In Re Applications of: )

CABLE SERVICE BUREAU )MM CS Docket No. 99‑251

For AT&T‑MediaOne Public )

Forum )

Pages: 1 through 246

Place: Washington, DC

Date: February 4, 2000

Before the

FEDERAL COMMUNICATIONS COMMISSION

Washington, D. C. 20554

In Re Applications of: )

)

)MM CS Docket No. 99‑251

CABLE SERVICE BUREAU )

AT&T‑MediaOne Public Forum )

Commission Meeting Room

The Portals

445 12th Street, S. W.

Washington, D. C. 20554

Friday

February 4, 2000

The parties met, pursuant to the notice of the

Cable Service Bureau, at 9:05 a.m.

BEFORE: Deborah Lathan

Chief, Cable Services Bureau

APPEARANCES:

James W. Cicconi, General Counsel, AT&T

Frank Eichler, Executive Vice President, MediaOne Group

Priscilla Hill-Ardon, Senior Vice President, SBC Communicatios Inc.

Andrew Jay Schwartman, President and CEO, Consumers Union

Gregory C. Simon, OpenNet Coalition

Diane Linderman, City of Richmond, VA

Christopher Melcher, General Counsel, RMI.net

Khalil Munir, Executive Director, TAP

Francois Bar, Asst. Professor of Communications, Stanford University

Gregory L. Rosston, Lecturer in Economics & Public Policy, Stanford
University

[C O N T E N T S]{.underline}

Hearing Began: 9:05 a.m. Hearing Ended: 4:05 p.m.

Recess Began: 10:30 a.m. Recess Ended: 10:45 a.m.

2:40 p.m. 2:58 p.m.

[P R O C E E D I N G S]{.underline}

(9:05 a.m.)

JUDGE LATHAN: Good morning. Welcome to the FCC Cable Services Bureau\'s
public forum on the application of AT&T and MediaOne to transfer
licenses and authorizations in connection with their proposed merger.

Before the Commission can approve this merger, it must determine whether
AT&T and MediaOne have demonstrated that the merger would serve the
public interest.

The public interest analysis involves a balancing that ‑‑ a balancing on
the process that weighs the potential public interest harms of the
proposed transactions against the potential public interest benefits.

As is the case for any merger under review at the FCC, the applicants
bear the burden of proving that the proposed transaction on balance
serves the public interest.

We have invited panelists here today to provide information that will
assist us in our analysis. And I want to thank all of the panelists for
coming out, especially since there\'s a dusting of snow and I have
learned what that means in Washington, and I\'m from Chicago. So, I
found it an amazing discovery.

And so I\'m looking forward to discussing some pretty important issues
this morning.

I want to apologize on behalf of Chairman Kennard. He cannot be with is
right now, but he will join us this morning, and hopefully, will have
some questions for you, as well.

The applicants tell us that the proposed merger of AT&T and MediaOne is
first and foremost about the promise of local telephone competition for
residential customers. And we have some questions about that.

Will the merger deliver on this promise? Will it bring the real choice
in local telephone service to all Americans, how could this merger
include AT&T\'s ability to deliver services it sought by acquiring TCI?

These are some of the questions that I very much am interested in
hearing answers to. Other questions also come to mind.

Will the merger produce benefits in addition to local telephone
competition? If so, what are they? How and when will they be achieved?
Will they be available to all Americans?

I know that our panelists will tell us also about some of the potential
harms that this merger could produce. Do these potential harms outweigh
the promised benefits?

We would like also to know how the merger would affect consumer\'s
choice of providers for broadband services. Will the merger narrow a
consumer\'s access to diverse video programming and reduce the number of
video competitors to AT&T? How will the merger affect the consumer\'s
choice for high‑speed internet services?

In short, how will the merger affect the consumer\'s access to diverse
selection of content and other information?

I\'d like to talk a little bit about the process that we\'re going to go
through to try to get some answers to some of these questions. We have
today two panels, and the first panel will run from this morning until
noon. We will take a fifteen minute break. And each panelist will be
given five minutes to give us a presentation of their choosing. We have
a timekeeper and she will hold up a sign telling you when you have one
minute remaining.

Will the timekeeper ‑‑ here she is right here. Okay, one minute, the
orange card. And after the orange card goes up, the pink card goes up.
And after the pink card, we\'ve got somebody with a hook, okay?

After the five‑minute presentations which we will do by each panelists,
we will then have questions and answers from the bench here.

I would now like to introduce some of our panelists who have been
gracious enough to come here today.

Representing AT&T, we have James Cicconi. He\'s General Counsel and
Executive Vice President ‑‑ Executive Vice President, Law and Government
Affairs.

Representing MediaOne, we have Frank Eichler, the Executive Vice
Present, Law and Public Policy and General Counsel and Secretary.

Representing SBC Communications, Inc., Priscilla Hill‑Ardoin, Senior
Vice President ‑ Federal Regulatory.

Representing the Consumers Union, Andrew Jay Schwartzman, President and
CEO.

Representing the OpenNet Coalition, Mr. Gregory C. Simon. And we\'re
going to begin with Mr. Cicconi.

Thank you, Jim.

MR. CICCONI: Thank you, Deborah.

Good morning, my name is Jim Cicconi, I\'m AT&T\'s General Counsel and
Executive Vice President for Law and Government Affairs.

I appreciate very much the opportunity you\'ve given us today to discuss
AT&T\'s merger with MediaOne and the benefits it will bring to American
consumers.

When Congress passed the Telecom Act in 1996, it sought to provide
American consumers with choices in telecommunications services.
Unfortunately, the plain fact today is that still over ninety‑six
percent of America\'s residential customers get local telephone service
from their incumbent provider and have been denied the benefits of
choice.

AT&T is leading the effort to change that fact. AT&T is committed, a
commitment, I might add, that is backed by many billions of dollars to
providing residential customers with a choice of local telephone and
broadband service. Our very business plan is to do so over cable
facilities wherever possible. And we\'ve made considerable progress
toward that end.

Since acquiring TCI, AT&T has spent over 2.7 billion dollars to upgrade
its cable systems to provide telephony services, and we are well on
track to having more than eighty‑five percent of the TCI network
upgraded by the end of the year.

In 1999, market trials of telephony services were launched in the Bay
area, Chicago, Pittsburgh, Dallas, Denver, Seattle, Salt Lake City and
Portland. Today, AT&T\'s actually marketing and selling its telephony
services in thirteen cities in California, Illinois, Texas and Colorado.
Because of AT&T\'s capital and telephony expertise, we\'re able to
accomplish this much faster than TCI could have done on its own.

Customers in these cities are starting to see real benefits in the form
of choice and lower prices. For example, AT&T in Fremont, California
offers second and third telephone lines for only \$5 a month. That\'s a
significant discount off back Bell\'s second line rate of \$10.69 a
month. And because most of AT&T\'s customers order two lines or more to
accommodate computers, fax machines and the ever‑present teenager, this
benefit is being widely sought and enjoyed.

The pending merger between AT&T And MediaOne is yet another step in this
effort. Together, MediaOne and AT&T will bring video, voice and data
services to more communities more quickly and more cost‑effectively than
either one of us could do on our own.

For its part, MediaOne is contributing to the merger the all important
facilities to homes that AT&T could not duplicate without considerable
expense, inefficiency and delay.

MediaOne is also bringing to the deal considerable technical expertise
in the delivery of phone services over cable and the technological
upgrading of cable networks.

AT&T will bring its brand name, resources, reputation and unparalleled
experience that will insure that telephony deployment over MediaOne
facilities is more certain, more imminent and more successful than if
MediaOne had continued on its own.

Surveys have shown that consumers are much more likely to purchase
telephone services from a long distance provider than from their cable
company. In fact, more than three times more likely. This reflects a
very strong consumer preference for phone service with the highest
levels of quality and reliability. Attributes with which AT&T has become
synonymous.

Thus, having MediaOne\'s facilities in AT&T\'s hands will insure that
they realize their full competitive potential more quickly and more
broadly than if MediaOne continues to operate independently.

The combined resources of AT&T and MediaOne will also create an entity
which will have both the size and scope necessary to truly compete with
the incumbent local phone monopolies. We\'ve seen clear indications in
the market that they\'re taking us very seriously as a competitor.

For example, in August, SBC announced that it would be offering
discounted packages that bundled voice, internet and satellite TV
services in Fremont, California and in Dallas, Texas. The selection of
those markets is hardly a coincidence. Those are two markets in which
AT&T is today aggressively pursuing facilities based broadband local
entry strategy for residential customers.

Similarly, the local monopolies have sped up the introduction of
high‑speed DSL services in an unquestionable and direct response to
AT&T\'s roll out of high‑speed cable modem internet services.

By the end of 1999, the Bells and GTE expanded the reach of their DSL
services to forty‑six million homes. SBC alone is investing six billion
dollars under its Prontal project to reach seventy‑seven million
customers, or eighty percent of its customer base, with DSL services by
the end of 2002.

I\'m proud of AT&T\'s unparalleled commitment to building a competitive
marketplace, particularly for the residential customer. We know that the
FCC is similarly committed to fostering a robust competitive
environment, and we urge you to approve this merger quickly.

We\'ve seen it in long distance and we\'ve seen it in wireless, and we
are now seeing it in areas where AT&T has launched its cable telephony
services. We\'ll soon see it across the full range of telecom services
if the Commission continues to support pro‑competitive mergers like the
one being discussed today.

Thank you, and I look forward to answering your questions.

JUDGE LATHAN: Okay. Okay. Our next speaker will be Mr. Eichler from
MediaOne.

MR. EICHLER: Good morning. My name is Frank Eichler, Executive Vice
President for Law and Public Policy and General Counsel for MediaOne
Group.

Let me echo Jim\'s remarks and thank the Commission, again, for
convening this panel also on a snowy morning, which I know is difficult
for a lot of people.

I\'d like to show to you this morning why the merger of AT&T and
MediaOne makes sense for consumers, for local phone competition and for
the converging communications marketplace.

By combining the skills, resources and footprint of AT&T and MediaOne,
we will create an entity to offer consumers true choice in their local
phone service.

Let me start with a quick background of MediaOne.

In 1992 we saw competition and convergence merging and concluded that
the future of communications lay in transforming traditional one‑way
cable pipes into interactive high‑width, band‑width platforms. Thus, we
began investing in cable\'s broadband future through partnerships,
acquisitions, system trades, and, more significantly in 1995, in
embarking on a massive seven billion dollar capital upgrade project to
transform a one‑way cable networks into two‑way broadband networks.

Today, the communications revolution, media solution vision is underway.
The \'96 Telcom Act accelerated the convergent race to the consumer. And
by doing so, created a competitive environment where size matters.

The marketplace reality facing MediaOne today is that we are just too
small to compete in a move away, particularly with the incumbent local
phone companies.

When you only look at some of the announcements over the last year to
witness this phenomenon. SBC is merged with Ameritech and now controls
fifty‑eight million access lines. Comes Sprint on the process of merging
and will have a competitive broadband play, including a national
wireless footprint. And most recently, AOL and Time Warner announced the
largest merger in U. S. history.

MediaOne simply cannot meet these competitive challenges on its own.
Although we passed 8 1/2 million homes with a subscriber base of about
five million customers, this represents just the ante in today\'s
communications playing field.

In every single one of our markets, we find ourselves dwarfed by the
competition to local phone companies. Our largest market in New England
is a great example.

We serve 1.3 million customers. And on head to head competition with
Bell Atlantic, which has at least ten times as many residential lines in
that market alone.

And the obstacles we face are further compounded by widespread consumer
skepticism over cable companies\' ability to provide telephone service.
MediaOne has launched facilities based residential phone service in nine
markets, with prices well below comparable services offered by the
incumbent LEX. Yet our own penetration rate is less than three percent.

Another way to put it, three out of every potential customers are
signing up for service. The slow penetration is driven primarily by
consumer reluctance to purchase basic telephone service from a company
without a established reputation for providing reliable, life‑long
communications services.

Our experience is confirmed that even a well‑established and respected
cable company faces a major hurdle in generating consumer confidence as
a provider of telephone service.

Enormous advantage enjoyed by the incumbent, LEX over all cable
companies, including MediaOne, is both stark and undeniable. Even they
don\'t consider MediaOne a competitive threat. In fact, Bell South
actually raised its prices when we launched local phone service in
Atlanta.

Converse, AT&T has launched its broadband and local telephone service,
SBC announced it would begin offering a competing video voice and data
product.

AT&T\'s established reputation and brand with some of the highest
consumer confidence ratings in the industry, would dramatically improve
and accelerate overall penetration rates in a way that MediaOne could
never hope to achieve on its own.

Moreover, AT&T has already has a sophisticated engineering expertise,
customer care and infrastructure and communications experience needed to
respond to large scale consumer demands.

MediaOne brings to the merger state of the art broadband networks. By
the end of the year, fifty‑nine percent of our cable plant will be
telephone ready and seventy‑five percent will be high‑speed data ready.
We\'re among the first cable companies to acquire the skills and
knowledge needed to deploy phone service over broadband. This experience
will be invaluable to AT&T after the merger.

Combining AT&T\'s unmatched brand, customer care and engineering
expertise with MediaOne\'s sophisticated cable infrastructure, would
jumpstart the market for competitive local phone service.

A combined AT&T, MediaOne will be uniquely positioned to lead the charge
and bring real choice to consumers faster and more effectively than
either AT&T or MediaOne could do alone.

Thank you for the opportunity to address you this morning and would be
happy to answer any questions.

JUDGE LATHAN: Thank you. And now we will hear from Priscilla Ardoin.

MS. HILL‑ARDOIN: Thank you very much. I\'m pleased to be here and
participate in this session.

We\'re here today because this merger between AT&T and MediaOne is no
garden variety merger. Through its acquisition, AT&T is positioning
itself to dominate the cable industry through ownership interest and
systems passing nearly sixty percent of the homes in this nation.

This merger would put AT&T at the center of an extensive web of
relationships that stands to form a TCI, MediaOne, Time Warner
Entertainment and other major cable companies. Their web would extend to
both video programming services and leading cable equipment
manufacturers, as well as two major cable internet service providers.

Furthermore, their ownership stake in Time Warner Entertainment puts
them squarely in the middle of the merger between that company and AOL.

Throughout the country, AT&T will own or control the cable pipe into
consumer\'s television sets, much of the content being through the pipe
and the high‑speed internet services consumers use to surf the net. If
this merger is approved, their grasp on the American consumer will be
far reaching and unprecedented.

Put, simply, AT&T has embarked on an aggressive strategy to dominate the
way Americans communicate.

If allowed to proceed, AT&T would end up serving sixty percent of the
homes passed by the cable industry. It would control ninety‑eight
percent of the high‑speed cable internet subscribers, and nearly
eighty‑five percent of the total internet ‑‑ of the total broadband
market.

AT&T would have interest in approximately sixty percent of the most
popular cable programming and it would have substantial equity
relationships with General Instrument, Microsoft and Leading Electronic
Guide Services.

This merger would bring together a varitable web of who\'s who of
leading cable companies, programmers, broadband internet service
providers, software companies and hardware providers.

On its face, it shadows the Commission\'s cable cap rule limiting the
number of subscribers a single provider can serve. On its face, AT&T\'s
inconsistent demand for access to ILEC facilities, a demand made at the
same time that AT&T has closed the door to its own second wire to the
home.

By any reasonable measure, this merger does not satisfy the
Commission\'s standard for concluding that the public interest benefits
outweigh the inherent and well‑documented anti‑competitive effects.

More specifically, I\'ll take a few minutes to address the key topics
identified for this forum. Those being public interest, video
competitive effects and the broadband market effects.

AT&T will say that we\'re here to block local phone service competition.
Simply put, this merger is not about local phone service competition.
It\'s about AT&T\'s attempt to dominate the cable and the web. SBC is in
the cable business. SBC is in broadband. And we welcome competition in
each of these markets, as well as the local phone market. As long as
competitors are treated equally.

Despite their repeated public professions, neither AT&T nor MediaOne has
made specific, tangible, verifiable commitments to actually roll out
local telephone service in any market. In marked contrast to commitments
made by SBC during our recent merger with Ameritech, as well as those
being considered for Bell Atlantic‑GTE merger. AT&T and MediaOne have
given no reason to support their claim that they will offer local phone
service.

In fact, in talking to Wall Street, the company\'s discussions about the
merger have centered on leveraging their cable pipe into the house and
to control over consumer\'s access to internet highways and internet
content.

More importantly, AT&T and MediaOne have not shown that but for the
merger they would not have competed in the local telephone market. Which
is the only purported benefit that they hold forth in this merger.

Each is developed plans to provide cable telephony. AT&T has spent
billions of dollars to acquire TCI and upgrade its systems. And MediaOne
has already pursuing cable entry in local telephone. And doing so more
aggressively and more successfully than AT&T.

As a consequence, there is no new benefit to offset the serious
deleterious effects of this merger before you.

The Commission has adopted and recently revised rules to insure
competition in the video marketplace. Those rules include a cap on the
number of cable customers a single entity can serve.

AT&T and MediaOne initially tried very creative interpretations of the
rules to avoid the obvious reality that their merger shatters the
ceiling. More recently, however, they have acknowledged a problem and
they have belatedly asked for a waiver to let this merger proceed.

The Commission for its part, should not embark down the path of cable
cap gerrymandering. The cable cap was required by Congress and developed
by the Commission to precisely prevent the kinds of problems raised by
this merger by its very nature. The cap only applies to the very largest
transactions. And if AT&T is allowed to circumvent the cap, then I ask
you, what meaning, at all, is the cap? It\'s quite meaningless.

AT&T has wasted untold resources and years of effort in supporting
horizontal ownership limits.

Finally, AT&T continues to support a regulatory ‑‑ time\'s up.

Finally, AT&T continues to support a regulatory model seeking to assure
that they will have competition to the ILEC\'s wire into the house.

Simply put, I think when we look at what it is going to take to spark
competition, we should consider not favoring any particular competitor
over the other, but having equitable parity in order that this may
occur.

Thank you very much.

JUDGE LATHAN: Thank you.

Mr. Schwartzman.

MR. SCHWARTZMAN: Thank you very much. Is this on?

JUDGE LATHAN: Oh, we hear you.

MR. SCHWARTZMAN: I\'m glad. Although maybe you\'re not going to be so
glad. I\'m afraid I\'m not going to be the warm and fuzzy Andy
Schwartzman today. You\'ve got the petulant, angry Andy Schwartzman here
today, I\'m afraid.

There\'s a lot of things been said already that I have a lot to say
about. And I\'m sure we will have a chance to discuss these substantive
things over the course of the morning. But I regret that I have to
devote much of my time today to discussing procedural matters. But said
factors were not being treated fairly, and I have no choice but to
explain why.

We\'ve already had to take the Commission to court, challenge its
unjustifiable handling of AT&T, giving it four additional months to come
into compliance with rules of which it\'s been aware since 1993. And
I\'m instructed to tell you that we will aggressively seek judicial
review of any decision approving the proposed AT&T‑MediaOne transaction,
conditionally or otherwise.

First, there\'s a huge pink elephant that\'s about to walk into the
parlor. And that is the proposed AOL‑Time Warner merger.

As you know, MediaOne and Time Warner are 50‑50 partners in Road Runner,
the number two cable internet service provider. AT&T owns some
fifty‑eight percent of Excite, the number one internet service provider.
And we\'ve been complaining that this combination will monopolize the
market for delivery of internet services. It will inhibit free
expression on the internet.

The possibility that AOL, by far the largest internet service provider,
will now share ownership of Road Runner, would give these companies even
greater incentive to act in concert.

Our position is that these applications need to be reviewed with an eye
towards what the partners are doing in a 50‑50 partnership. In fact,
these mergers may well be mutually exclusive. And I call on the
Commission to solicit comment on the impact of the AOL acquisition on
the AT&T‑MediaOne merger. You will not have a complete record unless you
do. And if we have to take it to court, we will.

Second, I want to ask the Commission to refer our October 7, 1999
complaint against AT&T to the Enforcement Bureau. It\'s painful for me
to sit in front of the Cable Service Bureau staff and complain about the
way this has been handled. But I have to.

AT&T repeatedly violated the Commission\'s horizontal ownership
reporting requirements. The very rules which it\'s seeking to have
waived. And it has repeatedly failed to comply with them. The Bureau was
aware of these violations and did nothing. The violations continue.

Attachment B to my testimony is a violation which occurred just three
weeks ago. Contact with staff tells me that no action is contemplated on
this complaint. It\'s basic communications law.

The Title 3 applications raising questions going to the character of the
applicants have to be resolved before the Commission can make the
requisite public interest determination.

The Cable Service Bureau\'s handling of these complaints and handling of
the repeated pattern of violations and the misrepresentation about those
violations, its acquiescence is part of the case. You do not have the
distance to consider these complaints. Perhaps that\'s why you put them
in the deep freeze

I ask that this be referred to the Enforcement Bureau for a fresh look.

I also want to complain about the waiver of ex parte restricted class
treatment of this case.

There have been sixty‑five meetings between AT&T, MediaOne and
Commission staff. Typically, they\'re memorialized by one page letter.
I\'ve got quoted an example in my testimony.

This is unprecedented. We complained about it, we got a letter back
which I can only characterize as snide. The Federal Communications Bar
Association advocated retention of restricted ex parte treatment for
judicatory proceedings.

The Commission, on the basis of that, decided to retain those rules,
even though the proposed to go otherwise. It affirmed that just three
months ago. Yet you\'ve lifted the restricted treatment that the Federal
Communications Bar Association advocated for this case.

How they\'ve used this extra freedom? They\'ve used it by filing a
waiver request on Page 30 of a forty‑five page pleading the day before
Christmas, two days before Christmas. The substance of this case is
being discussed in secret. This is no way to treat the public.

I\'ve also complained about the web page which is an advertisement for
AT&T\'s position. The Cable Service Bureau\'s web page has all of
AT&T\'s pleadings and none of the objecting pleadings. After I
complained this week, at least a link has been made to the ECFS system.

Now, you have T1 lines. People with 28a modems ‑‑ have you tried
downloading from ECFS with a 28a modem? I might add as a personal note,
Mr. Cicconi\'s letter explaining his agreement with Mind Spring on open
access is on that page. Oh, I\'ve requested that my letter explaining my
reservations about that agreement, be placed there. It hasn\'t been
placed there, either.

You\'re presenting one side of the story in a rushed come to judgment on
this case. Wall Street expects it to be done by the end of March and it
looks like the Commission staff has read the Wall Street Journal and
decided that\'s what it has to do.

We want you to slow down and give this record a full and complete look.
We deserve nothing less.

Intentions do not matter as much as appearance. I personally believe
we\'re going to get a fair shake. Many of my clients don\'t.

Even if our challenge will receive objective consideration, it doesn\'t
change the fact that there\'s an appearance of unfairness and a pattern
of unseemly favoritism towards AT&T. This undermines public respect for
the integrity of the Commission\'s processes and needless lends comforts
to the enemies of the FCC\'s public interest jurisdiction who now lead
to seek to limit the FCC\'s merger authority.

Thank you.

JUDGE LATHAN: Thank you, Mr. Schwartzman.

Mr. Simon, please.

MR. SIMON: Thank you for inviting me on behalf of the OpenNet Coalition
to be here today.

The OpenNet Coalition is an organization of over nine hundred ISPs
around the country. Ten of them are large companies, eight hundred
ninety of them are not. But they all have a common goal, which is that
consumers should have a choice of how they access the internet over
high‑speed cable networks.

We believe that the Commission should implement a national policy of
open access to cable broadband networks for three reasons.

Number one, it is irrefutably the policy of the Telecommunications Act,
the FCC and the Department of Justice that open networks are better than
closed networks.

Secondly, open networks benefit consumers by promoting investment in
innovation, improving quality of service, lowering prices and
stimulating competition in new applications in services.

And, finally, the growth of the internet itself depends on a competitive
environment in each technology upon which the internet rides.

The history of telecommunications in the United States from the
telegraph to the internet, shows the importance of open competitive
networks. That is why in 1994, Vice President Gore laid out open access
as one of our five principles for the National Information
Infrastructure and for the Global Information Infrastructure.

And, in fact, open access is the key to the success of the other
principles of universal service, flexible regulation, private investment
and competition.

The Government has had an undeniably significant role in opening
monopoly networks in our history. It is fashionable today, as Professor
Lessick and Professor Lumbley wrote, to argue that innovation is assured
that the Government simply stays out of the way. We believe this view is
misguided. It ignores the history that gave the internet its birth and
threatens to reproduce the calcified network design that characterized
our communications network prior to the internet.

The benefits of open access to society and the economy are best
understood by comparing an open network to a closed one.

In an open network, such as the internet has been, anyone can invest in
innovative technologies, applications and service, with confidence that
they can succeed or not based on their success with the consumer that
they can reach through an open network.

In a closed system when the owner controls access to the network, fewer
people will invest in innovation because of the increased risk that they
cannot gain access to the network or to significant numbers of
customers.

We have over six thousand ISPs in this country offering a range of
services to a range of customers over several different kinds of
networks. These ISPs are engines for innovation and they represent
potential vertical competitors with cable owners.

But the architecture proposed by AT&T‑MediaOne for their broadband cable
service threatens this vertical competition by bundling internet service
with access and not permitting users to select another ISP.

Now, closed networks also deny consumers the benefits of technology. It
would be the height of irony for the Commission to allow the cable
internet market to remain a monopoly for internet access at the very
moment that advances in cable technology are capable of promoting
competition in access, unbundling of services, decentralization of
programming control and providing abundant capacity where once there was
scarcity. Yet, that is exactly what the cable industry is seeking.

Now, in terms of the future of internet. As one analyst said, the beauty
of the internet is that it is a universal language that links any type
of device over any type of network to communicate any type of data. It
is delink from the underlying technology. It is a language. But the
cable industry is now trying to reverse thirty years of separating the
language from the network by claiming that its infrastructure and the
internet are one and the same.

Some argue that competition in cable access does not matter because
other broadband networks are available. And others argue that while open
access is a good thing, requiring it is a bad thing.

Well, how does it make sense that because there\'s competition in some
parts of the internet market that we shouldn\'t have competition in all
of the internet market?

AT&T used to argue that it was a crime ‑ and it was ‑ for others to
innovate and introduce new technologies into their network. Now, on the
same vein, they argue that it\'s a shame if others were to innovate and
introduce new technologies into their network.

In reaching a national policy to foster the growth of the internet, this
Commission must follow a principle. The internet\'s openness is that
principle. And those who would abandon that principle by closing their
networks or opening them only to a few, have a burden of persuading the
rest of us while the internet\'s open past should not be prologue.

Thank you.

JUDGE LATHAN: Thank you. Thank all of you. This was some very
interesting comments.

I have a question of Mr. Cicconi. Both you Mr. Eichler argue that you
have to be bigger in order to compete in telephony and that certain
synergies, AT&T\'s brand name and MediaOne\'s expertise in the cable
business, and these things combined will bring benefits to the American
consumer. And the argument was made that you have to have size in order
to be able to do this.

My question is how big do you need to be, really, and how big is really
too big?

MR. CICCONI: Well, I think the key here is question about the ability to
own facilities. As you all know and this Commission has fostered, the
idea of ownership of facilities and facilities‑based competition is
probably the most viable sword. When one is attempting to compete
against incumbent monopolies, other forms of competition have been found
wanting. You\'re either depending on the incumbent\'s facilities,
you\'re depending on their pricing or you have some other dependency
which makes that ability to compete at least suspect.

We\'re attempting to do so, as this Commission knows on a variety of
levels. But I think the Telecom Act and the Commission have long since
concluded the facilities‑based competition is first and foremost the
most desirable way to do it.

What this merger does, is it allows us to get a level of
facilities‑based ownership to deliver that competition. From there, we
feel it would be possible to move out and be able to conduct the type of
penetration that telephony to deliver competitive local phone service
across the country.

In terms of the, what we bring to the MediaOne market, which I think the
first part of your question there, I think as Frank pointed out in his
statement, and I can certainly let him expand upon it from MediaOne\'s
standpoint.

But I think what we\'ve seen from the marketing information from
MediaOne\'s own experience, is that AT&T, both its brand name, its
resources, its reputation as a telephone company and its focus as a
communications company as opposed to a cable company, would allow quite
faster penetration. I think our estimate, I believe we put this on the
record with the Commission, is that we believe in their territory we
could achieve a thirty percent penetration level within the first three
to four years. And MediaOne\'s current estimates is that it could take
them up ten years to achieve roughly half that penetration level.

So, this would deliver competition more broadly and much more quickly
than would otherwise be received. What that means in practical terms is
that millions of Americans who don\'t now have a choice of local phone
service would get a choice, and they\'d get it faster and it would mean
lower prices.

JUDGE LATHAN: So, it is your position, then, that you two combining you
would bring, you would deploy faster and that cost savings would be
passed onto consumers because of the synergies that exist between the
two companies and that going your separate ways, these benefits would
not be realized?

MR. CICCONI: Exactly. And I think that\'s clearly in the information we
put on the record. And in addition, it\'s our experience in the
deployment that we\'re putting forth today, as I said in my statement,
we would offer ‑‑

JUDGE LATHAN: Okay.

MR. CICCONI: ‑‑ competitive local phone service over our facilities in
cities where we\'re deploying currently at cheaper rates, lower prices
than the incumbent monopolies are putting out there.

JUDGE LATHAN: Excuse me, but have you done any studies that, you know,
would bear evidence or give any evidence as to how big a cable company
would have to be in order to compete on the local telephone market?

MR. CICCONI: I think we\'ve put information on the record in terms of
the market penetration that would be necessary in the importance of
ownership of the facilities to be able to achieve that. I mean, we\'re
cognizant of the ownership limits here, if that\'s what you\'re getting
at. And we understand that there will be a limit beyond which we would
not be able to go in terms of ‑‑

JUDGE LATHAN: So, to try to understand the basis of the conclusion that
by the mere combination these synergies exist and, therefore, consumers
are going to have more choice and better savings, versus if you went on
your own because MediaOne was aggressively rolling out their local
telephony prior to the proposed acquisition. And so we just wanted to be
a bit more concrete, as opposed to, you know ‑‑

MR. CICCONI: Well, again, we\'ve put on the record the synergies that
would be achieved through the merger and those savings in the cost of
deployment would, of course, affect the cost and delivery of the
service.

Secondly, we\'ve put on the record that the penetration levels that we
expect to achieve. And I think there\'s adequate, there\'s ample
evidence on the record that we\'d be able to penetrate these markets and
provide more effective competition to monopolies much faster in the
MediaOne regions.

So, I think that information is clearly on the record today that we
would be able to bring competition in telephony to these markets much
faster than MediaOne could do on its own.

JUDGE LATHAN: Ms. Ardoin raises the flip side. She argues that you\'re
going to dominate the last mile to the house, to the home and the real
purpose of the merger really is not local telephony, but to be able to
dominate the American household in terms of the provision of voice video
and data to the home.

Could you respond to the accusations made by SBC, please?

MR. CICCONI: Well, I think that first of all, it\'s not going to be
possible with an acquisition that, at most, involves 8.5 million
customers to achieve any level of dominance. Secondly, the ownership
limits the Commission itself has put on the record would limit the
ability to control cable.

