**REDACTED \-- FOR PUBLIC INSPECTION**

June 26, 2000

Ms. Royce Dickens

Deputy Chief, Policy and Rules Division

Cable Services Bureau

Federal Communication Commission

445 12th Street, S.W.---The Portals

Washington, D.C. 20554

> **Re: Response to June 9, 2000 Request for Further Information In the
> Matter of Applications of America Online, Inc. and Time Warner Inc.
> for Transfers of Control, CS Docket No. 00-30**

Dear Ms. Dickens:

This letter sets forth the narrative responses of America Online, Inc.
("AOL") and Time Warner Inc. ("Time Warner") to the June 9, 2000 letter
from Ms. To-Quyen Truong, Associate Chief of the Cable Services Bureau,
requesting certain documents and information (the "Information
Request"). In accordance with the Information Request and the Protective
Order adopted by the Cable Services Bureau on April 6, 2000,[^1] the
parties are filing the documents which accompany these narrative
responses under separate cover letter.

\* \* \*

**[AOL's Ownership Interest in Hughes Electronics Corporation
("Hughes")]{.underline}**

The Commission's Information Request begins with a series of questions
concerning AOL's indirect interest in Hughes, which controls direct
broadcast satellite ("DBS") provider DirecTV. Before responding to the
specific questions asked by the Commission concerning AOL's investment
in Hughes, we set forth below a brief overview of this investment and
the nature of AOL's interest.

In pursuit of its previously described multiple platform distribution
strategy of "AOL Anywhere," AOL last year announced a strategic alliance
with Hughes to develop and market Internet services nationwide via
satellite. As part of that agreement, AOL made an investment in General
Motors Corporation, the parent company of Hughes, to accelerate the
development of DBS as a platform for the next generation of Internet
services. That investment was not intended to, and does not, provide any
opportunity for AOL or the merged AOL Time Warner to participate in
DirecTV's video programming operations.

As detailed below, AOL's interest in General Motors takes the form of a
non-cognizable stock which, even upon conversion, would remain
non-attributable under any set of rules applied in the cable context.
Specifically, AOL's investment is currently in the form of a preference
stock which provides no voting rights except in the extremely limited
circumstances detailed below. Even after conversion to a GM common stock
that tracks the economic performance of Hughes, AOL's interest would
still be non-attributable under any even potentially relevant FCC
attribution rule. In particular, upon conversion, AOL's voting interest
in General Motors would be significantly below the five percent
threshold for attribution under the Commission's cable horizontal
ownership provision.[^2]

In June 1999, AOL invested \$1.5 billion in General Motors Corporation
in return for shares of GM's Series H 6.25 percent Automatically
Convertible Preference Stock (the "Series H Preference Stock").[^3] AOL
holds all of the outstanding shares of the Series H Preference
Stock.[^4] These non-attributable shares do not entitle AOL to voting
rights, except in the most limited situations.[^5] These shares will
automatically convert into shares of GMH stock on June 24, 2002, unless
the shares have been converted earlier.[^6]

GM's GMH stock is a tracking stock designed to provide holders with
financial returns based on the financial performance of Hughes.[^7] The
outstanding GMH shares, however, do not represent the full interest in
Hughes. Rather, GM has retained part of that value for itself. GMH
stockholders are common stockholders of General Motors and, as a result,
have rights in the equity and assets of GM rather than of Hughes.[^8]
GM's Certificate of Incorporation entitles holders of both GM and GMH
stock to a fixed number of votes per share on all matters submitted to
GM's common stockholders for a vote.[^9] GMH stock votes separately as a
class only on any amendment to the GM Certificate of Incorporation which
adversely affects the rights, powers or privileges of the GMH stock or
increases the number of authorized shares of GMH stock.[^10]

Recently, GM has made three announcements affecting the GMH stock.
First, on February 2, 2000, it announced a plan to repurchase up to 14
percent of its outstanding GM common stock in exchange for shares of GMH
stock.[^11] Under that offer, GM proposed to issue 1.065 shares of GMH
stock for each share of GM common stock tendered pursuant to the offer,
up to a maximum of 86,396,977 GM shares.[^12] On May 26, 2000, GM
announced that it had accepted 86,396,977 shares of GM stock in exchange
for a total of 92,012,781 shares of GMH stock.[^13] Second, on June 6,
2000, GM declared a three-for-one stock split of the GMH stock. The
stock split will be in the form of a 200 percent stock dividend, payable
on June 30, 2000, to GMH stockholders of record on June 13, 2000.[^14]
Third, on June 13, 2000, GM announced that it had contributed 60,500,000
shares of GMH stock to certain of its employee-benefit plans on June 12,
2000.[^15]

With this background regarding the AOL interest, we respond to the
Commission's specific inquiries below.

# 1.1 At page 11 note 15 of the Supplemental Information ("SI") statement, Applicants state that AOL invested \$1.5 billion in a General Motors ("GM") equity security and that GM then invested the \$1.5 billion in a security of Hughes under similar terms. The SI further states that GM has a current market capitalization (at the date the SI was filed) in excess of \$50 billion.

## a What is General Motors' current market capitalization?

GM currently has outstanding several classes of shares, including the GM
common stock and GMH stock discussed above. As of June 22, 2000, the
price per share of each of those classes of stock, as well as the total
value of outstanding shares, was as follows:[^16]

  -------------- -------------------- -------------- ----------------------
  **SYMBOL**     **NUMBER OF SHARES   **PRICE PER    **TOTAL VALUE OF
                 OUTSTANDING**        SHARE**        OUTSTANDING SHARES**

  GM             537,784,403[^17]     60             32,087,064,180.00

  GMH            290,950,014[^18]     103            29,967,851,442.00

  GMPRD          3,015,000            25 1/16        75,563,437.50

  GMPRG          5,015,000            26 1/8         131,016,875.00

  GMPRX          3,150,000            24 15/16       78,553,125.00

  GMPRY          5,221,000            26 3/8         137,703,875.00
  -------------- -------------------- -------------- ----------------------

Based on the foregoing, the total value of the outstanding shares of the
various classes of General Motors stock as of June 22, 2000 was
\$62,477,752,934.50.[^19]

## b What is Hughes' current market capitalization?

As noted above, Hughes is a wholly-owned subsidiary of GM. Other than
the GMH stock, which tracks a portion of the economic value of Hughes,
Hughes has no outstanding public stock on which to base a market
capitalization. However, as of June 22, 2000, the value of the
outstanding GMH stock was \$29,967,851,442.00.

## c Please produce documents to support your answers to the questions in a. and b.

As noted above, the parties are providing documents in response to this
request under separate cover letter.

# 1.2 At page 13 note 21 of your SI, Applicants state that AOL has 2,669,633 shares of GM's Series H 6.25% Automatically Convertible Preference Stock ("Preference Stock"). You state that this Preference Stock is convertible to GM's Class H common ("GMH") stock, which is a publicly held tracking stock that tracks the economic value of Hughes.

## a Under what circumstances may AOL choose to convert its Preference Stock?

AOL may convert all or any portion of its preference stock at any time
prior to the occurrence of a Tax Event or the Mandatory Conversion Date
(June 24, 2002).[^20] Upon the occurrence of a Tax Event, GM or Hughes
has the right to redeem or acquire all (but not less than all)
outstanding shares of Series H Preference Stock. GM or Hughes must take
such action on or before a Mandatory Redemption Date, and must give AOL
advance written notice.[^21]

## b If AOL were to convert its Preference Stock today, how many shares of GMH stock would it have?

AOL has 2,669,633 shares of Preference Stock which would be converted to
GMH stock at an Optional Conversion Rate of 8.0645 shares of GMH stock
for each share of Preference Stock.[^22] Thus, upon conversion, AOL
would have 21,529,255 shares of GMH stock.[^23]

## c What percentage of GMH stock would AOL's GMH shares constitute?

As noted above, the outstanding shares of GMH stock do not represent a
value based on the full financial performance of Hughes. Rather, the
290,950,014 shares of GMH stock presently outstanding track
approximately 67.7 percent of the financial performance of Hughes.[^24]

If AOL were to convert its Series H Preference Stock, the number of
outstanding shares of GMH stock would increase to 312,479,269.[^25]
AOL's GMH shares would represent 6.9 percent of the outstanding shares
of GMH stock.[^26] However, because all of the outstanding shares of GMH
stock would represent only 69.0 percent of the total economic value of
Hughes[^27], AOL's GMH shares would represent shares tracking
approximately 4.8 percent of the financial performance of Hughes.[^28]

## d What percentage of Hughes' economic value does AOL's Preference Stock represent?

As discussed above, AOL's shares of Series H Preference Stock are shares
of General Motors stock. Although AOL may convert its shares of Series H
Preference Stock into shares of GMH stock,[^29] until AOL's Preference
Stock is converted, AOL holds no direct or indirect interest in the
financial performance of Hughes.

## e What percentage of Hughes' economic value would AOL's GMH stock represent?

As discussed above, GMH stock is a tracking stock designed to provide
holders with financial returns based on the financial performance of
Hughes. However, GMH stockholders would have no direct claim against the
assets of Hughes because GMH stock is a common stock of GM and, in the
event of GM liquidation, insolvency or a similar event, GMH stockholders
would only have rights in the assets of GM as common stockholders of GM.

With respect to the economic performance of Hughes relative to the GMH
stock, the GM Certificate of Incorporation allocates Hughes' earnings
between the GM common stock and GMH stock based on a fraction referred
to as the "Class H fraction."[^30] The Class H fraction reflects the
tracking stock interests of each of GM's classes of common stock in the
earnings of Hughes for dividend purposes.[^31]

Class H Fraction = Weighted Average Number of Shares of GMH Stock
Outstanding During

[Any Applicable Accounting Period]{.underline}

Weighted Average Number of Shares of Class H Common Stock During

Any Applicable Accounting Period Which, If Issued and Outstanding,

Would Represent 100 percent of the Tracking Stock Interest in the
Earnings

of Hughes

As of March 31, 2000, the numerator of the Class H fraction was
137,800,000 and the denominator was 431,500,000.[^32] Thus prior to GM's
recent Exchange Offer and contribution to certain employee-benefit
plans, the Class H fraction for the first quarter of 2000 was 31.9
percent. The GMH stock represented 31.9 percent of the economic value of
Hughes on March 31, 2000. Today, with the additional GMH shares issued
as a result of the Exchange Offer and contribution taken into
consideration, the GMH stock represents approximately 67.7 percent of
the economic value of Hughes.[^33]

Upon conversion of the Preference Stock into GMH stock, both the
numerator and denominator of the Class H Fraction will increase by the
amount of GM Class H stock issued.[^34] As noted above, we estimate that
the AOL GMH stock would represent approximately 4.8 percent of the
economic value of Hughes.[^35]

## f Effect of the stock split.[^36]

### i What effect will the GMH 3 for 1 stock split have on the value of AOL's Preference Stock?

None. The Certificate of Designations provides for adjustment of the
Exchange Rate and the Optional Conversion Rate if GM pays or makes a
dividend or other distribution with respect to its GMH stock in shares
of GMH stock.[^37]

### ii Will it increase the number of AOL's possible GMH shares?

Yes. As discussed above, the Certificate of Designations provides for
the increase of the rate at which AOL's Series H Preference Stock is
converted to GMH stock as a result of the stock split.[^38]

### iii If so, if AOL were to convert its Preference Stock today, how many shares of GMH stock would it have?

As discussed above, if AOL were to convert its Series H Preference Stock
today, it would receive 21,529,255 shares of GMH stock. However, taking
into account the upcoming stock split and the impending adjustment in
the Optional Conversion Rate as a result of this split, we estimate that
AOL would receive 64,587,766 shares of GMH stock.[^39]

### iv After the GMH 3 for 1 stock split, and upon conversion of its Preference Stock to GMH stock, what will AOL's percentage voting interest in General Motors constitute?

