Stephen C. Garavito								Room 1131M1
General Attorney									295 North Maple Avenue
										Basking Ridge, NJ  07920
										908-221-8100
										FAX 908-630-3424

February 18, 2000

BY MESSENGER

To-Quyen Truong, Esq.
Associate Chief
Cable Services Bureau
Federal Communications Commission
445 12th Street, SW
Washington, DC 20554

Re:	Ex Parte Presentation

In the Matter of Applications for Transfer of Control to AT&T Corp. ("AT&T") 
of Licenses and Authorizations Held by MediaOne Group, Inc. ("MediaOne")

CS Docket 99-251					
		
Dear Ms. Truong:

	This letter responds to your request that we summarize our arguments rebutting claims 
that AT&T might use its broadband Internet access "dominance" to harm some Internet content 
providers by giving other providers preferential caching or favored placement on Excite@Home 
or Road Runner web pages.

	As a threshold matter, AT&T and MediaOne dispute the major premises underlying these 
claims:  the assumptions that there is a separate broadband market; that broadband service will 
quickly grow into the predominant mode of access; and that cable modem services will represent 
the predominant broadband services.  In fact, cable modem and other broadband service today is 
a tiny sliver of the online services market.  And, as our submissions in this proceeding have 
demonstrated and as the Commission itself has found, cable modem services face competition 
from DSL and a wide range of other broadband services.  DSL has been growing even faster than 
cable modem service,  and may even overtake may cable modem subscribership in the very near 
future.   MCI WorldCom, Sprint, Nextel, Hughes, Teledesic and others are making multi-billion 
dollar investments in alternative broadband technology.  All available evidence suggests that 
there will be multiple competing broadband paths into virtually all U.S. residences well before 
broadband Internet services eclipse traditional narrowband services, and that no one (or two) 
technologies, networks or providers are poised to dominate.  

As we have explained in past filings,  the fundamental characteristics of caching and 
content placement foreclose any argument that the Merged Entity could somehow "dominate" 
the Internet.  Attempts to institute preferential caching practices would be counterproductive, 
because they would undercut network efficiency, angering customers; and futile, because content 
providers could easily turn to any one of the numerous caching services that are available from 
third parties to enhance content delivery.  Attempts to favor content providers through favorable 
placement on the Excite@Home or Road Runner web pages would be similarly futile, because e-
businesses have myriad ways other than those pages - including TV, radio, and print advertising, 
and unaffiliated Internet sites - to advertise and gain exposure.  In addition, AT&T has pledged 
that customers will continue to be able to bypass those pages completely, and obtain "one-click" 
access to the content of their choice.  These points are presented in more detail in the attached 
papers.

	We hope that this summary is useful as you complete your public interest review of the 
applications.  Please let us know if you require any additional information.  We are submitting 
two copies of this letter and the attachments to the Secretary in accordance with Section 
1.1206(b)(1) of the Commission's Rules.

Very truly yours,

							/s/

				Stephen C. Garavito

							/s/

							Susan Eid

Cc:	Deborah Lathen
	Howard Shelanski
	Magalie Roman Salas

PREFERENTIAL CACHING WOULD BE COUNTERPRODUCTIVE AND FUTILE

? Preferential caching practices would cause network inefficiencies and result in higher costs.  
Caching is a dynamic, reactive process driven entirely by customer usage patterns -- i.e., the web sites 
that customers visit most often are cached.  Caching according to usage patterns is a matter of utmost 
importance to the economic and efficient operation and integrity of the networks.  In the absence of 
usage pattern caching, each time customers accessed content from popular content providers who 
were not "preferred providers," the content would have to be delivered over the backbone networks of 
Excite@Home and Road Runner, rather than from the local proxy servers.  To maintain standards 
adequate to attract and retain customers, Excite@Home and Road Runner would have to incur the 
costs of leasing more backbone, which would substantially raise bandwidth management costs.

? Degrading any content lowers customers' perception of service value.  A caching strategy that 
degraded the delivery of rival content would harm customers' perception of the value of our 
broadband services.  AT&T's customers judge the performance of AT&T's high-speed Internet 
services by how fast they can access the content they want.  If their experience in obtaining that 
content is degraded, they will think less of the service, harming AT&T's ability to attract and retain 
customers. 

? Discriminatory caching would drive customers to other online service providers.  When the 
Excite@Home and Road Runner exclusivity periods run, and other online service providers offer 
service over AT&T cable systems under commercial arrangements with AT&T, those other providers 
will determine their own caching policies.  Any AT&T strategy that could negatively affect customer 
perception of AT&T's service would simply drive customers to these competing services.