I think what this merger\'s really about is competing with companies
like SBC, who in their regions today do have dominance. In fact, in
their merger with Ameritech, they have monopoly position, local phone
service in a third of the nation. Now, what\'s really going on here is
SBC has a concern about competition. In fact, in the areas where AT&T is
deploying its local phone services, SBC is rushed to get out there with
a more attractive offer to compete against us.

I heard Priscilla\'s statement about how they don\'t feel we\'re
committed to it. They must feel we\'re committed to it or they wouldn\'t
be going into the very territories we\'re piloting. And, in fact, that
territory they\'re running ads criticizing the quality of our local
phone service. So, if somebody didn\'t view this as a competitive
threat, I don\'t think they\'d be running full page ads in the territory
criticizing our product.

I\'d also point out, again, that the benefits of this in terms of trace
and lower prices are something that one couldn\'t expect any monopoly to
appreciate because it would force them, of course, to compete where they
don\'t now have to, and to lower their prices where they don\'t now have
to.

But that is the upshot of this merger, particularly in those territories
where the monopolies have dominance to that.

MR. JOHNSON: Can I try another version of this size question, which I
think is always asked at these hearings. And Mr. Eichler sort of raised
of this. You need to get bigger to compete with the other participants
in the market who are getting bigger, which creates a dynamic for
unending mergers and concentrations in the market.

Is there a logical place to decide enough is enough, or is that dynamic
inevitable?

MR. CICCONI: I\'ll have to let Frank answer for what he says in his
testimony. But in terms of the size there, obviously, this is not about
size, per se, for AT&T. This is about acquiring the facilities to
compete and provide a viable competition against incumbent monopolies. I
would think that this Commission at some point, may decide that
question.

But if one looks at the Telecom Act and the record of that Act, it\'s
very clear that the incentives in the Act, and, in fact, the incentives
from the Commission, have been to encourage the cable companies and the
acquisition of cable in order to provide competitive local telephone
service.

Today, three and half years after the Act was put in place, the local
monopolies still dominate to the tune of ninety‑six percent of local
phone market. Ninety‑six percent of Americans still don\'t have a choice
in local phone service.

So, I think what I\'d say the point at which to answer that question
about size is perhaps when the Commission concludes that there is
sufficient competition at the local level to the incumbent monopolies
and sufficient percentage of Americans actually have a choice in local
phone service. Maybe that\'s the point at which to answer that question.

JUDGE LATHAN: Yes, ma\'am.

MS. HILL‑ARDOIN: MediaOne has indicated on the record and re‑enforced
today, its ability to be a facilities‑based competitor. The argument
that\'s being made here is simply one of having to have this size and
scale.

A question that I have some interest in is couldn\'t you get that same
benefit by AT&T or MediaOne licensing with AT&T. What AT&T brings to the
table, as has been described, is its formidable, and I might add as an
industry participant, inviable brand recognition.

Couldn\'t they achieve the same result by having MediaOne licensed from
AT&T? And you have the technology, the capability, the expertise, the
acumen that MediaOne has already demonstrated in the marketplace. And
seems like they could still give us a run for our money.

JUDGE LATHAN: I\'ll let Jim respond to that and then Andy I saw your
hand go up.

MR. CICCONI: Actually, I think since the point was about MediaOne\'s
ability to do that ‑‑

JUDGE LATHAN: Oh, I\'m sorry.

MR. EICHLER: Sure, let me try. Part of the issue I think here is how
fast do you want Telcom deployment and how fast do you want to go ahead
and offer consumers choice. And would MediaOne go ahead and do that
alone.

I will tell you that based upon our current penetration levels, as Jim
said, we were anticipating on our own, it would take us five to ten
years to get to a fifteen percent level of penetration. When we had
looked at some type of arrangement with AT&T, we concluded that if there
was ‑‑ and this was prior to ComCast and/AT&T taking a look at us.

We concluded that with their brand, with their service, with everything
that they brought to the table, that that penetration could easily be
doubled in a much shorter period of time.

In essence, we felt that there could be probably thirty percent
penetration of local competitive service within three to four years
after we had some type of arrangement.

Now, Priscilla brings up, you know, the concept well, let\'s talk about
some type of licensing arrangement.

As most of you probably know, joint venture details are very, very
difficult to negotiate. Most joint ventures fail. And part of what
you\'re talking about here is when and how long does it take to
negotiate something with another company. When and how long does it take
it then to go ahead and deploy. And part of what you\'re looking for is,
as we were looking for, is how fast can we offer choice.

One of the things that we as MediaOne take a look at every year, and
have looked at, as well, is where we at with respect to Telcom
penetration. I will tell you that our board looks at that on a regular
basis. And I will also tell you that we\'re not ‑‑ we would not have
continued spending hundreds of millions of dollars a year if we didn\'t
get to certain levels of penetration. At least on a break‑even basis.
Offering choice, even if it\'s a lot of choice, offering Telcom service
on a losing basis is not a good business decision. We wouldn\'t have
done it.

And, so, part of what we were looking at was what do we need to do in
order to get to a certain level size, to get the scale, to get the
brand, to get the services to go ahead and offer Telcom choice.

Our brand we think is a very good brand. I will tell you we\'ve been
brand services and looked at it. And people rarely know who we are when
it comes to telephone service. If you want to go ahead and market a
telephone service, marketing as MediaOne telephone service doesn\'t work
as well as marketing as SBC or PacTel or AT&T.

And so it\'s easy to go ahead and have SBC say, sure, let them do it on
their own because they\'re great. Making sure we don\'t get into the
local phone service.

JUDGE LATHAN: Okay.

MR. EICHLER: In fact ‑‑

JUDGE LATHAN: Let me just ask one question, though, because in the
record is stated ‑‑ I want to get ‑‑ you state that it\'s deeper
penetration but you\'re not intending to expand your geographical scope.
I mean, I want you to answer, but what we have in the record is you
stated that it is not anticipated that the merger would accelerate the
number of metropolitan areas covered by the roll out. Rather, the merger
will enable AT&T and MediaOne to achieve faster and deeper penetration
in each market.

Is my understanding correct that you just are going to go faster and
deeper in the markets that you\'re currently in and you don\'t expand ‑‑
you don\'t expect a greater geographical expansion of that?

MR. EICHLER: I think what we\'re saying when you say faster in the
markets that we\'re in, that means we\'re going to be basically, by the
end of the year, we\'re going to have ‑‑ at the end of our, in our
company alone, we\'ll have fifty‑nine percent of our homes will be
telephone ready. We\'re not just going to continue marketing in only the
nine homes that we\'re in. The nine markets that we\'re in.

As markets become telephone ready, we start marketing those. There\'s a
continuation of rolling those out. I think what we\'re talking about is
on a combined basis and when you\'re together, you roll out deeper into
those markets.

When you\'re building a market out, you\'re building ‑‑ for instance, in
Atlanta, we\'re going to continue to build out Atlanta. When Atlanta,
different areas of Atlanta, we\'re going to continue marketing telephony
service in Atlanta. All over that. As we build other markets to be
telephone ready, we will market to those areas.

MR. CICCONI: If I might, I think that ‑‑

JUDGE LATHAN: I think ‑‑

MR. CICCONI: I think the point about ‑‑ may I just try to ‑‑

JUDGE LATHAN: Follow up on this?

MR. CICCONI: Answer to this question here because I think your point
about going beyond the MediaOne markets I think is important here.

Clearly we intend to build out in the MediaOne markets. The question of
going beyond those markets really means going beyond the MediaOne
geography there. And, obviously, that\'s something that\'s limited by
cable ownership. Our ability to own more cable.

I think it is important to recognize that AT&T is committed, is
committed to this Commission. It intends to provide telephone
competition everywhere it can by whatever means it can. Obviously
ownership of facilities and delivery over cable systems is we feel, the
most efficient, cost‑effective, fastest way to do it.

At the same time where we do not own cable, we\'ve committed publicly
that we\'re going to provide, find other means of delivering that
competition. We\'ve just announced and launched a major initiative to
deliver telephone competition locally over fixed wireless systems. This
is specifically designed for those types of areas where we do not own
cable.

So, we\'re going to be coming in there. And I think the commitment of
AT&T as a telephone company with sixty million customers currently with
a long‑distance base, to protect there. You certainly have adequate
indications, and we have every incentive to enter those markets.

And in terms of cable concentration, which I keep hearing from SBC here
in the testimony, I dare say that SBC isn\'t a cable company. When
they\'ve done their acquisitions, they\'ve actually divested themselves
of cable locally. They\'re really, I think, not interested in cable
concentration so much as they are competition from cable. And I think
what\'s going on here is that they have a concern about that being
delivered over cable.

That the type of ads here that they\'re running in Pacific Bell
territory currently in California, is specifically designed simply to
prevent customers from switching to a pilot offering. They seem so
threatened by a pilot project that\'s going on currently in Fremont,
taking customers from them, that they\'re running full‑page ads being
very critical of our service, I might add, indicating to me that they
have quite a bit of fear of competition from cable even when it\'s in
its formative stages.

When we get this accelerated and scaling with lower prices for second
lines that are half the level they currently offer, of course they have
a concern about competition from that source, which is why they would
attempt to stifle it through opposition to this merger.

MR. JOHNSON: I can\'t honestly see that ad. Could you describe what ‑‑

MR. CICCONI: Well, it\'s a criticism, actually, of the original way we
rolled out the system. But it says if you\'re considering switching your
local phone service to AT&T, you should know the drill. And, of course,
it makes a point of criticism within certain of the initial
installations. We\'re actually having to install a battery pack for
power back‑ups that, as you all know, moved beyond that to line powering
and it, of course, made it a considerable investment to do that.

But when we were actually in the early stages in Fremont of doing
battery back up, they ran a series of ads criticizing that and
criticizing, in fact, the quality of our service. And, obviously, we
feel the criticisms are unwarranted and they\'re certainly out of date
by now.

But I think the mere fact that they would actually to go to the time and
expense of running ads to combat a pilot project in Fremont, California,
is indicative that they take this seriously, and well they should.

MR. SCHWARTZMAN: These guys from Texas really know how to filibuster and
divert.

Mr. Cicconi\'s just spent five minutes trying to divert you from the
question that wasn\'t answered, talking about newspaper ads having
nothing to do with the question. I got five points, I think I can make
them real fast.

JUDGE LATHAN: Okay.

MR. SCHWARTZMAN: Number one, every major cable network is a joint
venture. DOX is a joint venture, CSPAN is a joint venture, CableLids is
a joint venture. The cable industry is built on joint ventures. AT&T has
done telephone marketing deals and reseal deals for years. And Mr.
Eichler tells you it\'s easier to do a multi‑billion dollar transaction
which busts the 1992 Cable Act than it is to enter into a marketing
agreement.

Number two. It does bust the 1992 Cable Act. If Congress wants to amend
the 1992 Cable Act to let this transaction go through, then they can go
ahead and do it. But they\'re asking you to waive it.

Number three. You don\'t need to have AT&T buy MediaOne to do this
deployment. Paul Allen can write a check. Brian Roberts was standing
there. He didn\'t have a check, he had a VISA card, but he was ready to
do it, too. You don\'t need somebody to bust the cable cap in order to
bring deep pockets in to deploy video and to do so very aggressively.

I certainly agree that national branding through an agreement, having
AT&T national advertising on the Super Bowl and stuff would be terrific
way for the cable industry to collaborate and do marketing, but they
don\'t have to own the systems to do it.

Number four. Let\'s talk about deployment. As I understand it, there\'s
about ten thousand AT&T residential telephony customers on the former
TCI cable plant one year after the merger.

Now, I\'d like to tell you what the record shows about the promises that
were made to this Commission when it approved the merger on the basis
that it was going to accelerate the deployment of residential telephony.
All of that, of course, is under protective order.

I urge you to go back, I think Bill remembers what those numbers are,
and take a look at promise versus performance. They\'re standing here
making the same promises. They haven\'t come close to saying what they
were going to do. And if AT&T wants to get the protective order lifted
so everybody can see what those promises were, I invite Mr. Cicconi to
do that.

Finally, you\'re being tough, but you\'re not being tough enough. In the
October 1999 third report and order on cable horizontal ownership, I
want you to ask Mr. Cicconi whether he accepts this as binding
precedent. Commission said, cable operators have presented no credible
evidence that a larger size is necessary for the deployment of advanced
technologies or telephony.

Moreover, we note the possibility of cooperative arrangements among
operators to offer coordinated telephony services through their cable
systems so that a cable operator does not necessarily need to grow in
absolute size beyond the limit in order to participate in the offering
of a national telephony service.

That\'s the Commission\'s established policy. Let\'s ask Mr. Cicconi how
he comports this merger with that.

JUDGE LATHAN: Thank you, Mr. Schwartzman.

Yes, Mr. Cicconi?

MR. CICCONI: Well, the short answer is we\'re going to comply with the
limit, Andy, and we\'ve indicated on the record we intend to do that. We
indicated when we filed this merger we intended to do that. So, I think
it really is a moot question. We\'re going to comply with the limit,
period.

JUDGE LATHAN: I\'d like to ask a question about the compliance and the
request for an eighteen month waiver. And the question is both for Mr.
Schwartzman, actually, and for Ms. Ardoin.

And the question is that as you know AT&T has requested an eighteen
month waiver to come into compliance with Commission\'s horizontal
ownership rules. And let\'s just assume for the sake of argument that
that waiver were granted. And I say for the sake of argument make that
assumption.

Do you have any concerns about the proposed measures that AT&T has
offered us to protect against video harms? Are you familiar with their
proposal in that regard?

MS. ARDOIN: I am.

JUDGE LATHAN: And if you have concerns, I\'d like to hear what your
concerns are.

MS. ARDOIN: I think the, if I\'m referring correctly to the video harms
to which you\'re speaking, the fact that they\'re insulation criteria
and is programmed based. AT&T owns not just a little bit of Liberty.
AT&T owns one hundred percent of Liberty.

Liberty, under this proposed merger agreement, will sell to another
entity. I think that is outside of what the Commission contemplated, I
think it is contrary to the rules. And the fact that AT&T wants to
dismiss it as ‑‑

JUDGE LATHAN: It\'s a request for a temporary waiver, so my question
goes to they\'ve offered up some safeguards during the eighteen month
period. Do you find those safeguards acceptable?

MS. ARDOIN: I do not find those safeguards acceptable. I don\'t think
that they provide ‑‑ while the insulation ‑‑ I\'m sorry, while the
safeguards are there, I don\'t think that they provide the kind of
certainty that influence will not result to the harm of other
competitors in the marketplace. I think it gives them a disadvantage.

AT&T has known for a while what the Commission\'s rules were. And to
come in at this hour and say, well, in case you still think your rules
are right, in the alternative, we\'d like to have this eighteen month
waiver, I think takes advantage of the situation and abrogates the
public interest.

MS. TRUONG: May I impose that AT&T briefly summarize your proposal for
an eighteen month waiver so that we can have a more grounded discussion?

MS. SCHWARTZMAN: Ms. Truong, I was asked to address that question.

JUDGE LATHAN: We just ask ‑‑ we get clarification, then they know what
you\'re addressing. That\'s the only reason.

MR. SCHWARTZMAN: In the interest of time, we have Attachment D to my
testimony today, is a thirteen page statement discussing the very
question you asked. Pages 8 and 9, in particular, go to the question you
asked.

The short answer is you want us to believe that John Malone has never
met Michael Armstrong. It decries credulity. Why do they need eighteen
months in addition? Originally, the Commission said you have sixty days
and we mean it. Then the Commission said we\'ll give you 180 days. They
want eighteen months past that 180 days to violate the 1992 Cable Act.
And the Commission just adopted an order and attribution rules,
including broadcast cable attribution this past August.

We quote from the eloquent statement of the chairman, from the other
commissioners saying enough of this waiver stuff. We\'re not going to do
regulation by waiver anymore. We\'re going to adopt rules, we\'re going
to adopt reasonable limits and we\'re going to stick to them.

Now, you adopted rules, you adopted reasonable limits. You did much
more. You went from 60 days to 180 days and now they want eighteen
months more. It\'s just not justified.

It\'s not justified on the record and it\'s not justified by the fact
that they just don\'t need to buy these systems. Poor Allen will buy it,
poor Allen will deploy the telephony; Brian Roberts will buy it, Brian
Roberts will deploy the telephony.

JUDGE LATHAN: Mr. Cicconi, would you comment on the waiver issue,
please? And, first, clarify what your proposal is with respect to the
safeguards.

MR. CICCONI: Certainly. First of all, it\'s not eighteen months beyond
the 180 days that the Commission has already discussed. It\'s eighteen
months from closure of the transaction that we have requested. And I
think the Commission itself has already acknowledged that it would have
some issues there in the fairness dictated, giving companies a period of
time in which to comply. And it is already allotted six months in that
period. So, obviously, the six months would be part of the eighteen we
had asked for in those circumstances. But it would be eighteen from the
closure.

I think that the rationale for the request is fairly simple. First of
all, I think we can cite some significant overall benefits to this
transaction that would argue for a waiver. And that is, obviously as we
discussed earlier, telephony competition that would be provided to
millions of Americans who currently don\'t have a choice, among other
benefits we\'ve put on the record.

Secondly, I think in terms of safeguards, I think the Commission in its
ownership rule, new ownership rule, laid out as its primary concern,
concern about the influence in video programming involvement, material
involvement in video programming.

And on that core issue, AT&T is very clear and I think the record is
very clear, that we have absolutely no material involvement in the
programming decisions within the TWE partnership. And that really is the
core issue.

So, I think that the Commission, even during waiver period on the core
issue about which it was concerned in its rule, has that protection.
This is really about a sub‑issue. It is a factor. And that is the sale
of programming to TWE.

Now, keep in mind that, again, we\'re not able to influence and do not
have influence or involvement in the programming decisions in TWE. This
is really about whether there is any sort of influence inferred within
that partnership from the sale of programming entities in which AT&T has
an interest, however attenuated.

And that is really the issue or the factor around which AT&T feels it\'s
fair to ask for an eighteen month waiver. In order to come into
compliance there with that requirement AT&T may have to divest certain
assets or interests.

This Commission in the past has recognized that where divestitures may
be entailed to comply with certain requirements the Commission has put
in place, it is granted such waivers. I think four or five have been
granted in the last five years. And those waivers have ranged from
eighteen to twenty months.

So, there\'s ample precedent on the record. And these have involved
RBOC\'s and other entities. They\'ve involved cable broadcast cross
ownership, and things of that nature.

So, we\'re asking for eighteen months within which to make that decision
and to effectuate that type of divestiture if it proves necessary.

We feel it\'s also a matter of fairness because the rule itself was put
in place after the merger was filed. The merger was filed with this
Commission in early July. I believe the rule was actually put in place
the end of October. And, of course, the interpretations that have come
forth about the influence that the Commission staff is concerned about
through the sale of programming to TWE, is really a development that
followed the enactment of the rule in October, as that has become
clarified in the course of our discussions.

So, it really is, again, we feel a matter of fairness since the rule was
adopted subsequent to the merger filing.

MR. JOHNSON: Could you just describe a little bit what\'s going on
during this eighteen month period? I presume the way it\'s phrased, you
don\'t immediately set off to achieve compliance with the rules because
there\'s a period of waiting for THE decision and then there\'s a split
in the road involving certain IRS rulings.

Could you describe ‑‑ I mean, is it eighteen ‑‑ your own process starts
later in the eighteen month period?

MR. CICCONI: No, Bill, I think ‑‑ I mean, we understand what the rule
is. We understand that interpretation the Commission has put on it.
We\'re asking for that period of time within which to make the
decisions, some of which are difficult, some of which may involve tax
interpretations and tax issues, things of this nature. As well as
effectuating those decisions. They\'re a multitude of options. And,
obviously, I\'m not prepared to go into those in the course of this
proceeding.

But they\'re a multitude of options raised that we feel we could come
into compliance. We\'re determined to do so, but we\'re not going to
wait on that process until THE decision comes down. Obviously if THE
decision comes down, it could impact the rule itself, but we\'re not
certainly asking for that period of time within which to wait for THE
decision. We\'re going to proceed from the point of closing to try to
analyze that decision, make those decisions and, frankly, consult with
the Commission about how to do that. But we are determined to do it.

We indicated when we filed the merger in July that we would comply with
whatever rule the Commission put in place. And we intend to do that.
We\'re simply asking for a period of time beyond six months that the
Commission has already acknowledged.

So, I think the Commission, by stating that, that there would at least
be six months following the decision to begin enforcing the rule, that
there is a fairness issue here within which companies should be given
time to come into compliance. And obviously that issue is compounded
when a merger like this is taking place.

MR. JOHNSON: I guess what I\'m getting at is how much of the time is
occupied with making the decision what to do and how much is occupied
with achieving the result of that decision.

MR. CICCONI: I can\'t begin to quantify that for you right now, Bill,
because obviously the answer to that would depend on the options that we
conclude are most viable and how easy or difficult they might be to
effectuate. Some might involve fact issues, others might not.

JUDGE LATHAN: Assuming for the sake of argument that a waiver were
granted, and also assume that for whatever reason you were not able to
come into compliance after eighteen months, what should the Commission
do if after eighteen months you are not in compliance? What should, if
any, the enforcement action of the Commission be?

MR. CICCONI: Deborah, we\'ve said we\'d be in compliance and we will,
period.

JUDGE LATHAN: Mr. Schwartzman?

MR. SCHWARTZMAN: Here\'s the choice. We want certainty. We want to
deploy broadbands. You should let somebody else buy MediaOne or you can
let AT&T buy MediaOne. At that point, eighteen months commences with
stay lanxes of tax lawyers, Wall Street analysts, meetings ‑ can we do
it this way, can we do it that way, how about this one, how about that
one. And then as you hypothesize it, quite possible at the end of
eighteen months they might not quite make it. And then what does the
Commission have to do?

If you want certainty, if you want broadband deployment, don\'t approve
this merger which busts the law and requires a waiver.

I would note, also, that the concern that Mr. Cicconi has \'cause
there\'s something new here, is that the Commission liberalized the
rules in October, and they\'re not liberal enough. Until October, they
couldn\'t even begin to try this kind of maneuver and it\'s not good
enough. They want to go further. Why undertake all of this?

The hypotheticals you\'re asking prove the point. You\'re opening up a
Pandora\'s box in order to accommodate a company that just comes in here
and says we\'d like to do it and you immediately say, oh, yeah, well,
all right, we\'ll think about it. Well, don\'t think about it. It\'s
violating the law. Say no and let\'s move on.

JUDGE LATHAN: Thank you, Mr. Schwartzman.

MR. CICCONI: Could I just respond to the point about the liberalization?
\'Cause I think that creates a false impression, at least from our
standpoint. I think in some respects it can be argued that the
Commission may have liberalized the original rule. In other respects, it
clearly does not.

We felt that the original transaction would have qualified and we could
have qualified it to the Commission\'s satisfaction under the insulated
limited partnership exception. That was eliminated under the new rule.

So that, itself, is not a change that I would view as a liberalization.
In fact, it\'s complicated.

And, secondly, the market factors that Andy pointed out and the
complications there I think are an indication of how difficult such a
decision, particularly if it involves a sale of assets for several
interests, could become. And I think fairness dictates, again, that
particularly since rules adopted following the July filing of this
merger, that we be given some time to comply.

Lastly, again, precedent. This Commission has looked at situations like
this in the past, particularly in the last four or five years. And when
it is involved divestitures of this nature in order to come into
compliance, the Commission has given eighteen to twenty month waivers to
other parties when they\'ve come in here.

So, this is not in any way, shape or form an unusual request. In fact,
it\'s very much in keeping with precedents that the Commission has
acknowledged.

THE: Mr. Cicconi, can you clarify what you meant when you said that the
October \'99 rulemaking eliminated the insulated limited partnership
exemption, or otherwise tightened the ownership rules?

MR. CICCONI: We felt that under the original rule, the definition of
insulated limited partnership would be one that we could come into
compliance with. That definition was changed. I think we\'ve indicated
on the record that the rulemaking itself some concerns about certain of
these issues. The fact is that change is something that would not allow
us that avenue under the true partnership. This becomes much more now an
issue involving the material involvement in video programming, and that
really becomes the operative standard there. And, again, the sub‑issue
that being the sale of programming to TWE.

So the core issue for us during the eighteen month period is not
compliance with any of the other standards in the rule. The core issue
now for us becomes the issue of the sale of programming from other
interests that AT&T has an involvement in, even if it\'s attenuated to
the TWE partnership. And that is really the core issue, the single
factor that we would be seeking to address within that eighteen month
period. Because it calls into question our involvement in these other
entities that, again, however attenuated they may be, they\'re selling
programming to the TWE partnership. And that is something that we feel
will require some thought.

And we have a number of different options. And during that period of
time, we would have to make some decisions. Probably have to divest some
of those interests in order to come into compliance with the
interpretation of that rule by the Commission.

MR. JOHNSON: Could I try one, one just question? Maybe we should have
started earlier with this, but what do you see the real role of these
rules playing in this analysis? In light of the fact that the rules are
not enforced? And, particularly, Mr. Schwartzman, I know you\'d like the
rules to be in effect, but is it appropriate to make judgments based on
rules that aren\'t in place? Or should we make judgments as if there
were no rules and proceed on that basis?

MR. SCHWARTZMAN: Well, your question may be one of relative short
duration. I think there\'s a pretty good chance that the Commission at a
Court of Appeals is going to issue forth before the Commission can get
to it. Especially if the Commission heeds my request to solicit comment
on the effect of AT&T, the AOL‑Time Warner merger on this transaction.
Because as I said, I believe they are mutually exclusive and we intend
to press that aggressively. You have to develop a record on that.

So, the first level I\'m not sure there\'s a problem. At the second
level, even ‑‑ look, the Commission did not need the 1992 Cable Act to
impose horizontal hardship limits. It did them under the authority of
the public interest standard. It still has public interest authority.

If the Commission has conducted a rule making and found that thirty
percent is the appropriate limit, it would be arbitrary and capricious
not to use that as a principle, the loadstar for determining what is in
the public interest. Which is the determination the Commission still has
to make.

If they want to make it as an applied challenge to that in court
afterwards, fine. But I think the Commission has no choice but to apply
that limit. It\'s forcefully and vigorously defended. The legitimacy and
the soundness of the decision‑making process and finding that thirty
percent is the right number. I don\'t see how it cannot.

MR. JOHNSON: ‑‑ lend them to us which is that they will comply with the
rules if the rules exist.

JUDGE LATHAN: And to trust them that they\'ll do that.

MR. JOHNSON: Well, that\'s another issue. I mean, I\'m sort of getting
at the more structural problem if how can we ‑‑ it\'s sort of a
hypothetical merely if we\'re using the rules which may disappear,
wouldn\'t it make more sense to ignore the rules and come up with an
answer which would exist regardless of the rules?

MR. SCHWARTZMAN: How can you ignore your own rules?

MR. JOHNSON: Because they\'re stayed.

MR. SCHWARTZMAN: You\'re staying them. First of all, you\'re flipping
back and forth. And when the stay gets lifted and we\'re trying to help
you out in that regards. But, second, it\'s the basic reference. If you
didn\'t have the \'92 Act, you\'d be making the same determinations. I
just don\'t see how you can say we can pay no attention to it.

MR. JOHNSON: Well, that\'s why I guess shouldn\'t we just be making the
basic determination?

MR. SCHWARTZMAN: But the basic determinate is going to start with you
conducted this huge proceeding. You\'ve told THE of Appeals that this
was the right answer. This is, this is the sweep spot where competition
becomes problematic.

MR. JOHNSON: Well, presumably ‑‑

MR. SCHWARTZMAN: Would be arbitrary and capricious if a different
number.

MR. JOHNSON: We would come to the same conclusion if the analysis was
the same.

MR. SCHWARTZMAN: You sure would, especially since you\'d be writing them
all.

MR. JOHNSON: The decision wouldn\'t be based on a ‑‑ decision wouldn\'t
based on rule, it would be based on a specific analysis, which would
then endure regardless of the rules.

MR. SCHWARTZMAN: Well, certainly the specific analysis has that always
taken into account the overall video market. I don\'t see how it\'s
going to come out differently. Thirty percent is either going to be too
high or too low.

MR. JOHNSON: Could you respond, Mr. Cicconi?

MR. CICCONI: Well, I ‑‑ believe me, I recognize the conundrum. I think
we\'re operating under the assumption that there will be a valid rule in
place. That we\'re not submitting this request, nor are we operating
with the Commission in this area on any sort of assumption about THE
case. I think that\'s certainly something we all recognize that\'s out
there, it\'s something that could affect what\'s going on, could affect
the Commission\'s rule.

But I think we have to operate on assumptions. The assumption we\'re
operating on at AT&T is that the current rule the Commission adopted and
put in place in October is the one that we would be asked to come into
compliance with. And we\'re asking for an eighteen month period from the
point of closing within which to do so,

Obviously if a court decision comes down that affects the rule in some
way, the Commission first and foremost will have to figure out how to
address that. And, of course, we\'d work with you to do so.

Whatever rule is in place, AT&T will come into compliance with. We said
that on day one of the merger. Again, we\'re in a not dissimilar
situation in July when we filed the merger. The old rule, now
superseded, has been under suspension for I guess four or five years at
that point. Or had been stayed for four or five years. We were on notice
that the Commission intended to put a new rule in place at the time. We
didn\'t really know what it would say. The Commission didn\'t know what
it would say. But we indicated at the time we filed whatever it said, we
would come into compliance.

MS. HILL‑ARDOIN: It was before, actually, the AT&T proposed merger was
announced that the Commission warned, and I\'m quoting, interested
parties, including in particular parties that are now entering into
business arrangements that would violate the rules, but for the
existence of the stay, should be well aware of the existence of the
rules. And, thus, have a full opportunity to be prepared to comply with
them.

Perhaps now it might be held that this eighteen month waiver is that
full opportunity to comply with them. And in explaining why the waiver
would be justified, Mr. Cicconi went back to what was going to be
happening and focused on the benefit that were going to be delivered as
a result of this merger. And he spoke about telephony competition.

His commitment as he has stated here to telephony competition, and I\'ll
quote as best I can with my shorthand, that AT&T intends to provide
telephone competition everywhere it can by whatever means it can.

That\'s the commitment. It is not specific. I would like to see the
Enforcement Bureau have a run at whether or not they have competed in
telephone competition everywhere they could by whatever means they
could.

MR. CICCONI: Can I respond to that? Because first of all, we are out
there competing today. I think the ads I\'ve held up here are a little
dose of reality here. And SBC comes in and says one thing, competition
isn\'t occurring, AT&T isn\'t delivering. The fact is we are delivering
it out there and they\'re running ads to counter it out there. If it
wasn\'t in existence, they wouldn\'t be doing so.

Secondly, I think it\'s more than a little disingenuous for a company
that during the Telcom Act in 1996 assured the Congress and this
Commission of its intention to be unleashed to compete everywhere
against every other RBOC. Three years later we\'re still waiting.

In order to get their Pac Bell merger approved, they made, they gave
assurances to this Commission and to the California Commission about
their commitment to compete outside the region. Again, this Commission
has seen absolutely nothing from them on that. And to the point where in
order to get approval of the Ameritech merger, they were held to account
on that.

