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 Federal  Communications  Commission  FCC  01-  12
 Before  the  Federal  Communications  Commission
 Washington,  D.  C.  20554
 In  the  Matter  of
 Applications  for  Consent  to  the  Transfer  of  Control  of  Licenses  and  Section  214
 Authorizations  by  Time  Warner  Inc.  and  America  Online,  Inc.,  Transferors,  to  AOL  Time  Warner
 Inc.,  Transferee
 )  )
 )  )
 )  )
 )  )
 )
 CS  Docket  No.  00-  30
 MEMORANDUM  OPINION  AND  ORDER
 Adopted:  January  11,  2001  Released:  January  22,  2001*
 By  the  Commission:  Chairman  Kennard  and  Commissioner  Ness  issuing  separate  statements;  Commissioners  Furchtgott-  Roth  and  Powell  concurring  in  part,  dissenting  in  part,  and  issuing
 separate  statements;  Commissioner  Tristani  issuing  a  statement  at  a  later  date.
 TABLE  OF  CONTENTS
 Before  the......................................................................................................................................................  1
 Federal  Communications  Commission  .........................................................................................................  1
 Washington,  D.  C.  20554...............................................................................................................................  1
 MEMORANDUM  OPINION  AND  ORDER...............................................................................................  1
 I.  introduction......................................................................................................................................  3
 II.  PUBLIC  INTEREST  FRAMEWORK  ............................................................................................  9
 III.  Background....................................................................................................................................  12
 A.  The  Applicants..................................................................................................................  12  B.  Other  Proceedings  Relevant  to  the  Application  to  Transfer  Licenses.  .............................  20
 C.  The  Merger  Transaction  and  the  Application  to  Transfer  Licenses..................................  21  IV.  Analysis  of  Potential  public  interest  harms....................................................................................  22
 A.  High-  Speed  Internet  Access  Services  ...............................................................................  22  1.  Background..........................................................................................................  26
 2.  Discussion............................................................................................................  28
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 3.  Conditions............................................................................................................  55  B.  Instant  Messaging  and  Advanced  IM-  Based  High-  Speed  Services..................................  57
 1.  Background..........................................................................................................  59  2.  Discussion............................................................................................................  64
 3.  Condition  .............................................................................................................  81  C.  Video  Programming..........................................................................................................  84
 1.  Electronic  Programming  Guides..........................................................................  84  2.  Broadcast  Signal  Carriage  Issues.........................................................................  87
 3.  Cable  Horizontal  Ownership  Rules  .....................................................................  88  D.  Interactive  Television  Services  .........................................................................................  90
 1.  Background..........................................................................................................  91  2.  Discussion............................................................................................................  97
 E.  Multichannel  Video  Programming  Distribution  .............................................................  101  1.  Common  Ownership  of  DBS  and  Cable  MVPDs..............................................  102
 2.  Program  Access  Issues.......................................................................................  104  F.  COORDINATION  WITH  AT&  T...................................................................................  106
 1.  Background........................................................................................................  107  2.  Discussion..........................................................................................................  112
 G.  Other  Potential  Public  Interest  Harms  ............................................................................  119  V.  ANalysis  of  potential  public  interest  benefits  ..............................................................................  120
 A.  The  Evidence  ..................................................................................................................  122  B.  Discussion.......................................................................................................................  127
 VI.  CONCLUSION............................................................................................................................  132
 VII.  ORDERING  CLAUSES..............................................................................................................  132
 APPENDIX  A...........................................................................................................................................  136
 Initial  Comments.......................................................................................................................................  136
 Reply  Comments.......................................................................................................................................  136
 Appendix  B  ...............................................................................................................................................  137
 CONFIDENTIAL  APPENDIX  ................................................................................................................  137
 APPENDIX  C  ...........................................................................................................................................  138
 STATEMENT  OF  FCC  CHAIRMAN  WILLIAM  E.  KENNARD..........................................................  145
 ON  CONDITIONED  APPROVAL  OF  AOL  TIME  WARNER  MERGER  ............................................  145
 SEPARATE  STATEMENT  OF  COMMISSIONER  SUSAN  NESS  .......................................................  147
 VIII.  Cable  Internet  Access  ..................................................................................................................  150
 IX.  Interactive  Television...................................................................................................................  150
 X.  Time  Warner  Entertainment  and  AT&  T.......................................................................................  150
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 XI.  Privacy  .........................................................................................................................................  151
 Appendix  A:  List  of  Timely  Filed  Comments  Appendix  B:  Confidential  Appendix
 Appendix  C:  List  of  Authorizations  and  Licenses
 I.  INTRODUCTION
 1.  In  this  Order,  we  consider  the  joint  application  (  Application)  1  filed  by  America  Online,  Inc.  (  AOL)  and  Time  Warner  Inc.  (  Time  Warner)  (collectively  the  Applicants)  for  approval  to
 transfer  control  of  certain  licenses  and  authorizations  to  AOL  Time  Warner  Inc.,  a  newly  created  company,  pursuant  to  Sections  214(  a)  and  310(  d)  of  the  Communications  Act  of  1934,  as  amended
 (  Communications  Act).  2  The  licenses  to  be  transferred  include  the  cable  television  relay  service  (  CARS)  licenses  that  are  essential  to  the  operation  of  the  cable  systems  currently  owned  by  Time
 Warner,  which  are  in  several  respects  the  critical  asset  involved  in  the  combination  of  the  two  firms.  To  obtain  approval,  the  Applicants  must  demonstrate  that  their  proposed  transaction  will  serve  the  public
 interest,  convenience,  and  necessity.  3  In  this  regard,  we  must  weigh  the  potential  public  interest  harms  of  the  proposed  merger  against  the  potential  public  interest  benefits  to  ensure  that  the  Applicants  have
 shown  that,  on  balance,  the  benefits  outweigh  the  harms.  4
 2.  The  proposed  merger  of  AOL  and  Time  Warner  was,  at  the  time  of  its  announcement,  the  largest  corporate  merger  in  history.  5  The  combination  is  remarkable  not  only  for  its  size,  but  also  for  the
 *  The  Commission  on  January  19,  2001  approved  the  final  version  of  this  Memorandum  Opinion  and  Order.
 1  Applications  for  Consent  to  the  Transfer  of  Control  of  Licenses  and  Section  214  Licenses  Time  Warner  Inc.  and
 America  Online,  Inc.,  Transferors  to  AOL  Time  Warner  Inc.  ,Transferee,  CS  Docket  No.  00-  30  (filed  Feb.  11,  2000)  (  Application).
 2  47  U.  S.  C.    214(  a),  310(  d).  AOL  and  Time  Warner  now  independently  control  the  licenses  and  authorizations  at
 issue.  3
 See  47  U.  S.  C.    214(  a),  310(  d).  See  also  Applications  For  Consent  To  The  Transfer  Of  Control  Of  Licenses  and  Section  214  Authorizations  From  MediaOne  Group,  Inc.,  Transferor,  To  AT&  T  Corp.,  Transferee,  CS  Docket  No.