AOL presently does not have a voting interest in GM. If AOL converted
its Series H Preference Stock to GMH stock, its percentage voting
interest in GM currently would be approximately 1.8 percent.[^40] Under
the Certificate of Incorporation, if GM pays a stock dividend in shares
of GMH stock to GMH stockholders, GM will adjust the voting rights of
shares of GMH stock relative to the common stock so as to avoid the
dilution in any aggregate voting rights of any class.[^41] Thus, the
stock split should not affect the voting rights of GMH common
stockholders relative to GM common stock holders. Accordingly, after the
stock split and upon conversion of its Series H Preference Stock, AOL's
percentage voting interest in GM should remain 1.8 percent. To our
knowledge, however, GM has not publicly announced how it will adjust the
voting rights of GMH stockholders.

### v What percentage of GMH stock would AOL's GMH shares constitute?

If AOL receives 64,587,766 shares of GMH stock upon conversion of its
Series H Preference Stock, and the impending split of the shares of GMH
stock outstanding on June 13, 2000 has occurred, AOL will have 6.9
percent of the outstanding shares of GMH stock.[^42] As noted above,
however, the GMH stock, even taking the exchange offer, contribution and
split into account, tracks only a portion of the economic value of
Hughes---and thus AOL's interest in the financial performance of Hughes
would not exceed five percent.

## g Please produce documents to support your answers to questions in this paragraph.

As noted above, the parties are providing documents in response to this
request under separate cover letter.

# 1.3 Please identify all matters on which only GMH shareholders may vote. Please produce documents to support your response to this request.

GMH stock votes separately as a class only on any amendment to the GM
Certificate of Incorporation which adversely affects the rights, powers
or privileges of the GMH common stock or increases the number of
authorized shares of GMH common stock.[^43] As noted above, the parties
are providing documents in response to this request under separate cover
letter.

# 1.4 How are the directors of Hughes and DirecTV elected? Do GMH shareholders have the right to vote for the board of directors of Hughes and/or DirecTV?

GMH shareholders do not have the right to vote for the board of
directors of Hughes or DirecTV. Hughes Electronics Corporation is a
wholly owned subsidiary of General Motors Corporation. According to the
Hughes Bylaws, Hughes stockholders elect its directors.[^44] As GM is
the sole stockholder of Hughes, GM elects Hughes' directors. DirecTV is
a wholly owned subsidiary of Hughes Electronics Corporation. It is AOL's
understanding that Hughes, as the sole stockholder of DirecTV, elects
DirecTV's directors.

# 1.5 Please produce the agreement of strategic alliance between AOL and Hughes to which you refer on pages 10-11 of your SI.

As noted above, the parties are providing documents in response to this
request under separate cover letter.

**[Deployment of New Services]{.underline}**

The Commission's request for further information next posits a series of
questions seeking a description of ownership interests held by Time
Warner and AOL in entities providing telephony service as well as
information and documents relating to Time Warner's pre-merger and
post-merger plans for the deployment of three general categories of new
services: local telephony, high-speed Internet access and digital cable
television services. Among other things, the Commission is seeking
information relating to the "planned and actual investment" in each
category. Thus, for each category, Time Warner's response provides
information relating to relevant incremental capital expenditures. For
example, in the area of digital cable services, such incremental capital
expenditures would include certain headend upgrades and purchase of
digital set-top boxes.

Focusing exclusively on Time Warner's incremental capital expenditures
and budgets, however, does not provide a complete picture of the level
of Time Warner's "investment" in the provision of new services. Rather,
a more accurate analysis would start with Time Warner's substantial
embedded investment in its cable television infrastructure. But more
specifically, the successful roll-out of each category of service
identified by the Commission's request is entirely dependent upon Time
Warner's investment to upgrade its cable television infrastructure from
essentially an analog, coaxial, tree-and-branch design to a digital
enabled, hybrid fiber/coax ("HFC"), fiber-to-the-node architecture.

Traditional cable systems were initially constructed to provide one-way
transmission of video programming services. The capabilities of those
coaxial systems are being improved with -HFC systems consisting of a mix
of fiber-optic and coaxial lines. In an upgraded system, a fiber-optic
line travels from the cable headend to a node \-- a connection point in
a cable system where a fiber line enters a neighborhood and is then
connected to coaxial cables \-- which generally serves 200-1000
individual homes. [See]{.underline} [Broadband Today]{.underline}, A
Staff Report to William E. Kennard, Chairman, Federal Communications
Commission, October 1999. "The replacement of coaxial cable with
fiber-optic cable increases the system's capacity and reduces noise,
providing cleaner transmission paths that are necessary for two-way
interactivity, telephony, and other new services." [Id.]{.underline}

As the Commission is aware, in accordance with the undertakings of Time
Warner Cable ("TWC") pursuant to its Social Contract, TWC is in the
final year of a five-year program to substantially upgrade its cable
systems. As reported in its 1999 Social Contract Progress Report (copy
enclosed), at the end of 1999, TWC's cumulative investment in upgrading
and rebuilding its cable systems was \$3.7 billion. This investment has
affected approximately 9 million customers who are now being served by
upgraded plant in franchises where upgrades have been totally or
partially completed. These customers are already benefitting from
increased services and programming choice and enhanced system
reliability and picture quality. TWC expects to complete its system
upgrade obligations under the Social Contract by the end of this year.

**1.6 Describe Time Warner's local telephony roll-out plans and (if
applicable) its actual roll-out of such services for the following
periods:**

**a pre-merger (*i.e.*, from January 1, 1998, to the date of the Merger
Agreement);**

**b the present (*i.e.*, from the date of the Merger Agreement to the
present);**

> **c post-merger (*i.e.*, after consummation of the merger, assuming it
> is approved). Please specifically state how the merger would change
> Time Warner's prior rollout plans.**

**In responding to the foregoing, please identify the geographic areas
that Time Warner planned to serve, actually serves, and plans to serve
in the future; describe the means of offering local telephony (*e.g.*,
resale of ILEC services, facilities-based service); quantify the planned
and actual investment in this service; and quantify the planned and
actual number of homes passed and subscribers served or planned to be
served by systems offering this service.**

**[Residential Telephony]{.underline}**

TWC's local residential roll-out plans and (where applicable) actual
roll-out of such services are set forth below:

> **a. pre-merger (i.e., from January 1, 1998 to the date of the Merger
> Agreement):**

TWC completed a first-generation, equipment-only facilities-based trial
of residential, IP-based non-powered two-way voice service in Portland,
Maine in 1999. During 1999 (year one of the trial), this trial was
limited to a small number of homes, and was not marketed to customers.
TWC also undertook a facilities-based residential, IP-based service
trial in Rochester, New York, which also includes Road Runner high-speed
Internet service. This trial was intended to supplement TWC's
residential circuit-switched, facilities-based service to several
thousand customers in Rochester that commenced in 1994.

Time Warner Connect (formerly KBL Integrated Services) was founded in
1993 to offer local and long distance telephone service, as well as
cable television and intrusion alarm systems, to multiple dwelling unit
residents.

In addition, in February 1999, Time Warner and AT&T agreed upon a
preliminary letter of intent for a cable telephony joint venture. The
proposed terms of such venture are described in Time Warner's public
filings with the Securities and Exchange Commission. [See]{.underline}
Time Warner Inc. 10-K, SEC File #:001-12259 (March 26, 1999), at I1-2,
F17-18. The terms of that letter of intent called for the negotiation
and execution of definitive documents to create the joint venture, and
that has not occurred, but discussions with AT&T regarding the provision
of residential telephony to cable subscribers remain ongoing.

During 1998 and 1999 TWC reported a total capital investment related to
residential telephony of \$\_\_\_\_\_\_\_\_\_\_.

**b. the present (i.e., from the date of the Merger Agreement to the
present):**

In Rochester, New York, TWC currently provides residential
circuit-switched service to approximately \_\_\_ customers. In Portland,
Maine, TWC's second-generation trial of residential, IP-based
non-powered voice service does not yet include marketing and product
positioning. During 2000 (year 2 of the trial), TWC expects to do so, as
to its Road Runner Internet service subscribers, who make up
approximately 15 - 20 percent of TWC's cable subscribers in the area. As
of February 2000, Time Warner Connect had received state CLEC
certifications from California, Florida, Ohio, and Texas. Additionally,
as described above, Time Warner and AT&T continue to have discussions
regarding cable telephony. On March 8, 2000, TWC and AT&T announced a
joint marketing agreement. Pursuant to this arrangement, incentives are
being offered to consumers in Albany and Syracuse, NY who choose both
TWC cable service and AT&T communications service.

**c. post-merger (i.e., after consummation of the merger):**

Going forward, TWC expects to continue providing circuit-switched
service in Rochester, New York. In Portland, Maine, TWC plans to proceed
with marketing IP non-powered voice service to its Road Runner
subscribers on a trial basis. Pending analysis of the results of these
trials, TWC has no definitive plans for further roll-outs. TWC and AT&T
also expect to expand their joint marketing arrangement, by offering
other incentives to customers of long distance and cable service, and
engaging in joint telemarketing efforts.

Given TWC's technologically advanced cable systems and residential plans
focused on IP technology, and AOL's leadership in making the Internet
consumer-friendly, the parties expect to combine their skills to learn
from TWC's trials of residential IP voice service over cable plant, in
order to maximize the potential for a more rapid and widespread
deployment of this service. Indeed, AOL and Time Warner have already
held discussions to explore potential synergies in such areas as
residential IP telephony, long distance, and wireless services.