Finally, for SBC which has yet to demonstrate after three or four years
of promises any desire to compete anywhere in anybody else\'s territory,
I\'d like to see the SBC marketing ads in other RBOC territory looking
to compete and providing local phone service. We aren\'t seeing any of
that. Again, after four years of promises.

So, I think it\'s more of a little disingenuous for people that we\'re
actually seeking in the market today to compete against to lecture us
about providing competition when they\'ve so badly failed to meet any of
the commitments they made previously.

MR. KENNARD: Actually, I think it\'s wonderful to hear SBC welcoming new
telephony competitors in the marketplace. I\'ve never seen that before.

MS. HILL‑ARDOIN: We are indeed doing that. We are not shrinking from
competition. However, we do have some concerns that might taken up about
how competitors enter the market, the rules by which they have to live
and this whole issue of disparate regulation. But we, in fact, do
welcome regulation.

I enjoyed ‑‑ I\'m sorry, competition. I enjoyed that jaunt down memory
lane, but when we talk about mergers, rather than going back to the \'96
Act I think with reference to SBC, we can focus rather recently on our
merger with Ameritech.

And I can tell you that this Commission did not approve a merger in
which we committed to compete everywhere we could and whatever means we
could. Our commitment to competition is specific, it is verifiable, it
is enforceable and it is being aggressively executed. And probably if I
didn\'t have a bad back, I could have hauled those conditions in here.

JUDGE LATHAN: Andy.

MR. SCHWARTZMAN: I\'d like to observe that this is the third time, by my
count, that you\'ve asked Mr. Cicconi a question about AT&T and he\'s
given you an answer about SBC. This is about SBC.

Now, if he wants to talk about ‑‑

THE: You mean AT&T.

MR. SCHWARTZMAN: If he wants to talk about ‑‑ thank you.

If he wants to talk about commitments, first as I\'ve already pointed
out, there\'s ten thousand residential telephony customers in TCI and
you know what the promises were made. That merger\'s a year old.

Second, when they talk about we\'ll come into compliance, just trust us,
I\'m pointing out to you that we filed a complaint alleging repeated
violations of the reporting requirements involving these very rules. And
misrepresentations about it.

And as I got Attachment D in here, just three weeks ago, they filed
another, consummated another transaction without submitting the required
certification. And that complaint filed on October 7th sits in your
bureau.

Mr. Chairman, I\'ve asked that that be referred to the Enforcement
Bureau because it\'s supposed to be firm, fast and flexible and we\'re
not getting firm, fast and flexible on this.

JUDGE LATHAN: Mr. Simon.

MR. SIMON: Yes, I wanted to interrupt the conundrum about cable
ownership just to make a point.

In the Cable Bureau\'s broadband report, Ms. Lathan had the parable of
several people feeling the different parts of the elephant.

MS. HILL‑ARDOIN: The blind men they were.

MR. SIMON: The blind men. Let me back up and look at the whole elephant
just for a minute. And I want to ‑‑ well, I\'ll hold that.

Mr. Cicconi says that he needs to join the cable monopoly club because
he needs to fight the incumbent Bell monopoly club. Now, he then says
that acquiring facilities to compete with incumbent monopolists is
critical.

And before he changes that hat, and indeed his entire suit, I want to
embrace him because that is what we have been saying. That unless
internet service companies in this country are able to acquire through
open access the facilities to provide broadband internet access, how are
they going to compete with the incumbent cable monopoly?

So, when we\'re talking about the battle for local phones and the battle
regarding the cable ownership, horizontal limits, keep in mind that
during the eighteen month waiver, that is a sub‑set of the two and a
half year period that Mr. Armstrong says he intends to maintain his
monopoly on internet access over his cable system.

In internet time, that\'s about eight years. That will discourage
investment by untold thousands of people in innovative internet
applications that would never see the light of day in that network.

JUDGE LATHAN: Okay. I think on that note, I\'d like to take a break. And
when we come back, we are going to talk about video, potential harms,
programmers and broadband. And so let\'s just take a ten‑minute break,
and thank you so much for the spirited conversation this morning.

(Whereupon, a brief recess was taken.)

JUDGE LATHAN: Okay, we\'re back in session. Please take your seats.

We have only about an hour and fifteen minutes left, and so I want to
make certain we\'re able to move to the other issues, such as the
broadband issues and the video issues.

But, first, Quyen Truong would just, she has just one or two wrap‑up
questions with respect to the benefits of the merger and then we will
move on.

Quyen.

MS. TRUONG: AT&T and MediaOne have submitted independent deployment
plans showing how each company would provide local telephony and other
new services in their respective areas absent the merger. But we
obviously have not seen anything on your plans for deployment once a
merger was to go through. And I would like to hear from Ms. Ardoin, as
well, on your perspective of trying to develop that kind of post‑merger
plan since SBC in seeking its approval for its merger with Ameritech,
did have plans showing how the merger could accelerate the deployment of
new services.

Could AT&T and MediaOne discuss for us what impediments there may be to
your developing those post‑merger plans and how we can evaluate the
extent to which the merger would accelerate deployment absent a
comparison of the post‑merger plans with the plan for deployment if
there was no merger.

MR. CICCONI: I\'m not sure how much I\'m able to help you on that, but
I\'ll at least try. There are some impediments on us, as I understand
it, in terms of joint planning at this point. I think that\'s been one
of the main issues in terms of being able to submit any sort of joint
plan to you about how we would deploy going forward once we closed the
merger.

I think that\'s probably the primary answer to your question. I don\'t
know if Frank can ‑‑

MR. EICHLER: I agree.

MS. TRUONG: Ms. Ardoin, can you address how SBC was able to provide
post‑merger plans? Were you doing it independently or based on
cooperation with Ameritech? How was that done?

MS. HILL‑ARDOIN: Some limited cooperation with Ameritech, however, there
were certain prohibitions against joint planning at the time. And I have
to say that that does have a real impact on the ability to analyze the
situation you\'re going into, to make commitments and to get very
specific plans about what you will do.

However, we were committed to broad‑based competition. We were committed
to spurring competition in the local competition market and the local
service market and entering into long‑distance. And lots of long,
sleepless nights, lots of operations, people focusing on the details is
what it took. It\'s not impossible.

MS. TRUONG: Okay. Going to the other part of what you have submitted
from AT&T and MediaOne, your studies of the synergies estimated from the
merger, including both dollar saved and the increase in market
penetration from the merger, are based on the explicit assumption that
the merger will accelerate the deployment of new services, especially in
MediaOne\'s regions. Will you be submitting evidence to show that that
assumption is correct?

For example, the assumption that the merger will cause MediaOne\'s
market penetration to be thirty percent by the year 2004, as versus
sixteen percent absent a merger. Especially when we consider that,
according to your own representative, MediaOne\'s market penetration is
actually higher than AT&T\'s in areas where each have provided local
telephony so far.

MR. CICCONI: I\'m not aware of that information. I\'ll let Frank speak
to the MediaOne projections. But we did put into the record a
projection, market projection that we would achieve thirty percent
penetration by 2004 within MediaOne markets, which I think MediaOne is
also indicated is quite a bit faster, I think up to three times faster
than they would be able to achieve the same levels.

In terms of the synergies that would be possible on lower cost, I
believe all that is in the record. I realize that since July there\'s
been thousands of pages that have gone in there and there\'s quite a bit
that\'s been put on the record. And investment banker\'s information may
be particularly indecipherable, but I think it\'s roughly about a
billion dollars in savings and about five hundred million dollar impact
in EgodDod that was put on the record, if memory serves me.

But we\'d be happy to point out those portions of the record. Obviously
those lower costs would be benefit to the merger that would help drive
deployment at a faster pace, too.

MR. EICHLER: With respect to penetration, I think it\'s important to
recognize that we started marketing telephone service a lot earlier than
AT&T. We started in Atlanta three years ago. I think that was our first
launch of competitive telephone service. And so we have been rolling out
as markets become, basically they\'re built out and they become
telephone ready, that\'s when we start to market them.

And, remember, we\'re still in the process of building those systems
out. We still have a couple billion dollars to spend in the next year
and a half or two years to get the rest of our markets even capable of
marketing for telephone.

I think by the end of this year, we anticipate under our current plan,
that the MediaOne systems are going to be approximately fifty‑nine or
sixty percent marketable for telephone services. Only seventy‑five
percent marketable for high‑speed data.

So, we still have about a year and a half left to get them all up and
ready before we can even start marketing. You have to do the build‑up
first.

MS. HILL‑ARDOIN: I might add one of the things that causes you to have
to think very carefully about what you\'re going to do on a post‑merger
basis is when the Commission requires those plans to be very specific.
So, I think we\'re energized by that, put a lot more energy into it. And
when you have to make particular investment commitments, when you have
to talk about the number of markets that you\'re going to be in by a
particular time, causes you to have to get down into the details that
are being referred to here.

But without that, I think the process has no definite end. The benefit
has no time that it is assured to come into the market. And there are no
consequences for that public benefit not being delivered.

So, I think post‑merger planning is something that the Commission should
continue to be concerned about and appropriately incent parties to think
as deliberately as is required to, to make those commitments.

JUDGE LATHAN: Thank you very much.

Anything else, Quyen?

Mr. Cicconi, in your filings you state that it is crucial ‑‑ in fact,
imperative that AT&T be allowed to keep TWE. That the merger would not
be effective unless AT&T was able to keep its interest in TWE.

Would you please explain that? And by that, I mean Time Warner
Entertainment, excuse me.

MR. CICCONI: Time Warner Entertainment partnership. Well, obviously,
it\'s a major portion of the interest that MediaOne holds. And the
partnership agreement itself is extremely complicated. And I\'m not sure
even if one wanted to get out of it how possible that is.

But I think the larger point is that this is an essential component of
MediaOne, that interest. And we feel it does represent not just an
investment, but by becoming a partner with Time Warner, we hope that it
provides certainly a better incentive for Time Warner to take seriously
local telephony. To date, this has really not occurred at the
residential level in their territories. And we\'re obviously hoping
through that partnership to have some impact on that type of approach.

AT&T being a telephone company, being a communications company with its
primary motivation being to deliver those telephone services, has,
obviously, every incentive to further those ends with the partnership.

So, clearly we feel that that interest is one that could be used to
further the cause of local telephony deployment.

THE: But it\'s our understanding, and please correct me if I\'m wrong,
but it\'s our understanding that MediaOne does not have any governance
or management rights in TWE. If that is correct, then how would this
help you further your local telephony interest with Time Warner?

MR. CICCONI: We have ‑‑ obviously the investment interest itself, being
the partner in TWE would have, obviously, some effect in terms of
aligning the interests of the parties there. So I think that\'s one part
of the answer.

MS. TRUONG: You\'ve announced, I think previously, that prior to Time
Warner\'s announcement of a planned merger with AOL that you expect to
finish a joint venture agreement with Time Warner within the next few
months. And you\'ve also indicated that you\'ve reached an agreement to
provide phone service over ComCast cable systems.

In addition, we would also hear about how there is at least a tentative
agreement between MediaOne and AT&T to share switches in a box in
Atlanta.

Now, given all of those existing and potential agreements, why is it
necessary for AT&T to have an ownership stake in the Time Warner
Entertainment Partnership and to own MediaOne in order to provide phone
services instead of going through these types of arrangements?

MR. CICCONI: Well, I think you said it yourself; the potential
agreements. We have not been able to conclude any of them. We did
announce, for example, the intention to conclude a joint venture with
Time Warner quite a bit ago, I think about a year ago. And we have not,
to date, been able to conclude such a joint venture. We haven\'t been
able to with other cable companies, as well. And I think there\'s a
couple reasons for that. But, obviously, one conclusion that can be
drawn is that ownership of the underlying facilities obviates the need
to conclude such agreements. They are complicated to conclude.

It is difficult to bring the interests of the parties into alignment.
The interest of the different parties in delivering telephony can be
very different. We\'ve run into issues in terms of the term, in terms of
pricing, in terms of actually who controls the underlying facilities,
who delivers what services, the extent of those services.

Whether, for example, those services will be voice only. For a long
period of time. Or whether they could include developments of video
telephony when they came across. None of these issues have actually been
as soluble as we had initially hoped.

We do believe that the demonstration, particularly in the MediaOne
territories, but also in the TCI territories, of the power of AT&T\'s
brand, of its investment commitment in terms of those penetration levels
and the revenue that can be derived from that, will help spur some
interest in joint ventures.

But I think it\'s the cart before the horse. I think it\'s very easy to
conclude that there may be an alternative there in terms of joint
ventures, but we simply haven\'t been able to effectuate that. And we
have tried.

We do believe, very clearly, that the acquisition of MediaOne is
something that simply poses no impediments to delivering those services.
We\'re going to get them done. Just as we are in the TCI territories.

So, I think the acquisition of MediaOne actually will help us in terms
of being able to bring about subsequent joint venture arrangements with
cable companies that we haven\'t been able to conclude to this point.

But they are extremely difficult arrangements to work out, we found.

MR. SIMON: Can I make a comment on that before Andrew does?

We hear a lot about market forces, and yet, Mr. Cicconi from one of the
largest companies in the world, just said that because they have trouble
working out a deal with cable companies they had to go buy them. How in
the world do you expect Peria 51, ISP in New Mexico under market forces,
to negotiate its way onto a cable network if AT&T is justifying this
merger because it\'s too frustrating to negotiate a joint venture
agreement with other cable telephony providers?

Market forces have their limit. If AT&T has to buy into the cable
monopoly because it can\'t negotiate an agreement, how do you expect
your local ISP to negotiate an agreement unless they have a right of
non‑discriminatory access?

JUDGE LATHAN: Mr. Cicconi, we can\'t wait for your answer.

MR. CICCONI: Well, I think it\'s an interesting way to shoehorn open
access into this session.

JUDGE LATHAN: That\'s my job.

MR. CICCONI: And you do it well.

Frankly, I think it\'s a fair question, and I think the answer is very
clear that we\'ve made a commitment to do so. We\'ve made that
commitment in writing to this Commission with a fair degree of
specificity. We\'re under, we\'re in the process of negotiations with
ISPs right now, large and small ISPs, and we hope and expect to be able
to conclude agreements with them.

We have indicated publicly, as I think a particular sign of our
intentions on this, that we do not intend to extend current exclusivity
arrangements. We will provide a choice of ISPs on this system. That is
clearly our intention and we\'re seeking to carry that out now.

We\'re also in the process on our fixed wireless systems where we don\'t
have any exclusive contracts, of conducting those negotiations for media
carriage. We are looking to provide that choice, not just to be
responsive to the consumer desires, or frankly, even Greg\'s desires,
but from a business standpoint we\'ve concluded this is also good for
AT&T and its shareholders.

If our customers want a choice of ISPs on our platform, we feel it is in
our business interest to deliver that. If they don\'t get it from us,
they\'ll go somewhere else. And we want them on our system.

Let\'s keep in mind, too, that we\'re trying to attract people to our
platform for the provision of telephony services against an entrenched
monopoly that has upwards of ninety percent market share. We\'ve
concluded that if we in any way are restricting consumer choice on that
platform, that we would be doing something that\'s extremely
counter‑productive.

So, I think the short answer to Greg\'s desire, to OpenNet\'s desire for
us to deliver a choice of ISPs to our customers, is, yes, we intend to
do that. We have heard you and that\'s what we\'re going to do.

JUDGE LATHAN: We will turn to ‑‑ we\'re going to return to the open
access issue, but I want to finish up some TWE questions, Time Warner
Entertainment questions, and we will come back to this issue. And, Mr.
Simon, I\'m going to actually ask you a question that doesn\'t deal with
the access issue, and I\'d also like Mr. Cicconi to answer this
question.

In your view, if AT&T insulates TWE under the new attribution rules,
would the merger have an adverse impact on independent programmers and
smaller purchasers of programming? And I\'d like for you to specifically
answer questions such as would independent and start‑up programmers be
able to survive if AT&T does not carry their programming? Would AT&T\'s
competitors in the video distribution market, overbuilders, wireless,
cable operators, DBX, et cetera, would they able to obtain desirable
programming to offer their viewers if AT&T enters into exclusive
contracts?

And let me stop with those components. Could you just address those
issues for me, please, starting with Mr. Simon and then Mr. Cicconi.

MR. SIMON: To begin with, the question regarding whether AT&T will have
dominance in the programming world, affects investment in people who are
going to be creating programming to compete with existing cable video
programs and existing methods of delivery of cable video programming.

I am no expert on attribution rules, I\'m no expert on program carriage
economics, but I can tell you this. The internet provides the best
opportunity for new companies and new investors to provide competition
to existing cable video programming over high‑speed broadband networks.
And it is no accident that wherever cable monopolies have the chance,
they block streaming video that could compete with regular video.

Whatever technical arguments exist today will not exist tomorrow. But if
the owner of the network continues to have a chokehold in the access
point, why would people invest in putting internet video into a system
in which sixty percent of the homes can\'t get it? They get cable
service from people who control internet service providers over the
network.

So, whether or not AT&T has an attributable interest in Time Warner
Entertainment, if they continue to monopolize access to the network and
not allow cable technology to carry new types of video programming,
people will not invest if millions of households won\'t be able to see
their product. Or they\'ll be forced to go to less effective
technologies or technologies that are farther down the road.

Now, when you talk about can the overbuilders obtain programming. Well,
you know, it\'s been a long battle to get the Commission to make certain
that competitors to cable could obtain programming in the first place.
And if anybody here thinks that cable does not have a dominant position
today in video programming and that they leverage that position to keep
people in line on other issues, then ask yourself why are there no media
giant companies as members of the OpenNet Coalition. They have an
interest in providing their programming to consumers.

Right now, cable video programmers have a chokehold on new shows coming
onto cable channels. So, when we talk about whether there\'s going to be
a problem with a monopoly network in the video market, I tell you that
there is a problem today with cable monopolists in the video programming
network. This will not make it any easier.

JUDGE LATHAN: Thank you, Mr. Simon.

Mr. Cicconi and then Mr. Schwartzman.

MR. CICCONI: I think Greg\'s statement is simply unsupported by any
facts. There aren\'t any records that I\'m aware of, and certainly
unsupported by anything that\'s ever been filed with this Commission.
The fact is that there is no chokehold today. If anything, the ability
of cable to have any influence in this area is becoming more limited by
the day.

DBS is certainly coming in like gangbusters. They have a growth rate now
that\'s doubled what cables it is in terms of deployment. So, there\'s
absolutely no chokehold in terms of distribution. And, in fact, as cable
goes digital, you have a hundred stations going to a thousand stations.
Content itself is going to be even more in demand than it is today.

I\'m unaware of anything that is on the record at this proceeding from
any programmers indicating any sort of fear about any sort of chokehold.
I\'m also unaware of any sort of complaints at this Commission from
programmers indicating that cable, in general, is exercising any sort of
chokehold or somehow denying them access.

In fact, I think what we see occurring today is that programming is
proliferating and programmers are able to, in fact, exercise some degree
of market power of their own.

You have about two hundred and eighty programmers out there today, I
believe. And what you\'re seeing in the marketplace is that popular
programming, and ESPN is certainly one example I can cite, but there are
many, many others are able to demonstrate who has the power in this
relationship simply by the fact that they can raise prices at will and
sustain it. And the cable companies are forced to pay it in order to be
able to carry their content. This is what\'s happened with ESPN.
Frankly, it\'s what happened to us in our territories with the Chicago
Bulls. And, unfortunately, those costs have an affect on cable rates.

But it\'s the programming that is actually in demand today. This is not
a capacity issue. Law of supply and demand is actually working here and
the programmers, frankly, are the ones that seem to be having the best
of it in terms of that relationship today.

I\'d also add this. That I certainly don\'t think that Michael Eisener
or Sumner Redstone or Rupert Murdoch are sitting there in any sort of
fear of any sort of cable chokehold. Far from it. They seem to be doing
quite well, thank you, in being able to exercise a high degree of
control over their perimeter. They seem to have absolutely no
difficulties in not only getting their programming on, but sustaining
that programming.

I think as far as the independent programmers, all you have to do is
flick on any local cable network anywhere in the country, or DVS, and
you\'ll find that the programming from independent producers is very
much in evidence. In fact, a high degree of local programming is also in
evidence.

JUDGE LATHAN: Andy?

MR. SCHWARTZMAN: Yeah, I know Mr. Cicconi is new to this part of the
game and he\'s not really familiar with a lot of the jurisprudence, a
lot of the history.

As far as I know, there is material on the record complaining with those
kinds of things. And I think Seren Communications ‑‑

JUDGE LATHAN: They\'ll be in this afternoon.

MR. SCHWARTZMAN: ‑‑ has filed stuff. So, I encourage Mr. Cicconi to
stick around. I also encourage you to read Section 19 of the 1992 Cable
Act and the, as Bill Johnson will assure you, voluminous issuances that
the Cable Services Bureau on program access complaints. They\'re filed
every day, people are complaining. Maybe they don\'t win, but there\'s a
lot of people out there who sure think that there\'s chokeholds. I\'m
not going to regale everybody with the quotes that come out.

Every now and then a CEO forgets that they\'re not sitting around at the
closed doors at the MCTA and they\'re at a convention and they speak
truth that I\'ll be gosh darned if I\'m going to let them get onto my
cable, spend fifty billion dollars on it, then everybody says, oh, he
didn\'t mean it.

The video streaming issue is important and it\'s prospective. You don\'t
know how the technology is going to work out, I don\'t know how the
technology\'s going to work out. We do know that everybody\'s cross
purposing and cross branding and trying to find multiple platforms and
all sorts of interactivity.

And what this reminds me of is PrimeStar. If you combine Excited Home
and MediaOne Road Runner, forget about AOL. But if you really want to
bring in AOL, you\'re creating exactly the circumstance, a cable
industry distribution channel on another medium used to leverage the
other. This is a high‑tech PrimeStar that you\'re facing on the video
side. Why let it happen?

MR. CICCONI: Can I just ‑‑ the one company Andy mentioned here, Seren,
is not a programmer. And in his entire response, I didn\'t, frankly,
hear the name of one programmer that\'s having any difficulty with
access to the cable systems. Including our systems. Seren is not a
programmer.

MR. SCHWARTZMAN: Classic Sports Cable. There\'s case, after case, after
case, after case, Jim.

MR. JOHNSON: It\'s sort of a generic question which comes up in this and
other proceedings is which is increasing faster, program supply or
channel capacity. I think we have heard both answers in various
proceedings.

MR. CICCONI: I think that ‑‑ it\'s a very difficult question. Obviously
it\'s something that\'s involving a prediction of technology and the
ability of the market to respond. But it seems to me, frankly, channel
capacity is not only increasing exponentially, but is about to go even
beyond that as it goes digital.

And I think if this Commission\'s record and proceedings don\'t find any
evidence of any sort of programming access difficulties today that they
found actionable, then certainly as we move to the greatly increased
capacity of digital cable with a thousand stations instead of a hundred
and twenty, that, frankly, my belief is that, and I think my company\'s
belief, is that we\'re going to be crying for content, frankly.

MR. JOHNSON: Does that include digital must‑ carry signals?

MS. HILL‑ARDOIN: Is that ‑‑

MR. JOHNSON: Yes.

MS. HILL‑ARDOIN: Ms. Lathan, a short reply to your question about
whether or not overbuilders could obtain programming. As an overbuilder,
I\'d say certainly we can obtain programming, but at significant cost,
and therefore, a high interest area.

Our experience has been that we pay roughly two months of our cable
revenue to secure programming on an annual basis. That\'s upwards of
fifteen percent, and that\'s a significant concern. And an ability of
overbuilders to make this business and manage it as a going concern will
certainly go to managing the program cost and being able to acquire
programming at a cost that would be, let\'s just say, the same as would
be available under this proposed merger.

MR. CICCONI: I think, by the way, though, that point with respect,
Priscilla, makes the argument that programmers are not in any way
disadvantaged here. This is about programming. If your programming costs
are that high, it certainly indicates that the programmers are able to
extract that kind of cost from you and indicate your desire to carry
their programming. It doesn\'t indicate, in fact, any ability on the
part of either of our systems to block that programming.

So, I think it does make the point that the weight in the relationship,
frankly, shifted pretty dramatically toward the programmers and away
from the distributors.

MS. HILL‑ARDOIN: I think it certainly demonstrates that if you\'re going
to compete in the cable business you can\'t do it without programming.
So, paying that cost comes along with the territory. And it is something
that is going to have to see a lot of significant downward pressure.

MR. SIMON: Mr. Johnson, I think the question the bureau should ask
itself is how many new programs are coming on that are not affiliated
with the cable owner. That\'s the test. ESPN is not the problem. It\'s
the next new channel, the next history channel that wants to get on
that\'s not affiliated with the cable owner.

So, ask yourself how many truly independent programs do we see joining
the cable networks.

JUDGE LATHAN: That was precisely the question I asked. I asked for
independent and start‑up programmers be able to survive, and I guess I
would like to hear more.

MR. CICCONI: The overwhelming majority of the programming carried on our
systems today, has absolutely no affiliation with our cable company. And
that would be the case following this merger, as well. I just ‑‑ I
don\'t see the relevance of that point. It seems to presuppose some sort
of ownership stake here that is non‑existent. There\'s no evidence of it
in the record. Fact is that these systems are open to all manner of
programming today. The programmers are certainly not complaining about
it. They have not complained in this proceeding.

There\'s nothing on the record indicating any sort of concern from any
programmer about access to the system. And, in fact, all you have to do
is flip through the channels or look, in fact, in TV Guide today and you
can see the evidence of that on any cable system in America, not just
ours.

MS. TRUONG: Focusing on the issue of affiliation, AT&T has argued that
we should not attribute Liberty to AT&T in considering AT&T\'s
horizontal reach in the digital market and in considering the mergerous
impact on the video programming market because AT&T does not influence
Liberty.

I\'d like to hear from Ms. Ardoin, Mr. Schwartzman and Mr. Simon as to
whether you agree with that position with AT&T. To what extent ‑‑ and if
not, to what extent you think AT&T has influence over Liberty, and vice
versa. And apart from the issue of influence, are there other concerns
that we should look at here in assessing the impact on the video market.

MR. SCHWARTZMAN: Well, we addressed that in our witness submissions and
I am ‑‑ the way everybody is afraid is the case I could run on that one
for a very long time. I\'ll touch on one or two points.

First of all, AT&T and Liberty are tied together entirely its tracking
stock. Mark Cooper, Consumer Affairs of America, likes to talk about the
yo‑yo. They spin it off in the tracking stock and then when the
regulators turn around and go the other way, they pull it back in. And
Liberty and TCI have done that three times at last count.

John Malone serves on the board of AT&T, and his responsibility is to
the shareholders of Liberty Media. AT&T\'s control of one hundred
percent of the ownership of Liberty Media means that everybody involved
in the exercise knows that if the one company succeeds, the other
company is better off, and vice versa. You don\'t need to have explicit
communication for programmers to sit there and say, well, let me see.

If I pick this programmer who\'s got no affiliation to this company,
somebody might not like it. And I might not do well in my company if
they don\'t like it and my company might not do as well.

Or if I take the safe one, I don\'t have to call them up and tell them
I\'m going to do it or ask them whether I should it. I\'m going to be
safe.

You can\'t possibly chart it, you cannot possibly put monitors in, you
can\'t possibly deal with the myriad ways that relationships in this
kind of situation go back and forth.

The simple fact is that they own each other. And the Commission has
recognized it and have adopted rules. And have adopted very specific
rules about degree of insulation that it was going to require, which we
don\'t like. And that\'s not good enough, they want more.

Chairman said the time has come to start administering by rule and not
by waiver. And what they\'re saying is pay no attention to all those
rules you adopted, we\'ll be good, you know, it doesn\'t really matter.
They\'re really asking you to ignore all the proceedings you\'ve
conducted and tolerate structures that are tailor made for devious
conduct.

MS. HILL‑ARDOIN: I echo a number of those sentiments. I find it
inconceivable that there could be any version of insulation, barring the
rule that the Commission has put in place. AT&T may take the position
that effectively, even though it owns a hundred percent of Liberty, that
it\'s not their company, that they have no influence or control over it,
I would tend to disagree with that. But more importantly, the FCC and
the Department of Justice have disagreed with it.

MR. SIMON: As a personal matter, I wouldn\'t dispute anybody who said
they don\'t have influence over John Malone. But it is ironic that
earlier, Mr. Cicconi said that in an arm\'s length relationship with
Time Warner because of their joint ownership through MediaOne, that they
would be able to align their interests with regard to rolling out local
telephony.

And, yet, all of a sudden we\'re asked to believe that they won\'t align
their interests when it comes to programming and video services.

One could ask the question why do you spend so much money to buy
companies you then say you have no influence over and you\'re not going
to have any cooperation with.

My concern is this. The distribution point mentioned earlier allows AT&T
to adversely effect the roll out of other types of video distribution
over the internet. And we know that in the open internet networks, there
is considerable investment in broadband video. That won\'t happen in the
cable network if people can get access to provide video programming on
the cable network in competition with the cable video programs.

Why would we allow the owner of this network to control the next level
of competition on the underlying transport facility? AT&T is made it
clear in the past year that they consider internet video competitive
with cable video. That\'s why they have said, and as Mr. Schwartzman
says, their more candid moments, that the streaming video limit is
because they don\'t want people getting their video over the internet.
They want them to pay for it through the cable video property.

The cross‑ownership also affects electronic programming guides that will
influence video programming and programming success. You have the issue
of set top box control with relationship with Microsoft.

We are building here a house of interconnection that will take years to
unravel when you decide it\'s a problem. If you allow it to go forward
in its present state. If we\'re concerned about new methods of
distribution, why would we allow the legacy owner of a network to
prevent the new distributors from being on that network?

We fought this before with program access, we fought it with monopoly
control of set top boxes and remote controls. Why wouldn\'t we fight it
here?

MS. TRUONG: Mr. Cicconi, I\'m sure you\'d like to respond.

MR. CICCONI: Well, first of all, I thought the question was about
Liberty and not about every other conceivable interest that AT&T has
currently. I\'m unaware of anything that exists that somehow allows
Liberty to have any sort of role in the underlying transport, or even in
the internet or video streaming, or anything of that nature.

With respect to Priscilla on the point about the FCC and the DOJ having
somehow objected to the structure of Liberty in its relationship with
AT&T. With respect, that\'s simply not true. In fact, the Department of
Justice and the FCC approved the TCI transaction with full knowledge of
that arrangement. And, in fact, when they signed off, it effectively
signed off on that.

I think the sole issue here with Liberty relates to the underlying sale
of programming by Liberty to TWE.

Now, keep in mind, the larger issue here and the larger concern that the
Commission had about whether AT&T has a material involvement in video
programming decisions at TWE, we feel is taken care of on the record and
hopefully to the Commission\'s satisfaction. There simply is none.

The question is about this once removed issue of the sale of programming
from Liberty to TWE. And, of course, that is an issue that we would seek
to address through one means or another during the waiver period. But in
terms of Liberty itself, I think there\'s a number of misconceptions,
most of which have been laid out here yet again by the panel.