 99-  251,  Memorandum  Option  and  Order  (  AT&  T-  MediaOne  Order),  15  FCC  Rcd  9816,  9817    1  (2000);  Applications  of  Ameritech  Corp.,  Transferor,  and  SBC  Communications  Inc.,  Transferee,  for  Consent  To  Transfer
 Control  of  Corporations  Holding  Commission  Licenses  and  Lines  Pursuant  to  Sections  214  and  310(  d)  of  the  Communications  Act  and  Parts  5,  22,  24,  25,  63,  90,  95,  and  101  of  the  Commissions  Rules,  CC  Docket  No.  98-
 141,  Memorandum  Opinion  and  Order  (  SBC-  Ameritech  Order),  14  FCC  Rcd  14712,  14736    46  (1999),  revd  in  part  on  other  grounds  sub  nom.  Assoc.  of  Communications  Enterprises  v.  FCC,  No.  99-  1441,  2001  WL  20519  (D.  C.
 Cir.  Jan.  9,  2001);  Application  of  WorldCom,  Inc.  and  MCI  Communications  Corporation  for  Transfer  of  Control  of  MCI  Communications  Corporation  to  WorldCom,  Inc.,  CC  Docket  No.  97-  211,  Memorandum  Opinion  and  Order
 (  WorldCom-  MCI  Order),  13  FCC  Rcd  18025,  18026-  27,  18030-  32    1,  8-  10  (1998);  Applications  of  NYNEX  Corp.  Transferor,  and  Bell  Atlantic  Corp.  Transferee,  for  Consent  to  Transfer  Control  of  NYNEX  Corp.  and  Its
 Subsidiaries,  File  No.  NSD-  L-  96-  10,  Memorandum  Opinion  and  Order  (  Bell  Atlantic-  NYNEX  Order),  12  FCC  Rcd  19985,  19987,  20000-  04    2,  29-  32  (1997).
 4  SBC-  Ameritech  Order,  14  FCC  Rcd  at  14736    46;  WorldCom-  MCI  Order,  13  FCC  Rcd  at  18031-  32    10.
 5  See,  e.  g.,  AOL  and  Time  Warner  In  Record  $350  Billion  Merger,  COMM.  DAILY,  Jan.  11,  2000,  at  1;  Steven  Burke,
 AOL,  Time  Warner  Merger:  A  New  Model  For  Partnerships,  CMPS  TECHWEB,  Jan.  10,  2000,  at  http://  www.  techweb.  com/  wire/  finance/  story/  INV2000010S0008;  Paul  Kagan  Assoc.,  Inc.,  AOL:  Youve  Got  Time
 Warner,  Kagan,  BROADBAND,  Jan.  10,  2000.
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 nature  of  the  companies  and  the  assets  they  control.  The  proposed  merger  has  attracted  substantial  public  interest  and  has  come  under  scrutiny  by  several  bodies  other  than  this  Commission,  including  the  U.  S.
 Congress,  the  Federal  Trade  Commission  (  FTC),  and  the  European  Commission.  The  unprecedented  nature  of  the  merger  creates  more  than  the  normal  potential  for  controversy  and  confusion  both  about  the
 merits  and  about  the  role  of  the  Commissions  review.
 3.  To  minimize  potential  confusion,  we  begin  with  a  summary  overview  of  the  foundation  and  context  of  our  decision.  We  first  describe  the  scope  of  the  Commissions  inquiry  and  its  specific  focus  on
 potential  consequences  of  approving  the  proposed  transfers  on  the  rules,  policies  and  objectives  of  the  Communications  Act,  and  note  several  pervasive  issues  about  whether  and  how  those  potential
 consequences  should  be  addressed  by  this  Commission  in  the  context  of  reviewing  license  transfer  applications.  We  then  briefly  note  from  the  standpoint  of  the  Communications  Act  the  most  significant
 aspects  of  the  companies  and  assets  that  will  combine  if  the  transfers  are  approved.  Having  established  this  context,  we  describe  the  major  issues  that  have  been  identified  and  will  be  discussed  in  the  course  of
 the  decision.
 4.  As  the  Commission  has  explained  in  prior  merger  orders,  this  Commission  and  the  Federal  Trade  Commission  each  have  independent  authority  to  examine  communications  mergers,  but  the
 standards  governing  the  Commissions  review  differ  from  the  FTCs  standards.  6  The  FTC  must  examine  whether  a  merger  will  harm  competition.  7  The  Commissions  review  encompasses  an  examination  of
 anticompetitive  effects  but  also  evaluates,  as  explained  in  more  detail  below,  the  potential  impact  of  the  proposed  transaction  on  the  rules,  policies  and  objectives  of  the  Communications  Act.  8  Transactions  that
 would  violate  the  Act  will  be  rejected.  Transactions  that  would  violate  the  Commissions  rules  may  be  allowed  only  if  the  Commission  waives  the  rules  in  question.  Transactions  that  do  not  violate  the  Act  or
 the  Commissions  rules  are  examined  to  determine  whether  they  would  otherwise  substantially  impair  or  frustrate  the  enforcement  of  the  Act  or  the  objectives  of  the  Act  and  whether  the  transaction  would
 produce  potential  public  interest  benefits  in  furtherance  of  Communications  Act  policies.  Among  the  major  policies  and  objectives  that  may  be  affected  by  significant  mergers  are  preserving  and  enhancing
 competition  in  related  markets,  ensuring  a  diversity  of  voices,  and  providing  advanced  telecommunications  services  to  all  Americans  as  quickly  as  possible.  To  gain  approval,  an  applicant  bears
 the  burden  of  establishing  that  the  potential  for  benefits  to  the  public  interest  outweighs  the  potential  for  harms.
 5.  The  balancing  of  potential  harms  and  benefits  to  the  public  interest  is  particularly  appropriate  in  the  context  of  reviewing  license  transfer  applications  that  are  associated  with  significant  mergers
 because  such  mergers  are  likely  to  create  potential  for  both  good  and  ill.  For  example,  the  same  concentration  of  assets  that  may  support  technological  innovation  by  providing  sufficient  capital  to  take
 the  necessary  risks  or  by  reducing  transaction  costs  may  also  allow  the  merged  entity  to  create  or  enhance  barriers  to  entry  by  its  competitors.  As  a  result  of  this  ambiguity,  the  outcome  most  favorable  to  the
 public  interest,  in  terms  of  the  policies  and  objectives  of  the  Communications  Act,  is  often  best  achieved  by  allowing  the  transfers,  and  thus  the  associated  merger,  to  proceed  (thus  obtaining  the  positive  benefits
 6  Cf.  AT&  T-  MediaOne  Order,  15  FCC  Rcd  at  9811    10  (comparing  FCC  standards  to  those  employed  by
 Department  of  Justice);  Applications  of  AT&  T  Corp.  and  Tele-  Communications,  Inc.  for  Transfer  of  Control  of  Tele-Communications,  Inc.  to  AT&  T  Corp.,  CC  Docket  No.  98-  178,  Memorandum  Opinion  and  Order  (  AT&  T-  TCI
 Order),  14  FCC  Rcd  3160,  3168-  69    14  (1999)  (same).  7
 See  15  U.  S.  C.    18.  8
 See  Section  II,  infra  (Public  Interest  Framework).