**[Business Telephony]{.underline}**

As detailed in response to item 1.8, Time Warner holds a 47.85 percent
equity interest in Time Warner Telecom Inc. ("TWT"), a publicly-traded
corporation. TWT is a leading fiber facilities-based integrated
communications provider offering local business "last mile" broadband
connections for data, high-speed Internet, local voice and long distance
services. TWT offers a wide range of business telephony services,
primarily to medium- and large-sized telecommunications-intensive
business end-users, long distance carriers, Internet service providers,
wireless communications companies and governmental entities. These
business telephony services include dedicated transmission, local
switched, long distance, data and video transmission services and
high-speed dedicated Internet services.

TWT's dedicated services, including private line and special access
services, use high-capacity digital circuits to carry voice, data and
video transmissions from point-to-point in multiple configurations.
TWT's switched voice services use high-capacity digital switches to
route voice transmissions anywhere on the public switched telephone
network. TWT also provides private network management and systems
integration services for businesses that require combinations of various
dedicated and switched telecommunications services. Data services
provided by TWT allow customers to create their own internal computer
networks and access external computer networks and the Internet. TWT's
video transport services provide customers with advanced services such
as point-to-point, broadcast-quality video. TWT's Internet services
include dedicated Internet access, website hosting, transport and
e-commerce for business customers and local Internet service providers.

TWT's facilities-based local business telephony rollout plans and (where
applicable) actual rollout of such services is as follows:

> **a. pre-merger (i.e., from January 1, 1998 to the date of the Merger
> Agreement)**

As of January 1, 1998, TWT operated networks in 19 metropolitan areas
covering 5,913 route miles, 233,488 fiber glass miles and offered
service to 2,426 buildings. These 19 metropolitan areas are grouped in
six regional clusters, as follows:

[New York Region]{.underline}

Albany, NY

Binghamton, NY

Manhattan, NY

Rochester, NY

[Southwest Region]{.underline}

Austin, TX

Houston, TX

San Antonio, TX

San Diego, CA

[Southeast Region]{.underline}

Charlotte, NC

Greensboro, NC

Memphis, TN

Raleigh, NC

[Midwest Region]{.underline}

Cincinnati, OH

Columbus, OH

Indianapolis, IN

Milwaukee, WI

[South Region]{.underline}

Tampa, FL

Orlando, FL

[Hawaii Region]{.underline}

Honolulu, HA

As of January 1, 1998, TWT deployed switches in 14 of these areas. As of
March 31, 1998, TWT's networks spanned 6,240 route miles, contained
244,894 fiber glass miles and offered service to 2,711 buildings with
1,904,420 VGE circuits and 23,702 access lines in service. As of
December 31, 1998, TWT increased to 16 the number of metropolitan areas
in which it offered switched services. TWT's investment in its
communications networks during 1998 was over \$380 million. During 1999,
TWT added two service areas, Dallas, Texas and Jersey City, New Jersey,
for a total of 21, and increased to 19 the number of areas where it
deployed digital telephony switches. As of December 31, 1999, TWT's
network included 8,872 route miles, 332,263 fiber miles and offered
service to 5,566 buildings. During 1999, TWT's investment in its
communications networks was over \$556 million.

**b. the present (i.e., from the date of the Merger Agreement to the
present):**

TWT is in the process of constructing three additional networks during
2000: Los Angeles/Orange County, California; Dayton, Ohio; and
Fayetteville, North Carolina. Additionally, TWT is in the process of
interconnecting its 21 existing areas within regional clusters with
owned or licensed fiber optic facilities, which is expected to address
customers' regional long distance voice, data and video requirements.
TWT now offers switched services in 20 out of its 21 service areas.
Based on historic capital requirements for network construction in
relation to sales volumes and network expansion plans, TWT anticipates
it will commit approximately \$350 million in 2000 to fund its capital
expenditures. This includes requirements for current operating areas and
TWT's expansion plans.

**c. post-merger (i.e., after consummation of the merger):**

TWT expects a geographic expansion plan that presently calls for
commencing construction in an additional 8 to 12 metropolitan
statistical areas during 2000 and 2001. The first phase of this planned
expansion includes Denver, Colorado; Atlanta, Georgia; Chicago,
Illinois; Minneapolis, Minnesota; and Columbia, South Carolina, which
are expected to be operational in 2001. TWT has also indicated that it
will evaluate other expansion opportunities. As part of this process,
TWT is targeting the expansion of data and Internet products that can be
offered on TWT's existing network. TWT does not anticipate that its
deployment plans will be affected by the AOL/Time Warner merger.

**1.7. Please provide all documents relating to the telephony plans
discussed in your response to request 1.6.**

As noted above, the parties are providing documents in response to this
request under separate cover letter.

# 1.8 Describe and quantify all AOL or Time Warner ownership interests and voting and management rights in entities providing any kind of telephony service, whether local or long distance, circuit-switched or packet-switched (*e.g.*, Net2Phone), and describe and quantify the ownership interests and voting and management rights of all other entities holding ownership interests of 5% or more in those entities.

**[Time Warner]{.underline}**

TWC holds ownership interests in the following entities created to
provide telephony services:

Time Warner AxS of Northeast Ohio

L.P. Time Warner AxS of Western Ohio

L.P. Time Warner Rescom of New York LLC

Time Warner Rescom of Texas, L.P.

Time Warner Connect

Time Warner Connect of San Antonio Inc.

Time Warner AxS of Northeast Ohio, L.P. and Time Warner AxS of Western
Ohio, L.P. are Delaware limited partnerships each 99 percent owned by
Time Warner Entertainment Company, L.P. ("TWE") and one percent owned by
the general partner, Time Warner Cable Holdings, Inc. ("TWCHI"), a
Delaware corporation owned 100 percent by TWE. TWE is a partnership of
Time Warner and MediaOne Group, Inc. ("MediaOne").[^45]

Time Warner Rescom of New York LLC is a Delaware limited liability
company 50 percent owned by TWE and 50 percent owned by Time Warner
Entertainment-Advance/Newhouse Partnership ("TWE-A/N"). TWE-A/N is a
partnership of TWE, Time Warner and Advance/Newhouse Partnership
("Advance").

Time Warner Rescom of Texas, L.P. is a Texas limited partnership one
percent owned by its general partner TWEAN Holdings Inc., 49 percent
owned by TWE-A/N and 50 percent owned by Texas Cable Partners, L.P.
TWEAN Holdings Inc. is a Delaware corporation 100 percent owned by
TWE-A/N. Texas Cable Partners, L.P. is a Delaware limited partnership
49.5 percent owned by TCI Texas Cable Holdings LLC, a Colorado limited
liability company 100 percent owned by AT&T Corp., 49.5 percent owned by
TWE-A/N, .5 percent owned by TCI Texas Cable Inc., a Colorado
corporation 100 percent owned by AT&T Corp. and .5 percent owned by
TWE-A/N Texas Cable Partners General Partner LLC, a Delaware limited
liability company 100 percent owned by TWE-A/N.

Time Warner Connect is a New York general partnership 99 percent owned
by Time Warner Service Holdings I, L.P., a Delaware limited partnership,
and 1 percent owned by Time Warner Service Holdings II, L.P., a Delaware
limited partnership. These entities are wholly owned by Time Warner.
Time Warner Connect of San Antonio, Inc. is a Delaware corporation,
wholly owned by Time Warner.

TWT is a publicly traded corporation in which Time Warner indirectly
holds 47.85 percent of the equity and 66.68 percent of the voting power.
TWT holds certificates to provide telecommunications services in 12
states, which include 21 metropolitan areas. TWT began by providing
telephony services through cable television systems owned by TWE,
TWE-A/N and Time Warner. On July 14, 1998, TWT LLC succeeded to the
ownership of TWT's business. On May 14, 1999, TWT LLC was reconstituted
as a Delaware corporation under the name Time Warner Telecom Inc.

TWT's authorized capital includes two classes of Common Stock, Class A
Common Stock, which is held by the public, and Class B Common Stock,
which is held by Time Warner, Advance and MediaOne. Each share of Class
B Common Stock is convertible, at the option of the holder, into one
share of Class A Common Stock. As of May 2, 2000, the Class B
stockholders had approximately 95.6% of the combined voting power of the
outstanding Common Stock in TWT. Holders of TWT Class A Common Stock and
Class B Common Stock generally vote together as a single class. However,
the differences between these classes are:

> 1\. holders of Class A Common Stock are entitled to one vote per
> share, and holders of Class B Common Stock are entitled to 10 votes
> per share on all matters submitted to a vote of shareholders;
>
> 2\. certain matters require the approval of 100 percent of the
> outstanding Class B Common Stock, voting separately as a class; and
>
> 3\. certain other matters require the approval of a majority of the
> outstanding Class A Common Stock, voting separately as a class.

Time Warner owns a 66.68 percent voting and 47.85 percent equity
interest in TWT, in Class B Common Stock. Advance owns a 20.62 percent
voting and 14.8 equity interest in TWT, in Class B Common Stock.
MediaOne owns an 8.33 percent voting and 5.98 percent equity interest in
TWT, in Class B Common Stock, as is more fully explained below. The
remaining 4.37 percent voting interest in TWT is publicly held, in Class
A Common Stock, along with their 31.3 percent equity interest.

Management of TWT is accountable to its board of directors (the
"Board"). TWT's Board consists of seven directors. Time Warner has the
right to designate three nominees for the Board, and Advance has the
right to designate one nominee. Two directors are independent, and the
seventh is TWT's Chief Executive Officer.

TWT owns a 99 percent interest in the state and regional operating
entities that operate the TWT networks described above. The remaining 1%
interest is owned by Time Warner Telecom Holdings, Inc., which is wholly
owned by TWT. These operating entities are as follows:

> Internet Connect, Inc.
>
> MetroComm AxS, L.P.
>
> Time Warner Telecom of California, L.P.
>
> Time Warner Telecom of Florida, L.P.
>
> Time Warner Telecom of Georgia, L.P.
>
> Time Warner Telecom of Hawaii, L.P.
>
> Time Warner Telecom of Indiana, L.P.
>
> Time Warner Telecom of Illinois, L.P.
>
> Time Warner Telecom of New Jersey, L.P.
>
> Time Warner Telecom of North Carolina, L.P.
>
> Time Warner Telecom-NY, L.P.
>
> Time Warner Telecom of Ohio, L.P.
>
> Time Warner Telecom of Texas, L.P.
>
> Time Warner Telecom of The Mid-South, L.P.
>
> Time Warner Telecom of Wisconsin, L.P.