The fact is there\'s structural separation between these companies, as I
think by now everyone is well aware of. This has probably been one of
the most publicly discussed arrangements, given the merger that helped
put it in place. The economics of these companies are entirely separate.
We do not have an economic interest in TWE. In effect, we never ‑‑
excuse me, not TWE, Liberty. In effect, we never really purchased the
Liberty portion of it. And, thus, don\'t have an economic interest.

If Liberty succeeds today, it brings economic value to the shareholders
of Liberty, not to me, not to the shareholders of AT&T. If we do well,
it doesn\'t effect them, either.

Lastly, during this waiver period we pointed out that in addition to the
overall safeguard that the Commission has with regard to our lack of any
material involvement in programming decisions by TWE, we\'ve also
indicated a number of other safeguards AT&T would be willing to put in
place with regard to Liberty. That includes replacing the current AT&T
directors on Liberty board with independent directors that would be
submitted to the FCC so there could be oversight.

We have also indicated a willingness to agree to an auditor, an
independent auditor picked by the FCC, that would every six months be
able to report on compliance in terms of any involvement or influence
through any of these entities.

Obviously, we would take steps to insulate against any AT&T employee or
person having any sort of involvement or interest in any programming
decisions by Liberty, et cetera. I think most of that is on the record
today.

So, again, they\'re ample safeguards we feel out there that we have
offered up to deal with the sole issue of Liberty sale of programming to
TWE. Keeping in mind that the core issue here, the core concern that the
FCC had in its ownership rules was about our material involvement, or
lack thereof, in video programming decisions by TWE. Again, we have
none.

MR. JOHNSON: If I could have just one more question on the TWE
situation, you pledged not to have any direct involvement or indirect
involvement in the sale of programming to TWE through the various
programming entities you have an interest in. But I gather you would
have influence on the general policies of these companies. And I would
presume that probably the largest buyer of the content of these
companies would be TWE. Would that not be having an influence on the
buying decisions of TWE?

MR. CICCONI: The largest purchaser of what, for instance?

MR. JOHNSON: Just to take an example, you\'re acquiring programming
interest through MediaOne. You\'re, I guess, pledging not to participate
with those companies in decisions that involve sales to TWE directly,
but you would continue to participate with those companies in general
programming decisions. And those general programming decisions would
apply to TWE, which is a very large buyer of programming, one of the
largest buyers of this content.

MR. CICCONI: Again, the core issue is involvement in the decision making
at TWE. I may have misunderstood you, Bill, but I thought there were two
questions there and the first one was about the involvement in other
activities beyond programming.

MR. JOHNSON: No, I\'m just focusing on programming.

MR. CICCONI: Okay. Because I think that the Commission\'s specifically
narrowed down, as you know, in its rule the concern about material
involvement to programming and not the previous statement about
media‑related activities. So it just is about programming.

And I think the fact is we feel that at the TWE level, we are fully
insulated against any material involvement in their decision making. In
terms of the sale by other entities of programming to TWE, whether it\'s
from Liberty or from some other entity, we feel that we can provide
adequate protections, most of which we laid out on the record. But,
obviously, we\'re open to discussing any other degree of insulation the
Commission feels may be desirable in that.

Again, this is a factor here. It doesn\'t go to the core issue of
whether or not we have involvement in those decisions at TWE. Simply
goes to the mere fact of some programming being sold to TWE or TWE\'s
purchase of some programming by entities which AT&T may have some
interest in, however attenuated it may be.

MR. JOHNSON: That\'s what I\'m trying to get at. If you participate in
the generic decision about programming and the largest purchaser of that
programming is TWE, aren\'t you participating in the programming
decisions of TWE?

MR. CICCONI: I think that one can take attenuated and turn it into
something even far more distant here. I think ‑ again, I think we have
to focus on the core issue in the rule, you know, that was laid out by
this Commission, as material involvement in programming decisions at
TWE. Again, we have none.

The Commission has interpreted that to also infer a concern about the
sale of programming to TWE by other entities with which AT&T has an
interest. We have taken and offered to take steps to insulate ourselves
from those decisions, as well.

But I think ‑‑ Bill, I think to take the additional step and say one has
to effectively insulate oneself from their operations in general, beyond
the fact of sale of programming to TWE, takes it a lot farther than at
least my understanding of the Commission\'s own interpretation.

Again, keeping in mind that this, itself, is an inference the Commission
staff has drawn from the rule itself. We don\'t believe it is actually
in the words of the rule. We accept the interpretation that the
Commission and the staff have put on this, that it also entails a need
to insulate from the sale of programming to TWE, not just involvement,
material involvement in programming decisions by TWE.

But I think to then take it one or two steps beyond that would, I think,
probably be protecting against something that simply is not in any way
possible in terms of any influence at the TWE end.

But this is all got to go back to TWE in the end, and somehow I would
suppose have some sort of, some sort of kabuki‑like influence on their
decision making when we weren\'t, in fact, exercising any directly.

I mean, we\'ve at least been willing to accept the Commission\'s
interpretation that the mere sale of programming by an entity like
Liberty, or even an attenuated entity like Rainbow, that we somehow need
to insulate even though we\'re not at the decision making end in TWE.

I think if you look, by the way, at Time Warner\'s decision making
within that partnership ‑ and maybe Frank could speak to this ‑ that, in
fact, that supposition itself is open to question. Their decision making
is very much in their own interest there and certainly isn\'t designed
in any way to somehow serve our interest.

JUDGE LATHAN: Okay, we really have to move on. I want to move to the
area of broadband. That way, Greg, you get to answer directly.

As you know, a recent ‑‑ well, this past summer, I believe it was, AT&T
entered into a voluntary agreement with Mind Spring dealing with the
issue of access to its cable pipes. And in that agreement in a letter
dated December 6th, actually to the chairman, they proposed that they
would open up their networks after the expiration of the exclusivity
agreement that binds Excited Home.

My question to AT&T and then for comment by Mr. Simon is how does AT&T
propose to voluntarily open its cable networks to competing ISPs? What
does open actually mean? That\'s the first part of the question.

The second part is how many ISPs will you allow onto your system? And
then the third part is in terms of pricing, will large ISPs and smaller
ISPs be offered similar pricing? And then I would like Mr. Simon to
comment on Mr. Cicconi\'s response.

MR. CICCONI: Well, you\'re referring to the Mind Spring letter, and I
think a number of these issues are addressed in the letter, Deborah, but
let me try to be more clearer.

We have indicated that we are going to provide a choice of ISPs on the
system. I think your question of what does open mean, I think OpenNet
itself, from its inception, defined open access is the process of
providing consumers a choice in ISPs. AT&T is committed to do this on
its systems as soon as the current contract expires. And, in fact, has
gone one step beyond on its other broadband systems, most particularly,
fixed wireless, we\'re offering to do that immediately.

I think we\'ve probably led the industry in this regard, and we\'re
pleased that others, most recently Time Warner and AOL have cited that
commitment positively and have indicated that they would also follow
suit. We also believe that others in the industry are looking very
seriously at following that lead.

In practice, what it means is roughly this. During this period of time
here when the contract is running, we have to tackle the technical
issues of actually getting multiple ISPs on this system and then
negotiations with those ISPs for that carriage.

In terms of the technical issues, they are real and we have to address
them. We feel within this intervening period of time, we\'ll be able to
find a way to do that.

In terms of the capacity of this system to handle the specific number of
ISPs, we\'re confident that we\'ll be able to provide a more than
adequate range of choices on that system. I can\'t sit here today and
tell you how many we can accommodate. I can tell you that we intend to
accommodate as many as the technology and our agreements with different
ISPs and consumer demand, frankly, allow us to carry on the system.

But we have indicated in the letter that we would provide ‑‑ we would
hope to have multiple ISPs on the system. Again, I can\'t put a
particular number on that and I don\'t think anybody out there today is
really able to put a number on that. But ‑‑

JUDGE LATHAN: Let me just interrupt for a second. If we move beyond the
letter, has AT&T given thought to, for example, will writers be able to
write to a protocol that will be universal and shared by everyone, or
will you have a separate protocol that won\'t allow others to be able to
write programs that can run on your system? Will you extend the
exclusivity that you have with respect to At Home and Road Runner onto
the set top box?

MR. CICCONI: Well, in terms of protocols, we\'re committed to open
protocols. And, obviously, the system today offers access to all web
content and that would certainly be our intention to continue that. We
would hope it would be a vibrant platform for programmers and it\'s
certainly our intention to develop it in that manner. And that\'s a
commitment that we have made publicly.

And, in frank, the ability to propagate this platform and be successful
in the marketplace would argue for that.

In terms of exclusive arrangements ‑‑

JUDGE LATHAN: What I meant is will you ‑‑ will Excite, At Home and Road
Runner be exclusive ISPs on your set top boxes?

MR. CICCONI: The answer is no. We would not be extending exclusive
arrangements beyond the current duration period.

JUDGE LATHAN: No, let me backtrack because I may not be saying this
correctly.

My question is do the exclusivity provisions with respect to Excite At
Home and Road Runner apply to the set top box now? That\'s really what
I\'m asking you.

MR. CICCONI: I see your question. The answer here really is that the set
top box has very little to do with the internet access, per se. I think
what you\'re going towards here is is internet access over cable, run
over the cable television service.

JUDGE LATHAN: Through the set top box.

MR. CICCONI: Right. Through the set top box, but the set top box is
really a separate issue.

The exclusivity arrangement with our company and with other companies,
and I believe Road Runner, as well, goes to the provision of high‑speed
internet access over cable, period. So, if we provided over cable,
whether it terminates in PC or terminates in the television set,
exclusivity applies. It has nothing to do with set top box, per se.

So, during the duration of the contract, it goes to our provision, that
is AT&T/TCI\'s provision of internet, high‑speed internet access over
cable. Once that expires, it will not be extended. So, we no longer be
exclusive.

JUDGE LATHAN: Just so I\'m clear, you\'re saying that if you bring
internet access through the set top box to the television, the
exclusivity provisions do apply.

MR. CICCONI: If we did that today, it would apply because it would be
carried over the cable wire. That is the agreement we inherited. That is
what the contract says.

Let me speak to the set top box, though, because I want to be clear
here. I think when we talk about exclusivity in terms of the box, per
se, provision of internet access is just something that flows the box.
In terms of the boxes themselves, anything in that box is non‑exclusive.
We\'ve indicated that in terms of the provision of operating systems on
set top box in terms of the acquisition of set top boxes themselves.

We don\'t intend, and frankly, it\'s not in our customer\'s best
interest to be dependent upon any one supplier for set top boxes or for
operating systems on those boxes. And so we\'ve insisted that any
agreements we have, including one with Microsoft, be non‑exclusive and
that the protocols be open. That they be open to JAVA and things of this
nature.

JUDGE LATHAN: Okay. Mr. Simon, does the Mind Spring, AT&T agreement go
far enough for you?

MR. SIMON: No. A brief review of the bidding, the chairman asked a
number of people, including Mr. Schwartzman and Mind Spring and others,
to intervene with AT&T. I call it an intervention. To wean them from
their monopoly tendencies in the cable world.

The letter evidenced AT&T\'s admission that open system would be better
than a monopoly, but, gee, we\'ve got to keep it for two and half more
years. The letter, and it is not an agreement with Mind Spring, it is a
letter of intention to do it later if they choose to do it later.

I\'m willing to believe Mr. Cicconi when he says that they are going to
do it later. My question is why do we have to wait two and a half years,
what do they mean by open? Access for an oligopoly of the largest ISPs
is not open access. Open access is non‑discriminatory access for people
who invest to your network and want to have access on comparable terms
and conditions.

To say that we\'re going to cut a deal with people who have market
share, as Mr. Armstrong said in the New York Times a few weeks ago, is
not open access. That is leveraging your bottleneck control to cut a
deal.

Open access is open access. It\'s what people get when they want to buy,
borrow or lease a phone line to start an ISP company. They don\'t have
to bring market share to the phone company. They just have to bring
their checkbook.

Now, I think it\'s a really good thing that AT&T says open model is
better. But the letter they sent said they\'re a lot of open questions.
Some of those open questions are people may have to use our backbone,
which means they\'re leveraging their bottleneck control over the
high‑speed cable line to get advantage in the backbone market.

It also talked about getting a percentage of the revenues from the
e‑commerce that other ISPs have traffic over their customers. That\'s
not open access. That\'s leveraging market control.

We\'re happy to work with AT&T and Mind Spring to make that agreement
something real. We\'re happy to bring OpenNet technical experts to talk
about the Doxis standards. We\'re happy to talk about a reasonable
period of time.

And by reasonable, I don\'t mean tomorrow. I don\'t even mean a few
months from now. I think it takes some time. The Bells were given nine
months to unbundle their loop. AT&T said that was too long. I\'m willing
to give AT&T at least that much time to figure it out.

But when we say we can\'t open our system because we have a monopoly
contract with our own company, eyes must roll. After all, in other
context, in much more competitive markets, AT&T has argued for the
complete abrogation by the Commission of contracts it had with ComSat so
it could negotiate a better deal. Not because it couldn\'t have other
means of getting there. It owns all these undersea cables. But because
they said we ought to have open access to IntelSat and you should
abrogate our contract so we can do that.

Well, I ask why can\'t AT&T buy out its contract with At Home. It\'s
already spent a hundred and something billion dollars to have it
networked, what\'s another billion among friends? To have an open access
within a reasonable timeframe.

Now, the problem is that AT&T exhibits what I call the Jimmy Buffet
principle, which is change in latitude is a change in attitude.

In this country, AT&T says that with regard to the first mover
advantage, the cable broadband providers have no first mover advantage
or ability to lock in broadband customers. But to our northern neighbor
in Canada, AT&T said, given the fact that many of the technologies
involved in the provision of broadband access services are still in the
early stages of development, it is unlikely we will see customers
switching seemlessly from one service provider to another in the near or
mid‑term when they were asking for extensive conditions. To have access
to cable internet providers in Canada.

In this country, AT&T says accelerated competition from DSL and others
will deter the ability of any broadband provider to engage in
anti‑competitive contact. In the northern latitudes it says the supply
conditions on broadband access markets are extremely limited. There are
significant barriers to entry into these markets, including lengthy
construction periods, high investment requirements and some costs.

Under these circumstances, the ability for new interest or existing
facilities‑based service providers to respond in non‑transitory price
increases would be significantly limited, not to mention protracted.

All of these supply factors suggest that existing cable broadcast
carriers are capable of exercising a substantial degree of market power
in the broadband access market.

Now, unless we think that latitudes makes a difference in principle, I
ask you does a two and a half year delay in implementing open access
give AT&T an advantage in the broadband market? Absolutely. Is there a
resolution that is fair? Absolutely. What is that resolution? Open it up
sooner.

In a merger of this sort, there is often been divestitures of far
greater interest than the one AT&T has in At Home. For them to continue
to argue that their own contract prevents them from doing the right
thing, gives them two and half years of first mover advantage.

If you approve the merger without policy of open access, how will
anybody catch up to them among my ISP community?

JUDGE LATHAN: Okay, I\'m going to let you respond, but, Andy, you\'ve
been so quiet.

MR. SCHWARTZMAN: I don\'t know where people get this impression I talk a
lot.

JUDGE LATHAN: We\'ll come back to you after ‑‑

MR. SCHWARTZMAN: If you\'re giving me the floor, I will say one or two
things.

First, in order to shortcircuit some of the discussions ‑ and Greg has
obviously covered a lot and done it with a more elegant touch than I
could ever have ‑ I\'ve attached as Attachment C to my testimony today,
the single best succinct, forceful, eloquent statement as to why this
should be a condition of open access attached to this merger. It was
submitted by George Rydenberg of AOL. And I intend to quote to you and
to him, repeatedly, in the months to come. JUDGE LATHAN: Is this the
premier?

MR. SCHWARTZMAN: Second, it is a matter ‑‑

MR. CICCONI: I would like to hear the quote.

MR. SCHWARTZMAN: It\'s Attachment C there, Jim, go ahead and read.

Second, I do address the group number of the aspects of the Mind Spring
letter in the letter that I wrote to the chairman on December 6th. I
don\'t know why the Commission is afraid of that letter.

On December 6th, I asked that it be posted on the Commission\'s website.
I\'ve asked repeatedly since then, as recently as this week. And it
still isn\'t posted on the website. Mr. Cicconi\'s letter is on the AT&T
merger page. And my letter isn\'t. I just think it would be very useful
to facilitate debate if people had the benefit of my views.

MR. CICCONI: By the way, Andy, the Commission certainly has my
permission to remove my letter and put yours up there at any time.

JUDGE LATHAN: You had how many points, was it?

MR. SCHWARTZMAN: Oh, I can do two more.

JUDGE LATHAN: Okay.

MR. SCHWARTZMAN: I haven\'t even gotten the substance yet. This is
extremely important for Mr. Eichler to hear.

The Mind Spring AOL letter does not address MediaOne systems. Mr.
Cicconi has been unwilling to state in public, to my knowledge, and in
private to my definite knowledge, the nature, terms or length of the
MediaOne Road Runner exclusivity agreement. And they have not agreed to
offer open access on MediaOne systems so far as I know in public or in
private. And this is about whether AT&T should acquire MediaOne. AT&T
has not committed even, quote, unquote, voluntarily to offer open access
in the MediaOne systems.

Finally, this is not just about choosing your ISP, the formulation that
we\'ve heard repeatedly this morning. If you get to choose among a
couple ISPs but they all agree that they\'re going to use one or two
filling systems, if you get to choose among several ISPs, but they all
agree to limit uploading or to limit the size of video files because the
terms and conditions offered don\'t give them that option.

If they all agree that they\'re not going to permit certain kinds of
filtering, parent\'s concern about how their children access the
internet, it\'s not open access. Open access involves citizens, the
customers who have a right to speak in an interactive medium and to
receive information. It\'s not just their ability to have two or more
ISPs to choose from as a customer. It\'s about their rights as citizens
to use the internet as a medium of open expression.

Thank you.

JUDGE LATHAN: Thank you. Before you begin, Mr. Cicconi, I want you, when
you respond to them, I would also like for you to specifically address
the issue that Mr. Schwartzman about whether or not open access would
extend to the MediaOne systems. And, also, then I would like Mr. Simon
to tell us why this is a merger specific issue.

As you know, in ATT‑TCI, we did not address the issue of open access
within the context of the merger. What, if anything, has changed that
should lead us to believe that we should address it within this merger,
rather than in a more general format?

Mr. Cicconi?

MR. CICCONI: In terms of the MediaOne territories, I realize that when
we were negotiating the Mind Spring letter, you know, when Andy was
present, we were dealing with a lot of issues. But he did ask me this
question several times during those discussions and I gave the same
answer at those times. Yes. Unqualifiedly, yes. This commitment applies
to the MediaOne territories.

He also asked me at what point the exclusivity obligation with Road
Runner expires on the MediaOne territories. I indicated to him and it\'s
on the record here, that it expires the last day of December, 2001. At
that point, the commitments from the Mind Spring letter would be carried
out by AT&T.

We do intend to provide a choice of ISPs on all of our broadband
systems. We said that publicly when we laid out the letter, we\'re
applying it today to our fixed wireless systems which are not impeded by
either the same technical issues or exclusive arrangement. So, I think
the answer is yes.

In terms of Andy\'s last point about customer choice, again, I couldn\'t
agree more with him on that point. I think that\'s a very fair
statement. This isn\'t just about customers being able to access a
choice of ISPs. We\'ve committed to this.

Frankly, I think open access also involves whether they\'re able to, in
fact, exercise that choice. And, frankly, when it comes to that, I think
that Greg opened that or at least examine the question as to how easy it
is once choice is provided for the customers to actually be able to
exercise that. Because there\'s a number of impediments the ISPs
themselves have in place to make it very difficult for you to switch.

I think that certainly newspapers are full of a lawsuit right now about
the largest ISP in the nation, one of its largest members, is apparently
put a software product out there which it has not yet fixed. That for
some strange reason, seems to disable any competing ISP that you might
have when you install it. That\'s not certainly something that\'s
AT&T\'s problem, but it is something that impedes a real customer choice
of ISPs.

Similarly, when it comes to the open standards on the internet, some of
these members are fighting against the open standards involved in
instant messaging.

AT&T and others have taken the lead to try to get those standards open
across the internet and not force a proprietary standard held by one
company on the rest of the internet. That really is the type of
bottlenecking that would prevent customer choice.

We have publicly advocated that e‑mail be forwarded by ISPs if a
customer wants to actually change their ISPs. And we\'ve challenged
membership of OpenNet to agree to something like that. The failure to do
so is, frankly, inexplicable.

The United States Postal Service is able to reliably forward physical
mail, there\'s no reason it can\'t be done electronically. Except that
the ISPs themselves want to make it very difficult for you to exercise
that choice.

So, I think there is an extra dimension to the issue of open access
beyond the choice of ISPs.

The last point I\'d make is this. The contract keeps arising as if this
is something nefarious. In fact, no one was stepping up to the plate to
build broadband access system on cable so the customers could access the
internet. Investors in this company, Excited Home, which is not
controlled by AT&T, but which TCI was an investor in, along with many
others ‑‑ and, in fact, there\'s a public component of it, as well as
investment bankers and others, went out there and built a system when no
one else would build it. They took the risks, they secured contracts
from the cable companies who wanted to offer this service. And, in
return, they were given a period of exclusivity within which to realize
a return on the investment commitment they had made to build this
system.

And if Greg\'s membership has one thing in common, it\'s, frankly, that
a number of them want to be able to take advantage of that investment
for free. In essence, at wholesale. Deriving the benefit of somebody
else\'s risktaking. That isn\'t appropriate.

It is not the business of the Government, and I think this agency has
wisely concluded that it is not in the business of requiring the
abrogation of contracts out there.

We\'ve indicated we are not going to extend it, but we absolutely defend
that contract as a valid exercise.

Last point. I think the ‑‑ including the RBOCs, and specifically GTE,
that, frankly, following the double standard here. The Bell companies
themselves have absolutely no interest in open access, per se. They have
no ISP benefit that they derive from it. Their sole interest in this
issue is simply to bottleneck the realization of competition in their
territories.

GTE is particularly egregious. They\'re a member of OpenNet. They
operate a cable system which itself is closed. The Worldwind system is
actually advertised on the internet in a way at odds with the great
principles of OpenNet. If you want a different ISP, you have to pay an
additional charge.

And I\'d be happy to give Greg a copy of the letter that was submitted
to the FCC by consumer group pointing this out. And we\'re happy that
they\'ve done that.

JUDGE LATHAN: Mr. Simon, could you take just about a minute, \'cause
we\'re running out of time and I think there may be some wrap up
questions. But please remember to respond to the question about merger
specific.

MR. SIMON: Right. To begin with, obviously a national policy of open
access is in the best interest of consumers and internet service
providers. You ask why would we ask for it in this merger. The short
answer is we haven\'t been able to get the Commission to do a proceeding
in any other way.

You have the authority and the ability through this merger to begin a
proceeding to apply open access to all cable internet providers.

During the AT&T‑TCI merger, we said, please, begin the process of
requiring open access because cable concentration just makes the
problems worse by reducing the number of decision makers in the market.

Here I am again asking you, please, in the context of this merger, begin
a proceeding to institute a national policy that doesn\'t just apply to
AT&T and doesn\'t just apply to AOL‑Time Warner, but applies to the
cable industry. To apply the law that they cannot discriminate.

Now, is access to the network under non‑discriminatory terms, taking the
network for free at wholesale? No. Is that what AT&T is asking when they
go into the local loop, are they asking to ride for free? Because they
want to get a discount?

We haven\'t even asked for a discount from what they charge their own
affiliated ISP. We\'ve asked for the same deal. And that deal is they
take two‑thirds of every dollar that At Home makes from a subscriber.

We have said treat people as you would treat your own affiliated
provider. We have not even said you can\'t have discounts that are fair
for different classes of customers. You just can\'t discriminate in
favor of one customer or discriminate against one customer.

But the idea that only people with market power can get in is not open
access.

If we have won this debate because of AT&T\'s letter to the FCC, I have
somehow missed the party. It is the beginning of the process, and we\'re
happy for it. But it is not the end of the process. And if AT&T opened
tomorrow, if AOL‑Time Warner opened tomorrow, what about COX and ComCast
and Paul Allen and all the rest of the industry?

Competition ‑‑

JUDGE LATHAN: Let me stop you for a second. What about them? Do you not
believe that market forces would mandate that they would have to do that
and the Government would not have to mandate it?

MR. SIMON: When has a monopoly ever given up a monopoly without some
help from the Government? The AT&T says they\'ll give it up in two and a
half years, but I\'ve yet to see that they mean non‑discriminatory open
access as compared to deals. That is not open.

JUDGE LATHAN: Okay. Okay, we\'re running out of time.

Quyen, did you have some questions?

Okay. Bill?

MR. JOHNSON: At the risk of taking us slightly backwards, but trying to
bridge the gap. The internet, it seems to me from what I read in the
press every day, is moving more and more towards involvement with video
content.

AT&T is indicated that in connection with the TWE issue, going
backwards, it wouldn\'t be involved with TWE video content. Would that
include involvement with TWE internet video content?

MR. EICHLER: Let me try and answer that. There\'s very limited TWE
internet content in ‑‑

JUDGE LATHAN: That\'s today, though.

MR. EICHLER: That\'s today. But under the agreement they have no
oversight over TWE internet content.

JUDGE LATHAN: But assume for the sake of his question that TWE does
decide to move into the internet video market, then answer his question,
please.

MR. EICHLER: Again, the rules of the TWE agreement would not give AT&T
any oversight or input or control over or association with TWE internet
content.

MR. JOHNSON: What is the scope of the commitment, though? AT&T is
making.

MR. CICCONI: I think you have a rule in place that talks about material
involvement in video programming, and I think this goes to the type of
content you\'re talking about there. But, clearly, you know, if that
took a different form over the internet, we would have no more
involvement in that we would in current programming.

I think as a practical matter, the mechanisms within the partnership as
I understand them, simply don\'t give us any sort of involvement or
voice in it, regardless. On its face and on the face of the terms of the
partnership agreement. And we ‑‑ virtually all the management rights
have been yielded that remain, and very few were there to start with.

MR. JOHNSON: I\'m really not talking about ‑‑ I was trying to find out
how you would interpret your own words in terms of not what the TWE
partnership at the present moment says, but ‑‑

MR. CICCONI: But I think, though, in fairness, it is a hypothetical. I
mean, as Frank has indicated, they\'re not doing this now. I think that
internet content can be a host of different things. And down the road I
don\'t know exactly what form that might take. And, frankly, I don\'t
know that the Commission would, either. I\'m not prepared here to make
an open‑ended commitment in an area where, near as I can tell, there\'s
nothing presently where I can\'t even conjecture as to what that
commitment might be applied to in the future.

JUDGE LATHAN: But are you saying ‑‑

MR. CICCONI: If you have a specific ‑‑

JUDGE LATHAN: But are you saying that involvement in internet video is
or is not materially related to video programming?

MR. CICCONI: I think if it\'s video programming, it\'s video
programming, whether it\'s delivered over the internet or delivered over
a cable system. And I would assume that if it is video programming, per
se, delivery mechanism is not relevant. We would not have any material
involvement in video programming, period. And we would seek to insure
the Commission on that point.

So, if you\'re viewing the internet as a means of distributing or
accessing that programming, and that is the type of content you\'re
talking about, then I think that\'s certainly a fair question. But, as
you know, internet content can be a lot of things that wouldn\'t
necessarily be classed as video programming.

JUDGE LATHAN: On that note, I would like to thank each of you very, very
much for your participation here today. It\'s been very beneficial to
us.

We will reconvene at one o\'clock this afternoon.

Thank you again.

(Whereupon, at 12:02 p.m., the hearing was recessed, to reconvene at
1:00 p.m., this same day, Friday, February, 4, 2000.)

//

//

[A F T E R N O O N S E S S I O N]{.underline}

(1:03 p.m.)

JUDGE LATHAN: Time to begin.

Thank you for coming back, those of you who came back. We\'re going to
begin our afternoon session. And I\'d like to introduce ‑‑ we have
Howard Shelanski, he\'s our chief economist, and he\'s going to join us
for part of our afternoon session.

And we have Professor Francois Bar from Stanford University, Diane
Linderman from the City of Richmond, Virginia, Christopher Melcher from
Rocky Mountain Internet, Susan Eid from MediaOne, Mr. James Cicconi from
AT&T, Peter Glass from Seren Innovations, Inc., and I don\'t see Khalil,
I don\'t know if he\'s here yet, but Khalil Munir is supposed to join us
from TAP.

And we have Darryl Anderson from the National Association of
Telecommunications Officers and Advisors and Gregory Rosston, Professor
Rosston from Stanford University.

The way we\'re conducting these sessions is that we\'re asking for each
of you to give a five‑minute statement. We have a time‑keeper. She will
show you a one‑minute card when you have one minute remaining. When that
time is up, she will show you a pink slip which says you\'re done. Okay.

And we have already had Mr. Cicconi\'s statement this morning, so we
won\'t ask him to repeat that. Okay.

We are going to begin now with Diane Linderman from the City of
Richmond.

MS. LINDERMAN: Good afternoon. It is an honor to be here in front of
you. The City of Richmond did review a Transfer of Control back in
November concerning the AT&T‑MediaOne merger. And it was certainly an
interesting process for us.

I wanted to go through a number of things that we did consider.
Obviously, the key one is whether they\'re able to take over the system
from a technical standpoint, from whether they have the ability to take
over the system for us. And, certainly, we made that choice early on
that AT&T certainly could.

We did look at the contract to make sure they were in current compliance
with our current franchise contract, and found that to be true, as well.

Some other things that we considered during the transfer were that our
original franchise was approved by our counsel in 1992 and did allow the
cable operator to provide non‑cable services, as well. And we did
clarify some of the issues concerning that.

In \'92 I don\'t know that anyone considered that telephony would be a
major focus of some of the cable companies in ten years from then, eight
years from then.

And we did look at the financial impact of them providing telephony
under the current franchise. And, as I said, clarified what the
franchise fee would be based on as far as those revenues coming in to
MediaOne, or the new company, as well.

We looked at the revenues for the internet services that the franchisee
would be providing and how they would relate to the franchise fee, as
well.

The discrimination of the division of services was important to the
city. We didn\'t want the franchise holder to discriminate,
geographically, as to where they were going to provide the new internet
services. And we wanted them to be all over the city and not necessarily
those high‑income areas. And they did agree to that in the transfer of
control.

The issue that certainly was raised this morning and was an interest of
our counsel, as well, was the open access issue. And to be honest,
that\'s where they spent most their time debating on the transfer.

The City of Richmond actually had two ordinances that were introduced
for their review. One that did reserve the rights of the city to require
open access at some point in the future based on what was happening
within the marketplace. Or in the legal environment. And the second was
to require it.

There is actually the third, which was do nothing in concern with it.
But they chose that wasn\'t the right route, that they really did need
to debate the issue on open access. And it was a very interesting public
policy debate.

The questions, you know, with the preclusion of the non‑discriminatory
access effectively deprive the citizens of Richmond of choices in
accessing the internet via the high‑speed connections at competitive
prices. Would the public health, safety and welfare of this city be
advanced by providing a market environment that offers meaningful
choices to customers, foster competitive pricing and prevents
inefficient economic distortions that depress economic activity.

