re Internet Ventures, Inc., Internet On-Ramp, Inc.*,
    CSR-5407-L, Memorandum Opinion and Order ("*IVI*"), FCC 00-37 ¶¶
    12-13 (rel. Feb. 18, 2000). In *IVI*, Internet Ventures, an ISP,
    petitioned the Commission for a declaration that ISPs are entitled
    to commercial leased access under Section 612 of the Communications
    Act, 47 U.S.C. § 532. *Id.* at ¶ 1. Section 612 permits unaffiliated
    video programmers to lease channel capacity on a cable system in
    order to "originate, produce and provide independent video
    programming." *Id.* at ¶ 3. The Communications Act defines "video
    programming" to mean "programming provided by, or generally
    considered comparable to programming provided by, a television
    broadcast station," 47 U.S.C. § 522(20), and the leased access
    statute requires cable operators to reserve channel capacity only
    for video programming. 47 U.S.C. § 532(a); *see IVI,* FCC 00-37 at ¶
    13. The Commission found that ISPs provide a variety of services
    that are not video programming -- including access to web sites,
    electronic mail, and video messaging -- and accordingly are not
    entitled to purchase cable channel capacity under the leased access
    rules for the carriage of such services. *Id.*

[^266]: *IVI*, FCC 00-37 at ¶ 13. The Commission stated that "regardless
    of the source of the video content," the provider would be required
    to comply with all requirements of the rule and statute at issue.
    *Id.*

[^267]: *See* Bell Atlantic Comments at 14-16; SBC Comments at 27, 29;
    AOL Comments at 8-9; SBC Reply Comments at 4. Commenters argue that
    AT&T's streaming limitation constitutes discriminatory treatment
    against unaffiliated ISPs.

[^268]: *See* Bell Atlantic Comments at 9-12.

[^269]: *See* TV Guide, Inc., Filing S-4/A, dated July 2, 1999 at 6.
    Gemstar International Group Inc. and TV Guide shareholders have
    approved a merger between the two entities. *See* TV Guide, Inc.,
    *Gemstar International Group Limited and TV Guide, Inc. Shareholders
    Approve Merger* (press release), Mar. 17, 2000 ("The transaction
    will close as soon as it receives regulatory approval . . ..").
    After the merger, Liberty and News Corp. will each own approximately
    19.5% of the equity (for a total of 39% of the equity) of TV Guide
    International, the new name for the Gemstar/TV Guide merged entity.
    *See* *Gemstar International Group Limited, Gemstar & TV Guide
    Announce Merger Agreement* (press release), Oct. 4, 1999 ("TV Guide
    shareholders will, in the aggregate, receive approximately 45% of
    the fully diluted shares of the combined company").

[^270]: TV Guide, Inc., *TV Guide Interactive & TCI Sign Long Term
    Agreement* (press release), Mar. 8, 1999.

[^271]: *See, e.g.,* SBC Comments at 37-39; AOL Comments at 10.

[^272]: *See, e.g.,* Ameritech Comments at 24-26.

[^273]: EPGs are video programming activities as that term is used in
    the ILP exemption because they permit a viewer to select video
    content for viewing. AT&T agreed not to be involved in TWE's EPG use
    or selection until it has complied with the divestiture requirements
    of this Order. *See* AT&T Video Safeguard Proposal at 2.

[^274]: AT&T states that its subscribers will be able to purchase
    set-top boxes and television sets that contain alternative EPGs.
    Applicants Sept. 17 Reply Comments at 141 (citing Kathy Haley, *New
    Directions*, Broadcasting & Cable at 18-36 (Sept. 6, 1999)). We also
    note that AT&T's cable subscribers may purchase such EPG and
    video-recording devices as TIVO and Replay and use them as
    alternatives to AT&T's TV Guide.

[^275]: *See, e.g.,* Ameritech Comments at 24-26.

[^276]: *Implementation of Section 304 of the Telecommunications Act of
    1996, Commercial Availability of Navigation Devices*, CS Docket No.
    97-80, Report and Order ("*Navigation Devices Order*"), 13 FCC Rcd
    14775, 14820 ¶ 116 (1998).

[^277]: *In re Carriage of the Transmission of Digital Television
    Broadcast Stations*, CS Docket No. 98-120, Notice of Proposed
    Rulemaking, 13 FCC Rcd 15092, 15129 ¶ 82 (1998).

[^278]: BellSouth Comments at 20-28.

[^279]: *Id.* at 21.

[^280]: *See* Letter from Michelle M. Mundt, Esq., Mintz Levin Cohn
    Ferris Glovsky and Popeo PC, to Magalie Roman Salas, Secretary, FCC,
    dated Mar. 8, 2000, Transmittal of Letter from Michelle M. Mundt,
    Esq., to To-Quyen Truong, Associate Chief, FCC Cable Services
    Bureau, dated Mar. 8, 2000, Attachment at 1 ("Mar. 8 Mundt Letter").

[^281]: *Id.*

[^282]: *Id.*, Attachment at 1-2.

[^283]: The overlapping franchise areas are Alaiedon and Woodstock
    Township, Michigan; Coweta County, Fayette County, Fulton County,
    and Peachtree City, Georgia; Dade County, Florida; Hoffman Estates,
    Inverness, and Tazewell County, Illinois; and Beaumont, Murrieta,
    and Riverside County, California. *See* Letter from Michelle M.
    Mundt, Esq., Mintz Levin Cohn Ferris Glovsky and Popeo PC, to
    Magalie Roman Salas, Secretary, FCC, dated Feb. 24, 2000,
    Transmittal of Letter from Michelle M. Mundt, Esq., to To-Quyen
    Truong, Associate Chief, FCC Cable Services Bureau, dated Feb. 24,
    2000, Attachment ("Feb. 24 Mundt Letter"). Franchise authorities
    generally grant cable operators franchises for the entire franchise
    area, but the franchised cable operator does not always intend to
    serve the entire franchise area. Thus, although MediaOne and AT&T
    have overlapping franchise authority in these 13 franchise areas,
    they are serving separate portions of these areas.

[^284]: *See, e.g.,* Ameritech Comments at 23 (deny cable competitors
    access to cable equipment and exercise market power against
    equipment manufacturers); Bell Atlantic Comments at 52-55 (AT&T
    could direct affiliate Excite@Home to purchase equipment from
    affiliate General Instruments, Inc.); SBC Comments at 7-8, 36
    (noting AT&T's vertical integration); SBC Reply Comments at 3
    (merger would harm equipment market).

[^285]: *See* SBC Comments at 36; openNET Reply Comments at 14.

[^286]: *See, e.g.,* Ameritech Comments at 24-26; SBC Reply Comments at
    2.

[^287]: 47 C.F.R. § 76.1200 *et seq*.

[^288]: *See Navigation Devices Order*, 13 FCC Rcd at 14776 ¶ 2.

[^289]: 47 U.S.C. § 549. Section 629 was adopted as part of the 1996
    Act.

[^290]: 47 U.S.C. § 549(a).

[^291]: *See Navigation Devices Order*, 13 FCC Rcd at 14778, 14787 ¶¶ 8,
    34; *see* 47 C.F.R. § 76.1205.

[^292]: *See* 47 C.F.R. §§ 76.1201, 76.1202.

[^293]: *Navigation Devices Order*, 13 FCC Rcd at 14775, 14776 ¶ 2. The
    House Report stated that

    > \[C\]ompetition in the manufacturing and distribution of consumer
    > devices has always led to innovation, lower prices and higher
    > quality. Clearly, consumers will benefit from having more choices
    > among telecommunications subscription services arriving by various
    > distribution services.

    H.R. Rep. No. 104-204, 104^th^ Cong., 1^st^ Sess. 112 (1995).

[^294]: *See* 47 C.F.R. §§ 76.1201, 76.1202.

[^295]: *See* 47 C.F.R. § 76.1206.

[^296]: Cable Labs, *Cable Labs Certifies Best Data and Com 21 Modems,
    Re-Certifies GI and RCA Modems, Re-Qualifies Cisco CMTs* (press
    release), Dec. 9, 1999; *Clearing Shelf Space: Set-Top Boxes
    Mandated to be Available Via Retail Channels by July 2000*,
    [Multichannel News,]{.smallcaps} July 19, 1999, at 15A (noting that
    Circuit City is already selling cable modems).

[^297]: *See, e.g.*, Bell Atlantic Comments at 52-55; SBC Comments at
    7-8, 36.

[^298]: Prior to the merger of General Instruments, Inc. ("GI") and
    Motorola Corporation ("Motorola"), Liberty held a 6% voting equity
    interest in GI. Letter from Joan Marsh, Director, Federal Government
    Affairs, AT&T, to Magalie Roman Salas, Secretary, FCC, dated
    November 23, 1999, Transmittal of Letter from Joan Marsh, Director,
    Federal Government Affairs, AT&T, and Susan Eid, Vice President
    Federal Relations, MediaOne Group, Inc., to To-Quyen Truong,
    Associate Chief, FCC Cable Services Bureau, dated Nov. 22, 1999, at
    2 ("Nov. 22 Marsh-Eid Letter"). However, following GI's merger with
    Motorola, completed on January 5, 2000, Liberty's holdings would not
    exceed 4% of Motorola's stock, even if all of Liberty's GI warrants
    are vested and exercised. *Id.*; *see* Motorola, Inc., *Motorola and
    General Instrument Complete Merger* (press release), Jan 5. 2000.
    The Commission generally has not considered equity interests of less
    than 5% to confer on their holders influence or attributable
    interests in the held entity. *See, e.g.,* 47 C.F.R. § 76.501 n.2
    (a) (recognizing voting stock interests of 5% or more as
    cognizable).

[^299]: *See United States v. AT&T Corp. and MediaOne Group, Inc.,* Case
    No. 1:00CV01176, Complaint and Proposed Final Judgment (D.D.C.,
    filed May 25, 2000).