On May 1, 2000, MediaOne closed the sale of 9 million of its shares in
TWT, and along with such sale, its financial interest in TWT had been
reduced to less than 10 percent, and it lost the right to appoint
directors to TWT's board. MediaOne's board representatives resigned in
connection with this sale of shares. MediaOne has stated that it
continues to own 6,289,842 shares of TWT Class B stock, which represent
less than 6 percent of TWT's total outstanding shares and less than a 10
percent voting interest in TWT.

During the second quarter of 1999, TWT acquired all of the outstanding
common stock of MetroComm, Inc. through the issuance of 2,190,308 shares
of TWT Class A Common Stock valued at \$24.1 million, and the assumption
of \$20.1 million in liabilities. Through the acquisition of MetroComm,
TWT acquired the 50 percent interest of MetroComm AxS, L.P., a
competitive local exchange carrier in Columbus, Ohio, not already owned
by TWT.

**[AOL]{.underline}**

As for AOL's response to this question, AOL has ownership interests and
voting and management rights in the following two companies: (1)
Talk.com Inc. (formerly Tel-Save.com, Inc., hereinafter "Talk.com") and
(2) Net2Phone, Inc. ("Net2Phone").

**[Talk.com]{.underline}**

Talk.com, through its subsidiaries, provides telecommunications services
to residential and business customers throughout the United States,
primarily through its e-commerce platform, which uses online and
web-enabled customer care, billing and information systems. Talk.com's
telecommunications services include long distance outbound service,
inbound toll-free service and dedicated private line services for data.
Talk.com offers local telecommunications services in various states and
has announced plans to offer a bundle of long distance and local service
to small business and select residential customers in nine southeastern
states serviced by Access One Communications Corp., a private local
telecommunications service provider that is being acquired by Talk.com,
subject to stockholders and regulatory approvals.[^46]

**[AOL's Ownership Interest]{.underline}**

AOL owns 4,121,372 shares of Common Stock of Talk.com, which represents
6.26 percent of the total outstanding shares of Common Stock as reported
by Talk.com in its SEC Form 10-Q, filed on May 15, 2000.[^47]

**[AOL's Management and Voting Rights]{.underline}**

The voting and management rights of Talk.com are governed by the laws of
Delaware. AOL has entered into an Investment Agreement with Talk.com
dated as of December 31, 1998 (as amended February 22, 1999 and August
1999) that gives AOL certain rights with respect to the shares and
warrants it owns, and imposes certain restrictions on Talk.com. The
restrictions on Talk.com include a restriction on incurrence of
indebtedness and a limitation on Talk.com entering into transactions
with any person that owns more than 15 percent of the issued and
outstanding shares of Talk.com unless a majority of the disinterested
directors of Talk.com approve the transaction. The Investment Agreement
provides that AOL will have the right to sell its shares (and warrants
and shares received on exercise of warrants) back to Talk.com at certain
times and at specified prices, or to receive reimbursement from Talk.com
if AOL sells shares on the market for less than the specified prices.
Finally, the agreement provides that AOL\'s rights to sell shares and
warrants or to receive reimbursement will accelerate if Talk.com takes
certain actions including: undergoing a Change of Control (as defined in
certain debt instruments of Talk.com); retaining a specified person as
an executive officer of Talk.com; breaching its agreements under the
Investment Agreement or a Telecommunications Marketing Agreement with
AOL; or committing a material default under its debt agreements.

**[Five Percent or Greater Ownership Interests and Management and Voting
Rights]{.underline}**

AOL's knowledge relating to persons or entities with five percent or
greater ownership interest in Talk.com is based on Talk.com's publicly
available filings with the Securities Exchange Commission. Talk.com's
SEC Form 10-Q, Quarterly Report, filed on May 15, 2000 indicates that
65,819,573 shares of Common Stock were issued and outstanding as of May
2, 2000. Thus, based on Talk.com's SEC Form 10-K/A, Amended Annual
Report, filed on April 28, 2000, the other persons or entities that have
a five percent or greater ownership interest in Talk.com are as follows:

> Massachusetts Financial Services Company
>
> 500 Boylston Street
>
> Boston, Massachusetts 02116
>
> Legg Mason, Inc.
>
> 100 Light Street
>
> P.O. Box 1476
>
> Baltimore, Maryland 21203
>
> Paul Rosenberg
>
> 650 N.E. 5^th^ Avenue
>
> Boca Raton, Florida 33432
>
> Geocapital, LLC
>
> 767 Fifth Avenue, 45^th^ Floor
>
> New York, New York 10153

**[Net2Phone]{.underline}**

Net2Phone is a provider of services, commonly known as Internet
telephony or IP telephony, that enable users to make high-quality,
low-cost telephone calls over the Internet. Net2Phone's IP telephony
services enable end users to call individuals and business worldwide
using personal computers or traditional telephones. Net2Phone also
provides technology to integrate live voice capabilities into the Web.

**[AOL's Ownership Interests]{.underline}**

AOL owns 2,750,000 shares of Net2Phone, representing 2,250,000 shares of
Class A Common Stock (each share of which entitles its holder to two
votes) and 500,000 shares of common stock (each share of which entitles
its holder to one vote). AOL's 2,250,000 shares of Class A Common Stock
represent 6.63 percent of Net2Phone's outstanding Class A Common stock.
AOL's 500,000 shares of Common Stock represent 2.33 percent of
Net2Phone's outstanding Common Stock.[^48] AOL has sole voting and sole
dispositive power with respect to all such shares. Pursuant to a
Stockholders Agreement dated May 13, 1999, by and among IDT Corporation
("IDT"), Clifford Sobel, Net2Phone and certain other investors (the
"Net2Phone Stockholders Agreement"), AOL may not, without Net2Phone's
consent, transfer its shares of Net2Phone to any person or entity which
derives a majority of its revenue from providing Internet telephony
services until 2002.

[**AOL's Management and Voting Rights**]{.underline}

The voting and management rights of Net2Phone are governed by
Net2Phone's Certificate of Incorporation and Bylaws and Delaware law.
Pursuant to Net2Phone's Certificate of Incorporation, holders of its
Class A Common Stock are entitled to two votes per share and holders of
Common Stock are entitled to one vote per share. AOL's ownership
interest represents 5.6 percent of the voting power based upon the
number of shares outstanding of Common Stock as reported by Net2Phone's
Form DEF 14A, Definitive Proxy Statement filed on June 6, 2000. Class A
Common stock automatically converts into Common Stock with one vote per
share upon any transfer unless the transferee is a "permitted
transferee" under Net2Phone's corporate charter, the definition of which
includes other holders of Class A Common Stock. Net2Phone's Certificate
of Incorporation also provides that the affirmative vote of the holders
of at least 66 and 2/3 percent of the outstanding shares of Class A
Common Stock and Common Stock, voting as a single class, is required to
approve (1) any sale of all or substantially all of the property and
assets of Net2Phone; (2) any action taken to dissolve Net2Phone; (3) any
merger of Net2Phone with another company in which the holders of
Net2Phone's equity securities immediately prior to the closing of such
transaction become the beneficial owners of 50 percent or less of the
voting equity securities of the surviving entity; (4) any change in
authorized capital; or (5) the removal of a director other than for
cause. Pursuant to the Net2Phone Stockholders Agreement, AOL and other
investors have agreed to elect a nominee from each of Softbank
Technology Ventures IV, L.P. and GE Capital Equity Investments Inc. to
the board of directors of Net2Phone. In addition, a representative of
AOL is entitled to attend all Net2Phone board meetings in a nonvoting
observer capacity.

**[Five Percent or Greater Ownership Interests and Management and Voting
Rights]{.underline}**

AOL's knowledge of entities with five percent or greater ownership
interest in Net2Phone is based on Net2Phone's publicly available filings
with the Securities and Exchange Commission. Please see attached chart
for information regarding these entities. Based on information reported
in Net2Phone's SEC Form DEF 14A, Definitive Proxy Statement, filed on
June 6, 2000, the entities with five percent or greater ownership
interest in Net2Phone are as follows:

> IDT Corporation.
>
> 190 Main Street
>
> Hackensack, New Jersey 07601
>
> SOFTBANK Technology Ventures IV, L.P.
>
> 333 West San Carlos Street, Suite 1225
>
> San Jose, California 95110
>
> Yahoo! Inc.
>
> 3420 Central Expressway
>
> Santa Clara, California 95051

**[AT&T Agreement]{.underline}**

On March 30, 2000 Net2Phone entered into an agreement with AT&T Corp.
("AT&T") and IDT.[^49] If approved at a Special Meeting of Stockholders
to be held on July 6, 2000, AOL's ownership and voting power in
Net2Phone would be diluted. Pursuant to the terms of the agreement,
Net2Phone, subject to stockholder approval and the satisfaction of other
conditions, will issue 4,000,000 newly-authorized shares of its Class A
Common Stock to a newly formed corporation controlled by AT&T. In
addition, the agreement between AT&T and IDT provides that AT&T, upon
Net2Phone's stockholders' approval and satisfaction of the other
conditions in the agreement, purchase 14.9 million shares of Net2Phone
Class A Common Stock currently owned by IDT. Upon consummation of these
transactions:

>  AT&T will, through its wholly-owned subsidiary, own approximately 32
> percent of Net2Phone's outstanding capital stock, and will control 39
> percent of the aggregate voting power of Net2Phone's capital stock.
>
>  AOL's ownership of Net2Phone's outstanding capital stock will be
> reduced from 4.97 percent to 4.63 percent, and its voting power will
> be reduced from 5.6 percent to 5.14 percent.
>
>  AT&T's wholly-owned subsidiary and IDT will enter into a voting
> agreement with respect to the election of mutually acceptable nominees
> to the Board. So long as they agree on nominees, AT&T's wholly-owned
> subsidiary and IDT will collectively control approximately 60 percent
> of Net2Phone's voting power and will therefore likely control the
> election of all of Net2Phone's directors; however, if they are unable
> to agree on acceptable nominees, the votes of other stockholders will
> determine the election of Net2Phone's directors. This agreement
> terminates by its terms no later than August 1, 2003.
>
>  Initially, AT&T, through its wholly-owned subsidiary, also will have
> the right to designate three individuals to be appointed as directors
> on Net2Phone's Board, one of whom shall be elected to fill the vacancy
> created by the resignation of a director currently designated by IDT.
> AT&T's wholly-owned subsidiary and IDT has each agreed to use its best
> efforts, so long as it beneficially owns between 15 percent and 85
> percent of Net2Phone's voting power, to assure that Net2Phone's Board
> consists of at least 5 directors who are not employees of or
> affiliated with Net2Phone, IDT, AT&T or any of their affiliates. These
> "independent" directors will take action on behalf of the Net2Phone
> Board on matters involving or relating to its relationship with IDT,
> AT&T and other interested parties.