Will the regulation encourage investments of the franchise holder in
providing a high‑speed network. And should the city regulate access and
incur the costs that may be associated with developing pricing methods
and rules regarding dispute resolution on issues regarding open access
and providing ISPs.

They also considered the legal considerations. As I know you know, the
courts are making some of those decisions about whether local
Governments can actually make these kinds of requirements. And they did
consider that. They considered what classification of the cable modem
service under Federal law, they considered the city\'s legal authority.
And they also considered the FCC\'s position on open access.

And in the end, although I think every counsel person believed that open
access was the right thing for its citizens, they chose to reserve their
rights under the law. And the ordinance was passed, unanimously.

JUDGE LATHAN: Okay. We would now hear from Mr. Anderson.

MR. ANDERSON: Good afternoon. I\'m Darryl Anderson, President of the
National Association of Telecommunications Officers and Advisers and
Executive Director of the District of Columbia Government\'s Office on
Cable Television and Telecommunications.

Thank you for the opportunity to speak to you this afternoon.

While I realize that this proposed merger potentially affects telephone,
video and other related broadband services the companies may offer, my
particular areas of proficiency lie in the provision of cable television
and broadband telecommunications services.

My message today is quite poignant. NATOA, along with its many members
and other local jurisdiction officials, is formally committed to the
protection of citizen and consumer services and the communities it
serves.

Local governments are confident that through the promotion of
competition of service providers, rapid and managed deployment of
broadband services and the successful evolution of the
telecommunications industry, consumers of these technologies will surely
be the winners in this new digitally driven millennium.

Policymakers are at the threshold of an era when the development and
deployment of broadband services, coupled with the explosive growth of
the internet, five hundred plus cable channels, an ever increasingly
internet based economy dictates that the decisions made now will
definitely effect the competitive future of our communications systems.

By maximizing the partnership and shared responsibilities that exist
between local governments and state and federal authorities, we can
deeply consider and realize the importance of adopting policies and
making important decisions that will foster the rapid and managed
deployment of broadband services.

This consideration must occur in a manner that will realize the
potential of a convergent technologies of video, telephony and
high‑speed data through these types of mergers.

One of the decisions that we\'ll have to make are through this
partnership, is the issue of competitive access to cable operators\'
high‑speed broadband networks for the provision of internet and other
cable‑related services.

Over a year ago, NATOA\'s board of directors adopted an interim
statement on internet access via cable. I will attach this statement to
my written remarks today. This statement supports that a local franchise
authority has the legal right and jurisdiction under the Federal Cable
Act of 1984 to consider competition and a provision of internet services
over cable at certain times or as the result of certain trigger events.
Including a franchise transfer or renewal.

It is one of many issues that may be considered by the local authority
as it deems appropriate in the public interest. Or in light of
identified community needs.

The Federal Cable Act also acknowledges the local franchising
authority\'s ability to consider the elimination or reduction of
competition in the delivery of cable services and allows enforcement by
local franchising authorities of franchised provisions requiring leases
of capacity on the cable system for non‑video programming purposes.

Earlier this month, MediaOne and AT&T announced that by giving AT&T and
MediaOne the green light to move forward with the merger in the Twin
Cities of Minnesota, these municipalities have demonstrated their
foresight to create an environment conducive to investment and
competition.

They go on to say that the marketplace and competition, not Government
regulation, are the best means of assuring wide‑spread availability of
high‑speed internet service.

Well, we all have to ask ourselves whether or not this merger is truly
in the best interest of American consumers. Does allowing two of the
largest cable operators in the country to unite promote competition in
any marketplace? Will consumers be better served by paving the way for
one very large part of the country to be served by a single provider?

When you consider the entire web of integral relationships that exist
between AT&T, MediaOne, ownership interests in the other cable
companies, key video programming services, leading cable equipment
manufacturers, two major cable internet service providers and the
potential interest in Time Warner, potentially soon to be AOL‑Time
Warner.

Due diligence and caution must drive the review and consideration of
this merger if, in fact, expanded services, competition and, ultimately,
consumers are among the principle priorities.

The question is whether or not this merger will continue in the spirit
of protecting access to competition. The internet and the rapid and
managed growth of the telecommunications industry in the name of the
consumers.

In conclusion, I urge you to exercise the utmost care in considering the
long range impact of the merger and know that we will be all responsible
for the impact of this merger on our communities. Deep in all areas of
our communities long after this and similar mergers are completed.

Today, Heather Barber, representative for the City of Portland, joins
me. Ms. Barber is the Director of Federal Affairs at Simon and Company
here in Washington. Ms. Barber\'s prepared a statement regarding this
merger that I\'ve attached to my statement today.

Because of Portland\'s experience in various related matters, I have
asked Ms. Barber to join me and to be available to respond to your
questions.

Again, thank you for inviting me and I\'ll be happy to answer any of
your questions.

JUDGE LATHAN: Thank you very much. We will now hear from Mr. Glass.

MR. GLASS: Thank you. I appreciate the opportunity to speak to you
today.

I want to focus my remarks today on how AT&T already uses cable monopoly
power to hinder competition from Seren. And our concern that AT&T\'s
acquisition of MediaOne will further its power over video programming
marketplace. Unless the Commission imposes appropriate safeguards.

Let me begin by briefly describing Seren. Seren was formed in 1996 as a
non‑regulated subsidiary of Northern State\'s Power Company to provide
high‑speed internet cable television and telephone service to
residential and business customers through the state of our hybrid fiber
optic and coaxial cable broadband network.

Seren has received several cable television franchises in Minnesota. Is
already providing a full complement of services in the St. Cloud and
Wave Park, Minnesota, with over two hundred cable channels. In addition,
we are about to begin commercial service in Concord, California and four
other franchise applications pending in California.

We have recently filed a cable franchise application in Longmont,
Colorado, with plans for other Colorado locations.

In sum, we are fulfilling the intent of the Telecommunications Act by
competing head to head with entrenched incumbents in both cable and
telephone industries.

On the video side, access to popular cable programming networks is vital
to Seren\'s ability to compete. Unfortunately, the multi‑channel video
programming, distribution marketplace continues to be dominated by cable
monopolies which use a market power to deprive rivals of programming.

The unquestioned leader in this regard is AT&T, just as was its
predecessor, TCI.

You\'ve already heard earlier today about the high level of horizontal
concentration in the cable industry, and in particular, the extremely
high market share of AT&T.

While there may be quibbles about exactly what AT&T\'s ownership
percentage is, there can be no doubt that AT&T enjoys enormous power in
cable markets. And that this power will increase as a result of the
MediaOne acquisition.

The best evidence of AT&T\'s monopoly power is the fact that every time
an open builder like Seren enters the market, AT&T responds by dropping
its prices or adding newer services at no additional charge.

This market power problem is exacerbated by the concurrent formation of
ever larger refill clusters by AT&T and other large imersoles.

As the Commission warned in its 1998 competition report, this increased
concentration makes it more likely that large cable operators who do not
compete with other in local downstream markets, will be able to collude
in the in the upstream market for the distribution of programming.

This Commission finding is consistent with the recent GAO report finding
programming suppliers very dependent on large cable companies.

One of the ways cable imersoles can collude is to pressure programmers
not to sell to rivals. Complaints about such behavior were a major
element in the passage of the 1992 Cable Act with its programmed access
provisions.

However, the problem Congress addressed then has not gone away. It is,
in fact, made worse by the increased concentration resulting from
acquisitions like that of MediaOne by AT&T.

What I\'d like to do this afternoon is demonstrate the persistence of
this problem and the need for the Commission to make sure the proposed
merger does not worsen it by describing two examples where AT&T and TCI
has abused its power over programmers.

The first instance involves Seren\'s attempt to gain access to Midwest
Sports Channel, or MSC, the twenty‑four hour regional sports network in
Minnesota. Among the programs offered by MSC are Minnesota Twins
baseball games, Minnesota Timberwolves baseball, basketball games and
University of Minnesota football, basketball, hockey games. As well as
Saint All State university games.

I need hardly say that with this roster of sports, MSC programming is
highly desirable in Minnesota. Many viewers will not subscribe to a
service which does not offer MSC. Seren\'s experience is consistent with
this Commission\'s finding that sports programming increasingly warrants
special attention because of its wide‑spread appeal and its strategic
significance for MVPDs.

Because MSC is wholly owned by CBS and is not vertically integrated
under the Commission\'s program access rules, when Seren contacted MSC
in 1998 to contract for its programming, we were told by MSC that it
could not make its programming available to Seren because of its
exclusive contract it had with AT&T‑TCI.

When Seren raised this issue in the AT&T‑TCI merger proceedings,
AT&T‑TCI claimed that, quote, it had been entirely reasonable with its
competitors in voluntarily relinquishing exclusivity in certain cases.
Even though it was under no obligation to do so under the program access
rules. And that it would act reasonably and responsibly in this area.

However, after the merger was approved, when Seren contacted TCI to ask
that it make good on its representations to the Commission, Seren was
told that neither TCI nor Bresen, TCI\'s affiliate, was willing to waive
this exclusivity and Seren was denied access to MSC. To this day, we
still have not been able to carry that programming.

My second example involves a cable network that is vertically
integrated, but where AT&T has taken advantage of another loophole in
the program access regime, terrestrial delivery.

In October 1999, as Seren began its planned expansion to California, our
programming personnel sought to obtain carriage by ABAY TV, a channel in
the San Francisco Bay area offering sports, news and other local
programming. BAY TV is owned jointly by Chronicle and AT&T and is
delivered by terrestrial means.

In December we were told that we would not be allowed to carry BAY TV
because AT&T had an exclusive contract and would not allow competitors
such as Seren to carry it.

These are not the only instances where Seren has been denied programming
because of exclusionary behavior, but Seren has also been denied access
to several non‑vertically integrated channels. However, these examples
are representative of how the largest cable entity uses its power
unfairly to hobble competitors and illustrates a danger of allowing it
to further increase its power through this acquisition.

Any merger requiring Commission approval, the burden of proof is on the
merging parties to demonstrate that the merger would be in the public
interest. Part of the public interest standard is in assessment of
effective transfer competition.

Because a proposed merger would further increase AT&T\'s already
substantial power over programmers, would be entirely appropriate for
the Commission to deal with this competitor problem by conditioning its
approval of the merger on AT&T\'s agreement not to abuse its power in a
programming market. This can be accomplished by simple and quite limited
provision.

AT&T should be required to agree that the program access rules will be
applicable to all of its programming contracts, whether or not with
vertically integrated companies, and regardless of whether delivery is
via satellite or terrestrial means.

Such relief would be directly responsive to the anti‑competitive impact
of the acquisition, would, therefore, be fully justified. This relief
would also make economic sense because would focus on where the economic
power over programmers is, at the MSO level, rather than making an
artificial distinction between vertically and non‑vertically integrated
programming.

It would also prevent AT&T from using a technological loophole, the
medium used for program delivery, to avoid program access rules. Because
programming exclusivity on location may not be contrary to the public
interest.

AT&T could be permitted exclusivity where it demonstrates to the
Commission\'s satisfaction that an exclusive contract meets the public
interest criteria in procedures detailed in the program access rules.
This very limited condition would deal effectively with the source of
the problem, AT&T\'s market power with a minimum of regulatory
intervention.

It is thus a clear, clean response to a very real competitor problem
which would be worsened by the merger of these two very large MSOs.

I appreciate your time today.

JUDGE LATHAN: Thank you very much. We will now hear from Mr. Melcher.

MR. MELCHER: Thank you.

Good afternoon. My name is Christopher Melcher and I\'m Vice President
and General Counsel for RMI.net, Inc., formerly known as Rocky Mount
Internet. RMI.net is a Denver based internet service provider and web
commerce company.

I would like to thank the Federal Communications Commission and the
Cable Services Bureau, Ms. LATHAN, for providing me with the opportunity
to join this discussion today on the proposed merger of the AT&T Corp.
and the MediaOne Group, Inc. And its impact on the issue of open access.

I will focus my remarks on the issue of open access to cable based
broadband internet access as a requirement for FCC approval of this
merger.

I would like to first tell you a little bit about RMI.net. RMI.net
provides internet access to more than one hundred thousand customers
nationwide. Our internet access services cover the full spectrum, from
standard 56k dial up internet service to digital subscriber line
service, known as DSL on the residential side, to high‑speed or high
volume dedicated internet access in the form of T1s and DS3s for
business customers. And up to wholesale internet access through our
nationwide backbone.

RMI.net is a primary internet access provider for rural America, as
well, including farms, small towns and isolated communities throughout
the mid‑west and western United States.

AT&T, MediaOne and the RBOCs do not and have not served these
communities, whether through broadband or other forms of internet
access.

Currently we provide access in ninety of the nation\'s top one hundred
market areas, via a combination of POPs, or points of presence, that we
own ourselves or lease from others.

RMI.net recently purchased Data Exchange Network, the sixth largest
nationwide internet backbone provider, giving us the capability to
provide access at speeds up to DS3 in New York, Chicago, Atlanta,
Washington, Dallas, San Francisco and Los Angeles.

We also provide website hosting and competitive local exchange, long
distance and internet protocol voice service.

I give you some of this background to let you know that in the last
three years, our company has grown from approximately one million in
revenue to fifty million dollars and up in revenue per year on an annual
basis. This is an example of the rapid growth and development in the
internet industry and the internet community. And we think it\'s
imperative that the FCC help us and help other smaller ISPs continue to
thrive in the internet.

Our dual focus in our business is serving both residential and
commercial internet access customer base and commerce enabling small and
medium size businesses. Both of these groups will be directly impacted
by the merger and the ultimate decision by the FCC on open access.

As you probably can tell by my use of the term open access, as opposed
to the terms forced access by opponents of this concept, RMI.net
strongly supports opening up the nation\'s cable systems to competition
at the wholesale broadband internet access level.

We believe this should be a major component and a condition of any
approval of the merger between AT&T and MediaOne. The real issue here is
not how high‑speed cable compares to DSL or other forms of high‑speed
internet access technology. The issue is about how closing one form of
high‑speed internet access technology to competition will affect the
entire internet community.

With the potential switch in support for open access by AOL as a result
of its proposed merger with Time Warner, it becomes even more imperative
that the FCC take up the cause of open access for the nation\'s six
thousand plus small internet service providers.

Indeed, AOL\'s merger with Time Warner could be seen as proof that the
larger internet service providers, AT&T and AOL believe that cable and
access to the cable technology is imperative to survival in the future
on internet access.

Let me address the reasons we support open access, why open access
should be a condition to this merger and why the foremost common myths
perpetuated by opponents to the concept of open access are false.

First, the cable industry will tell you and 22‑MediaOne will tell you
that open access is not fair. They will tell you that they have built or
purchased their systems and have the right to control access. In fact,
those cable systems as you well know far better than I, were built with
the support of the public, not only through franchises and monopoly
awards, but through guaranteed customer revenue in the form of
predictable cable rates. The public helped these systems, the public has
an investment in these systems. The public, therefore, has a right to
open access on that system.

In reality, AT&T and the cable companies are trying to create an unlevel
playing field by creating a closed system for telecommunications
services that forces consumers into making difficult, non‑competitive
choices. It is only due to the hard work of this Commission and Congress
that the incumbent local exchange carriers must now provide access to
their systems under the Telecommunications Act of 1996.

As you know, this legislation was strongly supported by 22‑MediaOne and
many, if not all of the cable companies represented in this room here
today. At the end of the day, we believe that all companies that provide
telecommunications services should play by the same rules, whether over
copper wires or cable.

Myth number two is that open access cannot technically or feasibly be
accomplished. I have sat in hearing rooms and public forums with AT&T
and cable industry representatives many times over the past six months
and heard this argument over and over again. These, of course, are the
same individuals who said that telephone competition would never work,
they said that the internet would not work. Doesn\'t seem that anything
will work until competition makes it work.

The argument, in fact, is now irrelevant, according to AT&T itself. When
AT&T announced through its letter to the Commission with Earthlink in
December that they would be opening up the cable access, or the cable
technology, AT&T admitted to the world that the question of open access
for broadband cable internet service on the cable system was no longer a
question of if there would be access. The question was only when and
under what terms.

In fact, I was scheduled to speak to a conference that day of the
announcement of AT&T and Earthlink and I had mixed emotions because I
got that announcement or got word of that only a few hours before I
spoke. I was obviously very pleased to hear that AT&T had agreed that,
of course, open access is the only way to go, but I had to scramble to
change my remarks, substantially, for that afternoon.

AT&T and I think they should be taken at their word, has now said the
only issue, but it is an absolutely critical issue, is how do we insure
open access under what terms. And we think that is critical.

We think that the FCC ‑‑

JUDGE LATHAN: You need to wind up. Your time is up, but, please, you
know, just wind up for us.

MR. MELCHER: Thank you, Ms. LATHAN.

JUDGE LATHAN: Thank you.

MR. MELCHER: I\'ll run through very quickly the third myth is that open
access will hurt competition in the marketplace. What will hurt
competition is to allow AT&T to control nearly sixty percent of the
broadband access market. With AOL and Time Warner soon to control
another significant portion, it is imperative that open access be
allowed and regulated.

What is most strange to us in this whole equation is why the cable
companies would not want or embrace that ISPs sell the cable internet
access product. We are not asking for a free ride. We are simply asking
for the right to purchase wholesale high‑speed cable access and then
resell it at the retail level. What is going on in the telecommunication
market across the country right now.

Why wouldn\'t the cable companies and AT&T want six thousand resellers
out there trying to sell the cable internet broadband product. I\'m not
sure. But we\'re happy to do that.

The final myth is that it will hurt the consumer. And, of course,
that\'s false. What AT&T and MediaOne are proposing is that the consumer
will pay twice for the same internet service. They will have to buy At
Home or Road Runner or Excite. And then if they want another internet
service provider like RMI.net, they will have to pay RMI.net on top of
At Home or Road Runner or Excite. Obviously that would be a major blow
to competition. We think that would be an impediment to the continued
growth of the internet.

I would say as a final note that if the FCC or others do not insure the
competitive internet access will flourish, the opposite course would
almost certainly lead to broadband internet access monopoly in the cable
technology arena. It took us thirty‑six years to break up the telephone
monopoly.

In this day and age, and given how critical it is that the internet
develop rapidly, we cannot afford the luxury of that same course.

JUDGE LATHAN: Thank you.

Mr. Munir, please.

MR. MUNIR: Good afternoon.

My name is Khalil Munir and I am the Executive Director of the
Telecommunications Advocacy Project. I\'m accompanied by Thomas Hart
Teft, legal counsel and partner in the law firm of Shirk, Hardy and
Beacon.

TAP is a non‑profit organization created to increase small business
participation in emerging opportunities within the telecommunications
industry. Our raisal and detra is to promote sound public policy
regarding telecommunication industry issues.

I appear today to explain our opposition to the merger and to provide
clarification about the context and content of our allegations
pertaining to redlining. Our allegations are indeed serious and
incendiary. And it is incumbent upon me to provide foundation for those
allegations.

TAP believes that discriminatory deployment of basic and advanced
telecommunications services, or redlining in this case, broadband cable
service is a violation of Sections 202(a) and 254 of the Communications
Act.

TAP regularly analyzes how underserved communities, and in particular
minority communities are routinely disserved by telecommunications,
corporate titans, some of whom ultimately merge.

In our petition, we allege redlining has occurred in communities served
by MediaOne based on available data and research and conversations with
individuals and organizations, we have concluded that a disturbing
pattern has emerged.

TAP is conducting case studies throughout the country to document our
allegations of redlining by MediaOne. Today TAP would like to focus the
Commission\'s attention on the recent proceedings in Richmond, Virginia.
An area highlighted in our supplement.

TAP\'s initial field investigation, research and evaluation in the City
of Richmond, revealed that MediaOne deployed broadband cable services in
a discriminatory manner. Armed with this information, TAP appeared
before the Richmond City Council during a hearing on the city\'s consent
to the proposed transfer of control of MediaOne by AT&T in November of
1999.

TAP testified regarding MediaOne\'s alleged discriminatory actions and
the effect those actions have had on low income and minority residents
of Richmond.

I went to the jurisdiction of Richmond on numerous occasions to engage
city council members and to brief them on the importance of
understanding and adhering to the fundamental foundations of the Telcom
Act of 1996. As they considered granting transfer of franchise authority
from MediaOne to AT&T.

I\'m very familiar with the Act. I worked in the legislation for
Congressman Townes, a member of the Commerce Committee, and had three
amendments included in the final Bill that became public law. I
encouraged them to stipulate in their ordinance language, that
deployment of advanced technology by MediaOne should occur in a
non‑discriminatory manner.

The council voted to approve the transfer, but included the language in
their ordinance.

During the course of my visits and in conversations with elected
officials and ISPs and subscribers, a few things became very clear. The
longstanding and mutually beneficial business relationship MediaOne
shared with Richmond will continue under the banner of AT&T. However, I
was not confident that subscribers were likely to experience an equally
beneficial relationship that would be reflected in equal access to
technology and quality of service.

I contended that disparities in the deployment of advanced technology
and the quality of services provided after the transfer would be
affected by a number of factors. Those factors include where people live
and the belief that a company can recoup its investment quicker by
serving more affluent and better educated customers.

My message resonated with the members of the city council in Richmond to
the extent that in their collective wisdom, they voted to protect the
interest of their citizens by requiring MediaOne to guarantee that they
would not discriminate in their deployment schedule.

Although the Richmond City Council ultimately approved the transfer of
control, it took legislative action in part, based on TAP\'s
presentation and conditioned its approval upon several items.

Our examination of other jurisdictions reveal that there were community
and consumer concerns about the corporate philosophy and quality of
service provided by MediaOne. In some, such as Los Angeles, they have
endeavored to ensure to disparate treatment of consumers.

They, admittedly, when any company is accused of a repugnant and illegal
practice, they will respond with righteous indignation.

MediaOne claims our allegations are baseless. However, elected officials
of Richmond, Virginia recognized the merit of our argument. I do not
believe MediaOne is guilty of venal intent to deprive minority consumers
and customers of advanced technological applications. However, our
review of maps and other data reflecting demographics of deployment for
broadband in the Richmond area and surrounding suburbs, gave us cause
for pause.

My review of deployment maps and demographic data provided by MediaOne
has given me cause to consider the efficacy of plans by MediaOne to get
deployment schedule this color blind. This is a critical point when one
considers that in some jurisdictions, there may be more than one
provider servicing customers in very close geographic proximity to its
competitor or competitors.

It is clear to me that in instances where more than one cable company
services households in a jurisdiction, it is difficult to ascertain
where areas of service and coverage converge or diverge. However, due to
the proprietary nature of much of the evidence and TAP\'s inability to
cross examine MediaOne in a formal hearing process, TAP has been
restrained in submitting further evidence to the FCC.

Therefore, TAP recommends that the FCC conduct its own field
investigations and hearings of MediaOne\'s deployment patterns in other
jurisdictions where provide service in areas with high concentrations of
ethnic, rural and urban subscribers.

Designation of this matter for a hearing would give TAP the opportunity
to fully discover MediaOne\'s deployment tactics and practices, and
would give the Commission the opportunity to fully investigate the
allegations in our petition to deny.

Should the Commission\'s findings confirm our allegations, well, then
the Commission must deny the merger on the grounds that it would not be
in the public interest.

At a minimum, the FCC should impose forfeitures and conditions upon any
consent to the merger to protect the interests of low income, rural and
minority consumers.

Thank you very much.

JUDGE LATHAN: Thank you very much.

Mr. Francois Bar, please.

MR. BAR: Thank you very much. My name is Francois Bar and I\'m on the
faculty of Communications Department of Stanford. I would thank you for
the opportunity to be here today.

What I wanted to do this afternoon is focus my comments on issues of
network architecture and the need to actively pursue open access. And I
would like to make three points this afternoon.

One is that what we\'re seeing today with the transition towards
broadband is a critical transition for the life of the internet.

Second is that open access has been key to the evolution of the internet
so far, and it will similarly be key to this new transition. And I want
to spend a little bit of time discussing what exactly open access is.

And, finally, address the issue about whether action is required from
the FCC. Should we do anything and would competition not solve this
problem by itself?

The first point is that we are now seeing a transition that is
absolutely critical. The first phase of the internet was one of
experimental network. The second one was one of mass deployment of DOW
lap intermittent connections where we\'ve seen the explosion of the web.
What we\'re seeing today is a significant jump into a new kind of
internet which will be characterized by broadband and always on
capabilities.

The success of the internet in the first two phases fundamentally rested
on the network openness. Because it allowed the multitude of
participants to experiment, to explore, to innovate and to advance new
ways to use this new network.

Throughout these first phases, policy intervention was key to the
success. And here again, I emphasize the word intervention. It was not
the unregulation of the internet, but active involvement by policy
makers that guaranteed openness of the underlying infrastructure which
was the telephone network, and made competition possible in order to
spur the development of the internet.

So, the fundamental question we are facing today is what forces do we
want to unleash to shape the third generation of the internet. Do we
want to continue the successful policy of the past of promoting
openness, or instead, would you rather ‑‑ we rather trust the owners of
infrastructure to shape and determine the uses of the infrastructure?

My second point has to do with the definition of open access. We\'ve
heard a lot about open access today and in the past, but it is always
difficult to pin down a pure definition of what that is. So, what I like
to do is look at what it is not. And look at an example which is derived
from some of the policy of Excited Home.

The control that has been exerted by the owners of the cable
infrastructure and extended to the ISP provision in Excited Home results
in the ability to endorse two kinds of constraints on internet use and
internet applications.

One constraints on internet activities. And, second, gives trends on the
patterns of use and the contents and application providers.

In the first category, we\'ve heard many examples this morning. But,
again, constraint on the use and application, on user authorization of
the broadband network go from limits on upstream traffic that has been
imposed on them, prohibition from running a server in their home,
whether they\'re a web server or mail server, FTB servers, et cetera.

Prohibition from using their internet connection of the cable for work
related activity. There is another service for doing that, which is
called adhoric. And finally something which is also troubling, which is
the need for constant monitoring of activities in order to enforce those
rules. And AT Home has been monitoring who was running service, what
people were doing with their connection in order to be able to
disconnect them when they violate these terms of the agreement.

That is the constraint imposed on the user. They\'re other kinds of
constraints which are imposed on the patterns of use of the network
which has to do with this architecture of cashing and reputation which
ends up taking the best advantage, I guess, of the broadband connection
of the last mile.

What this has resulted in is a web of agreements between the owners of
the infrastructure, the ISP, and the content providers which,
essentially, provide favorite placement for contents which is affiliated
with the owner of the infrastructure. So that those content providers or
those application providers, those transaction providers which have made
a deal with the owners of infrastructure will then pay a strong
percentage of the transaction that they engage in over the broadband
internet.

What that results in is really a shaping of the architecture of the
network that supports electronic commerce over broadband and shaping the
electronic marketplace that is emerging over this. In ways which are not
often obvious, not often transparent to the end users.

By contrast, I think open access would need to have two components. One
is transparency in the architecture. And here there\'s an interesting
analogy which is that the power derived from control of the architecture
in cable internet access is very similar to the kind of control the
owner of an operating system on a computer derives from control over the
APIs, the application programmer interface.

There is a very interesting power here which may be worth exploring.

And, second, that other ISPs should really have reasonable access to
critical network features on a comparable basis.

So, finally, in conclusion, I would like to address the last question,
which is why do anything. And the reason why I think it\'s worth
thinking about doing something is that there are several indications
today that competition would probably be highly imperfect. What we have
today is limited competition between the alternatives. Between cable
broadband and a DSL. The footprints tend to not overlap.

We have a situation in which cable broadband has a substantial lead over
the alternative, DSL. Of about six to one. It\'s very hard to get
precise figures, but it\'s a substantial lead.

And, finally, a situation in which switching from one provider of
broadband access to another one, from cable to DSL or from DSL to cable
is very difficult.

Is it too early to intervene? As we\'ve heard, I think it\'s not,
essentially because what we are defining today is the projectory of
evolution of this third generation internet. And those projectories get
defined in the very early stages of evolution of these networks.

So, in conclusion, I would really urge the Commission to think very
seriously about exploring open access requirement as part of authorizing
this merger.

Thank you very much.

JUDGE LATHAN: Thank you.

Mr. Rosston?

MR. ROSSTON: Thank you very much for having me today. I think this is ‑‑
there\'s been a lot of interesting issues and from what I, my feeling is
that the focus should be on the merger and how the merger affects all
the arguments that have been put forth so far.

Right now, several people have put forth a lot of interesting questions.
Diane and Dell both said, you know, how do we worry about consumer
welfare, what do we do? And these should be our primary concerns in
evaluating the merger.

What I\'m going to do is look at the issue of open access and then come
then back to the idea of how does the merger affect open access.

We\'ve heard a lot about innovation, openness, competition. These things
are all like mom and apple pie. These are things we want to have.
Everyone is in favor of openness in competition. The question is how do
we get there and what\'s the best way of having this work.

So, looking at the effects of open access, I\'m an economist, I\'m going
to use an economic framework to think about this. And the way an
economist would look at this first is to say what sort of relevant
markets are we talking about.

Right now, what I think I\'ve heard a lot of people doing is sort of
assuming the relevant market and not really thinking about precisely
what they mean. Whether it will be, what the relevant market will be.

In terms of this, I think there are three possible choices that one
might analyze for a relevant market in this case. From going from the
most narrow would be a cable broadband market where cable is the only
thing in the relevant market, to maybe a broadband access market to
possibly having a market where all access providers are part of the
market.

In terms of thinking about the open access issue, this should be
investigated and clearly defined. How, what, how do people substitute
among them? What are the price comparisons and how do people view them
as possible substitutes?

In an era of rapid ‑‑ there\'s been rapid technological change. This
becomes somewhat difficult to determine what the relevant market is or
will be a year from now or two years from now. Right now, there are
slight differences in performance. I\'ve seen some statistics about how
cable and DSL differ. Depends on the peak times for cable versus DSL.
One may be better at different times than the other.

But what you need to do is to first assess what is the relevant market.
Second is to then say once you define the relevant market, what about
market power. In this, you would say do the merging parties have market
power or if you just looking at open access, does the cable provider
have market power in this.

What you also want to look at in this case is what are they doing to
exacerbate this possible market power. Is the market power just in
broadband access or is it in internet access. And the problem people
have been mentioning is this exclusive bundling of internet service
provision.

One of the things that needs to be thought about is in a broadband
market, what does an internet service provider mean or do, compared to a
dial‑up world where it made sense that I make a telephone call or my
computer calls up on a modem and gets transferred to a modem bank, that
then transfers me to the internet. Right now I think that almost
anything I can get from AOL, I can also get from Yahoo, that is, could
be considered an ISP, but it\'s for free on the internet and you can get
a lot of the same things, web hosting or whatever you want from an
internet portal that you can also get from an internet service provider
in the broadband network. It\'s just the connection from the regional
data center or the cable head to the network, to the internet.

So, then you also want to think about questions of ability and
incentives to actually do this. What incentive would a cable operator
have to try to foreclose other people who may be, as Christopher Melcher
said, they want to sell lots more broadband access. Why would the cable
operator have this incentive?