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 of  the  combination),  but  only  subject  to  certain  conditions,  either  voluntarily  agreed  to  or  imposed  by  the  Commission  under  its  statutory  authority,  designed  to  minimize  the  potential  harms  or  increase  the
 potential  benefits.
 6.  It  is  important  to  emphasize  that  the  Commissions  review  focuses  on  the  potential  for  harms  and  benefits  to  the  policies  and  objectives  of  the  Communications  Act  that  flow  from  the  proposed
 transaction    i.  e.,  harms  and  benefits  that  are  merger-  specific.  The  Commission  recognizes  and  discourages  the  temptation  and  tendency  for  parties  to  use  the  license  transfer  review  proceeding  as  a
 forum  to  address  or  influence  various  disputes  with  one  or  the  other  of  the  applicants  that  have  little  if  any  relationship  to  the  transaction  or  to  the  policies  and  objectives  of  the  Communications  Act.
 7.  License  transfer  applications,  even  those  associated  with  significant  mergers,  are  adjudications  focused  on  particular  parties.  Some  have  argued  that  the  Commission  should  avoid  in  such
 proceedings  addressing  significant  issues  that  also  apply  to  parties  in  the  same  industry  other  than  the  applicants,  and  should  deal  with  such  industry-  wide  issues  exclusively  in  rulemakings.  9  They  point  out
 the  potential  unfairness  of  subjecting  the  license  transfer  applicants  to  a  different  standard  that  is  not  applicable  to  their  competitors  and  contend  that  rulemakings  may  offer  a  better  opportunity  for  public
 comment  focused  on  the  adoption  of  an  industry-  wide  policy  rather  than  on  the  facts  of  a  particular  merger.  While  recognizing  the  relative  advantages  of  rulemakings  in  many  circumstances,  the
 Commission  also  recognizes  the  well-  established  principle  that  administrative  agencies  have  discretion  to  proceed  by  either  adjudication  or  rulemaking  to  decide  such  issues,  and  that  the  Commission  must  fulfill
 its  responsibility  in  an  adjudication  to  decide  the  issues  presented  by  that  case.  10  In  this  case,  the  Commission  is  required  to  balance  these  considerations  and  resolve  them  with  respect  to  several  of  the
 major  issues  presented  by  the  facts,  including  one  issue  that  is  currently  the  subject  of  a  notice  of  inquiry  that  may  lead  to  a  rulemaking  proceeding.
 8.  The  proposed  merger  has  been  touted  as  a  productive  marriage  of  a  new  media  giant  with  a  traditional  media  giant.  AOL  has  become  one  of  the  most  significant  forces  in  the  Internet  environment.
 It  is  the  nations  and  the  worlds  largest  Internet  Service  Provider  (  ISP),  and  serves  about  five  times  as  many  narrowband  subscribers  as  its  nearest  competitor.  11  AOL  initially  created  and  provided  an  online
 service,  separate  and  apart  from  the  Internet,  which  was  designed  to  provide  the  benefits  of  connecting  to  a  network  of  computers,  including  those  of  other  AOL  members  and  those  of  AOL  itself,  that  provided
 collections  of  information  on  various  subjects.  AOLs  online  service  was  distinguished  both  by  its  emphasis  on  creating  a  format  that  was  user  friendly  to  persons  not  otherwise  familiar  with  computer
 networking  and  by  its  aggressive  marketing  programs,  which  educated  the  general  public  as  to  the  benefits  and  relative  ease  of  connecting  to  a  computer  network.  The  development  and  increasing
 popularity  of  the  World  Wide  Web  eventually  led  AOL  to  adapt  its  service  to  include  access  to  the  broader  Internet,  transforming  AOL  into  an  ISP,  and  to  allow  access  to  AOLs  online  service  over  the
 Internet  to  persons  who  used  other  ISPs.  At  the  same  time,  AOL  has  continued  as  an  online  service  provider  (  OSP)  to  provide  a  number  of  resources  and  services  to  members  who  pay  a  monthly  fee.  As
 the  use  of  the  Internet  has  grown  in  popularity,  AOL  has  continued  to  attract  the  largest  share  of  users.  Moreover,  as  the  commercial  potential  of  the  Internet  has  been  recognized,  the  value  of  AOLs  large
 9  See  Applicants  Reply  Comments  at  53.
 10  See  Policies  and  Rules  for  Alternative  Incentive  Based  Regulation  of  Comsat  Corp.,  IB  Docket  No.  98-  60,  Report
 and  Order,  14  FCC  Rcd  3065,  3079    38  (1999)  (citing  SEC  v.  Chenery  Corp.,  332  U.  S.  194,  201-  03  (1947)).  11
 Narrowband  Internet  service  is  provided  over  modems  that  connect  computers  to  the  Internet  over  traditional  telephone  lines,  which  currently  allow  the  transfer  of  data  at  speeds  of  up  to  56  kbps.
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 subscriber  base  has  been  recognized,  as  has  the  value  of  AOLs  ability  to  attract  and  hold  its  members  to  the  services  and  information  provided  by  AOL  itself,  as  opposed  to  having  them  go  to  other  sites  on  the
 World  Wide  Web.  12  AOLs  abilities  to  attract  a  large  number  of  subscribers,  to  keep  them  primarily  inside  its  own  services,  and  to  negotiate  contracts  with  other  businesses  that  take  advantage  of  these
 abilities  have  provided  a  basis  for  a  profitable  business  enterprise.