[^300]: *Id.*

[^301]: *Federal-State Joint Board on Universal Service*, CC Docket No.
    96-45, Report to Congress (\"*Universal Service Report*\"), 13 FCC
    Rcd 11501, 11531 ¶ 62 (1998). IP defines the structure of data, or
    \"packets,\" transmitted over the Internet, and it was created for
    the purpose of permitting communications among a wide variety of
    networks.

[^302]: *Id. See also* Kevin Werbach, *Digital Tornado: The Internet and
    Telecommunications Polic*y (OPP Working Paper Series No. 29, 1997)
    (\"*Digital Tornado*\") at 10; Barbara Esbin, *Internet Over Cable:
    Defining the Future in Terms of the Past* (OPP Working Paper Series
    No. 30, 1998) (\"*Internet Over Cable*\") at 17-18.

[^303]: *Universal Service Report,* 13 FCC Rcd at 11531 ¶ 62 (1998).

[^304]: *Annual Assessment of the Status of Competition in the Market
    for Delivery of Video Programming*, CS Docket No. 98-102, Fifth
    Annual Report, 13 FCC Rcd 24374, 24314 n.197. \"Dial-up Internet
    access\" refers to the type of Internet access service for which the
    customer\'s computer must place a dial call to the ISP. The
    customer\'s local exchange carrier transmits the call to the ISP
    under the customer\'s normal local exchange service plan (which
    could include a separate line used by the customer solely for this
    purpose). The ISP purchases terminating access service from either
    an incumbent LEC or a competitive LEC. Once the dial-up connection
    is established, the ISP provides access to the Internet. For a more
    complete discussion of the relationship between the ISP and the LEC,
    see *AT&T-TCI Order,* 14 FCC Rcd at 3194 ¶ 67.

[^305]: Some customers obtain a higher-quality connection at speeds up
    to 128 Kbps using Integrated Services Digital Network (\"ISDN\")
    services sold by LECs. ISDN services can be used to connect with a
    wide variety of ISPs, not just the ISP affiliated with the LEC
    providing the ISDN service.

[^306]: Application at 13. WorldNet serves 1.8 million residential
    customers, as compared with America Online\'s approximately 22
    million customers and Earthlink's approximately 3 million customers.
    AT&T states that its primary focus is residential customers and
    dial-up service, but that it also offers private line and Frame
    Relay service at speeds of up to 45 Mbps.

[^307]: For a more complete discussion of broadband services, see
    *Broadband Today*: *A Staff Report to William E. Kennard, Chairman,
    Federal Communications Commission,* Cable Services Bureau, Federal
    Communications Commission, Oct. 1999 ("*Broadband Today*").

[^308]: Kinetic Strategies, Inc., *Cable Modem Market Stats &
    Projections*, http://www.cabledatacomnews.com/cmic/cmic16.html; 1999
    *Competition Report*, 15 FCC Rcd at 1005 at ¶ 56.

[^309]: TeleChoice, Inc. *Deployment -- Updated, May 5, 2000*,
    http://www.xdsl.com/content/resources/ deployment_info.asp. DSL
    technology upgrades the performance of the standard twisted pair
    (the copper line connecting most homes and businesses) to carry
    high-capacity data transmission. The technology expands the amount
    of frequency used over the copper line, whereby the line's high
    frequencies are used to transmit the data and the lower frequencies
    are free to transmit voice or fax transmissions. *See Broadband
    Today* at 20. While most cable modem customers are residential
    Internet users, it is difficult to discern what portion of DSL
    subscribers are residential. Some estimates of DSL subscribership
    (including business lines) are as high as 1.3 million. *See* Neil
    Strother, *Consumers and Biz Have the Hots for DSL,* [ZDNet
    Anchordesk]{.smallcaps}, Dec. 1, 1999,
    http://www/zdnet.com/anchordesk/story/story_4169.html.

[^310]: *See* Application at 17 & n.45.

[^311]: *Id.* at 17; AT&T Corp., *Excite@Home's Principle Cable Partners
    Extend Distribution Arrangements, AT&T Assumes More Prominent Role*
    (press release), Mar. 29, 2000.

[^312]: *See, e.g.* AtHome Corp., *Filing 10-Q* *for the Quarter Ended
    Sept. 30, 1999*, at 8-10, 12, 14, 39. (Excite@Home is "the leading
    provider of broadband Internet services over the cable television
    infrastructure to consumers. By virtue of our relationships with 21
    cable companies in North America and Europe, we have access to
    approximately 65 million homes, which includes exclusive access to
    over 50% of the households in the United States and Canada capable
    of receiving cable television.").

[^313]: AtHome Corp., *Excite@Home Reports First Quarter 2000 Financial
    & Operating Results* (press release), Apr. 19, 2000. Road Runner,
    *Road Runner Announces strong First Quarter* (press release), Apr.
    12, 2000.

[^314]: *See, e.g.,* SBC Aug. 23 Comments at 31-40.

[^315]: By "interactive television services," we refer generically to an
    array of services that AT&T and other broadband providers plan to
    offer by means of the advanced digital set-top box. The services
    will be delivered through the consumer's television set or personal
    computer.

[^316]: We address the merger's effect on EPG services in Section IV.A.,
    *supra.*

[^317]: Excite@Home plans to offer the full range of interactive
    television services over AT&T systems, including Internet access.
    *See* AT&T Corp., *Excite@Home'sPrinciple Cable Partners Extend
    Distribution Arrangements, AT&T Assumes More Prominent Role* (press
    release), Mar. 29, 2000. AT&T plans to begin offering Excite@Home
    through set top boxes in the summer and fall of 2000 as a two-tier
    service. The scaled-down version will offer only e-mail, shopping
    information, news, sports, and weather headlines at no extra cost to
    digital customers, while for an extra \$15 per month, customers will
    have access to the full Internet, personalized news, weather and
    sports, e-mail, enhanced TV overlays, electronic commerce,
    interactive programming, wireless keyboard, and other advanced
    features. *See Excite@Home Prepares to Start Internet TV Service,*
    [Communications Daily,]{.smallcaps} Mar. 31, 2000.

[^318]: At the Public Forum held on February 4, 2000, AT&T General
    Counsel Jim Cicconi explained that the Applicants' exclusive
    contracts with Excite@Home and Road Runner apply to all Internet
    access via the merged entity's cable systems, including Internet
    access via the digital set-top box. *See* Cicconi Public Forum
    Testimony, Tr. 101-02.

[^319]: *See* Application at Appendix A; Paul Kagan Assocs., Inc.,
    *Media Index Data Base*, The Kagan Media Index, Oct. 31, 1999, at 8.
    We have received various proposals regarding the appropriate measure
    of the Applicants' horizontal reach in the provision of broadband
    Internet services, based on their ownership interests in either
    cable systems or Excite@Home and Road Runner. Possible measures
    include, for example: (1) the total number of Excite@Home and Road
    Runner subscribers; (2) the total number of AT&T and MediaOne
    broadband Internet subscribers, excluding those of TWE; (3) the
    total number of AT&T and MediaOne broadband Internet subscribers,
    including those of TWE; (4) the total number of homes passed by AT&T
    and MediaOne cable systems, but excluding TWE cable systems; (5) the
    total number of homes passed by upgraded AT&T and MediaOne cable
    systems, but excluding TWE cable systems; (6) the total number of
    homes passed by AT&T and MediaOne cable systems, including TWE cable
    systems; and (7) the total number of homes passed by upgraded AT&T
    and MediaOne cable systems, including TWE cable systems.

[^320]: *See, e.g.,* GTE Comments at 49-58; SBC Aug. 23 Comments at
    40-43; Bell Atlantic Comments at 43-49.

[^321]: Excite@Home's caching capabilities are generally described on
    the company's Internet home page in a document entitled AtHome
    Corp., *\@Home* *Network Architecture*,
    http://www.home.net/about/network.html.

[^322]: *See, e.g.,* GTE Comments at 49-58; Bell Atlantic Comments at
    35-39, 43-46.

[^323]: With respect to pricing, GTE argues that ". . . a combined
    Excite@Home will be able to demand steep payments -- including
    possible equity positions -- from software and content providers in
    exchange for preferential placement on its system." GTE Comments at
    54 (citation omitted).

[^324]: GTE Comments at 49-53; GTE Nov. 1 Reply Comments at 23-28; SBC
    Aug. 23 Comments at 33-37.

[^325]: Parties urging "open/forced access" include GTE, Bell Atlantic,
    Ameritech, AOL, MCI Worldcom, SBC Communications, Mindspring, U.S.
    West, Bellsouth, Quest, the Telecommunications Advocacy Project,
    Sprint, and the Consumers Union, *et al.*

[^326]: *See, e.g.,* MCI WorldCom Comments at 6-26; *Ex Parte* Comments
    of Professors Mark A. Lemley and Lawrence Lessig ("Lemley and Lessig
    Comments"), *passim.*

[^327]: *See, e.g..* Bell Atlantic Comments at 35-39; GTE Comments at
    49-58.

[^328]: *See* Lemley and Lessig Comments, *passim.*

[^329]: SBC Aug. 23 Comments at 43-47; MindSpring Comments, *passim*; U
    S West Aug. 23 Comments at 17-20; Qwest Comments at 3-8; Bell
    Atlantic Comments at 40-42.

[^330]: In *Broadband Today* (at 42), the Cable Services Bureau found
    that "\[a\]s deployment of DSL, satellite, and wireless advances, in
    large part spurred by rapid cable modem deployment deployment,
    consumers will have alternative platforms to use for high-speed data
    access, telephony and video services." Analysts appear to disagree
    on when or if cable-based Internet access will lose its current lead
    over alternative broadband technologies. Some believe that the
    recent surge in DSL deployment signals that cable modem service has
    only "a six-month lead on DSL technologies," Sylvia Dennis, *DSL
    Taking off Big Time,* [Newsbytes News Network,]{.smallcaps} Aug. 17,
    1999, 1999 WL 20018859, and that DSL subscribership will surpass
    cable modem subscribership in 2001. Vito Racanelli*, AOL-Time Warner
    Deal Leaves Baby Bells Unjustly Shunned,* [barons,]{.smallcaps} 2000
    WL-[Barrons]{.smallcaps} 2363618, Jan. 15, 2000. Others predict that
    the cable industry will continue to be the high-speed access market
    leader over the next few years. *See* Yankee Group Report*, Cable
    Modems and DSL: High-Speed Growth for High-Speed Access,*quoted in
    Steven Bonisteel, *High-Speed Net in 16.6 Homes by 2004,* [Newsbytes
    News Network,]{.smallcaps} Jan. 28, 2000,
    http://www.newsbytes.com/pubNews/00/142944.html. There is little
    dispute, however, that cable faces increasing competition from
    alternative broadband technologies.