**1.9 Describe Time Warner's roll-out plans and (if applicable) its
actual roll-out of high speed Internet access services for the following
periods:**

> **a. pre-merger (i.e., from January 1, 1998, to the date of the Merger
> Agreement);**
>
> **b. the present (i.e., from the date of the Merger Agreement to the
> present);**
>
> **c. post-merger (i.e., after consummation of the merger, assuming it
> is approved). Please specifically state how the merger would change
> Time Warner's prior rollout plans.**

**In responding to the foregoing, please identify the geographic areas
that Time Warner planned to serve, actually serves, and plans to serve
in the future; quantify the planned and actual investment in this
service; and quantify the planned and actual number of homes passed and
subscribers served or planned to be served by systems offering this
service.**

Time Warner provides cable service (including high speed Internet
service) through Time Warner Cable ("TWC"), which manages its cable
systems. TWC is a division of Time Warner Entertainment Company, L.P.
("TWE"). TWC's divisions are organized geographically across the country
in 40 divisions:

> Albany, NY
>
> Austin, TX
>
> Bakersfield, CA
>
> Binghamton, NY
>
> Birmingham, AL
>
> Charlotte, NC
>
> Cincinnati, OH
>
> Columbus, OH
>
> Desert Cities (CA)
>
> El Paso, TX (a.k.a. Paragon Southwest)
>
> Florida
>
> Green Bay, WI
>
> Greensboro, NC
>
> Hawaii
>
> Houston, TX
>
> Indianapolis, IN
>
> Jackson, MS/Monroe, LA
>
> Kansas City, MO
>
> Liberty (NY)
>
> Lincoln, NE
>
> Los Angeles, CA
>
> Memphis, TN
>
> Milwaukee, WI
>
> Minneapolis, MN (a.k.a. Minnesota)
>
> National[^50]
>
> New York City
>
> Northeast Ohio
>
> Portland, ME (a.k.a. New England)
>
> Raleigh/Durham, NC
>
> Rochester, NY
>
> San Antonio, TX
>
> San Diego, CA
>
> Shreveport, LA
>
> South Carolina (a.k.a. Columbia)
>
> Staten Island, NY
>
> Syracuse, NY
>
> Tampa Bay, FL
>
> Waco, TX
>
> Western Ohio
>
> Wilmington, NC
>
> **a. Pre-merger high speed Internet service roll-out status:**

As of the week ending January 8, 2000, TWC had rolled out high speed
Internet service in the following divisions:

+-----------------------+-----------------------+-----------------------+
| **[Di                 | **Cable Modem**       | **Cable Modem Ready** |
| vision]{.underline}** |                       |                       |
|                       | **[Cus                | **[Homes              |
|                       | tomers]{.underline}** | passed]{.underline}** |
+=======================+=======================+=======================+
| Albany                |                       |                       |
+-----------------------+-----------------------+-----------------------+
| Austin                |                       |                       |
+-----------------------+-----------------------+-----------------------+
| Binghamton            |                       |                       |
+-----------------------+-----------------------+-----------------------+
| Charlotte             |                       |                       |
+-----------------------+-----------------------+-----------------------+
| Cincinnati            |                       |                       |
+-----------------------+-----------------------+-----------------------+
| Columbus              |                       |                       |
+-----------------------+-----------------------+-----------------------+
| El Paso               |                       |                       |
+-----------------------+-----------------------+-----------------------+
| Florida               |                       |                       |
+-----------------------+-----------------------+-----------------------+
| Greensboro            |                       |                       |
+-----------------------+-----------------------+-----------------------+
| Hawaii                |                       |                       |
+-----------------------+-----------------------+-----------------------+
| Houston               |                       |                       |
+-----------------------+-----------------------+-----------------------+
| Kansas City           |                       |                       |
+-----------------------+-----------------------+-----------------------+
| Los Angeles           |                       |                       |
+-----------------------+-----------------------+-----------------------+
| Memphis               |                       |                       |
+-----------------------+-----------------------+-----------------------+
| New York City         |                       |                       |
+-----------------------+-----------------------+-----------------------+
| N.E. Ohio             |                       |                       |
+-----------------------+-----------------------+-----------------------+
| Portland              |                       |                       |
+-----------------------+-----------------------+-----------------------+
| Rochester             |                       |                       |
+-----------------------+-----------------------+-----------------------+
| San Antonio           |                       |                       |
+-----------------------+-----------------------+-----------------------+
| San Diego             |                       |                       |
+-----------------------+-----------------------+-----------------------+
| S. Carolina           |                       |                       |
+-----------------------+-----------------------+-----------------------+
| Syracuse              |                       |                       |
+-----------------------+-----------------------+-----------------------+
| Tampa Bay             |                       |                       |
+-----------------------+-----------------------+-----------------------+
| **TOTAL**             |                       |                       |
+-----------------------+-----------------------+-----------------------+

> **b. High speed Internet roll-out status since the announcement of the
> merger:**

Subsequent to the announcement of the merger, TWC has rolled out high
speed Internet service to an additional four divisions. The roll-out
status as of the week ending May 20, 2000 is set forth below:

+----------------------+-----------------------+-----------------------+
| **[Div               | **[Cable Modem        | **Cable Modem Ready** |
| ision]{.underline}** | Cus                   |                       |
|                      | tomers]{.underline}** | **[Homes              |
|                      |                       | passed]{.underline}** |
+======================+=======================+=======================+
| Albany               |                       |                       |
+----------------------+-----------------------+-----------------------+
| Austin               |                       |                       |
+----------------------+-----------------------+-----------------------+
| Binghamton           |                       |                       |
+----------------------+-----------------------+-----------------------+
| Charlotte            |                       |                       |
+----------------------+-----------------------+-----------------------+
| Cincinnati           |                       |                       |
+----------------------+-----------------------+-----------------------+
| Columbus             |                       |                       |
+----------------------+-----------------------+-----------------------+
| El Paso              |                       |                       |
+----------------------+-----------------------+-----------------------+
| Florida              |                       |                       |
+----------------------+-----------------------+-----------------------+
| Greensboro           |                       |                       |
+----------------------+-----------------------+-----------------------+
| Hawaii               |                       |                       |
+----------------------+-----------------------+-----------------------+
| Houston              |                       |                       |
+----------------------+-----------------------+-----------------------+
| Kansas City          |                       |                       |
+----------------------+-----------------------+-----------------------+
| Los Angeles          |                       |                       |
+----------------------+-----------------------+-----------------------+
| Memphis              |                       |                       |
+----------------------+-----------------------+-----------------------+
| Minnesota            |                       |                       |
+----------------------+-----------------------+-----------------------+
| New York City        |                       |                       |
+----------------------+-----------------------+-----------------------+
| N.E. Ohio            |                       |                       |
+----------------------+-----------------------+-----------------------+
| Portland             |                       |                       |
+----------------------+-----------------------+-----------------------+
| Raleigh              |                       |                       |
+----------------------+-----------------------+-----------------------+
| Rochester            |                       |                       |
+----------------------+-----------------------+-----------------------+
| San Antonio          |                       |                       |
+----------------------+-----------------------+-----------------------+
| San Diego            |                       |                       |
+----------------------+-----------------------+-----------------------+
| S. Carolina          |                       |                       |
+----------------------+-----------------------+-----------------------+
| Syracuse             |                       |                       |
+----------------------+-----------------------+-----------------------+
| Tampa Bay            |                       |                       |
+----------------------+-----------------------+-----------------------+
| Waco                 |                       |                       |
+----------------------+-----------------------+-----------------------+
| Western Ohio         |                       |                       |
+----------------------+-----------------------+-----------------------+
| **TOTAL**            |                       |                       |
+----------------------+-----------------------+-----------------------+

> **c. Post-merger roll-out plans:**

By the end of 2000, TWC plans that high speed Internet service will be
rolled out to the following 12 divisions:

  -----------------------------------------------------------------------
  **[Division]{.underline}**       **[Projected Subs
                                   Year-end]{.underline}**
  -------------------------------- --------------------------------------
                                   

                                   

                                   

                                   

                                   

                                   

                                   

                                   

                                   

                                   

                                   

                                   

                                   
  -----------------------------------------------------------------------

By the end of 2000, high-speed Internet service will have been
rolled-out to virtually all TWC divisions, and available to
approximately \_\_\_\_\_\_\_\_\_ homes passed or \_\_\_% of all homes
passed by TWC. Roll-out of high speed Internet service is scheduled for
the following TWC divisions in 2001:

TWC's five year roll-out projections for high-speed Internet service are
set forth below:

  ----------------------- ------------------------------- -----------------------
                          **[Subscribers]{.underline}**   **[Homes
                                                          Passed]{.underline}**

  **Prior to 1999**                                       

  1999                                                    

  2000                                                    

  2001                                                    

  2002                                                    

  2003                                                    
  ----------------------- ------------------------------- -----------------------

TWC's five-year incremental (i.e., over and above the plant upgrade
costs described above) investment projections for high-speed Internet
service are set forth below:

  ----------------------- --------------------------------- --------------------------------
                          **[Subscriber                     **[Capital]{.underline}**[^52]
                          Acquisition]{.underline}**[^51]   

  1999                                                      

  2000                                                      

  2001                                                      

  2002                                                      

  2003                                                      
  ----------------------- --------------------------------- --------------------------------

In addition, as described in response item 1.6.c., TWT provides
telephony and Internet services primarily to business customers, and its
rollout plans for high-speed Internet service thus mirror TWT's
telephony rollout plans described above. During the second quarter of
1999, TWT acquired all of the outstanding common stock of Internet
Connect, Inc., an Internet service provider to business customers, for
consideration consisting of \$3.8 million of Class A limited liability
interests in TWT LLC, TWT's predecessor, approximately \$3.5 million in
net cash and the assumption of \$1.9 million in liabilities. At the time
of TWT's initial public offering in 1999, the Class A limited liability
interests were converted into 307,550 shares of Class A Common Stock of
TWT. This Common Stock will be held in escrow to be released to the
former Internet Connect, Inc.'s shareholders over a three year period.
Through the Internet Connect, Inc., acquisition, TWT manages current and
future data networks and provides new Internet products.