There was a question about a parallel with Microsoft. Microsoft had the
incentive to ‑‑ the theory of the Government\'s case was they have an
incentive to displace the browser because it was a threat to the
operating system. It doesn\'t appear ‑‑ one needs to think about whether
or not an internet service provider is a threat to the broadband
internet access in this.

There was also questions about lock in effects. In thinking about
whether cable, because it has a headstart, has more customers now than
DSL, is this going to prevent someone from switching back and forth
between cable and DSL. If they are not happy with their cable service,
can they easily switch, how hard is it to switch and what are the
switching costs and lock in effects?

Another lock in effect that people have talked about in some of the
filings in this is worrying about the cashing and replication at the
cable head end. How much is this going to buy us the cable system to
promote its own people versus partners or people, customers, portal
sites or e‑commerce sites that it does not have a partnership with.

Can they replicate if you have the cable head end, can I put forth a
whole set of web shopping stuff right next to the cable head end and
cash for other people. If that\'s a possibility, then cashing by the
cable system doesn\'t give it that much of an advantage, especially when
you think about this always on phenomenon.

I mean, there were a lot of people who went to Netscape Netcenter
because they don\'t know how to change their home page. When you move
into a world of always on, this idea of not knowing things, how to
change your home page doesn\'t matter because you go somewhere else and
you leave your computer on and you never go back to your home page.

I wanted to come back to the merger and I had a few other ideas on
things, but since my time is up, I\'ll come back to think about in all
this analysis of open access, at least it doesn\'t seem to me that I
haven\'t mentioned the merger and how the merger affects things because
it doesn\'t seem to play into this sort of competition analysis with, if
you think of it as a cable monopoly, well, it\'s a cable monopoly on a
local level.

Who I get from my internet service provider depends on who serves my
area. Whether it\'s DSL, wireless, cable, whatever it is, I have this
very localized market. Doesn\'t seem like the merger affects the ability
of someone to provide this service.

So ‑‑ and I haven\'t heard other arguments about how the merger affects
open access.

Thank you very much for inviting me.

JUDGE LATHAN: Thank you very much. Thank all of you.

I am going to start with Howard Shelanski because he can\'t ‑‑ he said
he wasn\'t going to stay with us for the full session, so I would like
for him to ask any questions that he has from an economist perspective.

MR. SHELANSKI: Yeah, I have a number of questions for a number of the
panelists, but I think I will start with Professor Bar.

I have a couple of questions for you, but I\'d like to start first with
your vision of the state of competition currently in the broadband
market and how this may affect the case for open access.

As you correctly point out right now, in the very small broadband market
‑‑ and I do mean very small because if we\'re talking a couple of
million lines out of seventy‑eight million internet users, the dial up
world still, obviously, dominates. And there\'s a lot of growth that\'s
yet to occur and a lot of things that can yet happen on that growth
power.

Right now, there\'s certainly a lead for the cable systems in delivering
broadband, although the data that I have looked at shows that over the
past several quarters, DSL has been taking market share at quite a rapid
rate. Now, these are aggregate figures that I\'ve looked at and perhaps
the residential difference is still quite great.

But this suggests that DSL is not able to be written off as a, as
conduit. And I think it\'s very possible that we have a very different
competitive scenario down the road. And I want to pose that scenario for
you. It\'s different from the one you proposed, and ask you how that
affects your arguments for open access.

And the scenario is that five years from now the ILECs have gotten their
DSL plans rolling, they\'ve gotten their implementation organized. They
are currently marketing mostly, or capturing mostly residential
customers. And DSL is not far behind cable in serving residential
customers and still has a substantial lead in the business world.

They\'re also all of these wonderful companies that are going to bid for
the 700 megahertz spectrum. And let\'s suppose that they\'re delivering
wireless internet access, fixed wireless internet access to the homes.
So, we now have three pipes.

There are a number of major ISPs who may morph into some other kind of
entity competing for customers based on the particular applications they
provide and the cashing services they provide and their neat graphics.

Do we need open access in such a world? And if so, what does it mean?

MR. BAR: This is a scenario I like. I mean, in the end, I think the goal
that we all have is to have the broadest possible deployment of
broadband access with as many different access methods as possible.

However, the question is can we get there and can we get there with many
alternative possibilities. As you put it, that would definitely not
write off the possibility that DSL will compete. My sense, though, is
that for the moment, there is ‑‑ again, to take Greg Rosston\'s point,
competition, if you look at it at the local level, even though those are
aggregate figures, make sure that there is a number of customers for
both DSL and cable. Means that individual customers at the local level
may not have the choice between the two.

And even if they do have the choice, it is quite difficult for them to
switch from one to another. It requires rewiring. It\'s an extremely
complicated process. And as a result, the competition between those two
different forms may not work very well.

The question is in this ideal world, and if we get to that environment,
I would think there are some much stronger market pressures to enforce
or to increase the incentives on the various carriers to have an open
system. Which will be the various providers of internet service will be
able to choose alternative carriage.

The question I think is really that if we don\'t have open access on the
cable side of this point, they\'re many incentives, also, to build an
infrastructure that might be very hard to reverse. There could be some
very big costs to go back from a closed cable infrastructure to one that
is more open.

MR. SHELANSKI: But if the other infrastructures at issue are not cable
infrastructures, if they\'re fixed wireless, if they are the telephone
network, in whatever form we find it a couple years from now, the
architectural decisions are going to be relevant for those ISPs who want
to get onto the cable network. But it would seem to me that they would
be completely irrelevant to the ISPs who want to go onto the other
networks.

And my concern is how much of this architectural argument that you make
is driven by a supposition of cable dominance, or how much are you
really arguing that is a set of contractual relationships that might be
put into place now with application providers, with content providers,
that might not be ‑‑ that might tip the balance decisively at this early
stage and interfere with the development of this ideal world that I hope
for.

MR. BAR: My preference, ultimately, would be to have a framework to deal
with this issue which is not tied to individual technologies. Which is I
think the reason why we\'re facing this problem today. We have on one
side if you provide broadband access over telephone wires, this is under
a common carriage environment and you have some kind of openness
requirement. And if you provide it on a cable network, you don\'t have
the same kind of requirements.

While this is another matter, I think it would make a lot more sense not
to have a comprehensive approach towards the solution. I think in the
end, also, having an open framework that is cross platform, cross
technology, has a sort of value. That you don\'t necessarily want to
develop an infrastructure where different kinds of technology line up
directly with different kinds of architecture because I think the
switching issues for customers will remain there.

It is not clear to me that in the end you want a system where you have
to pick a whole package of underlying technology, network architecture,
electronic commerce marketplace architecture and content provision.
Which is we\'re framing for, I guess, you know, in the world you are
finding. Vertical packages that go from transport all the way to
transaction and content.

My sense, again, that\'s derived from observing the evolution of the
internet to date, is that the more cross pollination possibilities you
make possible, the more experimentation you have. And the richer the
environment will be.

MR. SHELANSKI: That\'s very helpful. Let me just turn the question
around, then, to Greg because I\'m an economist, I like to pick on
economists.

Greg, let\'s say that Francois\' scenario, the one that he spelled out
underlying his initial remarks, does take hold and we do see a classic
kind of network tip and in residential market cable is the dominant
delivery system.

What kind of market pressures do you think enter in to meaningfully open
up that conduit, such that there will not be discrimination against
content, contract relationships that are locked in orally. For example,
by a proprietary ISP.

And what of the market for innovation and applications? Will there be a
vibrant enough market down the road or will all of the good deals have
been sewn up with the ISPs that are bundled with the conduit providers,
such that there would be a well out there ‑‑ I mean, excuse me a Yahoo
out there that does not have, at the moment, at least, a conduit
relationship. But they will not be able to induce a proprietary
applications development because the really good deals and the early
lead with customers was sewn up.

What kind of pressures will there be so that we don\'t get these maybe
three competing vertical systems, maybe just one competing vertical
bundle, or one vertical bundle to open those up?

MR. ROSSTON: First, I hope your first scenario is right that we do have
the competing, lots of competing technologies. But I think right now,
for example, one of the pressures that\'s going to keep the internet
open, I think, is that there\'s a huge proportion of people who go onto
the internet from work. And when you\'re at your office, that access
that you\'re going to be able to get to the same content, the same
things that you can get to from home. And there\'s going to be pressure
to have standardized interfaces, real player, windows media, whatever it
is, people are going to write applications for those kinds of things so
that those standards that will work on your Netscape browser or your
internet Explorer browser are going to work in both places so that you
might not have sort of a content that\'s tailored towards the cable
modem only.

I think you will have ‑‑ there\'s no sort of putting the genie back in
the bottle. I don\'t think the cable systems is going to dominate dense
downtown urban areas alone. So that\'s the first part of it.

I think, also, just this idea that what it is ‑‑ if it does come to pass
that you would want to look at it then, rather than looking at something
now as something that might possibly happen, as far as I\'ve seen
evidence is that DSL seems to be gaining a lot of speed.

So I\'m hoping that DSL, the competition between cable and DSL and
wireless comes on. I think there is that pressure. And to the extent
that consumers pick one over the other, there is the idea that this is
what consumers desire, as well, since there are the possibility of
choices now. They should be competing to try and offer the things that
consumers want in order to get them to pick their technology.

If one technology is clearly better than the other technology, we want
to allow that to succeed and then deal with the problems, if they occur,
of this content.

In other words, I think there are technological ways around this that
are talked about where you have someone who can cash things right next
to the server.

One of the things that may be the first mile access that\'s taken over,
but the internet is still an incredibly vibrant place where people to
come up with all sorts of new applications and there\'s a lot of
creativity to get around restrictions like this.

I wish there weren\'t restrictions like the video thing, but that would
be sort of a you rather have a restriction on integrity of the network
in terms of bits instead of types of bits.

MR. SHELANSKI: Deborah, I don\'t know ‑‑ they don\'t let me out very
often, so I have a list of questions. I don\'t know how long you want me
to go on, or ‑‑

JUDGE LATHAN: I do have ‑‑ I want to follow up on this video question,
here, because I have a question.

Post merger, do you think that AT&T will be able to adversely impact the
video programming market? And from several perspectives. From the
perspective of will small independent programmers be able to get
carriage? If they can\'t get carriage, you know, will they basically
just die? Will we continue to have a diversity of programming and
innovation that Americans expect to have?

So, basically, I\'m asking you what do you think, if anything, the
impact of the merger will have on programming, video programming?

MR. ROSSTON: First, I haven\'t thought about that issue very much, so ‑‑

JUDGE LATHAN: Well, you\'re an economist, so I thought I\'d try.

MR. ROSSTON: I guess the question is if you think that cable has
monopsony power in the programming market and that there was the
possibility of MediaOne and AT&T competing with each other or exerting
some sort of competitive discipline on each other prior to the merger,
there may be some impacts on that.

There also may be some impacts that if you got carriage on MediaOne but
didn\'t get it on AT&T prior to the merger, now you might not get it on
both. You might have some effects that way.

But I haven\'t really thought about how the independence would be
affected, in general.

One of the things is by digital upgrades and things, there\'s going to
be a bigger demand for programming which should be good for programmers.
And high‑speed access may be somewhat people can be programmers,
internet programmers, as well.

So I think there are benefits from having higher speed access and
upgrades to systems in terms of demand for programming which should help
people. But there may be these other questions that people need to
investigate. But I haven\'t thought through the issues on that as much.

JUDGE LATHAN: Well, let me just ask you one more, then. I mean, I know
you haven\'t thought through, but your first impression.

From the perspective of distribution, would you believe that ‑‑ do you
have any concerns that AT&T\'s ability to enter into exclusive contracts
might inhibit the ability of its competitors, such as overbuilders, to
be able to provide programming that consumers would find necessary in
order for them to subscribe, and, therefore, making it much more
difficult for an overbuilder or another competitor to AT&T to compete?

MR. ROSSTON: It\'s my impression that the program access rules were a
big benefit to competitors like Direct TV and Echo Star, and allowed
them to get programming. And that was probably a good thing. I think
that there, to me, they should be technologically neutral and not ‑‑ as
an economist, I can\'t see the difference between a program that\'s
delivered over satellite versus one that\'s delivered over microwave.

But ‑‑

JUDGE LATHAN: What about terrestrially?

MR. ROSSTON: What?

JUDGE LATHAN: Terrestrially.

MR. ROSSTON: Yeah, I guess ‑‑ yes, yes. I\'m sorry, I don\'t know the
lingo. I been away from the Commission too long to remember the lingo.

But, you know, so there\'s no sort of economic difference in that, I
don\'t think. But it\'s ‑‑ they seemed to have allowed the competitors
to succeed. There may be efficiencies from exclusivity in terms of
getting a program off the air, but in other cases, it definitely can
impact competition if you can\'t get subscribers because you can\'t get
a channel that everybody wants and won\'t subscribe without it.

MR. SHELANSKI: Francois Bar gave us a nice definition of what open
access is, for which I\'m very grateful because it\'s been very hard to,
often in the debate, to figure out whether people aren\'t talking past
each other. And his definition of open access has two components,
transparency and architecture. And access to comparable network features
on reasonable terms. These are both things that can be defined in a
variety of competitive levels.

So, my next question really is directed to the four of you, to Mr.
Anderson, to Mr. Glass, to Mr. Melcher and to Ms. Linderman as
competitors and people who are also in the policy and regulatory
standpoint.

I can imagine the competitive side of open access being defined in a
variety of levels. One possibility is that the cable companies will come
to private agreements as the AT&T letter might be an exemplar, with a
variety of ISPs. Not all of them, by any stretch of the imagination, but
with a few. And those agreements will provide technical solutions,
transparent technical solutions to some of the problems of a shared
infrastructure. And will also provide comparable network features,
cashing, replication, streaming to those partners.

Is that open access if this is a private agreement for five or six such
players to come into the market? The agreements might be driven either
by the incentives of AT&T to make its cable subscribers happy. They
don\'t want one ISP, they want choice, so it\'s a good business
decision. Or driven by fear that the Justice Department will be dragged
in on some kind of a central facilities case.

And just note the investigation recently announced of E.Bay as evidence
that the Justice Department is watching any bottlenecks created in the
internet extremely closely.

With that kind of more general competition regulation and legal
infrastructure and private incentives, is that open access? Or are you
looking for something more, a mandate that is, in fact, universal. That
any ISP that goes into business, can at any time come to any cable
system and say we want to be on your network, whether it\'s by reselling
and relabeling the service that you provide, putting a different cover
sheet in front of it, in essence. Or by actually having some kind of
co‑location, some kind of ‑‑ it\'s hard to talk about a virtual circuit
on cable infrastructure, but some kind of routing on direction of
traffic that must be provided to all comers.

What, from a competitive standpoint, do you as competitors and
regulators consider to be open access?

MS. LINDERMAN: I\'d be happy to make a comment. I think if you asked the
citizens in the city of Richmond who was an internet user what open
access meant to them is that they\'d have whatever choice they wanted
to. It wouldn\'t be limited to five or six or two, whatever.

I think because as a citizen and I have been in this debate for a long
time, I still don\'t understand it all. And the citizen, the consumer
doesn\'t ‑‑ understands it less than I do. And so the very simple choice
they may make is one who is going to be their provider just of the
architecture, the wire. And then, second, that they can get to the
internet service provider that they want.

I don\'t think there\'d be any argument ‑‑

JUDGE LATHAN: But following up on that, does that mean that,
theoretically speaking, then, that if there are six thousand ISPs that
AT&T should have to carry six thousand ISPs and with the risk, perhaps,
of sacrificing other services that it would not be able to render?

I mean, what\'s the numbers? If one is at six thousand ‑‑

MS. LINDERMAN: I don\'t know what the number is. In the world you\'re
talking about five years from now where everything was connected
somehow, then you can get to where you want to go on all those types of
infrastructures, the wireless and the cable and the broadband and the
dial up.

I don\'t know what, I don\'t think there is a magic number.

JUDGE LATHAN: Professor Bar, I mean, what do you think? Should they have
‑‑ should a cable company have to carry any ISP that demands carriage?

MR. BAR: Ideally, yes. I mean, we\'ve been doing that with the telephone
network and it\'s not been a major problem. It\'s just a question of
defining the architectures of that. It is ‑‑ again, this is sort of the
basic feature, the basic elements of the network are accessible on a
non‑discriminatory basis on reasonable terms.

JUDGE LATHAN: Mr. Cicconi, let me just get Jim\'s reaction to that.

MR. CICCONI: I am not the chief technologist, I am the chief lawyer. But
near as I\'ve been educated, there are differences between the
telecommunications infrastructure in this country and the internet
infrastructure in this country. I think those have been pointed out by
any number of people.

The example was used earlier by Professor Bar of restrictions on
consumers being able to set up service in their homes. This is a result,
frankly, of the shared architecture of the system.

I might add that a member of OpenNet that\'s been a strong advocate of
open access, GTE, on the Whirlwind system, on their cable system, has a
similar restriction to home servers. There\'s a very good reason for
that.

We had a real good example of it in California on the At Home system.
There the entire system in an area bogged down to a call and At Home was
not able to actually meet the speed levels that people had contracted
for. They traced it back and they found out that the reason was somebody
was running a server in their home. Had become, unfortunately, a very
popular porn site and that in violation of the restrictions.

The point is not that they were doing something they shouldn\'t have on
the server. The fact is that they were running the server that degraded
the quality of service for the entire surrounding area. And that is
something that\'s unique to the cable infrastructure but does not exist
in the telecommunications infrastructure.

So, I think just there I think that it\'s far too simplistic to
analogize between these two systems which were set up very differently,
they\'re structured very differently. They have because of their history
in different structure, set up under different structures of law by the
Congress and different forms of regulation within the FCC.

To suddenly analogize that these are, therefore, the same and should be
governed by the same restrictions, I think ignores the reality of these
systems. And not trying to do the same type, give the same type of
simplistic answer, analysis for the server example, but I think it is a
shared system. It is one of the challenges we face on the structure.

I cannot sit here and nor can anybody in the company today and tell you
how many ISPs we can accommodate on this system. We do not know yet. We
don\'t know the impact this would have on the scalability of these
systems.

I can tell you this. We are committed to do it. We\'re committed to have
it as open as possible. We\'re committed to as many ISPs as we could
accommodate on this system. But we don\'t know yet what the answer is. I
doubt seriously it\'s six thousand.

But if we could find a way to do that, we will.

MR. SHELANSKI: Well, let me ‑‑ yeah, before I get through, I like to
hear from Misters Glass and Melcher from the competitor\'s standpoint.
But let just push back to make I sure understood one of Francois Bar\'s
point. Because if I did, I think it\'s, it may well be one of the
critical points.

You suggested that there shouldn\'t be a problem requiring universal or
ubiquitous open access on the cable network because that\'s what we\'re
doing on the telephone network. By that do you mean that absolutely any
competitor should be able to come in and by a loop? Is that the analogy
that you\'re drawing?

MR. BAR: Again, I didn\'t say there shouldn\'t be a problem.

MR. SHELANSKI: No.

MR. BAR: I said ideally.

MR. SHELANSKI: Okay.

MR. BAR: I do understand there are technical restrictions. And I do
understand, also, that there is technology called solutions to technical
restrictions. It\'s a question of how hard you want to work at solving
them.

I was primarily reacting to the way you phrased the question which was
would it be open access if the owner of the infrastructure decides to
strike deals with four or five ISPs and let those ISPs onto the network.
That strikes me as not open access.

MR. SHELANSKI: Okay.

MR. BAR: If there are limits who gets to be let in should not be decided
by the owner of the infrastructure. I mean, we have all kinds of
mechanism; auctions, licenses, you know, that do not give the entire
power to decide who gets programming or applications or ISP onto the
infrastructure just because they own the infrastructure.

MR. SHELANSKI: Okay. I think that\'s an important point. Because it
would be nice if there were a technical solution, but certainly the
telephone contacts, the loop is a pretty separable item and only one
person gets it. You know, if I capture the customer, I get the loop and
it doesn\'t effect what\'s done with the rest of the network.

Obviously we don\'t have an analogy to the loop right now, anyway, in
the cable system. And I think there\'s a question that we need to ask is
the extent to which by mandating such an analogy, or even by having an
auction, that\'s another question.

Who sets the standard by which the interconnection would occur? Would
you let the cable system define that or would that come from somewhere
else?

MR. BAR: I wish I had the answer.

MR. SHELANSKI: Okay.

MR. BAR: I think at this point what I\'d like to say is this seems to be
quite complicated issues which do warrant an investigation. I mean ‑‑

MR. SHELANSKI: Fair enough. Fair enough.

MR. BAR: My goal here would be to advocate very strongly for debate.
That looks at the options. That looks at what exactly are the technical
restrictions, not just what the owners of the infrastructure tells us
are the restrictions. But of an open debate about looking at that. An
open debate about looking at alternative allocation mechanisms and
consequences.

MR. SHELANSKI: I agree that sounds very reasonable.

Mr. Melcher, do you want to respond?

MR. MELCHER: I would like to throw in support for the view that you
cannot allow the owner of the cable technology to run the auction or to
decide who gets access to the technology or not. I think it would be
similar to letting an RBOC decide who gets to get access as a CLEC, and
we happen to be a CLEC, as well.

If U. S. West or if Pac‑Bell decided they didn\'t like us, they wanted
someone else, I don\'t think that would be an appropriate situation.
Similarly, I don\'t think AT&T should be allowed to say that we\'ll let
Earthlink in and now we\'ve proven that we don\'t have a monopoly or
monopsonese, so, therefore, we don\'t have to let anyone else in.

I think that control certainly shouldn\'t be in the hands of AT&T. I
think the technological hurdles could be overcome. It\'s just something
needs to be looked at and resolved.

Going back to ‑‑ I\'d like to comment briefly on going back to DSL
versus cable. As I understand it, cable passes, not connect, but passes
approximately ninety percent of the homes in this country. DSL currently
only passes about thirty percent of the homes. So, there really isn\'t
free choice.

I would love to see the ideal world that members of the panel have
talked about, and I look forward to that world. But that is a long ways
off. And I think right now we need to make sure that everybody has
availability to each technology. The technologies have different
features and they have different pros and cons.

For example, personal example, I\'m a senior executive at an internet
company. I can\'t get high‑speed access from my own company. I live
twenty miles outside of Denver, I can\'t get DSL. I have to choose AT&T
digital cable or some other form. And that\'s true of a very large
percentage of this country. They don\'t have a choice of cable versus
DSL.

Last point. Obviously, if I\'m sitting at my home, I would like to be
able to choose my own company as my ISP provider over whatever
technology I\'m required to use to get high‑speed access. Otherwise,
obviously, I\'m going to pay twice. That\'s not fair. And what we do is
exasperate the digital divide that everyone\'s talking about these days.

If you can\'t ‑‑ if you have to pay twice for the same technology, a lot
people aren\'t going to get that technology.

JUDGE LATHAN: Mr. Cicconi?

MR. CICCONI: I just want to respond to one point, there. Chris used the
number that cable passes ninety million homes in America. And I think
it\'s an apples and oranges comparison. The fact is cable does pass
those homes, but this is not upgraded cable. This is not cable capable
today of delivering high‑speed internet access. Percentage, actually, is
far less and I don\'t have it.

But the ninety million is the entirety of cable systems in this country.
And it\'s simply not a comparison.

The other point I\'d like to make is this. There seems to be some
dissing of DSL that is going on here for purposes of trying to make a
point that somehow cable and internet access is the only means out
there. And I think those of us that pay a little bit more attention to
this may be looking at what the consumer\'s market\'s doing.

I think Howard made the point about how DSL seems to be accelerating
recently. Believe me, we\'ve noticed this, too. And I think that here in
the Washington area, what you\'ve noticed is that with the announcement
that At Home\'s coming into one area, I believe, and Road Runner\'s
going to be coming into the COX cable territories in Fairfax County, all
a sudden what you\'re finding is Bell Atlantic running DSL ads.

This is, by the way, the Best Buy ad from the Washington Post this
Sunday, they\'re marketing DSL modems complete with Bell Atlantic
service. You\'re finding a three‑quarter page ad in the Washington Post
this week with DSL service.

By the way, it\'s priced at forty‑nine ninety‑five, which is what the
cable service will probably be priced at when it comes in here. And
that\'s a significant drop from what Bell Atlantic was pricing the same
service at only about six months ago. And quite a bit less than what it
was pricing it at a full year ago.

My point is that just the mere pendency of cable coming in and providing
high‑speed access in an area is driving DSL deployment. The people in
this area are actually benefiting from lower prices for DSL services and
seeing very aggressive marketing abuse of services. Merely with the
plans to come in here with high‑speed cable modem service.

And I think that when the service actually comes in, they\'re going to
benefit far more from it. I think that for the Government to intervene
here, intrude and impose conditions on this, would actually retard the
very type of investor that\'s driving this into deployment in this
country. And I think we\'ve all been cognizant of the route that Canada
went down here. And this is not, frankly, a happy situation.

I was up in Canada meeting with one of the commissioners myself. And
they\'re not very happy with the quandary they find themselves in,
either. Fact is they put an open access regulation on the books several
years ago. They\'re still trying to implement it, and they\'re finding
themselves bogged down in the marasse of even pricing regulations and
how they administer these things. And they\'re finding that it\'s
leading them down the path of increasing regulation which they,
themselves, fear is going to have a stifling effect on the deployment of
broadband in Canada.

And I believe the Commission itself recently in looking at the Canadian
situation, is acknowledged, in fact, that that path is fraught with
exactly that type of danger.

This is exactly the type of deployment that the Commission and, frankly,
the Telcom Act was hoping to drive. It is working, broadband is coming
out there through a variety of different forms.

And for the Government to intervene, however well intentioned it might
be, when the market is in the process of addressing these problems,
including AT&T\'s commitment to provide a choice of ISPs, I fail to see
what rationale there is for Government intrusion here.

MR. SHELANSKI: Well, you know, Jim, I think it\'s right that a lot of
companies have popped into the Washington area, though I\'ve yet to be
certain whether it\'s because they\'re scared of you and figured out
where Chairman Kennard lives.

But I want to pick up on an issue that Mr. Melcher raised, and this is a
question for you, Mr. Munir.

One issue that we\'ve been wrestling with is the extent to which the
broadband internet access market and the dial up internet access market
are separate markets. Or should we just all consider it one market and
consider the fact that anyone who has a telephone can dial in to an ISP,
has internet access, and that should allay our fears about any potential
monopolies on the part broadband?

I think this is relevant to concerns about redlining to accessing
particular neighborhoods, that particular businesses and particular
customers have.

How important do you think it is to insure that broadband deployment is
fast and ubiquitous into all areas, regardless of income level,
regardless of ethnic and racial background? Or do you think that the
important thing is simply to insure that there is a vibrant functioning
internet and reasonable phone rates so that people can obtain those,
access to the internet through the dial up world.

Is there a difference ‑‑ should we really worry about getting bogged
down out there faster, should we worry on making sure that the vibrancy
of the internet and cheap ISP remains in place?

MR. MUNIR: It\'s an interesting question that you pose because as an
economist, you probably are familiar ‑‑ I know you\'re familiar with the
term all things being ‑‑

MR. SHELANSKI: We say it a lot.

MR. MUNIR: Yeah, all things being equal, which they are not. And in my
aspiring economist days, we frequently had to refer to that. I think
that\'s vitally important for it to be competition and for broadband to
be deployed as quickly as possible.

However, consider this. In many urban areas, although areas probably
very high proportion of families that have telephones, the level of
penetration is not universally a hundred percent. So, therefore, those
individuals who don\'t have telephones, even if you deploy quickly, they
wouldn\'t have the benefit of being able to take advantage of it.

So, that\'s a very critical factor.

Now, if you have a number of ISPs in competition in the marketplace,
that serves the marketplace very well. But I think as it relates to
discriminatory deployment, redlining, there are a host of issues that
mitigate and militate against each other.

JUDGE LATHAN: I want to follow up on this redlining issue and then I
want us to take a break.

You\'ve made some fairly serious allegations against MediaOne with
respect redlining. And my first is question to you can you give us some
specific incidents and evidence of redlining by MediaOne and then I
would like MediaOne to respond to any of the accusations that you\'ve
made.

MR. MUNIR: Okay, yes. First, let me set the stage that our allegations
were predicated on maps that we pick, that we utilize reflecting
MediaOne\'s deployment schedule in various localities around the
country. We used a demographer and a very reputable firm for those maps.
And that was taken off of the web.

Now, so we drew some inferences and some conclusions from those maps.
Subsequently, we were able to review the maps of deployment used by
MediaOne. So, our allegations about redlining were predicated on our
earliest information. And subsequently my visits to Richmond and my
inquiries around the country reinforced some of the notions that we have
about redlining or discriminatory deployment.

However, we are still in our fact‑finding phase.

JUDGE LATHAN: Well, can you give us just some examples of what you found
so far?

MR. MUNIR: In Richmond, in Richmond ‑‑ when we went to Richmond, we were
advised by customers that, in fact, they, their areas may have been
wired, but they didn\'t have access to the broadband applications. So,
the question for us was whether or not that was a calculated and
strategic process, or if it was just a matter of circumstance.

In speaking with people at MediaOne, they have indicated that they
wired, irrespective of class, ethnicity or income. But customers
indicated that they didn\'t have the benefit of certain technology. And
so the question for us well, why is that. And we didn\'t engage or have
discussions with anyone from MediaOne until very recently. So there was
a lot of vacuum there.

JUDGE LATHAN: So, there are not ‑‑ you don\'t at this point and time
have any specific incidences of redlining, but you have a concern that
redlining might occur or has occurred?

MR. MUNIR: We have concerns that if history is any barometer, we know
that in various jurisdictions around the country, typically, companies
will deploy advanced applications based on the likelihood that certain
areas are wired for the technology and that there is a likelihood that
those homes that have computers will take advantage of those advanced
applications.

If you look at rural communities, urban communities, of which there are
a host of ethnic residents, the question is whether or not they have the
opportunity to take advantage of services.

JUDGE LATHAN: But I just want to be clear. Are you saying that MediaOne
redlines?

MR. MUNIR: We allege initially that they redline.

JUDGE LATHAN: Are you alleging today that they redline?

MR. MUNIR: We allege we believe that they utilized discriminatory
deployment. Now, the term of art, discriminatory deployment, relates to
a strategic decision that\'s maintained by a corporation as to what they
do. And that\'s different than redlining.

You can make a determination that we want to wire in a given area
because we believe that, they believe that they will get a fairly ‑‑

JUDGE LATHAN: Okay, well, let\'s follow up on that, though. So you\'re
say you\'re not saying that MediaOne today has redlined. But you are
saying they engaged in discriminatory deployment.

MR. MUNIR: Selective deployment, yes.

JUDGE LATHAN: Okay. So, can you give me an example of discriminatory
deployment? Is it Richmond, Virginia? I mean, is there ‑‑ I\'m just
looking for something concrete.

MR. MUNIR: In different cities around the country; Atlanta. Let\'s see,
Atlanta, Los Angeles, Richmond and Chicago we made inquiries about
whether or not redlining was occurring.