[^331]: *See Broadband Today* at 24-26. *See also* Kinetic Strategies,
    Inc*., Commercial Cable Modem Launches in North America*,
    http://www/cabledatacomnews.com/cmic/cmic7.html.

[^332]: For example, SBC Communications announced in October 1999 its
    "Project Pronto," a \$6 billion commitment to upgrade networks and
    deploy high-speed DSL technology nationwide. *See* Patricia Fusco*,
    SBC Makes \$6 Billion Broadband Play*,
    I[nternetNews.com,]{.smallcaps} Oct.18, 1999,
    http://www.internetnews.com/ISP-news/article/0,1087, 8_220301,
    00.html; (based on announcements by RBOCs and other DSL providers,
    80 million homes are passed by DSL and 60 million homes are
    currently servable by DSL) *see also* DSL Prime, *Want to Win in
    ADSL? US DSL Deployment and Subscribers-Updated Feb. 4, 2000,*
    http://www.dslprime.com/News_Articles/Availability/
    availability.html. ("In March of 1999, industry experts predicted
    there would be only 500,000-600,000 active DSL lines by the end of
    1999. Data from late 1999 indicates the actual number is more than
    double the predictions, at approximately 1.3 million."). Neil
    Strother, *Consumers and Biz Have the Hots for DSL,* [ZDNet
    Anchordesk,]{.smallcaps} Dec[. 1, 1999,]{.smallcaps}
    http://www.zdnet.com/anchordesk/story/story_4169.html[.]{.smallcaps}

[^333]: Cambridge Telecom Report*, DSL Deployment Surges Well Beyond
    Projections; Grows Five Times Faster Than Cable in Six-Month
    Period*, Aug. 17, 1999,1999WL 8104033; Shy Shin Luh, *Digital
    Subscriber Lines Are the Latest Internet Wave, But Baby Bells Aren't
    Making the Connection Quickly*, [Washington Post]{.smallcaps}, Aug.
    23, 1999 at F5. A recent report by TeleChoice shows spectacular DSL
    growth during 1999 and projects continued rapid growth in the
    future. *See* TeleChoice, Inc., *Deployment -- Updated Nov. 5,
    1999,* http://www.xdsl.com/content/resources/deployment_info.asp.
    The Yankee Group predicts 4.1 million DSL lines in 2002. *See* Sarah
    L. Roberts-Witt, *The Coming DSL-Cable Race*, I[nternet
    World,]{.smallcaps} Nov. 15, 1999,
    http://www.iw.com/print/1999/11/15/infra/19991115-DSL.html.

[^334]: The Commission's Cable Services Bureau observed in October 1999
    that: "The ILECs' aggressive deployment of DSL can be attributed in
    large part to the deployment of cable modem service. Although the
    ILECs have possessed DSL technology since the late 1980s, they did
    not offer the service, for concern that it would negatively impact
    their other lines of business. The deployment of cable modem
    service, however, spurred the ILECs to offer DSL or risk losing
    potential subscribers to cable." *Broadband Today* at 27 (footnotes
    omitted). In July 1999, Bell Atlantic announced that it would double
    its deployment of DSL during 2000. In the same month, Ameritech
    launched its DSL program, and GTE announced that it was accelerating
    DSL deployment. In October 1999, SBC announced its \$6 billion
    "Project Pronto" initiative. *See* Bell Atlantic Corp., *Bell
    Atlantic Doubles Infospeed DSL Deployment* (press release), July 28,
    1999; David Schobert, *Ameritech takes DSL leap -- finally*,
    [telephony,]{.smallcaps} July 26, 1999, 1999WL 11171924; GTE Corp.,
    *GTE to offer lower-priced, higher speed Internet access service
    while accelerating deployment in 17 states* (press release), July
    22, 1999; SBC Communications, Inc., *SBC Launches \$6 Billion
    Broadband Initiative* (press release), Oct. 19, 1999.

[^335]: Covad's network already passes 25 million homes and businesses,
    and by the end of 2000 it expects to pass over 40 percent of the
    homes in the United States. *See* Covad Communications Group, Inc.,
    *Covad Communications Announces Third Quarter Results* (press
    release), Oct. 20, 1999.

[^336]: *See In the Matter of Deployment of Wireline Services Offering
    Advanced Telecommunications Capability, Third Report and Order, and
    Implementation of the Local Competition Provisions of the
    Telecommunications Act of 1996,* Fourth Report and Order*,* FCC
    99-355 (rel. Dec. 9, 1999), recon. pending, United States Telecom
    Association, *et. al.* v. FCC, No. 00-1012, *et. al.* (D.C. Cir.
    filed Jan. 18, 2000).

[^337]: Teligent, Inc, *About Us*, http://www.teligent.com.

[^338]: Winstar Communications, Inc., *Winstar Info*,
    http://www.winstar.com/info/content_technology.asp (web page)
    (viewed May 30, 2000).

[^339]: *See* Phillips Business Information, Inc., *MCI, Sprint Continue
    Mad Grab for Access,* [Broadband networking news,]{.smallcaps} 1999
    WL 7397825 at 1, Aug. 3, 1999.

[^340]: Sanford C. Bernstein & Co., Inc. and McKinsey & Co., Inc.,
    *Broadband! A Joint Industry Study* (Jan. 2000) ("*Broadband!*") at
    33.

[^341]: *See* JP Morgan, *Industry Report: The Mobile Millennium --
    Wireless Telecommunications Services* (May 3, 2000) at 3 ("Last year
    was an extraordinary year for the wireless industry. The industry
    added 16.8 million subscribers, up 21% from 13.9 million in 1998.
    The standard industry metric for subscriber growth is incremental
    penetration, which is defined as net additional subscribers divided
    by population. After several years of 3-4% annual incremental
    penetration, the rate started to accelerate with the introduction of
    PCS competition in 1997 and has continued to accelerate. Last year
    the industry achieved more than 6% of incremental penetration, and
    all indications are that it could reach 7% or more in 2000.").

[^342]: *Broadband!* at 54 ("Satellite has not been included in our
    overall estimates because it does not yet offer true broadband
    service currently, and won't until at least 2002 with the advent of
    Ka-band two-way service. Current cost for two-way CPE for the
    Ka-band is well over \$1,000, and considerable improvement from that
    level will be required.").

[^343]: Hughes Network Systems, *Spaceway,
    http://www.hns.com/spaceway/spaceway.com*.

[^344]: Motorola, Inc., *Teledesic, Motorola, Boeing, Matra Marconi
    Space to Partner on 'Internet-in-the-Sky;' Motorola Will Lead Global
    Industrial Team* (press release), May 21, 1998. In addition, several
    companies, including DirecPC, eSat and Gilat, are already offering
    satellite-based broadband Internet service. Hughes Network Systems,
    *DirecPC Satellite Solution Combines Speed, Bandwidth and
    Reliability to Deliver Ideal Internet Access Solutions for Business*
    (press release), Nov. 15, 1999; eSat, Inc., *Introduction to eSat,
    Inc. Satellite Internet Solutions* (newsletter, updated),
    http://www.esatinc.com/satellite1.htm; *Microsoft and Gilat Begin
    2-Way Satellite Satellite Internet Service: New Telephone-Free
    Operation Scheduled to reach 20,000 U.S. Sites,* [Communications
    Daily]{.smallcaps} (Feb. 17, 2000. AlphaStar International recently
    began 2-way Ku-band satellite broadband service for residential
    Internet users of wireless local access. AlphaStar's satellite-based
    broadband service is expected to compete directly with cable, DSL
    and wireless offerings, as well as with more established satellite
    companies such as DirecPC and Gilat-to-Home. [Communications
    Daily]{.smallcaps} (May 23, 2000).

[^345]: MindSpring recently merged with the ISP EarthLink. EarthLink,
    *EarthLink and MindSpring Complete \$4 Billion Merger Creating
    Nation's Largest Independent ISP* (press release), Feb. 4, 2000.

[^346]: *See* Cicconi Public Forum Testimony, Tr. at 110-11.

[^347]: Letter from Joan Marsh, Director, Federal Government Affairs,
    AT&T, to Magalie Roman Salas, Secretary, FCC, dated Dec. 7, 1999,
    Transmittal of letter from James W. Cicconi, General Counsel, AT&T,
    to William Kennard, Chairman, FCC, dated Dec. 6, 1999.

[^348]: Letter from Betsy J. Brady, Vice President, Federal Government
    Affairs, AT&T, to Magalie Roman Salas, Secretary, FCC, dated May 11,
    2000, Transmittal of Letter from James W. Cicconi, General Counsel,
    AT&T, to William E. Kennard, Chairman, FCC, dated May 10, 2000.

[^349]: *Id.* ("Second, as a matter of principle and of customer
    satisfaction, AT&T is committed to facilitate maximum access by its
    customers to any content of their choosing. Therefore, AT&T is
    committed to developing and negotiating appropriate technical and
    commercial mechanisms for managing bandwidth usage associated with
    video streaming on a shared network, and for ensuring the
    availability of streaming video to customers who desire it.").