Time Warner expects the AOL/Time Warner merger to expedite the
availability of high-speed Internet service to consumers from multiple
providers. First, pursuant to the MOU, Time Warner has agreed to work
with its venture partners in Road Runner to achieve an early termination
of the provisions of the agreements between Road Runner and Time Warner
Cable that restrict the ability to provide multiple ISPs. Second, Time
Warner has committed, as set forth in the MOU, to negotiate with
multiple ISPs towards arrangements whereby consumers will have
additional options in obtaining cable modem service. Time Warner firmly
believes that a multiple ISP model will lead to higher overall cable
modem penetration.

> **1.10 Please provide all documents relating to the high-speed
> Internet access plans discussed in your response to request 1.9.**

As noted above, the parties are providing documents in response to this
request under separate cover letter.

> **1.11 Describe Time Warner's roll-out plans and (if applicable) its
> actual roll-out of digital cable television services for the following
> periods:**
>
> **a. pre-merger (*i.e.,* from January 1, 1998, to the date of the
> Merger Agreement);**

**b. the present (*i.e.*, from the date of the Merger Agreement to the
present);**

> **c. post-merger (*i.e.*, after consummation of the merger, assuming
> it is approved). Please specifically state how the merger would change
> Time Warner's prior rollout plans.**

**In responding to the foregoing, please identify the geographic areas
that Time Warner planned to serve, actually serves, and plans to serve
in the future; quantify the planned and actual investment in this
service; and quantify the planned and actual number of homes passed and
subscribers served or planned to be served by systems offering this
service.**

As explained in response to question 1.9, Time Warner Cable ("TWC") has
40 divisions, organized geographically across the country. TWC's
roll-out of digital cable televison services[^53] is focused on these
divisions.

The "Pegasus Program" is TWC's company-wide project to provide digital
cable service, through the deployment of advanced set-top boxes, to its
cable subscribers.[^54] The Pegasus Program is divided into two phases.
Phase One, the current phase, is the deployment of "downstream digital"
services; the primary customer benefit is access to an increased number
of cable service channels. During Phase One, the total number of cable
service channels typically increases from 80 analog channels to an
additional 100 digitally-delivered channels.

During Phase Two, currently under development, TWC plans to launch the
Video On Demand ("VOD") service onto the existing digital set-up boxes,
utilizing interactivity between the subscriber and the cable system.
TWC's current goal is to have the VOD product commercially available
during 2000.

> **a. Pre-merger digital cable service deployment status:**

As of December 31, 1999, TWC had installed Pegasus headend components,
and rolled-out digital set-top boxes, in the following 29 divisions,
representing approximately 70% of TWC's total homes passed:

  -----------------------------------------------------------------------
  **[Division]{.underline}**          **[Digital Subscribers
                                      (12/31)]{.underline}**
  ----------------------------------- -----------------------------------
  Albany                              

  Austin                              

  Bakersfield                         

  Binghamton                          

  Charlotte                           

  Cincinnati                          

  Columbus                            

  El Paso                             

  Florida                             

  Greensboro                          

  Hawaii                              

  Houston                             

  Kansas City                         

  Liberty                             

  Los Angeles                         

  Memphis                             

  Milwaukee                           

  Northeast Ohio                      

  Portland                            

  Raleigh                             

  Rochester                           

  San Antonio                         

  South Carolina                      

  San Diego                           

  Syracuse                            

  Tampa Bay                           

  Waco                                

  Western Ohio                        

  Wilmington                          

  **TOTAL**                           
  -----------------------------------------------------------------------

Thus, by the end of 1999, TWC installed over \_\_\_\_\_\_\_ digital
set-top boxes company-wide. TWC's total investment in digital set-top
boxes during 1999 was \$\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_.

> **b. Digital cable deployment since the announcement of the merger:**

Subsequent to the announcement of the merger, TWC has rolled out digital
cable service to an additional seven divisions. The deployment status of
digital cable service as of the month ending May 31, 2000 is set forth
below:

  -----------------------------------------------------------------------
  **[Division]{.underline}**         **[Digital Subscribers
                                     (5/00)]{.underline}**
  ---------------------------------- ------------------------------------
  Albany                             

  Austin                             

  Bakersfield                        

  Binghamton                         

  Birmingham                         

  Charlotte                          

  Cincinnati                         

  Columbus                           

  El Paso                            

  Florida                            

  Greensboro                         

  Hawaii                             

  Houston                            

  Kansas City                        

  Liberty                            

  Los Angeles                        

  Memphis                            

  Minneapolis                        

  National                           

  New York City                      

  Milwaukee                          

  Northeast Ohio                     

  Portland                           

  Raleigh                            

  Rochester                          

  San Antonio                        

  South Carolina                     

  San Diego                          

  Syracuse                           

  Tampa Bay                          

  Waco                               

  Western Ohio                       

  Wilmington                         

  **TOTAL**                          
  -----------------------------------------------------------------------

As of the month ending May 31, 2000, TWC's incremental additional
investment for the year 2000 in digital set-top boxes amounted to
\$\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_.

**c. Post-merger deployment plans:**

Although TWC has not made any definitive five-year projections, TWC
expects to install \_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_ digital set-top box
units company-wide each year for the next three years. TWC's 1999
Business Plan included the following projections relating to digital
cable service roll-out:

> **Digital Subscribers**
>
> **[Year]{.underline} [(Millions) ]{.underline}**
>
> 1999
>
> 2000
>
> 2001
>
> 2002
>
> 2003

Time Warner believes that completion of the merger will help accelerate
TWC's ongoing roll-out plans for digital cable televison services. To
date, the most significant variable affecting TWC's ability to rollout
digital cable service expeditiously has been the availability of
advanced set-top boxes from third party suppliers. TWC understands that
AOL has been independently pursuing the design and manufacture by third
parties of advanced set-top boxes in connection with its AOL TV project.
Time Warner anticipates that, once the merger is completed and AOL and
TWC are able to combine their resources, particularly their cumulative
expertise with respect to set-top box design and functionality, the pace
of deployment of digital cable service by TWC will be accelerated.

> **1.12 Please provide all documents relating to the digital cable
> rollout plans discussed in your response to request 1.11.**

As noted above, the parties are providing documents in response to this
request under separate cover letter.

> **1.13 According to commenters, AOL originally pledged to work with
> the instant messaging ("IM") industry to create an interoperability
> standard, but has since ceased participation in the standard setting
> process. Please provide a narrative response to the following
> questions.**

## a. Is AOL actively working with other IM providers to set standards for interoperability? If not, why? If so, in what capacity?

AOL pioneered the concept of IM in 1985 and unveiled the first IM
service to its members as a feature of the AOL service in 1989. At that
time, IM was available only to AOL subscribers. Recognizing the growing
popularity of IM, in 1997 AOL began giving away for free its AOL Instant
Messenger ("AIM") client software to anyone on the web. AOL has also
entered more than a dozen royalty-free license agreements with other
companies---including Lotus, Lycos, EarthLink, and other ISPs---to
distribute AIM, including cobranded versions, and AOL is working to add
even more partners to this list.

In addition, AOL has and continues to support efforts to create an open
and interoperable standard that would allow users to exchange instant
messages across different IM networks. To that end, AOL has participated
in industry discussions through the Internet Engineering Task Force
("IETF") about how to best achieve this goal. At the same time, however,
AOL has resisted unauthorized attempts to access its network by
alternative IM providers that would jeopardize the security and privacy
of AOL members and AIM users.

On June 15, 2000, responding to a call from the IETF for industry ideas
on IM interoperability, AOL submitted a proposed architectural design
for a worldwide IM system. AOL believes that its proposal, a copy of
which is attached, represents a significant step toward the ultimate
development of detailed protocols for implementing full IM
interoperability. AOL's proposed system is specifically designed to
address threats to the user experience---including offensive spam,
attempts to defraud, and virus proliferation---by way of a
server-to-server approach to interoperability that would work in a
manner similar to Internet e-mail. AOL's design would protect user
privacy, security, and ease-of-use, promote continued long-term
competition and innovation in the industry, and provide the greatest
degree of scalability. Specifics include the following:

> ** Full Interoperability**---The server-to-server architecture of the
> AOL design would allow users of any two IM networks that use the same
> protocols to communicate with one another at any time;
>
> ** Privacy and Security**---Under this architecture, users would need
> to be registered with only one instant messaging system, and would not
> be required to share passwords, log-in IDs, or other confidential
> information with anyone outside the network they choose. In addition,
> the design includes requirements that IM data could not be easily
> intercepted or hijacked and that more advanced security measures such
> as end-to-end encryption or signing could be layered on top of initial
> implementations. Finally, it would require that individual networks be
> allowed to use firewalls or other precautions to ensure the highest
> possible degree of security;
>
> ** Scalability**---This design would enable the development of any
> number of IM systems, from large networks like AOL to individual
> families with their own servers;
>
> ** Independence**---No government or other central authority would be
> required to administer the system; and
>
> ** User Name Consistency**---Users of instant messaging networks
> would be able to keep their existing screen names or addresses, even
> if different users had identical names on different networks.

AOL is confident that this proposal will advance the effort to develop
and implement IM interoperability standards that abide by its first
commitment and biggest concern in this process: protecting the privacy
and security of IM users.

## b. Can other IM providers' customers currently connect with AOL's IM customers?

Today's instant messaging systems are typically comprised of a client,
through which the end-user interacts, and servers which relay
information between compatible clients. Tight integration between
clients and servers allows instant messaging services to provide a
secure, reliable channel through which authentication, presence, and
messaging information is passed between users and the service.

As a general matter, a consumer who is using one IM service is not able
to exchange messages with a consumer who is using another IM service. It
should be noted that this is true whether one consumer is using AIM and
the other is using an unaffiliated IM service, each is using a different
AOL-affiliated IM service (*i.e.*, one is using AIM and the other ICQ),
or if both are using different, unaffiliated IM services (*e.g.*, MSN
Messenger and Yahoo! Messenger). AOL is hopeful that the IM industry
soon will adopt an open IM standard---consistent with the proposal
recently submitted to the IETF and described above---that will allow
consumers to safely and securely exchange instant messages no matter
what IM provider they use, just as they are able to do with e-mail.