 9.  Prior  to  the  announcement  of  the  proposed  merger  with  Time  Warner,  AOL  faced  a  threat  to  its  continued  success  in  the  Internet  environment  as  a  narrowband  ISP  and  OSP,  posed  by  the  anticipated
 migration  of  Internet  users  from  narrowband  access  over  ordinary  telephone  lines  to  high-  speed  access.  The  early  leaders  in  providing  high-  speed  Internet  access  have  been  cable  television  operators  which,
 unlike  telephone  companies,  are  not  common  carriers.  High-  speed  ISP  service  over  cable  systems  is  provided  on  an  exclusive  basis  by  companies  owned  in  large  part  by  the  cable  companies,  and  AOL  had
 been  unable  to  negotiate  access  to  the  cable  systems  on  terms  satisfactory  to  it.  In  response,  AOL  developed  relationships  with  alternative  providers  of  high-  speed  access,  including  high-  speed  Digital
 Subscriber  Line  (  DSL)  service  provided  over  telephone  lines  and  satellite  broadcasting  service.  In  addition,  AOL  became  the  leading  voice  in  a  movement  led  by  narrowband  ISPs  to  compel  cable
 operators  to  allow  competing  ISPs  to  provide  high-  speed  access  to  the  Internet  over  their  cable  systems.  13
 10.  AOL  also  has  the  largest  share  of  subscribers  to  services  known  as  instant  messaging  (  IM),  which  allows  subscribers  to  detect  whether  other  identified  subscribers  are  currently  on-  line  (presence
 detection),  and  to  send  and  receive  messages  to  other  subscribers  in  essentially  real  time.  There  are  competing  versions  of  instant  messaging  software  and  most,  including  those  controlled  by  AOL,  are
 offered  without  charge.  It  is  anticipated  that  IM  will  become  a  significant  platform  for  launching  and  supporting  other  applications  that  take  advantage  of  the  tools  for  presence  detection  and  real-  time
 communication.  At  present,  with  a  few  exceptions,  the  competing  IM  systems  do  not  interoperate  with  one  another  i.  e.,  a  member  of  one  such  system  cannot  detect  the  presence  of  or  send  messages  to  a
 member  of  a  competing  system.  Competing  systems  have  attempted  to  interoperate  with  AOLs  system  without  AOLs  consent.  While  stating  its  commitment  to  the  principle  of  interoperability,  AOL  has
 blocked  these  unauthorized  efforts,  citing  concerns  for  security,  privacy  and  performance  of  its  own  system.  Finally,  AOL  has  recently  begun  to  provide  interactive  television  services  (  ITV)  that  combine
 traditional  video  programming  features  with  web-  based  and  other  interactive  features,  viewed  and  used  by  consumers  through  their  television  sets.
 11.  Time  Warner  is  a  conglomerate  of  many  of  the  most  successful  traditional  media  companies.  It  holds  one  of  the  worlds  largest  content  libraries,  comprised  of  innumerable  print,  film,  television
 programming,  and  music  interests.  Time  Warner  delivers  this  content  through  magazines,  records  and  its  cable  holdings,  the  second  largest  in  the  nation.  In  recent  years,  Time  Warner  leaped  into  the  new  media
 world  by  creating,  with  other  cable  companies,  Road  Runner,  the  nations  second  largest  broadband  ISP,
 12  Some  have  referred  to  the  effect  of  AOLs  techniques  to  keep  its  subscribers  within  its  own  services  as  a  walled
 garden.  AOLs  subscribers  spend  approximately  85%  of  their  time  within  this  walled  garden  rather  than  leaving  to  explore  the  remainder  of  the  Internet.  See  Holly  Becker,  America  Online,  Lehman  Brothers,  June  29,  2000  at  35
 (  Lehman  Brothers  June  29  Report),  cited  by  Ex  Parte  Comments  of  Disney  at  14-  15,  transmitted  by  letter  from  Lawrence  R.  Sidman,  Verner,  Lipfert,  Berhard,  McPherson  &  Hand,  to  Magalie  Roman  Salas,  Secretary,  FCC,
 dated  July  25,  2000.  13
 See  In  the  Matter  of  Application  for  Consent  to  the  Transfer  of  Licenses  and  Section  214  Authorizations  from  MediaOne  Group,  Inc.,  Transferor,  to  AT&  T  Corp.,  Transferee,  CS  Docket  No.  99-  251,  AOL  Comments  at  12-  17;
 In  the  Matter  of  Application  for  Consent  to  the  Transfer  of  Licenses  and  Section  214  Authorizations  from  Tele-Communications,  Inc,  Transferor,  to  AT&  T  Corp.,  Transferee,  CS  Docket  No.  98-  178,  AOL  Comments  at  30-  39.
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 which  Time  Warner  controls.  Most  of  Time  Warners  cable  systems  are  owned  and  operated  by  Time  Warner  Entertainment  (  TWE),  a  partnership  in  which  Time  Warner  has  a  75%  stake.  As  a  result  of  the
 merger  of  AT&  T  Corp.  (  AT&  T)  and  MediaOne,  AT&  T  owns  the  remaining  25%.  Thus  Time  Warner  already  represents  a  vertical  integration  of  substantial  programming  (content)  and  distribution  (conduit)
 assets.
 12.  This  proposed  merger  at  this  particular  point  raises  a  number  of  issues  with  respect  to  the  policies  of  the  Communications  Act  that  have  generated  intense  public  comment.  The  Internet  is  widely
 recognized  as  a  major  source  of  innovation  and  economic  growth  in  recent  years.  The  conditions  which  allowed  that  explosive  growth  and  innovation  to  occur  included  substantial  initial  public  investment  and
 an  architecture  that  encouraged  innovation  by  reducing  barriers  to  entry  and  ensuring  competition  on  the  merits.  Competition  among  narrowband  ISPs  has  been  open  because  of  the  common  carrier  telephone
 network  over  which  they  offer  their  services.  As  already  noted,  the  proposed  merger  has  been  motivated  in  large  part  by  the  anticipated  migration  of  ISPs  customers  from  the  regulated  common  carrier  telephone
 network  to  broadband  conduits,  primarily  cable  systems,  which  are  not  common  carriers.  The  policies  of  the  Communications  Act  that  are  potentially  implicated  by  this  shift,  and  by  this  proposed  merger,  include
 the  preference  for  competitive  telecommunications  markets,  the  existence  of  diverse  platforms  and  providers,  the  promotion  of  innovation,  and  rapid  deployment  of  advanced  telecommunications  services.
 13.  From  a  competition  standpoint,  vertical  integration  can  create  potential  problems  when  the  integrated  company  has  market  power  at  one  or  more  of  the  levels  of  integration.  Concerns  about  the
 integration  of  video  programming  content  and  the  cable  conduit  are  addressed  in  statutory  provisions  and  Commission  rules,  such  as  the  horizontal  ownership  cap  and  the  channel  occupancy  rules.  14  These
 provisions,  however,  do  not  necessarily  apply  to  or  resolve  the  similar  concerns  raised  by  the  proposed  merger  with  respect  to  the  integration  of  the  existing  Time  Warner  combination  of  content  and  conduit
 with  AOLs  online  services  in  the  residential  market.  As  Congress  and  this  Commission  have  recognized,  market  power  exists  on  the  Time  Warner  side  in  the  cable  assets.  On  the  AOL  side,  market  power
 arguably  exists  both  in  AOLs  position  as  the  leading  narrowband  ISP  and  in  AOLs  instant  messaging  network.