[^350]: In this regard, we note that at least seven of the eleven
    largest cable operators are exploring means to offer multiple ISPs
    access to their cable infrastructure. Those cable operators include
    Time Warner, Charter Communications, Classic Communications,
    Comcast, Cox Comunications, Insight Comunications, Adelphia
    Communications, and Cablevision Systems. *See Leading Cable MSOs
    Quietly Shifting Toward Open Access,* [Communications
    Daily,]{.smallcaps} Apr. 6, 2000; Memorandum of Understanding
    Between Time Warner, Inc. and America Online, Inc. Regarding Open
    Access Business Practices (Feb. 29, 2000), filed in *Applications
    for Consent to the Transfer of Control of Licenses, Time Warner,
    Inc. and America Online, Inc., Transferors, to AOL Time Warner,
    Inc., Transferee,* CS Docket No. 00-30.

[^351]: *See United States v. AT&T Corp. and MediaOne Group, Inc.,* Case
    No. 1:00CV01176, Complaint and Proposed Final Judgment (D.D.C.,
    filed May 25, 2000).

[^352]: *Id.*

[^353]: *Id.*

[^354]: 1996 Act § 706, 110 Stat. 153.

[^355]: *See Inquiry Concerning Deployment of Advanced
    Telecommunications Capability to All Americans in a Reasonable And
    Timely Fashion, and Possible Steps To Accelerate Such Deployment
    Pursuant To Section 706 of the Telecommunications Act of 1996*,
    Notice of Inquiry, CC Docket No. 98-146, FCC 00-57 (rel. Feb. 18,
    2000). The Commission's past monitoring of market developments
    pursuant to our Section 706 authority is reflected in the Cable
    Services Bureau's *Broadband Today* report, released in October,
    1999. In that report, the Bureau examined issues related to the
    deployment of broadband Internet services, primarily focussing on
    the question of whether the Commission should implement an
    open/forced access requirement. *See*, *e.g.*, *Broadband Today* at
    9-15.

[^356]: *See* Carol Wilson, *Broadband: Get Ready for the Gale*, ZDNN,
    June 26, 1999, http://www.zdnet.com/zdnn/stories/news (industry
    analysts expect that "software and applications designed to exploit
    the high bandwidth market" will be developed in earnest once the
    total number of broadband customers surpasses one million).

[^357]: Applicants Sept. 17 Reply Comments at 86.

[^358]: *Id*.

[^359]: MCI WorldCom and MindSpring argue that the Commission, in the
    context of its merger review, should rule that AT&T and MediaOne,
    insofar as they provide Internet access over cable, should be
    classified as "common carriers" subject to the provisions of Title
    II of the Communications Act of 1934. *See* MindSpring Comments at
    3, 7-16; MCI WorldCom Comments at 26-32. MindSpring further argues
    that the Admininstrative Procedure Act (5 U.S.C. §§ 551 *et. seq.*)
    requires the Commission to decide whether Title II applies to the
    Applicants because, given the Applicants' prior arguments that an
    "open/forced access" requirement would prevent their investments to
    make system upgrades, such a requirement would cause the anticipated
    benefits of the merger to disappear. *See* MindSpring Comments at
    19-21. We find this scenario unpersuasive, particularly because the
    Applicants continue to project extensive system upgrades and
    deployment of new services following the December 6, 1999
    AT&T-MindSpring letter memorializing AT&T's "open access"
    commitment, which is discussed above.

[^360]: *Amicus Curiae* Brief of the FCC at 9-11, *AT&T Corp. v. City of
    Portland,* No. CV 99-65 PA (9^th^ Cir. filed Aug. 16, 1999). The
    issue is pending in the forementioned litigation. In addition, the
    United States Court of Appeals for the Eleventh Circuit recently
    held that the Commission is not authorized under the 1996 Pole
    Attachment Act, 47 U.S.C. § 224, to regulate pole attachments for
    cable facilities used to provide "Internet service" because such
    service is neither a "cable service" nor a "telecommunications
    service." *Gulf Power Company v. FCC,* No. 98-6222, slip. op. at 26-
    30 (11^th^ Cir. Apr. 11, 2000).

[^361]: These concerns are exemplified by AT&T's recent acquisition of
    32% of Internet telephony provider Net2Phone for \$1.4 billion in
    cash, as part of a consortium of large media players including AOL
    and Liberty Media. (The consortium will hold a 39% voting interest.)
    The deal will require AT&T to work closely with AOL. AT&T Chairman
    Michael Armstrong stated that the company will soon announce another
    partnership with AOL in an undisclosed technology company. *See*
    AT&T Corp., *AT&T Consortium to Acquire 39 Percent Voting Stake in
    Net2Phone* (press release), Mar. 31, 2000.

[^362]: Some commenters argue that our review of the merger of AT&T and
    MediaOne should consider the impact of the proposed merger of AOL
    and Time Warner, Inc. *See* Schwartzman Public Forum Testimony, Tr.
    at 19-21. We find that it is inappropriate to consider the proposed
    merger of AOL and Time Warner in this proceding based on: (a) the
    assumption that the AOL-Time Warner merger will be approved and
    consummated, and (b) speculation regarding the competitive effects
    of that merger before full comment and review of the evidence has
    been completed. We conclude that the competitive effects of the
    proposed merger of AOL and Time Warner should be evaluated
    separately and fully in that merger review proceding.

[^363]: *See* ¶ 112, *supra*; *see also* Letter from Lorrie M. Marcil,
    Esq., Sidley & Austin, to Magalie Roman Salas, Secretary, FCC, dated
    Apr. 3, 2000, attaching e-mail message from Susan K. Marshall, AT&T,
    to Carl Vogel, AT&T, dated Aug. 26, 1999 (Bates Nos. 002759,
    02769-02771).

[^364]: The Communications Act defines \"local exchange carrier\" as any
    person that is engaged in the provision of telephone exchange
    service or exchange access. 47 U.S.C. § 153(26). The term
    \"telephone exchange service\" means \"(A) service within a
    telephone exchange, or within a connected system of telephone
    exchanges within the same exchange area, operated to furnish to
    subscribers intercommunicating service of the character ordinarily
    furnished by a single exchange, and which is covered by the exchange
    service charge, or (B) comparable service provided through a system
    of switches, transmission equipment, or other facilities (or
    combination thereof) by which a subscriber can originate and
    terminate a telecommunications service.\" 47 U.S.C. § 153(47). The
    term \"exchange access\" means \"the offering of access to telephone
    exchange services or facilities for the purpose of origination or
    termination of telephone toll services.\" 47 U.S.C. § 153(16).

[^365]: Application at 36.

[^366]: Section 652(b) of the Communications Act prohibits cable
    operators from acquiring a financial interest greater than 10% or
    any management interest in a LEC serving the cable operator's
    franchise area. 47 U.S.C. § 572(b); *see* 47 C.F.R. § 76.505(b).
    MediaOne previously held a 14.7% equity interest and an 18.3% voting
    interest in TWT. Letter from Howard J. Symons, Mintz, Levin, Cohn,
    Ferris, Glovsky and Popeo, P.C., to Magalie Roman Salas, Secretary,
    FCC, dated Mar. 24, 2000, Transmittal of Letter from Susan M. Eid,
    Vice President, Federal Relations, MediaOne, to To-Quyen Truong,
    Associate Chief, FCC Cable Services Bureau, dated Mar. 24, 2000. In
    response to concerns that the proposed merger of AT&T and MediaOne
    may violate Section 652(b), MediaOne reduced its equity and voting
    interests in TWT to approximately 6% and 7.7%, respectively, thereby
    also relinquishing its management rights. *See* May 9 Eid Letter.
    MediaOne's action rendered moot the question of whether AT&T's
    acquisition of MediaOne would violate Section 652(b). 47 U.S.C. §
    572(b)*.*

[^367]: *See AT&T-TCI Order*, 14 FCC Rcd at 3186 ¶ 50 ("incumbent LECs
    are facing increasing competition in markets for local exchange and
    exchange access services provided to business customers, and
    'numerous new entrants are rapidly entering this market'");
    *SBC-SNET Order*, 13 FCC Rcd at 21301-02 ¶ 20; *AT&T-Teleport
    Order*, 13 FCC Rdc at 15250-01 ¶ 27.

[^368]: Letter from Stephen Garavito, General Attorney, AT&T, to
    To-Quyen Truong, Associate Chief, FCC Cable Services Bureau, dated
    May 24, 2000.

[^369]: *Id.*

[^370]: *See* Section III.A. *infra.* In 1999, market trials of
    telephony services were launched in the San Francisco Bay Area,
    Chicago, Pittsburgh, Dallas, Denver, Seattle, Salt Lake City, and
    Portland. AT&T Corp., *AT&T -- MediaOne Combination Will Speed Local
    Phone Competition and Bring High Speed Internet Services to More
    Consumers, AT&T's Cicconi Says* (press release), Feb. 4, 2000.

[^371]: *See* AT&T Fixed Wireless Slides; *see also* Goldman Sachs Dec.
    7 AT&T Report; Paine Webber Dec. 7 AT&T Report at 2; Feb. 11 Marsh
    Letter; AT&T Corp., *AT&T 'Cuts The Cord' Top Provide Services Into
    Homes* (press release), Mar. 22, 2000.

[^372]: *See* AT&T Fixed Wireless Slides; *see also* Goldman Sachs Dec.
    7 AT&T Report; Paine Webber Dec. 7 AT&T Report, at 2; Feb. 11 Marsh
    Letter.

[^373]: *See* AT&T Fixed Wireless Slides; *see also* Goldman Sachs Dec.
    7 AT&T Report; Paine Webber Dec. 7 AT&T Report, at 2; Feb. 11 Marsh
    Letter.

[^374]: MediaOne Group, Inc., *MediaOne Installs 100,000^th^ U.S.
    Digital Telephone Customer* (press release), May 18, 2000.

[^375]: Application at 34.

[^376]: May 25 Eid Letter.

[^377]: Application at 34 n.71.

[^378]: *Id.* In Georgia, AT&T and MediaOne together serve less than
    15,000 local customers through facilities-based service and resale.
    *Id.* at 35.

[^379]: Letter from Joan Marsh, Director, Federal Government Affairs,
    AT&T, to Magalie Roman Salas, Secretary, FCC, dated Feb. 18, 2000,
    Transmittal of Letter from Joan Marsh, Director, Federal Government
    Affairs, AT&T, to To-Quyen Truong, Associate Chief, FCC Cable
    Services Bureau, dated Feb. 18, 2000.

