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
                                                    


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
                                             (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
                                             (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.
//
          (Whereupon, at 4:05 p.m., the hearing was 
concluded.)
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	REPORTER'S CERTIFICATE


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                
                              Official Reporter
                              Heritage Reporting Corporation
                              1220 "L" Street, N.W.
                              Washington, D.C. 20005


	TRANSCRIBER'S CERTIFICATE


	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

	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
                              Heritage Reporting Corporation
 

 
 
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