 14.  A  number  of  the  comments  reflect  fears  of  the  potential  anticompetitive  impacts  that  could  flow  from  the  unprecedented  combination  of  assets  that  the  merger  represents.  Our  task  in  evaluating  the
 comments  is  more  difficult  because  of  the  rapid  development  of  the  technologies  and  products  involved  and  the  ambiguous  nature  of  some  of  the  mergers  predicted  impacts.  For  instance,  several  of  the  most
 controversial  issues  relating  to  the  proposed  merger  involve  products  and  markets  that  have  only  recently  developed  or  that  are  only  anticipated  and  yet  commenters  urge  that  if  some  conditions  are  not  placed
 on  the  merger  at  this  point,  harms  will  occur  so  rapidly  that  much  more  onerous  intervention  will  be  required  to  cure  them  later.
 15.  We  recognize  that  there  is  a  difference  between  intervention  to  preserve  a  level  of  competition  that  will  allow  a  market  to  operate  effectively  and  the  kind  of  substantial  regulatory
 intervention  that  is  required  to  compensate  in  markets  where  sufficient  competition  is  lacking.  The  1996  Act  reflects  a  clear  preference  that  competitive  markets,  as  opposed  to  regulated  monopolies,  be  created
 and  preserved  as  the  mechanism  for  economic  decision  making.  Mergers  can  reflect  the  healthy  operation  of  competition,  creating  more  efficient  collections  of  assets;  but  they  can  also  threaten  its  continued
 existence,  eliminating  competitors  or  creating  opportunities  to  disadvantage  rivals  in  anticompetitive
 14  See,  e.  g.,  47  U.  S.  C.    533(  f),  548;  47  C.  F.  R.    76.  503,  76.  504,  76.  1000-  76.  1004;  AT&  T-  MediaOne  Order,  15
 FCC  Rcd  at  9835    38.
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 ways.  We  are  guided  both  by  the  desire  to  avoid  intervention  and  the  realization  that  some  degree  of  timely  intervention  to  preserve  competition  may  avoid  a  later  need  for  more  onerous  intervention  to  either
 regulate  where  competition  has  disappeared  or  to  attempt  to  reintroduce  competition  once  it  has  been  eliminated.
 16.  We  also  recognize  that  the  same  consequences  of  a  proposed  merger  that  are  beneficial  in  one  sense  may  be  harmful  in  another.  For  instance,  combining  assets  may  allow  the  merged  firm  to  reduce
 transaction  costs  and  offer  new  products;  but  if  the  merged  firm  has  market  power,  these  advantages  may  operate  to  consolidate  that  power.
 17.  In  its  review  of  the  instant  merger,  the  FTC  found  that  the  merger  would  harm  competition  in  the  residential  Internet  access  marketplace  and  imposed  conditions  on  the  merging  parties  requiring  them
 to  afford  access  to  Time  Warners  cable  plant  to  unaffiliated  ISPs,  requiring  them  not  to  discriminate  against  unaffiliated  content  under  certain  circumstances,  requiring  AOL  Time  Warner  to  market  AOLs
 DSL  services  in  the  same  manner  and  at  the  same  retail  price  in  Time  Warner  cable  areas  as  in  other  areas,  and  to  hold  separate  Road  Runner,  a  cable  ISP,  from  AOLs  ISP  service  until  AOL  Time  Warner
 offers  an  unaffiliated  ISP  on  all  AOL  Time  Warner  cable  systems.  15
 18.  After  reviewing  the  comments  filed  in  this  proceeding,  16  we  find  that,  subject  to  certain  conditions  designed  to  mitigate  merger-  specific  harms,  and  in  light  of  the  terms  of  the  FTC  Consent
 Agreement,  the  public  interest  benefits  of  the  proposed  merger  outweigh  the  public  interest  harms.  Among  many  issues  raised  by  commenters,  we  focus  particularly  on  four  potential  harms.  First,  we  find
 that  the  proposed  merger  would  give  AOL  Time  Warner  the  ability  and  incentive  to  harm  consumers  in  the  residential  high-  speed  Internet  access  services  market  by  blocking  unaffiliated  ISPs  access  to  Time
 Warner  cable  facilities  and  by  otherwise  discriminating  against  unaffiliated  ISPs  in  the  rates,  terms  and  conditions  of  access.  To  remedy  this  harm,  this  Order  conditions  approval  of  the  merger  on  certain
 conditions  relating  to  AOL  Time  Warners  contracts  and  negotiations  with  unaffiliated  ISPs.  Second,  we  find  that  the  merger  would  make  it  more  likely  that  AOL  Time  Warner  would  be  able  to  solidify  its
 dominance  in  the  high-  speed  access  market  by  obtaining  preferential  carriage  rights  for  AOL  on  the  facilities  of  other  cable  operators.  We  particularly  find  that  the  merger  would  harm  the  public  interest  by
 allowing  for  greater  coordinated  action  between  AOL  Time  Warner  and  AT&  T  in  the  provision  of  residential  high-  speed  Internet  access  services.  To  remedy  these  harms,  we  impose  a  condition  forbidding
 the  merged  firm  from  entering  into  contracts  with  AT&  T  that  would  give  AOL  exclusive  carriage  or  preferential  terms,  conditions  and  prices.  Third,  we  find  that  the  proposed  merger  would  enable  AOL
 Time  Warner  to  dominate  the  next  generation  of  advanced  IM-  based  applications.  To  remedy  this  harm,  we  impose  a  condition  requiring  AOL  Time  Warner,  before  it  may  offer  an  advanced  IM-  based
 application  that  includes  streaming  video,  to  provide  interoperability  between  its  NPD-  based  applications  and  those  of  other  providers,  or  to  show  by  clear  and  convincing  evidence  that  circumstances  have
 changed  such  that  the  public  interest  will  no  longer  be  served  by  an  interoperability  condition.  Fourth,  although  we  have  concerns  that  the  merger  may  give  AOL  Time  Warner  the  ability  and  the  incentive  to
 discriminate  against  the  interactive  television  (  ITV)  services  of  unaffiliated  video  programming  networks,  we  find  that  the  terms  of  the  FTC  Consent  Agreement  will  adequately  protect  the  public
 interest  by  prohibiting  certain  types  of  discrimination  and  that  it  is  not  necessary  for  us  to  impose  further
 15  In  the  Matter  of  America  Online,  Inc.  and  Time  Warner  Inc.    FTC  Docket  No.  C-  3989,  Agreement  Containing
 Consent  Orders;  Decision  and  Order,  2000  WL  1843019  (FTC)  (proposed  Dec.  14,  2000)  (  FTC  Consent  Agreement).
 16  See  Appendix  A  for  a  list  of  commenters  in  this  proceeding.
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 conditions  in  this  proceeding;  however,  we  have  initiated  a  Notice  of  Inquiry  (  ITV  NOI)  to  explore  ITV  issues  in  the  market  generally.  17  Subject  to  the  conditions  described  above,  we  find  that  the  proposed
 merger  will  serve  the  public  interest.