[^380]: *Id.*

[^381]: *See*, *e.g.*, *AT&T-TCI Order*, 14 FCC Rcd at 3185 ¶ 47. The
    term "most significant market participant" refers to service
    providers that are "either in the market already or are the most
    likely to enter and to have an effect on the market . . . ." *Bell
    Atlantic-NYNEX Order*, 12 FCC Rcd at 20024-25 ¶ 70.

[^382]: *AT&T-TCI Order*, 14 FCC Rcd at 3185 ¶ 47.

[^383]: AT&T Corp., *AT&T 'Cuts the Cord' To Provide Services Into
    Homes* (press release), Mar. 22, 2000; Goldman Sachs Dec. 7 AT&T
    Report, at 3. While AT&T\'s fixed wireless initiative predated the
    announcement of the proposed merger, AT&T\'s specific statements
    that it plans to use fixed wireless to provide local exchange
    service in areas where it does not have a cable presence occurred
    after the filing of the Application.

[^384]: Application at 40-41 n.91. These overlapping interests include
    cellular interests held by BCP CommNet, L.P., which was acquired by
    Vodafone AirTouch. *Applications of BCP CommNet, L.P. Transferor,
    and Vodafone Airtouch, PLC Transferee, for Consent to Transfer of
    Control of Licenses*, Memorandum Opinion and Order, DA 99-3009 (WTB,
    rel. Dec. 27, 1999).

[^385]: *Id.* at 8.

[^386]: Nov. 24 Lindsay Letter; *see also* Application at 16. Since the
    filing of the Application, Vodafone has merged its U.S. wireless
    interests with those of Bell Atlantic and formed Verizon Wireless,
    further diluting MediaOne's stake in Vodafone's U.S. wireless
    interests. *See In re Applications of Vodafone AirTouch, Plc, and
    Bell Atlantic Corporation*, Memorandum Opinion and Order, DA 00-721
    (WTB/IB, rel. Mar. 30, 2000).

[^387]: 47 C.F.R. § 22.942(a) (1999).

[^388]: *1998 Biennial Regulatory Review Spectrum Aggregation Limits for
    Wireless Telecommunications Carriers*, WT Docket Nos. 98-205 *et
    al.*, Report and Order, FCC 99-244 (rel. Sept. 22, 1999) ("*Spectrum
    Cap Order*").

[^389]: 47 C.F.R. § 22.942(a) (2000 forthcoming); *Spectrum Cap Order*,
    FCC 99-244 at ¶ 74. This rule continues to require that a party with
    a controlling interest in one cellular licensee in a CGSA may not
    have a controlling interest, no matter how small, in the other
    licensee in that market.

[^390]: Echostar Comments at 6; Qwest Comments at 17-18 n.21; Ameritech
    Comments at 33.

[^391]: Nov. 22 Marsh-Eid Letter at 4; *see also* Application at 42.

[^392]: *See* *AT&T-TCI Order*, 14 FCC Rcd at 3219 ¶ 125.

[^393]: *Id.*

[^394]: *AT&T-TCI Order,* 14 FCC Rcd at 3219 ¶ 126. In other words,
    consumers would not be harmed if rivals could offer a similar
    package of bundled services. To illustrate with a simple
    non-telecommunications example, a firm that bundled flour and sugar
    could inflict no competitive harm on either sugar or flour sellers
    because each could match the offer by buying the other product in an
    open, competitive market. The bundling would be profitable (*i.e*.,
    a sound business strategy) only if there were some efficiency
    associated with selling flour and sugar as a bundled package.

[^395]: Ameritech Comments at 32; EchoStar Comments at 6. Ameritech
    further contends that AT&T could tie-up consumers with long-term
    contracts and high exit fees that foreclose competition from new
    entrants in the MVPD and Internet access markets. Ameritech Comments
    at 33.

[^396]: *1999 Competition Report*, 15 FCC Rcd at 981 ¶ 5.

[^397]: *Id.*, 15 FCC Rcd at 981 ¶ 7. Non-cable MVPD subscribers
    increased 26% (to nearly 14.2 million) from the previous year,
    whereas cable subscribers grew only 2% for the same period. Much of
    the increase in non-cable MVPD subscribers is attributable to the
    growth of DBS. See *id*. at ¶¶ 8, 16. Currently, DBS subscribers
    represent over 12.5% of all MVPD subscribers, an increase of
    approximately 39% since June 1998. *See id.* at ¶¶ 8, 70.

[^398]: *AT&T-TCI Order*, 14 FCC Rcd at 3219 ¶ 126.

[^399]: *See, e.g.*, Sherman Antitrust Act, 15 U.S.C. § 1; *Eastman
    Kodak Co. v. Image Technical Servs., Inc.*, 504 U.S. 451, 461-62
    (1992); CA Bus. & Prof. Code § 16720 (California); C.R.S.A. §
    6-4-104 (Colorado); F.S.A. § 542.18 (Florida); IL ST CH 740 § 1013
    (Illinois); N.J. St. § 56:9-3 (New Jersey); NY Gen. Bus. § 340 (New
    York); TX Bus. & Com. § 15.05 (Texas).

[^400]: TAP Comments at 33-34; TAP Supplement to Petition to Deny at 3
    ("TAP Supplement"); SBC Sept. 17 Reply Comments at 3.

[^401]: Testimony of Khalil Munir, Executive Director, TAP, FCC Cable
    Services Bureau AT&T-MediaOne Public Forum (Feb. 4, 2000), Tr. at
    186-88 (hereinafter "Munir Public Forum Testimony").

[^402]: TAP Comments at 16, 18-19.

[^403]: *Id.* at 15; TAP Supplement at Exhibit A. TAP's allegations are
    based on its examination of MediaOne's initial network design,
    construction schedules, and actual service areas for the greater
    metropolitan areas of Los Angeles, California, and Richmond,
    Virginia.

[^404]: TAP Supplement at 2.

[^405]: 47 U.S.C. § 309(d)(1).

[^406]: Section 1 of the Communications Act charges the Commission with
    ensuring that communictaions services are made available, "so far as
    possible, to all the people of the United States, without
    discrimination on the basis of race, color, religion, national
    originn, or sex . . . "). 47 U.S.C. § 151.

[^407]: Joint Manager's Statement, S. Conf. Rep. No. 104-230 at 113.
    *See* 47 U.S.C. § 254(b)(3) (the 1996 Act envisions that
    "\[c\]onsumers in all regions of the Nation, including low income
    consumers and those in rural, insular, and high cost areas, should
    have access to telecommunications and information service. . .").

[^408]: 47 U.S.C. § 309(d)(2); *WorldCom-MCI* *Order*, 13 FCC at 18144
    ¶209.

[^409]: *Astroline Communications Company Ltd. v. FCC*, 857 F.2d 1556,
    1561 (D.C. Cir. 1988).

[^410]: Letter from Susan Eid, Vice President, Federal Relations,
    MediaOne Group, Inc., to Magalie Roman Salas, Secretary, FCC, dated
    Oct. 14, 1999, Attachment (Ex Parte Presentation of MediaOne Group)
    ("MediaOne Oct. 14 Redlining Rebuttal Filing ") at 3. While TAP's
    maps illustrate that the low-income communities of Boyle Heights,
    Huntington Park, South Gate, El Monte, Bell, Cudahy, Pacoima,
    Norwalk, and Hawthorne were not upgraded, these communities are not
    franchised to be served by MediaOne. Accordingly, MediaOne could not
    have upgraded those communities.

[^411]: *Id.* at 3 n.7.

[^412]: *Id*. at 2. MediaOne stated that it was difficult to ascertain
    the precise areas where TAP alleges that discriminatory deployment
    occurred, because TAP's maps did not include ZIP codes, community
    names, nor any other geographic references. *Id*. at 2 n.3. MediaOne
    produced its own maps that illustrated its franchise areas with
    relevant geographic information. *See* MediaOne Oct. 14 Redlining
    Rebuttal Filing; Letter from Lorrie M. Marcil, Esq., Sidley &
    Austin, to Magalie Roman Salas, Secretary, FCC, dated Jan. 27, 2000,
    Attachment (Ex Parte January 14, 2000 MediaOne Presentation on
    Status of Deployment of High-Speed Internet and Local Telephone
    Services in MediaOne Markets) ("MediaOne Jan. 27 Deployment Status
    Update"). In addition to Los Angeles and Richmond, MediaOne produced
    maps and demographic data for the following areas: Northern
    California; Ohio; New York; New Hampshire; Minnesota; Michigan;
    Massachusetts; Florida; and Atlanta, Georgia.

[^413]: TAP Supplement at 3.

[^414]: MediaOne Oct. 14 Redlining Rebuttal Filing at 4. MediaOne states
    that, to avoid customer confusion, it lists ZIP code information on
    its website only after a majority of the nodes in a ZIP code are
    activated. In some instances, MediaOne decided not to list ZIP codes
    on its website, because its franchise area may encompass only a
    portion of a particular ZIP code. *Id.* at 4 n.10.

[^415]: *See* MediaOne Jan. 27 Deployment Status Update.

[^416]: For example, in Atlanta the affluent and predominantly white
    communities (*e.g.,* Acworth, Kennesaw, Marietta) were in the same
    upgrade condition as predominantly black and low-income areas
    (*e.g.,* Douglasville, Decatur).

[^417]: Letter from Howard J. Symons, Esq., Mintz, Levin, Cohen, Ferris,
    Glovsky, and Popeo, P.C., to Magalie Roman Salas, Secretary, FCC,
    dated Nov. 18, 1999, Attachment (Ex Parte Presentation of MediaOne
    Reviewing MediaOne's Oct. 14 Redlining Rebuttal and Depiction of
    MediaOne's Deployment of Broadband Facilities in Altanta, Los
    Angeles and Richmond) ("MediaOne Nov. 18 Redlining Rebuttal
    Filing"); MediaOne Jan. 27 Deployment Status Update. MediaOne's
    properties in the Atlanta metropolitan area---with a high percentage
    of minorities and a low average household income---will be offered
    advanced new services before some of the affluent, predominantly
    white suburbs will receive these services. MediaOne Nov. 18
    Redlining Rebuttal Filing.