? Content providers seeking to improve content delivery speed by network edge replication could 
simply turn to "content delivery" companies.  Caching can - and does - occur at many places not 
controlled by AT&T, Excite@Home or Road Runner. As detailed below, there are numerous "content 
delivery" companies that deal directly with content providers and use their own facilities to replicate 
bandwidth-heavy content closer to customers.  If AT&T attempted to advantage one streaming media 
provider by not caching its rivals, the rivals could simply obtain local caching from a third party.  
Third party caching would not require the cooperation of AT&T, Excite@Home or Road Runner. 

? Providers of "content delivery" services are proliferating and prospering.  There are numerous 
content delivery services available to interested content providers.  Akamai has a market 
capitalization of approximately $25 billion; over 2000 servers (including servers collocated in the 
Road Runner network) with sufficient capacity to serve peak demand of the world's top 25 web sites 
combined; and over 200 content-owner customers, including seven of the top 10 search sites, major 
portals such as the Go Network, Looksmart, Lycos and Yahoo, and over 75 e-businesses including 
CCNB.com, discovery.com, jcrew.com and marthastewart.com.  

Competing services include a venture between Digital Island, Inc., Sun Microsystems, Inc., and 
Inktomi Corp. to provide content delivery service over a 5,000 server network that has already signed 
up  many content providers, including CNBC.com, ft.com, Blue Mountain Arts, PBS and Value 
America,  as well as Mirror Image Internet (with funding from Hewlett Packard), AboveNet 
Communications Inc., and Adero. 

PREFERENTIAL PLACEMENT PRACTICES WOULD NOT BENEFIT AT&T

? Preferential placement is futile when customers can bypass the AT&T home page and 
go directly to the home page of any portal or website.  Even if some e-businesses negotiate 
favorable advertising deals with Excite@Home and Road Runner for favorable placement on 
their home pages, the e-businesses' competitors would not be at any competitive 
disadvantages.  All customers would still be able to access the content of rival e-businesses, 
and would be aware of their existence through traditional advertising media or other Internet 
advertising.

? Most e-businesses still use traditional advertising media.  There are myriad ways - 
including TV, radio and print advertising - for new e-businesses to advertise and gain 
exposure.  Internet financial companies, for example, have the option of advertising in the 
Wall Street Journal, Bloomberg, Fortune, and Business Week.  It is widely recognized that 
more traditional alternatives like TV and radio are much more effective than Internet 
advertising,  which explains why e-businesses, like their "bricks-and-mortar" counterparts, 
spend far more of their advertising dollars on traditional media.   CNET reportedly spends 
91.7% of its advertising dollars on traditional media.  Similarly, Priceline.com and 
Amazon.com spend 99.9% and 90.7%, respectively, of their advertising dollars on traditional 
media.   Internet companies that spend heavily on TV advertising quickly achieve far greater 
brand awareness than those that don't..   That is why so many "dot-com" companies bought 
ads during the Super Bowl this year. 

? An ISP's home page is just one of many places to get exposure on the Internet.  Large 
percentages (up to 50 percent) of Excite@Home and Road Runner customers never even 
view the Excite@Home and Road Runner home pages.  And even among those customers 
that maintain Excite@Home or Road Runner as their home page, most visit and spend 
considerably more time on popular portal sites like Yahoo.   That is why Yahoo brings in 
almost twice as much advertising revenue as Excite@Home and Road Runner combined.   

? Much advertising takes place on Internet content sites.  Internet content sites such as 
CNET, PC World, and the Wall Street Journal generate more in Internet advertising revenues 
than Excite@Home and Road Runner combined.  

? Alternative advertising still allows for "broadband" advertising.  Numerous companies 
that do not themselves offer broadband Internet service have equal ability to (and do) offer 
placement for "broadband" (i.e., "rich media" or interactive) advertising.  Recent 
technological advances will further strengthen the ability of a wide array of sites and 
providers to offer placement for "broadband" advertising.  For example, content delivery 
pioneer Akamai now offers a service to website owners (and ISPs) that stores "rich-media" 
ads locally, allowing even narrowband users to view and enjoy rich-media ads. 

DCDOCS:166276.1(3K@S01!.DOC) 