 II.  PUBLIC  INTEREST  FRAMEWORK
 19.  Sections  214(  a)  and  310(  d)  of  the  Communications  Act  require  the  Commission  to  determine  whether  the  Applicants  have  demonstrated  that  the  public  interest  would  be  served  by  transferring  control
 of  AOLs  and  Time  Warners  Commission  license  authorizations  to  AOL  Time  Warner.  18  Our  statutory  mandate,  confirmed  by  our  precedent,  requires  that  we  weigh  the  potential  public  interest  harms  of  the
 proposed  transaction  against  the  potential  public  interest  benefits  to  ensure  that  the  Applicants  have  demonstrated  that,  on  balance,  the  merger  serves  the  public  interest  and  convenience.  19  The  Applicants
 bear  the  burden  of  proving  that  the  transfer  will  advance  the  public  interest.  20
 20.  In  conducting  its  public  interest  inquiry,  the  Commission  examines  four  overriding  questions:  (1)  whether  the  transaction  would  result  in  a  violation  of  the  Communications  Act  or  any  other  applicable
 statutory  provision;  21  (2)  whether  the  transaction  would  result  in  a  violation  of  the  Commissions  rules;  22  (3)  whether  the  transaction  would  substantially  frustrate  or  impair  the  Commissions  implementation  or
 enforcement  of  the  Communications  Act  and/  or  other  related  statutes,  or  would  interfere  with  the  objectives  of  the  Communications  Act  and/  or  other  related  statutes;  23  and  (4)  whether  the  transaction
 promises  to  yield  affirmative  public  interest  benefits.  24
 21.  The  Commissions  analysis  of  public  interest  benefits  and  harms  includes,  but  is  not  limited  to,  an  analysis  of  the  potential  competitive  effects  of  the  transaction,  as  informed  by  traditional  antitrust
 principles.  25  While  an  antitrust  analysis,  such  as  that  undertaken  by  the  Department  of  Justice  or,  in  this
 17  See  Nondiscrimination  in  the  Distribution  of  Interactive  Television  Services  Over  Cable,  CS  Docket  No.  01-  7,
 Notice  of  Inquiry  (  ITV  NOI),  FCC  01-  15  (rel.  Jan.  19,  2001).  18
 47  U.  S.  C.    214(  a),  303(  r),  310(  d).  See  WorldCom-  MCI  Order,  13  FCC  Rcd  at  18030    8  (1998);  Bell  Atlantic-NYNEX  Order,  12  FCC  Rcd  at  20000    29.
 19  SBC-  Ameritech  Order,  14  FCC  Rcd  at  14736    46;  WorldCom-  MCI  Order,  13  FCC  Rcd  at  18031    10.
 20  AT&  T-  TCI  Order,  14  FCC  Rcd  at  3169-  70    15  (1999);  WorldCom-  MCI  Order,  13  FCC  Rcd  at  18031    10  n.  33
 (citing  47  U.  S.  C.  309(  e)  (burdens  of  proceeding  and  proof  rest  with  the  applicant.)).  21
 AT&  T-  MediaOne  Order,  15  FCC  Rcd  at  9820-  21    9;  SBC-  Ameritech  Order,  14  FCC  Rcd  at  14737    48.  22
 Id.  23
 Id.  24
 Id.  25
 Although  the  Commissions  analysis  of  competitive  effects  is  informed  by  antitrust  principles  and  judicial  standards  of  evidence,  it  is  not  governed  by  them,  which  allows  the  Commission  to  arrive  at  a  different  assessment
 of  likely  competitive  benefits  or  harms  than  antitrust  agencies  may  find  based  solely  on  antitrust  laws.  See  FCC  v.  RCA  Communications,  346  U.  S.  86,  96-  97  (1953)  (  To  restrict  the  Commissions  action  to  cases  in  which  tangible
 evidence  appropriate  for  judicial  determination  is  available  would  disregard  a  major  reason  for  the  creation  of  administrative  agencies,  better  equipped  as  they  are  for  weighing  intangibles  by  specialization,  by  insight  gained
 through  experience,  and  by  more  flexible  procedure.)  See  also  WorldCom-  MCI  Order,  13  FCC  Rcd  at  18034    13  (citing  RCA  Communications,  346  U.  S.  at  94;  United  States  v.  FCC,  653  F.  2d  72,  81082  (D.  C.  Cir.  1980)  (en  banc)
 (The  Commissions  determination  about  the  proper  role  of  competitive  forces  in  an  industry  must  therefore  be  based,  not  exclusively  on  the  letter  of  the  antitrust  laws,  but  also  on  the  special  considerations  of  the  particular
 (continued)
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 case,  the  Federal  Trade  Commission,  focuses  solely  on  whether  the  effect  of  a  proposed  merger  may  be  substantially  to  lessen  competition,  26  the  Communications  Act  requires  the  Commission  to  make  an
 independent  public  interest  determination,  which  includes  evaluating  public  interest  benefits  or  harms  of  the  mergers  likely  effect  on  future  competition.  27  To  find  that  a  merger  is  in  the  public  interest,  therefore,
 the  Commission  must  be  convinced  that  it  will  enhance  competition.  28
 22.  Our  public  interest  evaluation  necessarily  encompasses  the  broad  aims  of  the  Communications  Act.  29  These  broad  aims  include,  among  other  things,  ensuring  the  existence  of  a
 nationwide  communications  service,  available  to  everyone;  implementation  of  Congresss  pro-competitive,  deregulatory  national  policy  framework  designed  to  open  all  telecommunications  markets  to
 competition;  the  preservation  and  advancement  of  universal  service;  and  the  acceleration  of  private  sector  deployment  of  advanced  services.  30  Our  public  interest  analysis  may  also  entail  assessing  whether  the
 merger  will  affect  the  quality  of  telecommunications  services  or  will  result  in  the  provision  of  new  or  additional  services  to  consumers.  31  Thus,  apart  from  traditional  antitrust  concerns,  we  are  required  to
 consider,  among  other  things,  whether  the  proposed  merger  will  further  the  statutory  goals  of  assur[  ing]  that  cable  communications  provide  and  are  encouraged  to  provide  the  widest  possible  diversity  of
 information  sources  and  services  to  the  public,  32  and  promot[  ing]  competition  in  the  delivery  of  diverse  sources  of  video  programming  .  .  .  33
 23.  The  Supreme  Court  has  found  that  decentralization  of  information  production  serves  values  that  are  central  to  the  First  Amendment.  Indeed,  the  Court  has  repeatedly  emphasized  the  Commissions
 duty  and  authority  under  the  Communications  Act  to  promote  diversity  and  competition  among  media  voices:  It  has  long  been  a  basic  tenet  of  national  communications  policy  that  the  widest  possible
 dissemination  of  information  from  diverse  and  antagonistic  sources  is  essential  to  the  welfare  of  the  public.  34  Accordingly,  the  Court  had  no  difficulty  in  concluding  that  the  Commissions  interest  in
 promoting  widespread  dissemination  of  information  from  a  multiplicity  of  sources  is  an  important  governmental  interest.  35
 (  continued  from  previous  page)  industry.);  Teleprompter-  Group  W,  87  FCC  2d  531  (1981),  affd  on  recon.,  89  FCC  2d  417  (1982)  (Commission
 independently  reviewed  the  competitive  effects  of  a  proposed  merger);  Equipment  Distributors  Coalition,  Inc.,  v.  FCC,  824  F.  2d  937,  947-  48  (1  st  Cir.  1993)  (public  interest  standard  does  not  require  agency  to  analyze  proposed
 mergers  under  the  same  standards  that  the  Department  of  Justice  .  .  .  must  apply.).  26
 15  U.  S.  C.    18.  27
 See  WorldCom-  MCI  Order,  13  FCC  Rcd  at  18032-  33    12-  13;  Bell  Atlantic-  NYNEX  Order,  12  FCC  Rcd  at  19987    2.