[^418]: Munir Public Forum Testimony, Tr. at 186-88.

[^419]: *See* MediaOne Jan. 27 Deployment Status Update at 1.

[^420]: TAP Comments at 15.

[^421]: *Id.* at 15-16.

[^422]: *WorldCom-MCI* *Order*, 13 FCC at 18144 ¶ 209.

[^423]: *See* APT Reply Comments at 1-4 (seeking a condition requiring
    equitable deployment of the merged firm's high-speed cable
    infrastructure). Citing Section 706 of the 1996 Act, 110 Stat. 153,
    APT argues that the Commission should exercise its jurisdiction to
    eliminate the digital divide between the information rich and the
    information poor. To this end, APT asks that the Commission create a
    social compact as a condition for approval of the proposed merger.
    This social compact would require AT&T to allocate a portion of the
    synergy savings resulting from the merger to fund research and
    development of technology applications that address the needs of
    underserved communities. APT also requests that the Commission
    obtain AT&T's enforceable pledge to deploy its upgraded high-speed
    networks equitably throughout its service territory. APT Reply
    Comments at 1-4.

[^424]: Letter from Pastor Herrera, Jr., Director, County of Los Angeles
    Dept. of Consumer Affairs, to Magalie Roman Salas, Secretary, FCC,
    dated Jan. 18, 2000 ("Los Angeles County Comments").

[^425]: *Social Contract for Continental Cablevision*, 11 FCC Rcd 299
    (1995) ("*Social Contract*"), *amended by* *Continental Cablevision,
    Inc. Amended Social Contract*, 11 FCC Rcd 11118 (1996) ("*Amended
    Social Contract*"). Continental Cablevision, Inc., was later renamed
    MediaOne. *See* *Social Contract*, 11 FCC Rcd at 361-64; *Amended
    Social Contract*, 11 FCC Rcd at 11157-60, 11164-67. The Social
    Contract also allows MediaOne to increase rates by up to \$1.00 per
    subscriber per year to recover the costs of system upgrades. Amended
    Social Contract Section III.D, 11 FCC Rcd at 11161.

[^426]: *Social Contract*, 11 FCC Rcd at 365-66; *Amended Social
    Contract*, 11 FCC Rcd at 11164. Certain provisions apply
    automatically to the acquiring operator. Social Contract Section
    III.H.2., 11 FCC Rcd at 356-66.

[^427]: *Social Contract*, 11 FCC Rcd at 369; *Amended Social Contract*,
    11 FCC Rcd at 11174-75.

[^428]: Los Angeles County states that such a condition would not be
    unprecedented, citing a May 1999 Cable Services Bureau order
    concerning AT&T's adoption of the Time Warner Cable social contract
    with respect to systems that AT&T acquired from Time Warner Cable.
    Los Angeles County Comments at 2. The order Los Angeles County
    cites, however, merely approved AT&T's request to adopt the social
    contract obligations; the order did not impose these obligations as
    a condition of Commission approval of AT&T's merger with TCI. *See*
    *Time Warner Social Contract*, 14 FCC Rcd 7774 (1999).

[^429]: Letter from Betsy Brady, Esq., Vice President Federal Government
    Affairs, AT&T, to Magalie Roman Salas, Secretary, FCC, dated Apr.
    13, 2000.

[^430]: *SBC-Ameritech Order*, 14 FCC Rcd at 14825 ¶ 255; *AT&T-TCI
    Order,* 14 FCC Rcd at 3168 ¶ 13*; WorldCom-MCI Order*, 13 FCC Rcd at
    18134-35 ¶ 194.

[^431]: *SBC-Ameritech Order*, 14 FCC Rcd at 14825 ¶ 256; *Bell
    Atlantic-NYNEX Order*, 12 FCC Rcd at 20063 ¶ 157.

[^432]: *SBC-Ameritech Order*, 14 FCC Rcd at 14825 ¶ 255.

[^433]: *Id.*

[^434]: Application at 28-29; Letter from Stephen C. Garavito, General
    Attorney, AT&T, Magalie Roman Salas, Secretary, FCC, dated Nov. 24,
    1999, Transmittal of Letter from Stephen C. Garavito, General
    Attorney, AT&T, to To-Quyen Truong, Associate Chief, FCC Cable
    Services Bureau, dated Nov. 24, 1999 ("Nov. 24 Garavito Letter") at
    6-13; Letter from David M. Levy, Esq., Sidley & Austin, to To-Quyen
    Truong, Associate Chief, FCC Cable Services Bureau, Dated Dec. 8,
    1999, Attachments (Declaration of R. Glenn Hubbard and William H.
    Lehr) ("Hubbard-Lehr Decl."); Ordover-Willig Decl.

[^435]: Hubbard-Lehr Decl. at ¶ 20.

[^436]: *Id*. at ¶ 20.

[^437]: Application at 18; Applicants Sept. 17 Reply Comments at 16-18;
    Nov. 24 Garavito Letter at 6-10; Applicants Dec. 21 Ownership Reply
    Comments at 27.

[^438]: Application at 20, 25; Applicants Sept. 17 Reply Comments at
    5-26; Applicants Dec. 21 Ownership Reply Comments at 27.

[^439]: Application at 22; Applicants Sept. 17 Reply Comments at 16-17;
    Nov. 24 Garavito Letter at 6-10; Applicants Dec. 21 Ownership Reply
    Comments at 27 n.41.

[^440]: Application at 31-32; Applicants Sept. 17 Reply Comments at
    18-23.

[^441]: Ordover-Willig Decl. at ¶ 62; Declaration of Terrell Wingfield,
    Jr., Attachment Appendix D to Applicants Sept. 17 Reply Comments
    ("Wingfield Decl.") at ¶¶ 6-9; Declaration of Douglas D. Holmes,
    Attachment Appendix C to Applicants Sept. 17 Reply Comments ("Holmes
    Decl.") at ¶ 6; Applicants Sept. 17 Reply Comments at 19.

[^442]: Wingfield Decl. at ¶ 9.

[^443]: *Id.* at ¶¶ 6-9; Holmes Decl. at ¶ 6.

[^444]: Contract-specific investments refer to expenditures that a
    company must make to perform its contractural obligations or to
    receive the benefits of the other party's performance, but that
    cannot be recovered should the company terminate the contract before
    full performance by the other party. Examples of such investments
    include costs of research and development, licensing and permitting,
    acquisition of real estate and capital assets, installation of cable
    and customer premises equipment, marketing and advertising, and
    staffing of customer care centers. Ordover-Willig Decl. at ¶¶ 55-58.

[^445]: Applicants Sept. 17 Reply Comments at 21.

[^446]: Application at 32; Applicants Sept. 17 Reply Comments at 21;
    Ordover-Willig Decl. at ¶ 60.

[^447]: Nevertheless, AT&T has stated that it "will continue to pursue
    all reasonable opportunities to provide consumers nationwide with a
    facilities-based local service alternative to the ILECs," including
    joint ventures and other contractual arrangements. Holmes Decl. at ¶
    4.

[^448]: Wingfield Decl. at ¶¶ 2-6.

[^449]: Wingfield Decl. at ¶ 10.

[^450]: Wingfield Decl. at ¶ 10. Applicants further assert that their
    ownership interest in TWE may create an alignment of interests
    between the merged entity and TWE to facilitate a telephony joint
    venture, and that the success of this arrangement also may help the
    merged firm to secure joint ventures with other cable companies.
    *Id.*; *see also* Cicconi Public Forum Testimony, Tr. at 72-73;
    Applicants Dec. 21 Ownership Reply Comments at 18, 24, 30.

[^451]: AOL Comments at 3-4; WCA Comments at 3; US West Aug. 23 Comments
    at 2; Ameritech Comments at iii; Bell Atlantic Comments at 20-25;
    MCI WorldCom Comments at 1; Consumers Union Aug. 23 Comments at 24;
    TAP Comments at 23; GTE Comments at 67; SBC Aug. 23 Comments at 17;
    BellSouth Comments at 4.

[^452]: Consumers Union Aug. 23 Comments at 25; SBC Aug. 23 Comments at
    20; SBC Reply Comments at 5; GTE Comments at 67-69; BellSouth Reply
    Comments at 3; OpenNET Reply Comments at 9; Seren Reply Comments at
    3.

[^453]: Consumers Union Aug. 23 Comments at 24-25; OpenNET Reply
    Comments at 9.

[^454]: GTE Comments at 69-71; Ameritech Comments at iii; OpenNET Reply
    Comments at 9.

[^455]: WCA Comments at 3; Consumers Union Aug. 23 Comments at 32; TAP
    Comments at 25; BellSouth Reply Comments at 3-5; Ameritech Comments
    at iii.

[^456]: Application at 22-28.

[^457]: *Id.* at 15.

[^458]: *Id.* In 1995, MediaOne (formerly Continental Cablevision)
    entered into a Social Contract with the Commission which, among
    other things, required MediaOne to upgrade its systems substantially
    by December 31, 2000. *See Social Contract for Continental
    Cablevision, Inc.,* 11 FCC Rcd 299 (1995), *amended by Continental
    Cablevision, Inc. Amended Social Contract*, 11 FCC Rcd 11118 (1996).
    Continental Cablevision, Inc., was later renamed MediaOne.

[^459]: Letter from Lorrie M. Marcil, Esq. Sidley & Austin, to Magalie
    Roman Salas, Secretary, FCC, dated Feb. 22, 2000, Transmittal of
    Letter from Stephen C. Garavito, General Attorney AT&T, and Susan
    Eid, Vice President, Federal Relations, MediaOne Group Inc., to
    Deborah Lathen, Chief, FCC Cable Services Bureau, dated Feb. 22,
    2000 ("Benefits Letter") at 5 Attachments (AT&T and MediaOne's
    Independent Deployment Plans and Schedules) ("Benefits Letter
    Supporting Confidential Documents").