I must admit that based on our review of the maps that MediaOne provided
to us recently, it caused me to raise questions because I was told and
it became clearer to me that there may be some instances where there are
multiple cable providers.

So, for example, if you\'re in a jurisdiction and there are two or three
cable providers including MediaOne, redlining may be taking place, but
it may not necessarily be MediaOne. And at the time that we filed our
application, there was some question as to who were the guilty parties.
It was our understanding based on maps, the information, the relevant
information that we had the time, that MediaOne wasn\'t involved ‑‑

JUDGE LATHAN: Well, let me just ask you this and then I want Diane to
tell me a little bit about redlining in Richmond, if it exists, since
you\'re there.

Based upon what you know today, would you oppose this merger because you
believe MediaOne or AT&T engages in redlining?

MR. MUNIR: I would like to, based on what I know today, I still have
some questions that I would like to have answered. I am not of, as
strongly of the opinion that they are guilty of redlining. But I still
have questions.

JUDGE LATHAN: Okay, thank you.

Let me just let Diane tell us about if you believe they\'re instances of
redlining in Richmond. And, Susan, we\'ll hear from MediaOne.

MS. LINDERMAN: And I\'m sure Susan, as a result of allegations, MediaOne
did make a response I think to you and we certainly got copies of it.

It was a little confusing for us to determine based on the information
we had, as well. And there was some ‑‑ in Virginia, the counties and
cities are separate, and some of the information that we were getting
was that it wasn\'t happening in the county and it was being referred to
as the city.

But the council, although, was concerned about the potential for it to
happen, we didn\'t find any specific instances that it had happened.
And, actually, if MediaOne had wanted to serve the affluent parts of the
community, they would have gone to Henreco County first and not even
looked at the city of Richmond. Because obviously, our median income is
far lower than the suburban areas surrounding it.

So, they did make a condition in the ordinance that didn\'t allow them
to discriminate, but they didn\'t find any specific instance in the city
that it happened.

MS. EID: Thanks, Deborah. I appreciate Khalil\'s coming as close as he
could to withdrawing the accusations. I\'m surprised that he didn\'t go
a little bit further. We actually met this week, twice. And as recently
as last evening, I sat down with Khalil and went through all of the maps
that we submitted to the bureau at your request.

And as he said, these are extremely serious accusations, ones that
MediaOne has taken very seriously, as has the bureau. We spent a lot of
time analyzing our deployment in every market across the country. And as
we said in our response to the petition, the allegations are baseless.
They\'re not grounded in the facts that we have put forward. The
evidence in the record will support that.

And I would really encourage Khalil and his folks to go back and review
the information that we\'ve put on the record.

I think the point that he was trying to make is that TAP\'s methodology
is defective in two important respects. One, they included franchise
areas in the map that MediaOne does not serve today, and therefore, we
have no control over deployment in those franchise areas.

And, number two, they did not include a number of communities that we
have, in fact, upgraded and do provide broadband services today.

So, at the bureau\'s request, we looked at the three markets where we
have the most diverse population. Richmond is one, Los Angeles and,
actually, Atlanta, Georgia. And just let me give you quickly the rolled
up statistics for our deployment of high‑speed data in each of those.

In Los Angeles, by the end of this year, ninety‑seven percent of the
white homes passed will have high‑speed data. Now, almost ninety‑nine
percent of the African American homes in that market will have
high‑speed data, and ninety‑seven percent of the Hispanic homes.

In Georgia, the numbers are almost ninety‑five percent of the Hispanic
homes will have high‑speed data. Ninety‑three point five of the African
American homes and ninety‑one percent of the white homes.

And in Richmond, as Diane said, by the end of this year, we will
complete our upgrade so that a hundred percent of all the homes will
have high‑speed data, digital telephone service and the upgraded video.

When TAP filed its petition last Fall, that build was about four months
along. And as she said, it was actually the African American population
in Richmond was three times more likely to get the upgraded services
than the white population in that market.

And in the petition they claimed that only eleven percent of the African
American population had access to the service. But they ignored the fact
that ninety‑six percent of the white population did not.

But the important point is by the end of this year, a hundred percent of
that market and the very high statistics in the others.

So, I just conclude, again, that the facts support our response, which
is that these claims are baseless.

JUDGE LATHAN: I was going to ask you, Mr. Munir, what assurances can
AT&T and MediaOne give the Commission that advance services will be
rolled out to all communities? What assurances would you find adequate?

MR. MUNIR: I think at the very least ‑‑ well, as a starting point,
utilizing or taking off from the language employed by the jurisdiction,
City of Richmond for non‑discriminatory deployment. And that\'s a great
starting point to proceed from. At the moment.

However, I do want to raise a question or point.

The buildout that was just addressed was, we believe, accelerated. And
perhaps accelerated as a consequence of our inquiries and allegations.
That may not have been the case. On the face of it, it appeared that
once our allegations were made, the buildout was accelerated. It could
very well have been a function of the fact that the land mass and area
in Richmond is not that great and the number of customers is not that ‑‑
isn\'t that substantial.

So, that\'s a question that I raise. And that\'s why, after having
looked at the maps, in many respects, it answered some questions, but it
raised others.

Additionally, I spoke to this earlier. The fact that an area is wired,
if the lines are deployed, the question is whether or not the services
are afforded to the customers and consumers. And I don\'t know, I would
like for them to answer that question that when they say that a hundred
percent of the homes have been passed, ninety‑seven percent, whatever
that figure is, does that necessarily mean that if a customer calls up
and says I want your services and they live ‑‑ and they happen to be
African American and live in a given area or they live out in Goochland
‑‑ excuse me if I\'m abusing the name ‑‑ whether or not the services are
available.

MS. EID: Yes, I guess the short answer to that is looking at Los Angeles
as an example, a company such as MediaOne wouldn\'t spend close to a
half a billion dollars upgrading that network and not market those
services. There would be no return on that investment and it just makes
no business sense for any company to do that. I\'d be happy to send some
marketing materials along to Khalil so he can take a look at them.

And, again, in Richmond, in Atlanta, it\'s the same thing.

But I just want to comment on the non‑discriminatory provisions that
were included in the transfer. I, in my former life, used to do a lot of
franchising and I am hard‑pressed to think of one local franchise that
we have that doesn\'t include some requirement that we serve a hundred
percent of the community or that it be non‑discriminatory in our
deployment of those services. So, I really don\'t think that that\'s an
issue at all.

JUDGE LATHAN: Mr. Anderson.

MR. ANDERSON: Yes. Many local governments I think are concerned with
protecting residents against these issues of, you know, cherry picking
or redlining. And I think, well, as Mr. Shelanski asked earlier, you
know, is there a real difference between dial up access versus
broadband. Are they really the same product or they\'re two really
different kind of animals.

And I think, yes, I think experience tell us, for anyone whose made the
migration from dial up access to cable modem or DSL service, especially
those of us like myself who made the migration back to dial up service
because of the availability in the internet community for the service.

Yeah, there is a difference. And we talk about redlining and providing
service and barging, these companies barging themselves to universal
service requirements in servicing all areas, despite, you know, the
demographics of the area.

We talked earlier, you know, about providing what percentage of phone
service to which percentage of neighborhoods. And here we\'re back to
this whole dial up scenario again. I think really going forward, we need
to look at the issue of providing broadband services.

You mentioned, yes, the homes are passed, but are the services really
being offered. Sure. That becomes the issue for people in large urban
cities. I know that even in the District, here we have experiences where
we have some of the services that are available, however, companies,
telecommunications companies have issues with concern of safeties for
their employees, for insulations or repair or maintenance of these
broadband services.

So, it\'s not as unrealistic to think that although the homes are passed
for the broadband network passes homes that, you know, automatically
these folks have access to it. Quite realistically, there becomes issues
of safety and concerns for employees or theft of the services that
really can slight and sway the decision on whether or not to make these
services available to those residents.

JUDGE LATHAN: Thank you.

I think on that note, we\'ll take a short break. When we come back, I
want to talk more on the subject of programming and also video
competition when we come back.

We\'ll take a ten minute break. Thank you.

(Whereupon, a brief recess was taken.)

JUDGE LATHAN: We\'re back in session.

Okay, ladies and gentlemen. It\'s the home stretch. Okay, we\'re
beginning now.

Quyen Truong has a few questions and she\'s going to begin with some
questions pertaining to the broadband market, is that where you\'re
going to first start, Quyen?

MS. TRUONG: Yeah, I think we\'ve had a very interesting discussion about
the open access or force access in general, and I\'d like to bring it
back to the merger, specifically. And this can go to anybody on the
panel, basically.

Do any of you contend that the merger would actually make the situation
worse as far as the issue of open access is concerned? And, if so, can
you explain how the merger would make it worse?

JUDGE LATHAN: And, let me add, should this be something considered
within the context of the merger? Is this merger specific?

MR. MELCHER: I won\'t represent that I am a merger expert by any stretch
of the imagination. However, the reason I\'m here and the reason I\'ve
flown out from Denver and postponed my vacation, which is the first one
I\'ve had in about a year and a half, was because it is so important to
us as a smaller ISP to be here to comment on this merger.

If this merger goes forward and there is no open access mandated for the
cable technology, our company does not ‑‑ our company believes that our
odds of surviving are reduced significantly. And the smaller ISPs and
the competition you get from a vibrant small ISP market will be damaged
in a material way.

And the reason I say that is because this is a critical technology. This
is a technology that people want to have, people want high‑speed access.
Whether it\'s DSL or cable, they want high‑speed access. And if they can
only get it through a few providers, those few providers will capture
that market. And every ISP out there is very much concerned and very
much focused on cable technology as a broadband access plant or forum.
That\'s why we\'re here.

So, the answer to your question is yes. If this merger is approved and
22‑MediaOne and 22‑TCI MediaOne and whatever else AT&T joins with,
controls sixty percent of the cable market and controls that cable
technology and does not open it up to other ISPs, we believe you\'re
going to see less competition in the future, you\'ll see less smaller
ISPs and we\'ll be at a competitive disadvantage.

Right now, some of the products that we offer, just so you can get a
sense of what we offer, require high‑speed access. We have our own
search engine, we have a vertical portal, we have streaming products
that require high‑speed access, we have application services. We\'re an
application service provider, which you may know as a rapidly growing
new segment of the united industry, whereby your software packages are
hosted on a server outside of your PC and your PC, through the internet,
accesses that server, draws down the software like Windows, like Excel,
like Access, like Outlook. It\'s not hosted on your PC. It\'s over the
internet as a server. You\'re required to use those kinds of programs
efficiently, you require high‑speed access.

If you\'re a small business person running a business out of your home,
you require high‑speed access. If you\'re telecommuting and you want to
work efficiently at home, you require high‑speed access. If you want to
participate in the internet revolution, if you want to participate in
all the products out there, you require high‑speed internet access. And
cable is one of the best, if not the best technology available today for
high‑speed internet access.

So, that\'s why I\'m here, that\'s why the small ISPs care so much about
this.

MR. ANDERSON: As I said when I opened today, one of the concerns that I
have, one of the primary concerns was protection for consumers and the
promotion of competition through the cable services.

I think as we see this merger and you begin to review this merger, I
think that has to be a primary priority for the consideration of the
merger. You ask will it effect, negatively, competition. Is it healthy
for the consumers.

Well, when you consider that the number of cable companies through these
and similar mergers begin to diminish the number of cable operators out
there, where smaller and smaller number of companies control this
broadband access through the cable television network, then I see us
moving back to a throw‑back of the old, the AT&T of old. The big days.
Prior to the split up of the company where the services the people
really want, people required, were only being offered by one or two
companies.

I think there\'s no way that we can expect to foster competition and
offer diversity of services and embellish consumer services for the
benefit of the consumer if the merger is allowed to take place without
there being serious consideration to the protection of consumer\'s
rights to competition for the services.

MR. GLASS: Yes. To me, this debate is missed the point. I don\'t see
that there\'s a problem, necessarily, with the 22‑MediaOne merger. As
far as open access is concerned. If there was a situation where there
was an impact on content as a result of the merger, I\'d be concerned.
But the way I see it, there is a number of competing technologies, be it
T‑OneMind\'s dial up, wireless, broadband or DSL, these technologies
provide a number of ways for customers to get access to the internet.

The internet content that I see is mostly duplicative. So no matter what
technology used to get there, it\'s, you see the same content. Now, if
for some reason as a result of this merger that AT&T is able to capture
some content that\'s widely appealable and keep that from the masses,
then I would have a concern. But I don\'t see it that way.

JUDGE LATHAN: Yes, Professor Bar, please.

MR. BAR: I would argue that this is purely a merger issue. If the issue
of open access is not simply one of allowing an extra ISP onto one
network. If it is as I described it earlier, the issue about the
definition about the underlying architecture of the carrier
infrastructure. Then merging two infrastructure that deliver broadband
access cable will make that the dominant architecture. And once you
combine Excited Home plus Road Runner, you do have ‑‑ you would end up
with a dominant way of designing a broadband access network over cable.

JUDGE LATHAN: But my question would be, then, if this merger\'s
specific, it would not apply to the other MSOs, cable companies, such as
COX and Cablevision. I mean, is that a fair and equitable thing to do in
the context of a merger where it would apply to some parties and not to
others?

Professor Bar?

MR. BAR: No. Obviously not. It\'s something that should apply to all the
cable carriers.

JUDGE LATHAN: Mr. Cicconi?

MR. CICCONI: Well, first of all, we have committed to provide a choice
of ISPs on all of our broadband systems, and we\'re going to do so.
We\'ve led the industry and you\'ve seen response from the industry to
that leadership.

So, I think this is, frankly, an issue, if it is a problem at all, it\'s
an issue that\'s being addressed by the free market today.

Secondly, we hear ‑‑ you continue the statement about controlling
broadband access. No one in America controls broadband access. There\'s
absolutely no evidence before this Commission, and no evidence, frankly,
that anyone at this panel has presented that I\'ve heard today that
indicates anything to the contrary. It\'s simply untrue.

AT&T will not control sixty percent of cable subscribers in America. And
even if it did, that doesn\'t constitute the broadband universe. There
is DSL out there, there is satellite, there is fixed wireless. They\'re
other technologies coming on.

So it\'s ludicrous to argue that the broadband market which itself
cannot be segmented from overall internet access, should, in turn, be
segmented into just cable broadband. Just does not constitute the
broadband universe. And the broadband itself, does not constitute the
universe of internet access.

So, the segmenting of segments here in order to prove a point, is,
frankly, refuted by the facts. Is simply unfair and unsupported. There
is no such control.

If there is no control, you can\'t have any sort of bottlenecking. To
argue that AT&T, with about a hundred thousand broadband high‑speed
internet customers today, is somehow able to bottleneck internet access,
when the largest single internet provider has twenty million customers,
is added more in three months than Excited Homes added in the past three
years, is simply ludicrous on its face.

The consumer will continue to have multiple means of accessing the
internet. This is very clear. It will not come just through cable. And,
by the way, cable will just not come from AT&T.

You\'re going to have multiple means of accessing the internet available
to everyone at multiple speeds. And this will insure the choice
continues and that the market can continue to drive this. I believe the
market will dictate a choice of ISPs. It is caused us to reach that
conclusion today. And, again, I see no reason for Government
intervention if the market appears to be responding.

Finally, I think the original question is the appropriate one. How
appropriate is it to address something like this in the context of a
merger of AT&T and MediaOne. If this is indeed a policy issue, as our
opponents have suggested here of broad applicability, even though we
disagree with this, it is something that should be applied on an
industry‑wide basis, not in the context of a specific merger. It would
be grossly unfair to impose requirements on just two companies in this
industry if indeed they feel this is a problem affecting all of cable.

Thank you.

JUDGE LATHAN: On that note, though, Professor Rosston, I know you had a
comment. Before you comment, would you address the issue ‑‑ because I
was playing devil\'s advocate with Professor Bar.

Some would argue that it is most appropriate to address the issue of
access in this merger because of the horizontal reach that AT&T, the
merged entity would have, that it should be addressed within the context
of the merger.

So, would you answer that question? And we\'d also like the comments
that you were previously going to make.

MR. ROSSTON: Okay. I think that the issue of horizontal reach is ‑‑ when
I went through the questions that you will go through to look at the
economic effects of this, whether you have ‑‑ whether I\'m served by a
company that serves Memo Park where I live only, or serves the whole
rest of the company, doesn\'t really matter to me wherever else they
serve. It\'s the options that are available to me. Do I have DSL and
wireless and cable available to me, or do I just have cable available to
me? Or dial up access.

It\'s a question of what\'s available to a specific group and it
doesn\'t really matter in terms of access what somebody else across the
country has access to, for the most part. There may be some
circumstances in which you care sort of network effects of programming
availability or content availability. But it seems to me a lot of those
issues are not a real problem right now and should be considered in more
of a general access proceeding.

I was going to comment that I think that this is ‑‑ most of the issues
as I said earlier, are not merger specific. And that if the Commission
is concerned about this issue, we should have a specific proceeding
directed towards the open access proceeding, just like your question to
Professor Bar of is this really something we should impose only on these
two. Well, it doesn\'t sound like he was convinced or I\'m convinced
that it\'s something that if you\'re going to do something, it should be
only on these two.

There is the issue of if you do something that there\'s going to be a
large amount of regulation of both figuring out what to do, how to do it
and prices. And that\'s going to take ‑‑ and the Commission should be
aware that doing anything is going to cause a lot of regulation and a
lot of regulatory apparatus. And that regulation is not perfect. And the
Commission should be wary of that.

Finally, I was just struck by the comments about what RMI.net could
provide and would provide as an ISP. And to me, that sounded like it\'s
a ‑‑ and I appreciate the idea of streaming video and ASP provision. But
there are a lot of companies that are providing this on the internet and
they can provide to ‑‑ my assumption is they can provide to people at
the FCC who have access at their desktops. They can provide it to me
with my cable modem at home. And they can provide to people with DSL
services, and it doesn\'t necessarily mean, being an ISP in the
traditional sense of dialing up into an ISP.

So there maybe different ways to think about what an ISP is in an always
on digital architecture like cable.

JUDGE LATHAN: Picking up on this issue of merger specificity and also
the point that Mr. Glass made about being concerned only if there may be
an impact on content, as is alleged exists in the multi‑channel video
programming market.

Is it possible that we would also have similar adverse impact in the
broadband market based on AT&T\'s horizontal reach post merger? That is
its ownership interest in the two leading cable ISPs, Excited Home and
Road Runner. And, also, its ownership interest in cable systems covering
sixty percent of homes passed by cable, nationwide, which can and will
be upgraded to provide high‑speed internet access.

Now, the large customer base, the horizontal reach that AT&T would have,
would you consider that that may allow it to attract broadband content
and application provider who needs the access to the customer eyeballs,
and therefore, allow AT&T to enter into exclusive arrangements with
broadband content application providers? Or, otherwise, affect content
applications that also be broadband architecture. And I\'d like to hear
from I think most of the panelists here, starting perhaps with
Professors Rosston and Bar, and then some of the competitors, Mr. Glass
and Mr. Melcher.

MR. ROSSTON: I guess there were a few other questions and the first that
I heard was whether control of both Excite At Home and Road Runner, if
there is control, is that a problem.

I actually get cable modem service from my ISP channel rather from
either of those two. And I imagine that being the ISP for a cable ‑‑
would this ‑‑ I think the concern is do other cable systems have a
concern that AT&T would be controlling the two top cable modem ISP
services.

And it seems to me that, first of all, there\'s ISP channel. I assume
there are some other ones, as well, who could provide ISP service,
RMI.net or Mind Spring who could provide the ISP service for other cable
systems. So, I don\'t think ‑‑ I haven\'t investigated, but it seems to
me that it\'s not going ‑‑ if they\'re all these ISPs who want to be on
cable systems that control over two of them that have started for cable
systems wouldn\'t be that much of a concern if there was lots of entry.

In an anti‑trust analysis, competitive analysis, you worry about entry.
Or you think about entry. And if these other companies could enter to
provide ISP service, then other cable systems, DSL service, other people
would have ISP choices, as well.

So, I don\'t see that as a problem right now.

The other question you addressed was would AT&T have control over
programming. And right now, that doesn\'t seem to be a big, given the
number of people who use dial up access and use access from work and the
increasing number of DSL subscribers, it doesn\'t seem like that\'s a
big problem, either.

I don\'t know if they\'re doing exclusive deals. There may be benefits
to exclusive deals from product differentiation, but there seems to be
an incredible amount of competition in internet content that even if the
New York Times were to do an exclusive deal with AT&T, there are lots of
other news services that people would subscribe to and, for the
Washington Post, or whatever, so that they could get service on their
DSL lines.

It doesn\'t seem like there is the one thing that everybody has to have
on the internet right now. To me, it seems like this is a concern you
might want to monitor but you shouldn\'t do anything about it right now.

MS. TRUONG: Professor Bar.

MR. BAR: I\'m going to address the second part of the question which is,
just as we did the kind of application and exclusive deal, exclusivity
of content.

My understanding is that today At Home has a number of exclusivity deals
with applications of providers and some content carriers which are
application providers that require high‑speed. I was looking for my
notes for the specifics and I wasn\'t able to find it in the few seconds
we had, but my recollection is that there is an agreement with an on
line game company that takes advantage of this big architecture of the
At Home network.

So in that sense, having a high‑speed network that combines Excited Home
plus Road Runner, provides the opportunity to create the architecture
that will support these kinds of exclusive deals and reinforce AT&T\'s
negotiating power or At Home and Road Runner\'s negotiating power in
striking those exclusivity deals.

MS. TRUONG: I think what ‑‑ Mr. Cicconi, stick around. I\'m sure you
want to respond, but if we can perhaps hear from Mr. Glass and Mr.
Melcher.

MR. GLASS: I\'m not aware of anything that would result from this merger
that would have AT&T or MediaOne have any power over the content on the
broadband. Most of that from my experience, is duplicative and I don\'t
see how this discussion, although quite interesting, is all that
relevant to the 22‑MediaOne merger.

In context with ‑‑ I contrast that with the fact that the Commission
does have power over cable programmers. And, in fact, I presented a
couple of specific instances where we have problems with programming and
getting access to it. I think that is a more relative discussion.

MR. MELCHER: Thank you. I beg to differ. I think you need to look at how
important this technology is to the types of things you can do with the
technology. And as Professor Bar mentioned, there are a number of
content providers and a number of pieces of content out there that do
require high‑speed access. I\'m negotiating a deal right now with
someone who\'s coming up with a 3D chat room. And this is a concept that
I won\'t go into for obvious reasons, but it requires high‑speed access,
it requires broadband access.

They\'re a number of other relationships that we\'re negotiating
currently that require high‑speed access. And some of those we\'re not
going to be able to complete until we see whether or not we\'re going to
get access to this cable plant.

Specifically, people are asking to see are you going to have access to
this technology because currently, this technology, a lot of folks
believe will be the dominant technology in the next two year period.

So, I think you need to look at that. You need to understand there are
some content companies that will only negotiate with folks who have
access to a technology, a high‑speed technology. And, secondly, only
have access to a certain number of eyeballs.

People are not as interested in negotiating or discussing agreements
with RMI.net as they are with AT&T or MediaOne because our eyeballs are
a hundred thousand and their eyeballs are many, many millions. So, I
think that ‑‑ obviously, there\'s nothing you can do about that, but I
think you combine that, their eyeballs with the control of the
technology, and you get a very dangerous combination.

One thing I\'d like to say, if I can, just comment on the AT&T statement
that they are already opening this up to ISPs. I\'ve got a statement
here from Legg Mason, obviously a very well known investment group and
they\'ve got analysts that cover this industry. And Legg Mason, on
December 6th, 1999, Scott Cleland, Legg Mason Percursor Research, states
their opinions of the 22‑Mind Spring letter.

Essentially, the agreement represents very selected access to AT&T\'s
cable plant. In brief, the two page letter agreement, (a) is
non‑binding, (b) does not apply until July 2002, (c) is not enforceable,
(d) sets no wholesale price, (e) sets no guidelines or guarantees on
bandwidth or performance, (f) does not afford an ISP full control of its
relationship with its customer, and, (g) does not address operational
support systems and bandwidth performance measures for competitive ISPs.

The proposed agreement would resolve the easiest parts of the
negotiations, however, it does not resolve the most important.
Investment relevant parts of the agreement and the hardest parts of the
negotiation which are price, bandwidth and customer control. Those are
the three key elements.

Again, quoting price Legg Mason, they say for AT&T, this is a political
tourniquet to try and staunch the political hemorrhage for open access.
Essentially, the best reaction to a bad situation. It could have the
added benefit of delaying regulatory intervention, which is their goal
here. Providing AT&T valuable time to lock up as many customers as
possible while still enjoying first mover advantage.

That\'s the key here, AT&T wants to lock up this technology and these
customers for two years. That\'s our ‑‑

MR. JOHNSON: Let me just follow up one thing. Have you tried to become a
cable broadband access provider on a system that\'s just starting out,
that doesn\'t have an affiliated provider?

MR. MELCHER: No, sir, I have not.

MR. JOHNSON: Is there some reason why that mode of entry is difficult?

MR. MELCHER: I think the difficulty is that I would require, for
example, where we are located, our corporate headquarters are in Denver,
I would require the City of Denver to give me a franchise, a legal
monopoly ‑‑

MR. JOHNSON: Hold on, I\'m talking about, in effect, becoming a Excite,
At Home, cable firms that are not affiliated with that.

MR. MELCHER: Not affiliated with AT&T or Excite or At Home? In Denver,
TCI is the cable provider and they will have nothing to do with us. We
would love to.

MR. JOHNSON: But ‑‑

MR. MELCHER: We would love to do that.

MR. JOHNSON: You\'re providing ISP service outside of Denver?

MR. MELCHER: We\'re providing ISP service around the country, yes. And
we\'re actually exploring that with Portland, with companies in Portland
because Portland has denied AT&T their effort to close the system.

So, we\'ve had preliminary discussions. Nothing, nothing very
substantial yet.

MR. JOHNSON: Mr. Rosston said, well, there are more companies than Road
Runner and Excited Home. I\'m just wondering if entrance into that
market by you or similar firms is difficult, or if there really are
reasons why Excited Home and Road Runner and a few of these firms have
something you don\'t have.

MR. MELCHER: What they have is the technology. It would not be difficult
if we had access to the technology.

MR. CICCONI: Actually, it\'s not a matter of the technology, it\'s a
matter of the investment and they have not been willing to make the
investment. Excited Home made the investment, others have made the
investment, Road Runner made the investment.

I think the big difference that we have with Mr. Melcher\'s analysis is
he keeps using words like wholesale, non‑discriminatory. He cites Scott
Cleveland\'s laundry list of things, all of which add up to common
carrier status. That is not the law. And as much as he and some of his
friends would like to impose common carrier regulation on this system,
in fact, that is not the law. That is not the regulation. It is not a
wholesale system.

We\'re not spending billions of dollars to upgrade these systems so
someone can come in and add their profit margins on it. I mean, that is
simply not the way this works.

You have to ‑‑ if people are going to get this service, others have to
be able to invest, be willing to invest, have the incentive to do so to
build those systems. To add that technology, to market it and to deploy
it. No one will do it if somebody can sit back, wait for somebody else
to dig up the streets or put in the servers or build the systems or
market them, sit back and then demand to be able to get on that back as
wholesale. It\'s simply unfair. It is also not the law.

Now, a couple other ‑‑ I really like ‑‑ they\'re a couple other points
I\'d like to respond to here. I think Mr. Melcher also made the point
about eyeballs and somehow exclusive contracts may be somehow unfair
because of the cable system, having an exclusive contract with someone
that had broadband content, or something in this nature.

He cites the fact he\'s got a hundred thousand subscribers versus a
million here that we have. Well, in fact, he\'s in a far more dire
situation right now in Meril Band. He has a hundred thousand there and
AOL has twenty million. AOL subsists on exclusive contracts. They have
an exclusive contract with Barnes & Noble. I dare say Mr. Melcher\'s not
able to get Barnes & Noble\'s bookselling services on his ISP because of
that exclusive contract.

In fact, most of AOL\'s contracts are exclusive to that nature. And I
have not heard any indication from Mr. Melcher. Indeed, other ISPs, that
somehow they seem bothered by that fact. It is directly analogous. This
is ‑‑ these content providers, these people selling services, retailing
services have a right to contract with whom they want.

Now, I don\'t see any diminution in the innovation on the internet, the
development of new technologies. Frankly, the development of broadband
applications or things of this nature that somehow indicates any danger
this is going to be locked up. If he\'s certainly got some examples,
I\'m willing to listen to them.

But I really have heard none.

Finally, there seems to be a premise here which was laid out in the
question about the horizontal reach of our systems. And the ability,
somehow, control programming on broadband here. And the figure sixty
percent was used.

Well, in fact, the horizontal reach of these systems is right around
twenty‑seven percent. That would be attributable interest equally of
AT&T once this merger is concluded. Not sixty percent.

When you\'re talking about ‑‑

JUDGE LATHAN: Is that taking out Liberty and TWE?

MR. CICCONI: I believe so. Again, we\'re talking the Commission\'s own
rule on attributed interest. And to comply with those rules, we have to
be under thirty percent.

Now, if you\'re talking about ability ‑‑

MS. TRUONG: I\'m sorry, but before you go on now, we just want to
clarify. Is it your position, then, that you would not be ‑‑ in order to
avoid attribution of TWE, AT&T would stay out of the internet activities
of TWE, as well as the video programming?

MR. CICCONI: That\'s not what I\'m saying. I\'m saying we would comply
with the rules here and the rules talk about the material involvement in
video programming. What we\'re getting into, though, is control here.
Because that was really what your question goes to, the ability to
control programming on this medium here.

The control you have to ‑‑ to control programming, you would have to
have control of the systems that provide the programming. We have
absolutely no such control on the Time Warner systems. Absolutely none.

There\'s adequate showings on the record here, in fact more than
adequate before the Commission to indicate that. That control that one
would have to have to somehow control programming, doesn\'t exist on
those systems. It does not exist on cablevision systems, frankly,
either.

So, in order to be able to exert control of programming, one would have
to exert control over those systems. The only systems we would be able
to actually control would be the ones we own and operate.

So, I think the ability to do anything of that nature would be extremely
limited. And I contrast that with the SBC again we heard from this
morning here who actually would have control of about thirty‑five
percent of the local phone lines within their territory, with a
penetration level of about ninety‑four percent.

Again, when you consider penetration level for this high‑speed service
there, you\'re starting very, very low in these territories. So, I think
again, if you contrast this with the true horizontal reach of others in
this market for deploying DSL and other things, I think you come away,
you know, with a clear conclusion that it\'s simply not possible for any
one company, particularly AT&T, to exercise anything of that nature.

JUDGE LATHAN: Well, let\'s move just for a second when we\'re talking
about exercise and control away from broadband market for a second, and
back to the video market.

Mr. Glass says that, look, I\'m having trouble today, right now prior to
your merger being able to get programming. I\'m a competitor, I want to
be a competitor, but I can\'t get the programming that I need in order
to be able to compete effectively because of your exclusive contracts.

Now, assuming for the sake of argument that that is true, wouldn\'t this
be exacerbated, wouldn\'t the merger exacerbate that situation of
inability to be able to get programming in the video context?