The instant messaging industry today is a dynamic and rapidly growing
arena with dozen of companies competing for customers and constantly
innovating in order to improve their users' experience. In fact, more
than 40 different instant messaging and chat programs are available
today. These include the following:

**[Name]{.underline}: [Available On The Web At]{.underline}:**

AbbottChat www.abbottsys.com/atchat.html

ACD Express Communicator www.acdsystems.com/products/express/expcom.htm

Ahoy! www.quicomm.com/AHOY/ahoy.html

ChitChat members.aol.com/chinyu/chitchat

Excite PAL talk.excite.com/communities/excite/pal

Gooey www.gooey.com

ichat Pager www.ichat.com

Infoseek Messenger www.peoplelink.com/v1/down_infoseek

Jabber jabber.org

Joe Galaxy joegalaxy.net

MmChat www.erols.com/clintg

MSN Messenger messenger.msn.com

NetPopUp www.vtoy.fi/\~malo/netpopup.html

Odigo www.odigo.com

Palace: Visual Chat www.thepalace.com

Paltalk www.paltalk.com

**[Name]{.underline}: [Available On The Web At]{.underline}:**

Peerchat www.peerchat.com

Peoplelink www.peoplelink.com

Pink Notes Plus www.pinknotesplus.com

PowWow www.tribal.com

QuickFlash www.arm-group.com

ScreenFire www.screenfire.com

Shizzam home.xnet.com/\~soliday1/shizzam

TalkR www.acacia-net.com/romain/talkr.htm

WorldChat home.sunrise.ch/compag/sds/wchatfw.html

Vypress Messenger www.vypress.com

Yahoo! Messenger messenger.yahoo.com

Most of these IM services are free to use, so consumers can choose the
program---or programs---that best meet their needs. As a practical
matter, then, even without interoperability, Internet users today can
exchange instant messages, regardless of their preferred IM provider.
AOL distributes its AIM software for free, as do a significant number of
other IM providers, including many of those listed above. Internet
users---including subscribers to the AOL online service---are able to
use more than one IM client simultaneously. As a result, an Internet
user, with little effort, can exchange instant messages with virtually
any other Internet user, simply by downloading and installing the IM
software used by the intended recipient.

## c. If not, how is this beneficial to AOL and its IM customers?

AOL is involved, as demonstrated by its recent submission to the IETF,
in efforts to develop an interoperability standard that will allow IM
users to exchange instant messages regardless of their chosen IM
service---and in a way that does not jeopardize user privacy and
security or the integrity of AOL's network. Until such an open standard
is adopted, however, AOL will continue to regard the privacy and
security interests of its users as its top priorities. As a result, AOL
members and AIM users will benefit in two ways. First, while work
continues on a suitable IM interoperability standard, our instant
message users will continue to enjoy the privacy and security
protections currently offered by our service. Second, once a standard
that incorporates these safeguards is adopted, AOL members and AIM
users---and, indeed, all IM users---will be able to exchange instant
messages across IM services in an environment that is specifically
designed to ensure that their passwords and personal information are
secure, and that protects them from unsolicited instant messages.

AOL believes that protecting the privacy and security of its AOL members
and AIM users should be its highest priority. AOL is proud of its
efforts to safeguard the interests of instant messaging users both
within the AOL service and through AIM, which include:

> ** Privacy Controls**---allowing users to block other people from
> seeing if they are online or sending them messages;
>
> ** Knock-Knock**---a pop-up box that gives AOL members and AIM users
> the option of whether or not to open a message sent by a stranger;
>
> ** Neighborhood Watch**---a feedback option that allows AOL members
> and AIM users to identify improper behavior or violations of the Terms
> of Service;
>
> ** Anti-Spam Technologies**---designed to prevent AOL members and AIM
> users from being deluged with thousands of unwanted
> messages---including a limit on the number of messages that can be
> sent from one account; and
>
> ** AOL's Privacy Policy**---a clear and easily obtainable policy
> outlining exactly what information AOL collects and what choices AOL
> members and AIM users can make about its use.

Competing IM providers have sought to allow their users to exchange
instant messages with AOL members and AIM users either through
unauthorized attempts to hack into AOL's IM servers or by advocating
proposals that fail to address many of the technical, security, and
privacy-related issues surrounding IM interoperability. Such proposals
would sacrifice the user privacy and security that AOL has worked to
protect. In short, we believe that any approach which would require
consumers to register for accounts with every instant messaging system
they use and force them to manage multiple IDs and passwords is
seriously flawed and will not result in convenient, secure, or truly
open interoperability. More importantly, forcing consumers to disclose
their passwords whenever they send messages across systems would make
them increasingly susceptible to hackers.

The better approach---and the one advanced by the proposed architectural
design for a worldwide IM system AOL submitted to the IETF---is to first
resolve the technical, security, and privacy-related challenges of
building a secure and open system. Indeed, had the industry been more
deliberate in the development of e-mail protocols, many of the issues
that consumers encounter today with respect to e-mail---including
offensive spam and viruses---might have been avoided.

## d. If so, are the alternate IM providers required to sign a licensing agreement that includes payment to AOL for access to AOL customers?

AOL has not required payment for the licensing of its IM technology.

## e. Does AOL pay for access to alternative IM providers' customers?

As noted above, AOL does not demand payment in exchange for use of its
IM technology. Likewise, AOL does not pay for access to other providers'
customers.

# 1.14 Please provide copies of the 1999 annual reports and SEC 10-K filings for AOL and Time Warner.

As noted above, the parties are providing documents in response to this
request under separate cover letter.

\* \* \*

In conjunction with the documents the parties will be providing under
separate cover letter, this completes AOL and Time Warner's response to
the requests made in the June 9, 2000 letter from Ms. Truong. Please do
not hesitate to contact the undersigned should you have any questions
regarding this letter or the documents produced herewith.

> Respectfully submitted,

Peter D. Ross Arthur H. Harding

Wiley, Rein & Fielding Fleischman and Walsh, L.L.P.

1776 K Street, N.W. 1400 Sixteenth Street, N.W., Suite 600

Washington, D.C. 20006 Washington, D.C. 20036

\(202\) 719-4232 (202) 939-7900

*Counsel for America Online, Inc.* *Counsel for Time Warner Inc.*

120922.2

[^1]: *In the Matter of Applications of America Online, Inc. and Time
    Warner Inc. for Transfers of Control*, CS Docket No. 00-30, Order
    Adopting Protective Order, DA 00-780 (CSB April 6, 2000).

[^2]: *See* 47 C.F.R. § 76.503.

[^3]: *See* Excerpts from General Motors Corporation Offer to Exchange
    1.065 Shares of Class H Common Stock for each share of \$1 2/3 Par
    Value Common Stock, at 117 ("Exchange Offer"). The complete document
    is available at \<http://www.gm.com/company/investors/
    stockholders/classh_main.html\>.

[^4]: *Id*.

[^5]: AOL is entitled to vote on amendments or alterations to any
    provision of the GM Restated Certificate of Incorporation or the
    Certificate of Designations of Series H 6.25% Automatically
    Convertible Preference Stock of General Motors Corporation which
    would adversely affect the powers, preferences or special rights of
    the Series H Preference Stock. Exchange Offer at 120; Certificate of
    Designations of Series H 6.25% Automatically Convertible Preference
    Stock of General Motors Corporation, at Section 5(ii) ("Certificate
    of Designations"). Further, in the event that (1) GM fails to pay,
    in full, the preferential dividends accumulated on AOL's Series H
    Preference Stock for any six quarterly dividend payment periods
    (whether or not consecutive), and (2) all such dividends remain
    unpaid, the number of directors of GM will be increased by two and
    AOL will elect such directors. *Id.* If holders of other series of
    preference stock are entitled to vote on the election of such
    directors due to a preferential dividend default with respect to
    those series, AOL, as the sole shareholder of Series H Preference
    Stock, and the holders of these other series of preference stock
    will elect such directors together as a class. *Id.*

[^6]: *Id*.

[^7]: Exchange Offer at 124.

[^8]: *Id.* at 29. Although the net income of Hughes is allocated for
    accounting purposes to calculate the amounts which may be used to
    pay dividends on each class of GM common stock, this allocation does
    not result in a physical segregation of the assets of GM or Hughes,
    or the establishment of separate accounts or dividend or liquidation
    preferences. *Id* at 29, 124. If a liquidation, insolvency or
    similar event occurred with respect to Hughes, creditors of Hughes,
    as well as GM as the sole stockholder of Hughes, would receive
    payment from the assets of Hughes. *Id.* at 29. The holders of GMH
    stock would not be entitled to any payment from the assets of
    Hughes. *Id.* at 29.

[^9]: Exchange Offer at 129; General Motors Corporation Restated
    Certificate of Incorporation, As Amended June 24, 1999, at Article
    4, Division I(b) ("Certificate of Incorporation").

[^10]: *Id*.

[^11]: General Motors Corporation, Current Report, SEC Form 8-K,
    February 2, 2000.

[^12]: *Id*.

[^13]: GM Announces Final Results of Successful Exchange Offer, May 26,
    2000.

[^14]: GM Announces Three-For-One Split of Class H Stock, June 6, 2000.

[^15]: GM Announces \$5.6 Billion Contribution to Employee-Benefit
    Plans, June 13, 2000.

[^16]: GM Stock Quotes, \<http://www.nyse.com/\> (visited on June 22,
    2000).

[^17]: Because of recent changes in the GM and GMH capital structure,
    our calculations are based on information reported in the General
    Motors Quarterly Report for the first quarter of 2000, adjusted to
    reflect the publicly available information regarding the recent
    Exchange Offer and contribution to certain employee-benefit plans.
    General Motors Quarterly Report for the Quarterly Period Ending
    March 31, 2000, SEC Form 10-Q, at 1. The number of GM shares
    outstanding on March 31, 2000 was 621,181,380. *Id.* General Motors
    repurchased 86,396,977 shares of GM stock through the Exchange
    Offer. GM Announces Final Results of Successful Exchange Offer, May
    26, 2000. The number of GM shares outstanding has been calculated by
    subtracting the number of shares repurchased through the Exchange
    Offer from the number of shares outstanding on March 31, 2000.
    621,181,380 - 86,396,977 = 534,784,403.

[^18]: As noted, because of recent changes in the GM and GMH capital
    structure, our calculations are based on information reported in the
    General Motors Quarterly Report for the first quarter of 2000,
    adjusted to reflect the publicly available information regarding the
    recent Exchange Offer and contribution to certain employee-benefit
    plans. General Motors Quarterly Report for the Quarterly Period
    Ending March 31, 2000, SEC Form 10-Q, at 1. The number of GMH shares
    outstanding on March 31, 2000 was 138,437,233. *Id.* General Motors
    recently issued 92,012,781 shares of GMH stock as a result of the
    Exchange Offer. *See* GM Announces Final Results of Successful
    Exchange Offer, May 26, 2000. GM also contributed 60,500,000 shares
    of GMH stock to certain employee-benefit plans on June 12, 2000. GM
    Announces \$5.6 Billion Contribution to Employee-Benefit Plans, June
    13, 2000. The number of GMH shares outstanding has been calculated
    by adding the number of GMH shares issued as a result of the
    Exchange Offer and the contribution to the number of GMH shares
    outstanding on March 31, 2000. 92,012,781 + 60,500,000 + 138,437,233
    = 290,950,014.