[^460]: *See* Benefits Letter at 6 ("\[I\]n a brand study that measured
    other local telephone service brands against an AT&T standard of
    '100,' MediaOne registered a mere '5.'").

[^461]: May 25 Eid Letter; Application at 22-24; Letter from Joan Marsh,
    Director, Federal Government Affairs, AT&T, to Magalie Roman Salas,
    Secretary, FCC, dated Jan. 12, 2000, Transmittal of Letter from Joan
    Marsh, Director, Federal Government Affairs, AT&T, and Susan Eid,
    Vice President, Federal Relations, MediaOne Group Inc., to To-Quyen
    Truong, Associate Chief, FCC Cable Services Bureau, dated Jan. 12,
    2000, at 1. AT&T submitted a chart showing its projection of
    increased local telephony market penetration in MediaOne franchise
    areas post-merger. While AT&T's nationwide local telephony
    subscribership totals less than 1.3% of the number of homes it has
    upgraded for local telephony service, AT&T's projection of
    MediaOne's post-merger penetration rate is based on the assumption
    that AT&T has a penetration rate of 1% per month in areas where it
    has marketed the service. Benefits Letter at 10; Letter from Stephen
    C. Garavito, General Attorney, AT&T, to Magalie Roman Salas,
    Secretary, FCC, dated Mar. 29, 2000, Transmittal of Letter from
    Stephen C. Garavito, General Attorney, AT&T, to Royce Dickens, FCC
    Cable Services Bureau, dated Mar. 29, 2000, at 2. Based on
    information AT&T provided about the markets and time periods
    included in its calculation, it is unclear whether AT&T would be
    able to maintain a consistent 1% penetration rate over the long-run.
    *See* Letter from Joan Marsh, Director, Federal Government Affairs,
    AT&T to Magalie Roman Salas, Secretary, FCC, dated Apr. 24, 2000,
    Transmittal of Letter from Joan Marsh, Director, Federal Government
    Affairs, AT&T, to Royce Dickens, FCC Cable Services Bureau, dated
    Apr. 24, 2000. Of the 22 communities listed, AT&T commenced service
    to only eight before December, 1999. *Id*. The earliest
    service-initiation date was September, 1999. *Id*. Thus, the 1%
    figure reflects relatively little experience in a small fraction of
    the communities AT&T plans to serve.

[^462]: Benefits Letter at 7-8.

[^463]: *Id.* at 11-12

[^464]: *Id.* at 11.

[^465]: *Id.* at 6-7.

[^466]: *Id.* at 8. On March 31, 2000, an AT&T-led consortium announced
    that it will acquire a 39% voting stake and a 32% economic stake in
    Net2Phone, the leading provider of packet-switched telephony over
    the Internet and other web-based communications services. AT&T plans
    to invest \$725 million for a 51% interest in the consortium. AT&T's
    Liberty Media and other partners, including British Telecom, are
    expected to purchase the remaining partnership interest. AT&T
    Chairman Michael Armstrong said that AT&T, together with Net2Phone,
    will develop the next generation of voice-enhanced web-based
    communications services and create a standard for packet-switched
    telephony over the Internet. [Communications Daily]{.smallcaps},
    Apr. 3, 2000, at 2-4; AT&T Corp., *AT&T-Led Consortium to Acquire 39
    Percent Voting Stake in Net2Phone* (press release), Mar. 31, 2000.

[^467]: Benefits Letter at 6.

[^468]: *Id.* at 9.

[^469]: *Id.* at 12.

[^470]: Teleport has switches necessary for telephony services in the
    top 40 markets. Letter from Joan Marsh, Director, Federal Government
    Affairs, AT&T, to Magalie Roman Salas, Secretary, FCC, dated Oct.
    25, 1999, Attachment (AT&T Ex Parte Oct. 23, 1999 Presentation).

[^471]: *See supra* Section III.A.

[^472]: Benefits Letter at 5, 8. Currently, IP telephony lacks the
    quality of service and reliability necessary for voice services on a
    commercial scale.

[^473]: Application at 27; Benefits Letter at 12. The Applicants state
    that they have the potential to cluster systems in the following
    areas: North Central Connecticut; Atlanta and Central and Northern
    Alabama; Pompano and Dade County, Florida; Jacksonville and North
    Central Florida; and Sacramento and San Francisco, California.
    Benefits Letter at 12.

[^474]: Letter from David L. Lawson, Esq., Sidley & Austin, to Magalie
    Roman Salas, Secretary, FCC, dated Mar. 22, 2000, Attachments
    (AT&T-Comcast Joint Venture; AT&T-Time Warner Joint Venture,
    AT&T-Cablevision Joint Marketing Agreement; AT&T-Time Warner Joint
    Marketing Agreement).

[^475]: *See* AT&T Corp., *Insight Communications and AT&T Reach
    Agreement in Principle to Offer Local Phone Service* (press
    release), Mar. 16, 2000. AT&T and Insight have previously
    established a joint venture for the provision of cable service. In
    December 1997, TCI of Indiana Holdings, LLC and Insight
    Communications Company, LLC announced a 50-50 partnership combining
    systems in Indiana, to be called Insight Communications of Indiana,
    LLC. Tele-Communications, Inc., *TCIC and Insight Announce
    Partnership and Cable System Trade* (press release), Dec. 2, 1997.
    On Oct. 1, 1999, Insight Communications Company, LLC and AT&T
    Broadband each contributed its 50% interests in Insight
    Communications of Indiana, LLC, as well as their respective 50%
    interests in InterMedia Capital Partners VI, L.P., to form a new
    partnership known as Insight Midwest, L.P. Insight Communications is
    the general partner of this new partnership, and an affiliate of
    AT&T Broadband is the limited partner. Insight Midwest, through its
    subsidiaries, is the largest owner and operator of cable television
    systems in the States of Indiana and Kentucky. As of Dec. 31, 1999,
    Insight Midwest\'s cable television systems passed approximately 1.2
    million homes and served approximately 748,800 customers. As of Dec.
    31, 1999 Insight Communications Company, LLC served 935,000
    customers, a portion of which are customers that are managed by
    Insight Midwest. *See* Insight Communications Company, LLC, *Filing
    10-K for the Year-ended December 31, 1999*, at 5.

[^476]: *See* AT&T Corp., *AT&T and Cablevision to Create High-Value
    Telecommunications Bundle for New York Metropolitan Area Customers*
    (press release), Feb. 23, 2000; AT&T Corp., *AT&T and Time Warner
    Cable Announce Joint Marketing Agreement* (press release), Mar. 7,
    2000. *But see* AT&T Corp., *Insight Communications and AT&T Reach
    Agreement in Principle to Offer Local Phone Service* (press
    release), Mar. 16, 2000. The Insight agreement, when finalized, will
    be the first such joint operating agreement that AT&T enters into
    with a cable operator. *Id.* As noted above, AT&T already owns 50%
    of a joint venture with Insight that serves 748,000 subscribers.
    Unlike the Insight agreement, AT&T's joint marketing agreements with
    Cablevision and Time Warner do not provide that AT&T branded
    telephony will be provided over Cablevision's or Time Warner's cable
    infrastructure.

[^477]: Letter from David L. Lawson, Esq., Sidley & Austin, to Magalie
    Roman Salas, Secretary, FCC, dated Mar. 22, 2000, Attachment
    (AT&T-Time Warner Joint Venture Agreement dated Feb. 3, 1999).

[^478]: *See* Comcast Corp., *AT&T and Comcast Agree to Swap Cable
    Systems -- Comcast to Add 2 Million New Subscribers; Two Companies
    to Collaborate in Offering Cable Telephony* (press release), May 4,
    1999. AT&T's joint venture negotiations with Time Warner and Comcast
    appeared headed for successful conclusion prior to the announcement
    of the proposed merger of AT&T and MediaOne. The lack of "complete"
    written joint venture agreements between these parties at the
    present time likely indicates that these negotiations are on hold
    pending the completion of the merger of AT&T and MediaOne and its
    resultant impact on the ownership interests and relationships
    between the merged firm, Time Warner, and Comcast.

[^479]: We note that of the foregoing contractual arrangements, only the
    AT&T-Insight joint operating agreement involves more than just a
    marketing agreement. The parties intend to operate over Insight's
    cable infrastructure and use AT&T's switching, transport and long
    distance services. *See* AT&T Corp., *Insight Communications and
    AT&T Reach Agreement in Principle to Offer Local Phone Service*
    (press release), Mar. 16, 2000.

[^480]: Jessica Reif Cohen and Nathalie Brochu, *Cable Television: Q3
    Preview*, Merrill Lynch, Oct. 25, 1999, at 16.

[^481]: Cox was offering residential telephone service to 870,000 homes
    in six markets and was serving 60,000 subscribers as of June 1999.
    Jones has deployed telephony to 62,000 homes in the Washington, D.C.
    area, and as of June 1999, was serving 12,000 subscribers. Paul
    Kagan Assocs., Inc., *Telephony Deployments by Cable Operators*,
    Cable TV Financial Databook, July 1999, at 72; *1999 Competition
    Report*, 15 FCC Rcd at 1010 ¶ 67.

[^482]: AT&T's rollout of cable telephony over TCI's cable systems could
    also serve this purpose. MediaOne's facilities, however, generally
    have been upgraded to a greater extent than TCI's facilities.

[^483]: AT&T did not provide any projections of the number of broadband
    Internet or local telephony subscribers it expected to obtain. *See*
    Letter from Betsy J. Brady, Esq., Vice-President, Federal Government
    Affairs, AT&T, to Magalie Roman Salas, Secretary, FCC, dated Jan. 7,
    1999, Attachment (AT&T Telephony Plans Over TCI Facilities). AT&T
    planned to deploy cable telephony in ten major markets in 1999.
    *See* Letter from Michael Armstrong, Chairman, AT&T, to William E.
    Kennard, Chairman, FCC, dated Feb. 8, 1999, Transmitted by Letter
    from Betsy J. Brady, Esq., Vice-President, Federal Government
    Affairs, AT&T, to Magalie Roman Salas, Secretary, FCC, dated
    February 9, 1999 ("Feb. 8 Armstrong Letter") at 1.