 28  Bell  Atlantic-  NYNEX  Order,  12  FCC  Rcd  at  19987    2.
 29  AT&  T-  TCI  Order,  14  FCC  Rcd  at  3168-  69    14;  WorldCom-  MCI  Order,  13  FCC  Rcd  at  18030-  31    9.
 30  WorldCom-  MCI  Order,  13  FCC  Rcd  at  1830-  31  9.
 31  See,  e.  g.,  id.
 32  47  U.  S.  C.    521(  4).
 33  47  U.  S.  C.    523(  a).
 34  Turner  Broadcasting  System,  Inc.  v.  FCC,  512  U.  S.  622,  663  (1994)  (quoting  United  States  v.  Midwest  Video
 Corp.,  406  U.  S.  649,  668  n.  27  (1972)).  35
 Turner  Broadcasting,  512  U.  S.  at  663.  See  also  Review  of  the  Commissions  Regulations  Governing  Television  (continued)
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 24.  Following  passage  of  the  1996  Act,  local  telecommunications  markets  have  been  undergoing  a  transition  to  competitive  markets.  Therefore,  a  transaction  may  have  predictable  yet  dramatic
 consequences  for  competition  over  time  even  if  the  immediate  effect  is  more  modest.  36  When  a  transaction  is  likely  to  affect  local  communications  markets,  our  statutory  obligation  requires  us  to  assess
 future  as  well  as  current  market  conditions.  In  doing  so,  the  Commission  may  rely  on  its  specialized  judgment  and  expertise  to  render  informed  predictions  about  future  market  conditions  and  the  likelihood
 of  success  of  individual  market  participants.  37
 25.  Where  necessary,  the  Commission  can  attach  conditions  to  a  transfer  of  licenses  and  authorizations  in  order  to  ensure  that  the  public  interest  is  served  by  the  transaction.  38  Section  214(  c)  of
 the  Communications  Act  authorizes  the  Commission  to  attach  to  the  certificate  such  terms  and  conditions  as  in  its  judgment  the  public  convenience  may  require.  39  Similarly,  section  303(  r)  of  the
 Communications  Act  authorizes  the  Commission  to  prescribe  restrictions  or  conditions,  not  inconsistent  with  law,  that  may  be  necessary  to  carry  out  the  provisions  of  the  Act.  40  Indeed,  unlike  the  role  of
 antitrust  enforcement  agencies,  the  Commissions  public  interest  authority  enables  it  to  impose  and  enforce  certain  types  of  conditions  that  result  in  a  merger  yielding  overall  positive  public  interest
 benefits.  41
 26.  Where  a  license  transfer  applications  shows  that  the  merger  would  yield  affirmative  public  interest  benefits  and  would  not  violate  the  Communications  Act  or  Commission  rules,  nor  frustrate  or
 undermine  policies  and  enforcement  of  the  Communications  Act,  there  is  no  need  for  extensive  review  and  expenditure  of  considerable  resources  by  the  Commission  and  interested  parties.  42  This  is  not  the
 case  with  regard  to  this  proposed  transaction.  We  analyze  the  potential  public  interest  harms  and  benefits  of  this  proposed  merger,  absent  conditions,  in  the  next  sections.
 (  continued  from  previous  page)  Broadcasting:  Television  Satellite  Stations  Review  of  Policy  and  Rules,  14  FCC  Rcd  12903,  12910-  12916  (1999).
 See  also  Red  Lion  Broadcasting  Co.  v.  FCC,  395  U.  S.  367,  390  (1969)  (  It  is  the  purpose  of  the  First  Amendment  to  preserve  an  uninhibited  marketplace  of  ideas  in  which  truth  will  ultimately  prevail,  rather  than  to  countenance
 monopolization  of  that  market,  whether  it  be  by  the  Government  itself  of  a  private  licensee.);  Turner  Broadcasting,  512  U.  S.  at  657  ([  T]  he  potential  for  abuse  of  this  private  power  over  a  central  avenue  of  communication  cannot  be
 overlooked.  The  First  Amendments  command  that  government  not  impede  the  freedom  of  speech  does  not  disable  the  government  from  taking  steps  to  ensure  that  private  interests  not  restrict,  through  physical  control  of  a  critical
 pathway  of  communication,  the  free  flow  of  information  and  ideas.).  36
 WorldCom-  MCI  Order,  15  FCC  Rcd  at  9822    12;  SBC-  Ameritech  Order,  14  FCC  Rcd  at  3170    51.  37
 Id.  38
 See  47  C.  F.  R.    1.10;  WorldCom-  MCI  Order,  13  FCC  Rcd  at  18031-  32    10.  39
 47  U.  S.  C.    214(  c).  See  WorldCom-  MCI  Order,  13  FCC  Rcd  at  18031-  32    10;  Bell  Atlantic-  NYNEX  Order,  12  FCC  Rcd  at  20002    30  n.  59  (citing  Atlantic  Tele-  Network,  Inc.  v.  FCC,  59  F.  3d  1384,  1389-  90  (D.  C.  Cir.  1995).
 40  47  U.  S.  C.    303(  5).  See  WorldCom-  MCI  Order,  13  FCC  Rcd  at  18032    10  n.  36  (citing  FCC  v.  Natl  Citizens
 Comm.  for  Broadcasting,  436  U.  S.  775  (1978)  (broadcast-  newspaper  cross-  ownership  rules  properly  adopted  pursuant  to  section  303(  r));  U.  S.  v.  Southwestern  Cable  Co.,  392  U.  S.  157,  178  (1968)  (section  303(  r)  powers  permit
 Commission  to  order  cable  company  not  to  carry  broadcast  signal  beyond  stations  primary  market);  United  Video,  Inc.  v.  FCC,  890  F.  2d  1173,  1182-  83  (D.  C.  Cir.  1989)  (syndicated  exclusivity  rules  adopted  pursuant  to  section
 303(  r)  authority).  41
 See  WorldCom-  MCI  Order,  13  FCC  Rcd  at  18034-  35    14.  42
 AT&  T-  TCI  Order,  14  FCC  Rcd  at  3170    16.