[^19]: Prior to the Exchange Offer and contribution, the total value of
    the outstanding shares of GM stock was \$51,441,583,031.25, and the
    total value of the outstanding shares of GMH stock was
    \$17,235,435,508.50. The total value of the outstanding shares of GM
    stock was calculated using the number of shares outstanding on March
    31, 2000 (621,181,380) and the stock price of GM stock on that date
    (82 13/16). *See* General Motors Quarterly Report for the Quarterly
    Period Ending March 31, 2000, SEC Form 10-Q, at 1. The price of the
    GM stock on March 31, 2000 can be found at
    \<Quotehttp://www.bigcharts.com/historical/default.asp?detect
    =1&symbol= gm&close\_ date= 03%2F31%2F00&x=8&y=16\>. Likewise, the
    total value of the outstanding shares of GMH stock was calculated
    using the number of shares outstanding on March 31, 2000
    (138,437,233) and the stock price of GMH stock on that date (124
    1/2). *See* General Motors Quarterly Report for the Quarterly Period
    Ending March 31, 2000, SEC Form 10-Q, at 1. The price of GMH stock
    on March 31, 2000 can be found at \<http://www.bigcharts.com/
    historical/default.asp?detec t=1&symbol=gmh
    &close_date=03%2F31%2F00&x=31&y=30\>.

[^20]: Certificate of Designations at Section 6(ii). A "Tax Event" is
    defined as "any amendment to or change (including an announcement of
    a prospective change, such as but not limited to, the reporting of
    legislation by the House Ways and Means Committee or the Senate
    Finance Committee, or the proposal of a legislative change that has
    an effective date that is proposed to precede the date of enactment)
    in, the laws or regulations of the United States or any political
    subdivision or taxing authority thereof or therein, or any official
    administrative pronouncement or judicial decision interpreting or
    applying such laws or regulations, as a result of the enactment,
    adoption or issuance of which there is in the opinion of the
    Corporation's outside counsel more than an insubstantial risk that
    the Corporation or any subsidiary thereof is or will be subject to
    more than an insignificant amount of Income Taxes with respect to
    the Series H Preference Shares, the shares of Class H Common Stock
    issuable upon conversion, exchange or redemption thereof, or any
    capital stock of the Corporation or any subsidiary issuable pursuant
    to \[the Certificate of Designations of Series H 6.25% Automatically
    Convertible Preference Stock of General Motors Corporation\]." *Id.*
    at Section 13.

[^21]: *Id.* at Section 7.

[^22]: Exchange Offer at 119; Certificate of Designations at Section
    6(ii).

[^23]: Exchange Offer at 119.

[^24]: 290,950,014 (the number of GMH shares outstanding) divided by
    431,500,000 (the denominator of the Class H fraction for the first
    quarter of 2000) equals 0.677 or 67.7 percent. *See infra* at
    Section 1.2(e).

[^25]: The sum of 290,950,014 (the number of GMH shares outstanding) and
    21,529,255 (the number of GMH shares that AOL would receive upon
    conversion of its Series H Preference Stock) is 312,479,269.

[^26]: 21,529,255 (the number of GMH shares that AOL would receive upon
    conversion) divided by 312,479,269 (the total number of GMH shares
    that would be outstanding upon AOL's conversion of its Series H
    Preference Stock) equals 0.069 or 6.9 percent.

[^27]: 312,479,269 (the number of GMH shares that would be outstanding
    upon AOL's conversion of its Series H Preference Stock) divided by
    453,029,255 (the denominator of the Class H fraction for the first
    quarter of 2000 adjusted to reflect the number of GMH shares that
    AOL will receive upon conversion of its Series H Preference Stock)
    equals 0.690 or 69.0%.

[^28]: The product of 0.069 and 0.690 by the GMH stock after the is
    0.048 or 4.8%.

[^29]: *See infra* at 1.2(e) (discussing the characteristics of GMH
    stock, and the percentage of Hughes economic value that AOL's GMH
    stock would represent).

[^30]: Exchange Offer, at 11, 126-27; Certificate of Incorporation, at
    Article 4, Division I(a)(4).

[^31]: Exchange Offer, at 126.

[^32]: Both the numerator and denominator of the Class H fraction are
    adjusted quarterly. General Motors Quarterly Report for the
    Quarterly Period Ending March 31, 2000, SEC Form 10-Q, at 37. The
    most recent adjustment of these numbers was reported in the General
    Motors Quarterly Report for the first quarter of 2000. *Id.* The
    numbers reported in the General Motors Quarterly Report were used to
    estimate the percentage of the economic value of Hughes that is
    presently tracked by the GMH stock, and the percentage of the
    economic value of Hughes that would be tracked by the GMH stock upon
    conversion of the AOL Series H Preference Stock.

[^33]: *See supra* note 24.

[^34]: Exchange Offer, at 126.

[^35]: For the purposes of this estimate, we divided 21,529,255 (the
    number of shares of GMH stock which AOL would hold if it had
    converted its Preference Stock to GMH stock before the Mandatory
    Conversion Date) by 453,029,255 (the denominator for the first
    quarter plus the additional AOL shares) (431,500,000 + 21,529,255).

[^36]: As noted above, on June 6, 2000, GM announced a 3 for 1 stock
    split of GMH stock. GM Announces Three-For-One Split of Class H
    Stock, June 6, 2000. The stock split will be in the form of a 200
    percent stock dividend payable on June 30, 2000 to GMH stockholders
    of record on June 13, 2000. *Id*.

[^37]: Certificate of Designations, at Section 6(iii)(a). The Exchange
    Rate and the Optional Conversion Rate are each increased by
    multiplying such rate by a fraction the numerator of which is the
    sum of the number of shares of GMH stock outstanding at the time and
    date fixed for the determination of stockholders entitled to receive
    the stock dividend plus the total number of shares of GMH stock
    constituting the dividend; and the denominator of which is the
    number of shares of GMH stock outstanding at the time and date fixed
    for such determination. *Id.* As noted above, we have calculated the
    number of shares of GMH stock outstanding to be 290,950,014. *See
    supra* note 18. Using this number, we estimate that the Optional
    Conversion Rate would become 24.1935. The numerator of the fraction
    would be the sum of 290,950,014 + 581,900,028. The denominator of
    the fraction would be 290,950,014. Thus, the Optional Conversion
    Rate of 8.0645 would be multiplied by 3.

[^38]: *Id*.

[^39]: The product of 2,669,633 (the number of shares of Series H
    Preference Stock which AOL holds) and 24.1935 (the adjusted Optional
    Conversion Rate) is 64,587,766.

[^40]: Presently, each holder of GM common stock is entitled to one vote
    for each share of GM common stock that he owns; and each holder of
    GMH common stock is entitled to 0.6 votes for each share of GMH
    common stock that he owns. Exchange Offer, at 129. Thus,
    stockholders of GM common stock will have a total of 534,784,403
    votes. (534,784,403)(1) = 534,784,403) Stockholders of GMH common
    stock will have a total of 187,487,561 votes. ((290,950,014 +
    21,529,255)(0.6) = 187,487,561) AOL will have 12,917,553 of these
    votes. ((21,529,255)(0.6) = 12,917,553) Thus, AOL will have a 1.8
    percent voting interest in GM. (12,917,553 divided by
    (534,784,403+187,487,561) equals to 0.018 or 1.8 percent.).

[^41]: Certificate of Incorporation, Article Fourth, Division(I)(e)(1).

[^42]: 64,587,766 divided by ((290,950,014)(3) + 64,587,765) equals
    0.069 or 6.9 percent.

[^43]: Certificate of Incorporation at Article 4, Division I(b).

[^44]: Hughes Electronics Corporation By-Laws Dated as of May 2, 1999.

[^45]:
    > On June 15, 2000, AT&T Corp. completed its acquisition of
    > MediaOne.

[^46]:
    > Talk.com currently offers local telecommunications service in
    > Florida, Georgia, North Carolina, and New York. *See* Talk.com SEC
    > Form 10-Q, Quarterly Report, filed May 15, 2000.

[^47]:
    > Talk.com's SEC Form 10-Q reports that there were 65,819,573 shares
    > of Common Stock outstanding as of May 2, 2000. AOL also holds
    > warrants to acquire an additional 2,721,984 shares of Common Stock
    > of Talk.com.

[^48]:
    > AOL's total ownership interest represents 4.97% of Net2Phone's
    > Common Stock, based upon the number of shares of Common Stock
    > outstanding as reported by Net2Phone's SEC Form DEF 14A,
    > Definitive Proxy Statement, filed on June 6, 2000. Net2Phone's SEC
    > Form DEF 14A reports that there were 33,924,250 shares outstanding
    > of Class A Common Stock and 21,420,473 shares outstanding of
    > Common Stock. AOL also owns an unvested warrant to purchase, at
    > specified prices, up to 4.5% of the fully-diluted shares of
    > Net2Phone's outstanding Common Stock at the time of exercise. That
    > warrant vests upon AOL's achievement of specified performance
    > hurdles relating to revenues received by Net2Phone as a result of
    > AOL's promotion of Net2Phone's services.

[^49]:
    > *See* Net2Phone SEC Form DEF 14A, Definitive Proxy Statement
    > (filed June 6, 2000).

[^50]:
    > The National division is comprised of smaller systems located in
    > Alabama, Florida, Georgia, Indiana, Kansas, Louisiana, Michigan,
    > Mississippi, New Hampshire, New Jersey, Oklahoma, Pennsylvania,
    > Texas and West Virginia.

[^51]: Includes marketing, PC installations, etc.

[^52]: Includes cable modems, additional outlet installations, etc.

[^53]:
    > Given the juxtaposition of questions 1.9 and 1.11, Time Warner
    > construes question 1.11 to focus on roll-out plans related to
    > digital video programming services, and to exclude any "other
    > programming services" that may fall within the statutory
    > definition of cable service, 47 U.S.C. § 522(6).

[^54]: TWC has also deployed advanced broadband services outside of is
    Pegasus Program in a small number of systems, primarily in Texas,
    recently acquired from Tele-Communications, Inc. ("TCI"). In these
    systems acquired from TCI, TWC has continued to deploy General
    Instrument Corporation's ("General Instrument") DCT 2000 platform
    that includes TV Guide's Navigator (formerly Prevue Guide, now TV
    Guide Interactive). The General Instrument platform was chosen by
    TCI before TWC acquired the systems and TWC has continued to use the
    platform already in place. TWC's response to this question focuses
    only on TWC's own Pegasus deployment, which includes TWC's digital
    television strategy, but does not include the strategy TWC inherited
    from TCI.