 	Sylvia Dennis, DSL Taking Off Big Time, Newsbyte News Network (Aug. 17, 1999); 
http://www.uswest.com/news/012600.html.
  	Vito Racanelli, AOL-Time Warner Deal Leaves Baby Bells Unjustly Shunned, Baron's (Jan. 15, 
2000) (Exhibit 3).  
  	On caching, see, e.g., September 17, 1999 Reply Comments 73, 92; Medin Declaration (submitted 
with Reply Comments)  19-20; November 24, 1999 Response to Commission's November 3, 1999 
Request for Additional Information No. 23; December 14, 1999 Ex Parte Reply Comments 26-28; Medin 
Reply Declaration (submitted with Ex Parte Reply Comments)  15-19; Ordover/Willig Reply 
Declaration (submitted with Ex Parte Reply Comments)  51-52.  Regarding access to content, see, e.g.,  
July 7, 1999 Transfer of Control Application 84-86; Medin Reply Declaration (submitted with Ex Parte 
Reply Comments)  14; Ordover/Willig Reply Declaration (submitted with Ex Parte Reply Comments)  
45-50.  	
  If a streaming media provider, for example, wanted to improve delivery of its content to 
Excite@Home subscribers, it could simply collocate its servers at Excite@Home's peering points 
with MCI or any of the many other backbone providers with which Excite@Home interconnects.  
The streaming media provider could deal directly with MCI or it could hire a third party content 
delivery service that operates such collocated servers.  In either case, AT&T would have no way 
noticeably to degrade performance from the rival provider (absent blocking all content from the 
rival's website, which AT&T has pledged not to do).
  See http://www.upside.com/texis/mvm/print-it?387e33d00&t+/texis/mvm/people/story; 
http://www.akamai.com/service/network.html; http://www.akamai.com/news/press537.html; 
http://www.akamai.com/news/press010500.html; http://www.akamai.com/news/press 
010600.html.
  http://www.digisle.net/customers/all_customers.shtml.  Inktomi also has an arrangement with 
Verio, Inc., the world's largest operator of business and e-commerce Web sites, under which 
Inktomi will provide Verio with content delivery infrastructure.  See http://www.inktomi.com/ 
new/press/verio.html.
  See http://www.infoworld.com/articles/el/xml/99/12/21/991221elmirror.xml; http://www. 
mirror-image.com/press/frame_latest.cfm?news_item_id=35; http://www. mirror-
image.com/services/ overview.html; http://www.adero.com/index.html.
  Richard Tomkins, Caught in a Tangled Web of Confusion, Financial Times, (Jan. 21, 2000).  As 
one commentator puts it "Before the Internet, advertisers understood how to reach people 
effectively through both print and electronic media.  They knew where to run ads, how to apply 
creative talent, and how to measure and understand the results.  On the web, they haven't figured 
it out yet."  Peter Schwartz, Internet Advertising is Going to Change.  But How?, Red Herring, at 
76 (Feb. 2000).
  See Morgan Stanley, The Internet Data Services Report, pp. 42-45 (http:// www.msdw.com/ 
techresearch/inetdata/index.html).  Forrester Research estimates that the typical dot.com company 
spent 63.4% of its ad dollars in traditional media in 1999 (with that number going up to 73.8% in 
2004).  See Jennifer Gilbert, Gaining Credibility and Trust Central to Online Strategies, 
Advertising Age Interactive Special Report Supplement, p. 72 (November 1, 1999).  AP reports 
that Internet-related companies bought $277 million in TV advertising in just the first 9 months of 
1999.  David Bauder, NBC Leads the Way with Richer Viewers, Internet Users (January 25, 
2000).
  See Jennifer Gilbert, Gaining Credibility and Trust Central to Online Strategies, Advertising 
Age Interactive Special Report Supplement, p. 72 (November 1, 1999); Top 25 Internet 
Advertisers, Advertising Age, p. 41 (September 27, 1999); Amazon.com 10-K (March 5, 1999).
  See Sylvia Dennis, On line Ad Growth Will Fail to Topple Broadcast Dominance, Newsbyte 
(Jan. 26, 2000) (Exhibit 11) (quoting Fletcher Research analyst Caroline Sceats).  
  Kathryn Kranhold, The Real Action:  Ad Bowl XXXIV, Wall Street Journal, at B1 (Jan. 28, 
2000).  
  Jupiter Communications estimates that 50% of persons that visit the Excite portal also visit 
Yahoo (but that only 27% of those that visit Yahoo visit Excite).  Jupiter Communications, Portal 
Deals, Fig. II.20 (July 1999).   See also id. (estimating that 32% of visitors to the Excite portal 
visit MSN; 42% visit Infoseek; 43% visit Netscape; 40% visit Lycos; and 24% visit Alta Vista).
  See The Strategis Group, Advertising on the Internet:  1999, Figure 9.7. 
  See Morgan Stanley, The Internet Data Services Report, pp. 42-45 (http://www.msdw.com/ 
techresearch/inetdata/index.html).  
  See http://www. akamai.com/service/howitworks.html.  Bluestreak.com's E*banner 2.0 service 
employs a "bandwidth sniffing" technology that senses the speed of the end user's modem.  The 
customer's computer then downloads only the discrete pieces of the ad that are needed in real-
time.  See http://www.bluestreak.com/pressrelease2.asp.
 
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To-Quyen Truong, Esq.
February 18, 2000
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