MR. CICCONI: Absolutely not. First of all, Seren\'s situation has
nothing to do with MediaOne. Their particular issues with the TCI
system, it was raised in the context with the TCI merger, in fact. They
argued that they should be allowed somehow through the merger there to
have the Commission intercede. And, in essence, may an exception to its
own program access rules there in order to give them access to
programming that\'s currently under exclusive contract.

Now, the Commission\'s program access rules prohibit a cable operator
from having an exclusive contract with a programmer is, (a) satellite
delivered, and (b) vertically integrated with a cable system.

The programming in question that\'s been cited by Seren in this instance
is neither. The Commission concluded that when it considered their
request for special condition on the TCI merger and rejected it on those
grounds.

It is also heard from them in the context of several rule makings with
exactly the same issue and is rejected that concern in those
proceedings, as well. To bring it up here in the context of the MediaOne
merger when MediaOne properties are simply not involved, is, frankly,
inappropriate.

JUDGE LATHAN: But Professor Rosston, you disagree. I mean, you earlier
stated that you believe that the program access should apply to
terrestrially delivered programming, irrespective of the method of
delivery, do you believe that the merger would exacerbate ‑‑ let me not
say exacerbate. Do you believe that the merger would have a stifling
effect upon competition into the video programming marketplace?

MR. JOHNSON: Well, let me just add one little piece to that. Would
AT&T\'s relationship with CBS change if they acquire MediaOne?

MR. ROSSTON: Sorry, could you explain that? AT&T\'s relationship with
CBS?

MR. JOHNSON: With CBS who is the source of this product that Mr. Glass
can\'t get access to. Does it make any difference if the ‑‑ is it
clearly market specific or is it matter what the broad coverage of what
AT&T is?

MR. ROSSTON: One thing, and this is not an issue I\'ve thought about
before. Sitting here, it seems to me if it\'s a local programming, local
sports programming issue, that the merger wouldn\'t sort of change that.
Because if it\'s adding cable systems that are already in the area, it
doesn\'t seem like it would change the demand at all for that local
sports franchise. It wouldn\'t change any leverage or anything else for
a local sports programming channel in that sense.

MR. CICCONI: Bill, I\'d hardly consider whether Mid‑West Sports decides
they want to offer the Minnesota Twins on an exclusive contract with the
local cable system as a matter of national import. It\'s certainly not a
matter that arises in the context of this merger.

MR. JOHNSON: No, but CBS has a lot of relationships with other media
companies. And the size of those companies, presumably, has something to
do with the relationship that developed with CBS.

MR. CICCONI: Bill, again, I think you\'re using word relationship. This
is a contract. This is a contractual relationship, so it\'s limited to
that. This is not some sort of strategic partnership that these
companies have entered into. They\'re programming supplier. We have a
contract with them in this territory. It is a contract. Is nothing more
than that.

MR. JOHNSON: Oh, I\'m not suggesting that ‑‑

MR. CICCONI: It\'s perfectly valid and appropriate under the
Commission\'s own program and access rules.

MR. JOHNSON: That seems to me quite clear that it\'s, I mean, there are
a set of rules. But does the fact that this impedes competition, if it
does ‑‑

MR. CICCONI: Whether Seren is an overbuilder in that region, has access
to the Minnesota Twins, you know, is hardly an issue or question, I
think that is exacerbated somehow by AT&T acquiring the cable systems in
Boston.

This is a contract that Mid‑West Sports which supplies, I guess,
broadcasting rights for the Minnesota Twins, Minnesota Timberwolves, I
think you read the list there. I think it\'s hardly in any way affected
by our acquisition of cable systems in Atlanta and Boston.

JUDGE LATHAN: This is merely an example. The point was does AT&T have
the ability to stifle competition through the use of exclusive
contracts? And, if so, should there be some limitation on the ability of
AT&T as a merged entity to be able to use exclusive contracts if they,
in fact, impede competition.

MR. CICCONI: I think that the answer is no. This is a matter ‑‑ I mean,
I could leave it there, I suppose, but maybe I should leave it there.
This is obviously something that Mid‑West Sports decides it wants to
offer it on that basis and it made the decision to do so. It\'s as much
their decision as our decision.

MR. JOHNSON: Is that right, that it\'s as much theirs as yours?

MR. CICCONI: It is a contractual relationship. If they don\'t want an
exclusive arrangement ‑‑

JUDGE LATHAN: But isn\'t it so the larger that a DSL gets, the more
clout it\'s going to be able to have to influence a local market? Is
that correct?

MR. CICCONI: Your status ‑‑ our status in the local market in
Minneapolis is unaffected by this merger.

MS. TRUONG: I think perhaps the actual question is whether your
horizontal reach post‑merger would increase your clout to the extent
that you can get more exclusive contracts and, thereby, harm other MDPD
providers, as well as a diversity of the programming market. And I think
Mr. Glass has been waiting to address that issue.

MR. GLASS: Well, the Commission itself has recognized the fact that
access to local originated sports programming is an important issue in
its affecting ability of upstart competition to really get a foothold in
the marketplace. And we have provided this as one example of what we\'re
experiencing up in Minnesota and I\'ve also provided another example on
another technicality that AT&T has used to preclude us from getting
access to programming in the Bay area.

And my next question is what are they going to do to us when we get into
start building and looking for programming in the Denver area.

MR. CICCONI: Our sports programming, it\'s my understanding that the
Commission\'s actually considered the argument that the sports
programming is somehow unique and that it should somehow be treated
differently under the program access rules.

It\'s my understanding that there are two cases that the Commission took
up, one involving ComCast, the other involving Cable Vision. And in
those cases, I understand the Cable Bureau refused to extend program
access rules to sports programming services because they were
terrestrially delivered.

So, this issue has been considered by the Commission before, including
the specific questions just raised about sports programming. And the
Commission stuck by its rules.

MR. JOHNSON: I think it\'s quite a different question. The question here
is whether the changing size of the entity that\'s involved in this
negotiation changes its ability to acquire exclusive rights. And I guess
you\'re suggesting it doesn\'t matter how big AT&T becomes, they have
the same access to or leverage over CBS.

MR. CICCONI: I think that ‑‑ well ‑‑

MR. MELCHER: If I could add to that, that in addition, I think your
earlier question adds to this issue, which is that to the extent they
have exclusive control over another technology through which they can
offer content, cable content or other content, how does this merger
through that means, also stifle competition. Or have an adverse impact
on our current internet industry.

And I think one of the things that\'s important to keep in mind is that
right now, the broadband internet access will allow streaming video
which is cable programming. It will allow television quality programming
over the internet on the computer screen.

One of the interesting new applications is that you will open up your
computer screen, you\'ll turn on your PC at your desk, you\'ll launch
Windows, you\'ll start working in a document and then you\'ll put a
little TV screen on the upper right hand corner of your computer screen,
and you will watch live feeds of the FCC hearings or you will watch
CSPAN or you will watch NASDAQ or the stock market or you will watch
CNN, and you will have content delivered. And that requires broadband
access.

Now, if they control the technology, they obviously will have a better
ability to control the content. I think that goes directly to what
you\'re talking about.

MR. CICCONI: Mr. Melcher keeps using the terms controlling the
technology and exclusive control over high‑speed internet access. Both
of these statements are simply false. There\'s absolutely no evidence to
support either of them. There is absolutely no control of the technology
for internet access, no control over the technology for high‑speed
internet access, no exclusive control on access the high‑speed internet
services. Witness DSL, which we\'ve talked about most of the day. These
are simply untrue statements.

And so to somehow take those and assert that this control can then be
used to disadvantage others, is, I think, unfair.

Let me go back to Bill\'s question here, \'cause I really do, I think
it\'s a fair question, but I also think the answer is that, in candor,
when they\'re marketing Minnesota Twins and Minnesota Timberwolves
games, and that\'s really what, as I understand it, they market sports
programming, local sports programming. And I think one has to assume
that the market is the local market. And I think that in deciding who
they want to contract with in that area, they\'re going to look at the
relative strengths in audiences of those systems. And if they choose
AT&T system over Seren system, it may well be because of our presence or
the number of RBOCs we have in that local market. That\'s not our fault.

I mean ‑‑ and, frankly, if Seren develops adequate local presence for
coverage there, they may well, Mid‑West Sports may decide to deal with
their next contract in a different manner. But the fact is I think the
relevant market is the local market, Bill. And I think that\'s, frankly,
the basis on which they\'ve made their decision to contract with us and
we made our decision to contract with them.

And we\'re serving the local audience who wants to watch Minnesota Twins
baseball games. God knows, I don\'t want to watch those here, that\'s
for sure. And I think there\'s a market for it there and that\'s the
relevant market.

MR. GLASS: Mr. Cicconi keeps referring to the fact that the AT&T and
MediaOne merger won\'t have any impact on its ability to contract with
MSC. And that\'s just not the case.

As they continue to receive larger and larger market share of the
Metropolitan Minnesota, Minneapolis Metropolitan area market and
outstanding areas, there\'s no ‑‑ it\'s going to be increasingly
difficult for Seren to ever get accessing to that programming. And
without that programming which is an important product offering, we\'re
never going to be a viable competitor to them.

Now, you know, Mr. Cicconi, you know, continues to say that that has no
significance ‑‑ market presence doesn\'t have any impact on their
ability to market, to contract with MSC. You know, Mr. Johnson, that is
just not true. And we\'re certainly seeing that. We\'re never going to
get access to that programming and we\'re going to be at a continuing
disadvantage.

Mr. Cicconi previously provided a copy of a Best Buy advertisement
showing that, you know, all these competing technologies are out there.
I agree with him on that. I also see in my local newspaper,
advertisements from his affiliates showing that they are the only
providers of MSC. And continue to hammer home the fact that don\'t take
Seren\'s products because you will not have access to that programming.

MR. MELCHER: If I might, I don\'t mean to interrupt or to stray back to
an issue that you feel has been covered, but Mr. Johnson asked me a
question and I been reminded with regard to ISPs applying to cable
systems or cable companies, Mr. Brewer of Mind Spring, testified that he
requested carriage with the twenty largest cable systems. Every one of
them refused to allow him to enter into any sort of relationship with
them.

Coincidentally, Mind Spring is the one that AT&T agreed to allow access
to. But they have no concrete deal, no enforceable agreement.

Secondly, you asked whether or not we would invest in a relationship
with a cable provider. And we would absolutely be able to and would be
willing to duplicate At Home\'s network investment in the head end.
We\'d be more than happy to invest our own dollars, which we have done
by the millions, into the content and into the end product, the ISP
product.

All we\'re asking for is access to the pipe that carries it, the
technology. We\'re not asking to carry or to be on At Home\'s system,
we\'re not asking to piggyback on At Home\'s investment. We\'re simply
asking to be allowed the same access to a technology that the public
helped to build so that we can offer new content, we can offer what we
believe are distinct and better value ad products to the consumer.

JUDGE LATHAN: Mr. Cicconi, some say that because cable has a really
mover advantage, and even though DSL is on its heels, you know,
witnessed by the fact that SBC and others have announced roll outs of
DSL plans. That because of your early mover advantage, you would be able
to move into market places and on negotiated exclusive of programming
agreements that will basically make it difficult for DSL and other
competing technologies to compete because they will not be able to get
the programming because you\'ve sewn the market up by entering into
exclusive agreements.

Could you address that feeling?

MR. CICCONI: Well, sure. I mean, I assume you\'re talking about some
sort of internet content, locking up the market on some internet
content?

JUDGE LATHAN: Even the video programming market, as well.

MR. CICCONI: Okay, well, \'cause this really does, if you talking about
the At Home system and the Excited Home system, you\'re really I think
talking about internet content and I think if there\'s a first mover
issue, it lies there.

I think, first of all, you\'ve seen the deployment of this and you
haven\'t seen that occurring, so if there\'s a first mover advantage,
Excited Home has had it and they have not locked up exclusive content
arrangements that have been, somehow been, somehow been denied to DSL.

Secondly, I think what you\'re finding is that while cable got out there
quickly, DSL is catching up quickly. You\'ve seen a lot of studies
recently, most in the past week, the Yankee Group, which is pretty
reputable analysis outfit, came out with a study that essentially said
over the next couple of years that the market share of cable and
high‑speed broadband is going to be cut in half by DSL. And that\'s, you
know, it\'s pretty good indication that scenario that Howard Shelanski
talked about earlier is probably coming to pass.

I don\'t think one can look at the billions of dollars, like seven
billion dollars the SBC is deciding to invest in DSL deployment in order
by the end of two years from now to be able to reach seventy‑seven
million people and somehow think that DSL is not going to be viable with
billions of dollars being thrown behind it by the local phone
monopolies.

So, I do think that is there. You haven\'t seen the first mover
advantage exercised in that way. Again, first mover advantage, if it\'s
meant anything over the past three or four years, has gotten Excited
Home to a grand total of one million subscribers. Of whom we have about
ten percent actually on our systems. We\'re certainly hoping that gets
to be a bit higher. But it isn\'t yet. One million as compared with
twenty million for American Online.

So, this is ‑‑ I think if there\'s a first mover advantage here, it
certainly isn\'t somehow being seen as leading to any sort of control or
dominance with exclusive programming arrangements that\'s in any way
locking DSL out of content.

If any of the RBOCs run into any sort of issues of that nature, I\'m
sure they would have brought them up to you by now and they would have
filed them in this proceeding.

JUDGE LATHAN: Mr. Rosston, Professor Rosston?

MR. ROSSTON: Yeah, I think one thing, when you talk about first mover
advantages, in some sense, those, if they do exist ‑ and I haven\'t seen
any evidence that they do ‑ but if they do exist, this is good because
it will spur the second person to come and try and make sure they\'re
deferred until you get dual deployment.

The fact that the RBOCs are investing more is probably due to the fact
that cable has come out, partly. There\'s competition to be the first
mover if you do have first mover advantages. The problem comes if
there\'s some lock‑in effects of customers not being able to switch and,
or if there\'s some sort of content problems where you can get content
on one where the first mover somehow locks up content and detrimentally
affects consumers the other way.

And I don\'t think ‑‑ the switching costs for switching from cable to
DSL, imagine are pretty low. I haven\'t tried to switch from a cable
modem, but if they\'re trying to sell DSL in mass markets, they\'re
trying to make it very easy to implement and have very software driven
installations of this.

And then on the contents side, everybody can get access to the internet.
So that it doesn\'t seem like, you know, if there\'s a game ‑‑ as
Francois said, there\'s a game situation that is exclusive to Excite At
Home, I don\'t imagine that the game programming market is a monopoly
and there aren\'t seventeen other game manufacturers who would be happy
to have their games on every single ISP who would be on DSL or wireless
or other things.

JUDGE LATHAN: Excuse me, but what you\'re saying is you believe there
would be availability of programming for the competitors to AT&T?

MR. ROSSTON: Right. Yes.

MR. CICCONI: I think there\'s one other point here, too, if I might add.
And that is if we\'re really talking internet portal sites here somehow
doing exclusive arrangements, that certainly hasn\'t transpired in the
broadband world and it\'s barely transpired in the narrow band world.
And I think there\'s another reason for that in addition to the fact
that you really haven\'t seen a major first mover advantage or any sort
of dominance developing there. The reason\'s at the other end.

Why would any sort of portal or content provider want to tie themselves
up in that type of arrangement, lock themselves out of another
technology? They simply aren\'t doing it because they have no reason to
do it. They\'re restricting their own reach and access.

JUDGE LATHAN: But the argument ‑‑ the counter‑argument one would make is
because if you\'re as large as AT&T and you want to be carried on a
system as large as AT&T, you prefer that over having to run around the
country and trying to negotiate with a multitude of small cable
companies when you can just get you programming carried by the largest
system in the country.

MR. CICCONI: Well, if the largest system in the country is able to only
reach thirty percent of the people in the country at its maximum, which
under your rules is, of course, what we would be able to do, then they
would restricting themselves from accessing seventy percent of the
country. I don\'t know why they\'d do that, frankly.

MR. MELCHER: I think there\'s one other issue.

MR. CICCONI: And, by the way, they haven\'t.

MR. MELCHER: I think there\'s one other issue here, as well. Which is
that there is certain content that may only work over certain
technologies. And I go back again to high speed access, broadband
access. If you want a video streaming applications or certain very
intensive applications, those will require certain technologies.

And if you have someone like AT&T which is able to, maybe not exclusive
control, but a majority control of a certain technology and certain
content only works over that technology, then you have content monopoly
and you have content control. And only folks who have access to a
certain technology can then get access to that content.

MR. CICCONI: I would think Mr. Melcher would be far more concerned about
instant messaging technology where you actually have one dominant player
on the internet today exercising such control to the disadvantage of
other ISPs like himself. That is a very real example of a dominant
player with market power exercising it to dictate standards across the
internet. And I would hope they\'d be just as outraged about the actual
exercise of that as potential exercise.

MR. MELCHER: I\'m concerned about every monopoly.

MR. ROSSTON: Just on this thing, Excited ‑‑ in the Wall Street Journal
today, there\'s a clip about the Excited Home actually selling web
access via phone lines via DSL, so in some sense they try to have
technology geared towards cable modem, they don\'t seem to be practicing
that by trying to also sell DSL service.

MS. TRUONG: I hate to harp on this point, but just to play devil\'s
advocate. First, I think to address the point of AT&T\'s horizontal
reach in the digital market, I do want to clarify here if we\'re talking
about AT&T satisfying the insulate limited partnership exemption so that
the TWE partnership would not be attributable to it because it\'s not
involved in TWE video programming activities, then that would mean that
22\'s reach would be under thirty percent when we consider the video
market.

But if we look at the internet market and AT&T is involved in the
internet activities of TWE and its other cable systems in which it has
ownership interest ‑‑

JUDGE LATHAN: You mean the Road Runner?

MS. TRUONG: Well, no, I\'m talking about the whole universe of cable
systems that are attributable to AT&T. Then I think it would be
legitimate for us to consider that AT&T\'s reach would cover sixty
percent of homes passed by cable nationglide. Recognizing that not all
of those homes passed are currently upgraded to provide high speed
internet service, of course.

MR. CICCONI: I\'m at a lost to know where you\'re getting the sixty
reach from if we\'ve got an attributable interest in only thirty
percent.

MS. TRUONG: You have attributable interest in thirty percent of the
market for the video programming market. THE MPPD market.

MR. CICCONI: And under your ownership rules.

MS. TRUONG: Yes, but if we\'re talking about the high speed market or
the internet service ‑‑

MR. CICCONI: We\'re talking about is ‑‑ if you\'re talking about the
potential reach of any system in which AT&T has an interest, however
attenuated, I\'m not certain how you, then, extrapolate from there to
the internet and somehow get some sort of internet reach based on that.
Maybe you can explain the question to me a little better and I\'ll try
and answer it.

MS. TRUONG: Well, I think if you look at it from the standpoint of our
attribution rules, we find that putting aside the issue of the TWE
partnership, you, post‑merger, would have close to thirty percent of
homes passed ‑‑ or, rather, thirty percent of ‑‑

MR. CICCONI: Subscribers.

MS. TRUONG: ‑‑ MVPD subscribers nationwide. So that\'s a different
standard than if we\'re looking at the internet market where the
question would be the number of homes that can be upgraded for you to
provide high speed internet access. And so from that standpoint, it
would make sense for us to look at the cable homes passed number as the
base line.

MR. CICCONI: Well, we\'re not upgrading cable homes for high speed
internet access unless we own those systems. It\'s not ‑‑ so I\'m,
again, I\'m having a little with this. Certainly if we own the systems
to deliver high speed internet access, we\'re going to do those
upgrades. We\'re in the process of doing many of them now.

But if you\'re talking about systems owned by others for purposes of
their decision to upgrade whether it\'s Cable Vision or someone else,
that\'s certainly their decision to make those upgrades and that is not
something where we\'re making the decisions.

MR. JOHNSON: Can I just try this one more way?

MR. CICCONI: Okay.

MR. JOHNSON: I assume from the documents you filed that you have an
interest in being involved in the TWE phone business.

JUDGE LATHAN: By TWE we mean Time Warner Entertainment, for everybody.

MR. JOHNSON: And that you would want to be involved in upgrading those
operations and marketing the phone business.

MR. CICCONI: We would hope to conclude a joint venture agreement with
Time Warner to do that, yes, Bill.

MR. JOHNSON: Would the same be true with respect to internet access on
those systems?

MR. CICCONI: Not necessarily. That would be a decision that Time Warner
itself would have to make as to whether they wanted to, wanted to
include that in the arrangement. And it\'s simply something to be
negotiated. I\'m not certain and I don\'t think anybody could conclude
in any hypothetical negotiation that that\'s something the cable system
would want to yield up nor needed because it\'s not necessarily an
adjunct to delivery of telephone service.

MR. MELCHER: Well, Mr. Johnson, I think you\'re absolutely right. If you
look at yesterday\'s U. S. A. Today newspaper, you\'ll see Mr. Levin, I
think he\'s still Chairman and CEO of Time Warner, TWE, and he is
literally crowing about how much money Time Warner made from value ad
internet services. And I believe his quote was ‑‑ you can get it out of
U. S. A. Today newspaper article yesterday ‑‑ I believe his quote was,
crowing about the inertia of first movers status and the inertia of
customers, you sign them up on the credit card, you roll them in and you
just watch it, keep going. And they never leave.

And that\'s what AT&T is looking to do and I think we have to be
concerned about AT&T and TWE together what they\'re going to do with
that cable technology.

MR. CICCONI: But the larger point I think Chris may well have made is if
Jerry Levin is so happy with the revenues from his ISP internet access
on his cable systems today, I don\'t know why he\'s about to yield those
over to AT&T as part of the telephony deal. We certainly would like to
think he might, but the statement that Chris mentioned from Jerry Levin
certainly doesn\'t seem to indicate that that is his game plan, nor is
that anything that we\'ve had indicated to us.

So, I think that the notion that somehow our reach on the internet would
include and would subsume the ability to access the internet over all of
Time Warner systems, I think is certainly hypothetical and most probably
flawed.

MR. CICCONI: Let me just read this one ‑‑ one of your filings said that
you want to emphasize the ability to retain MediaOne\'s interest in TWE
is critical to the proposed merger and to AT&T\'s ability to achieve a
broad rapid deployment of competitive telephony and broadband services.
Which I would read as it\'s critical to getting access to the TWE plant
for internet access services.

Is that not right?

MR. CICCONI: Again, if you\'re talking about Time Warner\'s cable
systems which may be included in the TWE partnership, those systems are
currently on the Road Runner system today. We would hope to have an
access to those systems to provide competitive telephony services.
Frankly, any other services we\'re able to provide.

But the fact is today if you\'re talking about reach today, what you\'re
talking about is Time Warner\'s control of the internet access on those
systems. We do not have that control. And I don\'t think we can sit here
and hypothesize that we may as a result of some agreements or
arrangements in the future be able to somehow get a hand in that.
That\'s not the case today. It certainly doesn\'t appear to me to be the
case tomorrow, if and when we acquire MediaOne.

It is a fact that those systems are controlled by Time Warner today and
that Time Warner controls the internet access, provision of internet
access on the system.

JUDGE LATHAN: But if you were to merge with MediaOne, you would acquire
their twenty‑five percent ‑‑ I\'ve seen numbers from twenty‑one percent
to twenty‑five percent interest in Time Warner Entertainment. And I know
that you do not have management or governance rights under, the way the
provisions are written in that agreement, but would it not be possible
for you to swap items in and out of that agreement?

For example, HBO ‑‑ to do a deal where you could swap HBO for the right
to deliver those internet services over the TWE systems?

MR. CICCONI: Again, what we\'re able to do in the future negotiation
which we may or may not enter into as part of the partnership is highly
speculative and certainly the other party to those negotiations isn\'t
here and I don\'t think ‑‑

MS. TRUONG: We invited them.

MR. CICCONI: I know. I don\'t think, Deborah, I can draw ‑‑ and I can
understand why they\'re not here, too. I don\'t think I can really draw
a conclusion here as to what they would be willing to negotiate or not
negotiate. But I think there\'s a core.

JUDGE LATHAN: I\'m not asking if they would or wouldn\'t. Simply saying
would you have the ability.

MR. CICCONI: I don\'t really want to go down, go too far down the
hypothetical road. Let me say this again. If we\'re talking about cable
high speed internet access here, what you\'re talking about, again, is
is a segment of overall high speed internet access, which somehow
excludes DSL, excludes satellite, excludes fixed wireless, excludes any
other means of accessing the internet. And, by the way, which ignores
the dominant means of accessing the internet today, which is merilband.

So I think one is taking a segment of the segment of the segment and
then, somehow, hypothesizing that we might have a position there within
that segment. The fact is we don\'t have that position today in
broadband internet access. And there\'s really no reasonable belief we
would have that tomorrow. It\'s a highly competitive market.

And from the consumer\'s standpoint, this is probably the most important
aspect of it. The consumer has other choices for getting internet
access, both high speed and low speed. In fact, in a variety of speeds.

So, from a consumer standpoint, if they don\'t like one offering that
one particular company is laying down, they can go somewhere else.
That\'s really what this is all about. From a consumer standpoint, there
is no bottleneck, there is no blockage today and there would not be
tomorrow.

I think the development of this market, the acceleration of DSL, the
advent of fixed wireless and these other technologies is the best
assurance the Commission has that the marketplace is indeed working.

I certainly understand that it\'s your responsibility to monitor those
developments closely to make sure bottlenecks don\'t occur. Fact is,
there\'s no evidence on the record that there is a bottleneck today and
there\'s certainly no indication or evidence that the bottleneck will
develop in the course of this merger.

And if one believes the studies like Yankee Group and others, then the
possibility of any bottleneck developing in the years ahead, in the
immediate years ahead is greatly diminished.

MR. MELCHER: I thought there\'s a comment from the Consumer Federation
of America that might be relevant for this discussion. And the Consumer
Federation of America in their December 1999 report entitled Keeping the
Information Superhighway Open for the 21st Century, concludes that
AT&T\'s efforts to impose discriminatory access on a major means of
communication, the broadband internet, should be opposed and should not
be allowed.

They go on to talk about this discussion here. AT&T\'s continuing, and I
quote, AT&T\'s continuing efforts to mask its central role in the
ownership of cable and broadband internet companies are examined. The
new AT&T is now a jumble of management gimmicks intended to convince
regulators that AT&T is not in charge. Tracking stock for cable
programming, tracking stock for wireless, tracking stock for internet
programming, a management committee for Time Warner Entertainment and an
independent, quote, unquote, independent operating agreement for
Cablevision.

These arrangements do not eliminate the ability of AT&T parent to
influence the decisions of these corporate children. There are extremely
for regulators to police to prevent abuses of influence. They deny
regulators full oversight over major ownership decisions.

That\'s their statement, not mine. But I ‑‑

MR. CICCONI: Can I respond to that statement since you\'ve read it?

First of all, that was a statement that the Consumer Federation put on
the record in response to the announcement by AT&T who is going to put
out a tracking stock. And there\'s several simply false statements in
there.

Talked about a tracking stock for cable. There\'s no such animal,
there\'s been no such announcement, there is no such tracking stock.

Talks about a tracking stock for internet interest. There\'s no such
animal, there\'s no such tracking stock.

There is a tracking stock that has been announced for a wireless
interest. Has nothing to do with the issues before the Commission here
in this merger. Or, frankly, anything to with anything that Mr. Melcher
has brought up.

MS. TRUONG: Well, I think there is a lot of disagreement about the
extent of AT&T\'s horizontal reach, obviously, in both the video and
broadband areas. But I like to bring it a little bit farther out and to
ask a broader overall question and certainly would love to hear from
Professors Rosston and Bar and Misters Cicconi and Melcher, but from
anybody else on the panel, as well.

Going back to the broader question, do you think that the merger would
give AT&T some kind of horizontal reach that would allow it to handicap
or slow down the growth of competition from alternative broadband
providers such as DSL or wireless, either by virtue of its being able to
have first pick or exclusive arrangements with broadband content and
application providers or through some other means.

Professor Rosston?

MR. ROSSTON: Given it\'s late, how about no?

JUDGE LATHAN: Yeah, our time is really up. If you want to give quick
answers to that, you know, that\'s fine, but, you know, make it like
thirty seconds or so.

MR. MELCHER: It\'s not a primary concern of ours, that particular issue.

JUDGE LATHAN: Professor Bar?

MR. BAR: The answer is no, but my sense is that there are some concerns
that can raised which I\'ve raised earlier, so I\'m not going to repeat
them for the sake of time. They are issues about first mover advantage,
there are issues about defining the architecture for important portion
of the cable infrastructure which I think do translate into a new power.

JUDGE LATHAN: Okay, we\'ll let Mr. Cicconi have the last word since he
chose to be here all day.

MR. CICCONI: Well, if you believe this stuff about first mover
advantage, and I don\'t think there\'s really any evidence that we\'re
benefiting from it, but apparently some people on the panel here seem to
think we have it. If we have it, then the notion of exclusive
arrangements ‑‑

JUDGE LATHAN: Well, Jim, let me stop you. We do not ‑‑ we draw no
conclusions. Those were hypotheticals.

MR. CICCONI: No, I understand.

THE: Okay.

MR. CICCONI: But the fact is that if we did have a first movers
advantage somehow here, one would think we might have some exclusive
broadband content arrangements. The fact is we don\'t. That\'s probably
the best evidence that there is really not much of a first mover
advantage here. Certainly the content providers haven\'t seemed to feel
there is. But there are no exclusive content arrangements in this base
that I\'m aware of.

JUDGE LATHAN: Well, before we conclude, I want to thank all the staff
who really helped put this meeting together. There were a lot of people
who devoted a lot of work to making certain that your water jugs were
filled and the tables were set and coming up with some, a lot of these
questions.

So I want to thank the Cable Services Bureau staff for putting this
together.

And I want to thank each of you for coming. It has been a very long day.
We have found this to be very, very beneficial. And thanks so much.

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**[REPORTER\'S CERTIFICATE]{.underline}**

**FCC DOCKET NO.**: 99-251

**CASE TITLE**: AT&T-MediaOne Public Forum

**HEARING DATE**: February 4, 2000

**LOCATION**: Washington, DC

I hereby certify that the proceedings and evidence are contained fully
and accurately on the tapes and notes reported by me at the hearing in
the above case before the Federal Communications Commission.

Date: \_\_\_\_\_\_\_\_\_\_ [Sharon Bellamy]{.underline}

Official Reporter

Heritage Reporting Corporation

1220 \"L\" Street, N.W.

Washington, D.C. 20005

**[TRANSCRIBER\'S CERTIFICATE]{.underline}**

I hereby certify that the proceedings and evidence were fully and
accurately transcribed from the tapes and notes provided by the above
named reporter in the above case before the Federal Communications
Commission.

Date: \_\_\_\_\_\_\_\_\_\_
\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_

Official Transcriber

Heritage Reporting Corporation

**[PROOFREADER\'S CERTIFICATE]{.underline}**

I hereby certify that the transcript of the proceedings and evidence in
the above referenced case that was held before the Federal
Communications Commission was proofread on the date specified below.

Date: \_\_\_\_\_\_\_\_\_\_
\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_

Official Proofreader

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