[^484]: Feb. 8 Armstrong Letter at 2. The Commission noted in the
    *AT&T-TCI Order*, 14 FCC Rcd at 3230 ¶ 148, that AT&T's deployment
    plans lent support to its assurances that "it intend\[ed\] to
    provide residential local exchange service in the foreseeable
    future," although the Commission did not make the fulfillment of
    these deployment projections a condition of approval of the license
    transfers.

[^485]: AT&T Upgrade/Deployment Memorandum dated Oct. 1999; Letter from
    Joan Marsh, Director, Federal Government Affairs, AT&T, to Magalie
    Roman Salas, Secretary, FCC, dated Mar. 7, 2000, Attachment (Status
    of AT&T-TCI deployment); Letter from Joan Marsh, Director, Federal
    Government Affairs, AT&T, to To-Quyen Truong, Associate Chief, FCC
    Cable Services Bureau, dated Mar. 27, 2000. AT&T maintains that the
    March 27, 1999 projections are fully consistent with those of
    October and March 7, 1999.

[^486]: Application at 3-4, 20; Letter from Stephen C. Garavito, Senior
    Attorney, AT&T, to Magalie Roman Salas, Secretary, FCC, dated Nov.
    24, 1999, Transmittal of Letter from Stephen C. Garavito, Senior
    Attorney, AT&T, to To-Quyen Truong, Associate Bureau Chief, Cable
    Services Bureau, dated Nov. 24, 1999 ("Nov. 24 Garavito Letter") at
    6, 10; Cicconi Public Forum Testimony, Tr. at 7.

[^487]: Benefits Letter Supporting Confidential Documents; Benefits
    Letter; Nov. 24 Garavito Letter at 3-4, 13.

[^488]: Jack Grubman, Saloman Smith Barney Report, Nov. 29, 1999 ("Nov.
    29 Grubman Report"). The future revenue streams are (1) telephony,
    (2) high speed data, (3) digital TV, (4) interactive services, and
    (5) basic cable.

[^489]: Nov. 29 Grubman Report.

[^490]: Nov. 29 Grubman Report. According to some industry analysts,
    AT&T will need to achieve 30% market penetration for its local
    telephony service. At that level, local telephony should account for
    approximately 20% of AT&T's overall earnings by year-end 2004; Nov.
    24 Garavito Letter at 3-4.

[^491]: Motion of Consumers Union, The Consumer Federation of America,
    and the Center for Media Education To Consolidate (Apr. 11, 2000)
    ("Consumers Union Motion").

[^492]: *Id.* at 1.

[^493]: *Id*. at 5 (citing *Ashbacker Radio Corp. v. FCC*, 326 U.S. 327
    (1945)).

[^494]: Consumers Union Motion at 5. Where an administrative body is
    confronted by mutually exclusive applications, it must consider them
    simultaneously, and select the application which will best serve the
    public interest. *Ashbacker*, 326 U.S. at 329.

[^495]: Consumers Union Motion at 1.

[^496]: Opposition of AT&T Corp. and MediaOne Group, Inc. to Motion To
    Consolidate (April 21, 2000) at 2-3.

[^497]: *Id.*

[^498]: *R.L. Mohr, d/b/a RadioCall*, 85 F.C.C. 2d 596 at ¶ 34 (1981).
    Under Section 309(a) of the Communications Act, the Commission
    determines "in the case of each application filed with it . . .
    whether the public interest, convenience, and necessity will be
    served by the granting of such application . . . ." 47 U.S.C. §
    309(a).

[^499]: *Ashbacker*, 326 U.S. at 328.

[^500]: AT&T in fact responded to the information requests at issue.
    *See* Letter from Douglas G. Garrett, Senior Regulatory Counsel,
    AT&T Broadband and Internet Services, to Magalie Roman Salas,
    Secretary, FCC, dated Apr. 7, 2000, Transmittal of Letter from
    Douglas G. Garrett, Senior Regulatory Counsel, AT&T Broadband and
    Internet Services, to Deborah A. Lathen, Chief, FCC Cable Services
    Bureau, dated Apr. 7, 2000; Letter from Michelle M. Mundt, Mintz
    Levin Cohn Ferris Glovsky and Popeo PC, to Magalie Roman Salas,
    Secretary, FCC, dated Apr. 7, 2000, Transmittal of Letter from Susan
    M. Eid, Vice President, Federal Relations, MediaOne Group, Inc., to
    Deborah Lathen, Chief, FCC Cable Services Bureau, dated April 7,
    2000.

[^501]: *See* Section IV.A.1.c., *supra*.

[^502]: *See* Section IV.C.3, *supra*

[^503]: 47 C.F.R. §§ 1.1200, *et seq.*

[^504]: Consumers Union, Consumer Federation of America, and Media
    Access Project, Request for Expedited Ruling Interpreting the
    Commission's *Ex Parte* Rules and Their Application, CS Docket No.
    99-251, filed on May 2, 2000.

[^505]: The Applicants must reduce their attributable cable ownership
    interests by (a) divesting their interests in TWE, (b) terminating
    their involvement in TWE's video programming activities (pursuant to
    the limited partnership exemption and the officers/directors
    attribution waiver provisions of the cable ownership attribution
    rules), or (c) divesting their interests in other cable systems,
    such that they will have attributable ownership interests in cable
    systems serving no more than 30% of MVPD subscribers nationwide.
    Appendix B also lists other interim conditions and enforcement
    mechanisms by which the Applicants must abide as a non-severable
    condition of exercising our grant of the Application.

[^506]: ^?^ *See WorldCom-MCI Order*, 13 FCC Rcd at 18153 ¶ 226(c).

[^507]: ^1^ I have recognized this principle and applied extant
    regulations to pending applications even when I might disagree with
    the regulations as a matter of policy. *See, e.g.,* Statement of
    Commissioner Harold W. Furchtgott-Roth, Concurring in Part and
    Dissenting in Part, *In the Matter of CBS/Viacom* (rel. May 3, 2000)
    (concurring in application of national broadcast cap to instant
    application because rule, while under regulatory review, was
    effective at time of Commission review).

[^508]: ^2^ Notably, we limited ourselves to just this narrow sort of
    review in the *CBS/Viacom* matter. There, we made *no* mention of a
    public interest overlay, a four-pronged test, or anything other than
    the statutes and rules that governed the transaction in question.
    The approach taken here represents a marked departure from that one,
    and I see nothing inherent in the nature of the transactions -- both
    are transfers of section 309 licenses -- that could rationally
    justify today's abrupt and unexplained change in course.

[^509]: ^1^ *In the Matter of the Applications of Shareholders of CBS
    Corporation, and Viacom, Inc., For Transfer of Control of CBS
    Corporation and Certain Subsidiaries, Licensees of KCBS-TV, Los
    Angeles, CA, et al*., 15 FCC Rcd 8230 (2000).

[^510]: ^2^ See, *e.g*., 47 U.S.C. Sections 214(a), 310(d).

[^511]: ^3^ According to that test, the Commission will evaluate whether
    an applicant has met its burden of proof that the transfer will
    advance the public interest by considering the following factors:

    > 1\) Whether the transaction would result in a violation of the
    > Communications Act or any other applicable statutory provision;

    Whether the transaction would result in a violation of Commission
    rules;

    Whether the transaction would substantially frustrate or impair the
    Commission's implementation or enforcement of the Communications
    Act, or would interfere with the objectives of the Communications
    Act or other statutes; and

    Whether the merger promises to yield affirmative public interest
    benefits.

[^512]: ^4^ Implementation of Section 11 of the Cable Television
    Consumer Protection and Competition Act of 1992: Horizontal
    Ownership Limits, 14 FCC Rcd 19098 (1999).

[^513]: ^5^ *Review of the Commission's Regulations Governing Television
    Broadcasting; Television Satellite Stations Review of Policies and
    Rules*, 14 FCC Rcd 12903 (1999).

[^514]: ^1^ See, e.g., Communications Act, 47 U.S.C. § 257 (1996)
    (noting that one of the \"policies and purposes\" of the
    Communications Act favors a \"diversity of media voices\"); Metro
    Broadcasting, Inc. v. FCC, 497 U.S. 547, 567 (1990) (\"Safeguarding
    the public\'s right to receive a diversity of views and information
    over the airwaves is therefore an integral component of the FCC\'s
    mission*\");* Turner Broadcasting System, Inc. v. FCC, 512 U.S. 622,
    663 (1994) (\"\[I\]t has long been a basic tenet of national
    communications policy that the widest dissemination of information
    from diverse and antagonistic sources is essential to the welfare of
    the public.\" (quoting United States v. Midwest Video Corp., 406
    U.S. 649, 668 n. 27 (quoting Associated Press v. United States, 326
    U.S. 1, 20 (1945))).

[^515]: ^2^ *Arkansas Ed. Television Commission v. Forbes*, 523 U.S. 666
    (1998).

[^516]: ^3^ *See* Paul Kagan Assocs., *Cable Network Television
    Household Growth 1998-1999*, *Cable Program* *Investor*, at 4-5
    (Mar. 17, 2000); Liberty Media Corp., *Affiliate List*,
    [http://www.libertymedia.com (last updated 1999);]() Time Warner
    Inc., *10-K for the year ended 12/31/99*, at I-3 to I-7; AT&T/Media
    One Application. *See also* Horizontal Ownership Third Report and
    Order, 14 FCC Rcd 19098 (1999) at para. 41.

[^517]: ^4^ *See* Cahners Business Information, *Cablevision Database:
    Network Subscribers*,
    [www.cablevisionmag.com/database/db_pay.asp]{.underline} (last
    updated 2000).

[^518]: ^5^ *The F.C.C.'s Ownership Rules,* The New York Times at A24
    (June 2, 2000).