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 III.  BACKGROUND
 A.  The  Applicants
 27.  AOL.  AOL  is  divided  into  four  operating  groups,  the  Interactive  Services  Group,  the  Interactive  Properties  Group,  the  AOL  International  Group,  and  the  Enterprise  Solutions  Group.  43  These
 groups  provide  interactive  service,  Web  brands,  Internet  technologies  and  electronic  commerce  (  e-commerce)  services.  44  For  the  twelve  months  ending  June  30,  2000,  AOL  earned  $6.9  billion  in
 revenues.  Subscription  services  accounted  for  $4.4  billion,  advertising,  commerce  and  other  related  services  accounted  for  just  under  $2  billion,  and  Enterprise  Solutions  accounted  for  the  remaining  $500
 million  in  revenues.  AOLs  net  income  for  this  period  totaled  $1.2  billion.  For  the  first  quarter  of  its  fiscal  year  2001,  AOL  reported  $2.0  billion  in  revenue.  45
 28.  Interactive  Services.  The  Interactive  Services  Group  operates  branded  interactive  services  such  as  AOLs  flagship  ISP  AOL  Internet  service.  This  fee-  based  service  provides  Internet  access  and
 specialized  content  to  more  than  26  million  subscribers.  46  AOLs  ISP  content  includes  news,  entertainment,  health,  travel,  sports,  and  finance  information  organized  into  channels  from  which
 subscribers  can  choose.  47  Included  among  AOLs  numerous  corporate  partners  that  provide  it  with  content  and  advertising  are  American  Airlines,  Budget  Rent-  a-  Car,  Sesame  Street,  Toys-  R-  Us,  Barnes
 and  Noble,  Amazon.  com,  Godiva  Chocolatier,  JC  Penney,  Wal-  Mart,  Coca  Cola,  Proctor  and  Gamble,  Avon,  and  CBS  News.  48  A  non-  exhaustive  list  of  additional  features  that  the  AOL  service  affords
 members  includes  e-  mail,  public  bulletin  boards,  and  the  Buddy  List  feature  (allowing  members  to  discern  whether  fellow  members  are  online  simultaneously).  49  The  AOL  ISP  service  also  includes  AOL
 Plus,  AOLs  broadband  Internet  access  service  and  enhanced  content.  AOL  also  offers  the  CompuServe  ISP  service,  which  has  2.8  million  subscribers  worldwide.  50
 29.  An  additional  feature  offered  by  AOL  to  its  subscribers  is  IM.  51  In  its  simplest  form,  IM  enables  the  almost  instantaneous  exchange  of  short  text  messages  over  the  Internet  between  a  person  (  the
 sender)  and  another  person  (  the  recipient)  chosen  by  the  sender.  AOL  also  offers  IM  software,  known  as  AOL  Instant  Messenger  (  AIM)  to  non-  AOL  subscribers  free  of  charge.  52  AOL  has  AIM  co-  branding
 43  See  Supplemental  Information  to  Applications  filed  by  AOL  and  Time  Warner  on  Mar.  21,  2000  (  Applicants
 March  21  Supplemental  Information)  at  8;  see  also  America  Online,  Inc.,  Form  10-  Q  For  the  Quarterly  Period  Ended  Mar.  31,  2000,  at  4.
 44  Application  at  2.
 45  America  Online,  Inc.,  America  Online  Reports  Record-  Breaking  Results  For  FY2001  First  Quarter  In  Net
 Income,  Total  Revenues,  Ad/  Commerce  And  Membership  (press  release),  Oct.  18,  2000.  46
 America  Online,  Inc.,  AOL  Membership  Surpasses  26  Million  Milestone  (press  release),  Dec.  12,  2000.  47
 Applicants  March  21  Supplemental  Information  at  4.  48
 See  America  Online,  Inc.,  Who  We  Are,  at  http://  corp.  aol.  com/  whoweare/  partners.  html  (visited  Nov.  28,  2000).  49
 America  Online,  Inc.,  Form  10-  K  for  Year  Ended  June  30,  1999,  at  3  (  AOL  1999  10-  K).  50
 America  Online,  Inc.,  AOL  Gears  Up  For  Holiday  Shopping  Blitz  With  Best  Partners,  Most  Convenient  Tools,  And  Industrys  Leading  E-  Commerce  Performance  (press  release),  Nov.  15,  2000.
 51  AOL  1999  10-  K,  at  3.
 52  The  Interactive  Services  Group  also  houses  AOLs  Netscape  Netcenter  Web  portal,  and  the  AOL.  com  Web  Portal,
 both  of  which  are  available  to  non-  AOL  members.  Id.
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 arrangements  with  numerous  companies,  including  Apple,  BellSouth  Mobility,  DigitalWork.  com,  EarthLink  Communications,  Juno,  IBM,  Lycos,  Motorola,  Net2Phone,  Nokia,  Oxygen  Media,
 RealNetworks,  and  TV  Guide.  53  AOL  also  owns  another  IM  service,  ICQ.  54  AOL  is,  by  far,  the  largest  provider  of  IM.  55
 30.  The  Interactive  Services  Group  also  oversees  AOLTV,  an  advanced  interactive  television  service.  AOLTV  enables  subscribers  to  access  AOL  features,  such  as  chat  rooms,  e-  mail,  and  IM  through
 an  interface  overlaid  on  their  television  screens.  56  In  addition,  AOLTV  offers  interactive  content  and  information  tailored  to  the  specific  video  programming  being  viewed.  57  Selected  retailers  started  selling
 AOLTV  set-  top  boxes  in  June  2000.  58  The  boxes  retail  for  $200-  300.  In  addition,  consumers  must  pay  a  monthly  subscription  fee  to  receive  the  service.  59  AOLTV  services  can  also  be  purchased  directly  from
 AOLTVs  website.  60  AOL  has  plans  to  develop  an  AOLTV  integrated  cable  set-  top  box,  61  as  well  as  an  integrated  DirecTV  set-  top  box.  62
 31.  Interactive  Properties  Group.  The  Interactive  Properties  Group  includes  Digital  City,  MovieFone,  Spinner,  WINamp,  and  ICQ.  Digital  City  provides  Internet  local  content  and  community
 guides  that  include  news,  sports,  weather  and  entertainment  information,  as  well  as  an  interactive  forum.  63  Digital  City  provides  this  information  for  200  markets.  64  According  to  AOL,  Digital  City  averages  40
 million  page  views  a  week,  and  has  2,000  interactive  marketing  partners.  65  AOL  MovieFone  is  a  movie  guide  and  ticketing  service  customers  can  access  either  through  a  toll-  free  number  or  the  MovieFone.  com
 web  site.  Prior  to  the  merger,  AOL  MovieFone  had  entered  into  advertising  agreements  with  Time  Warner  film  companies,  Warner  Bros.  and  New  Line  Cinema.  66  Spinner  is  a  web  site  that  allows  users  to
 53  America  Online,  Inc.,  America  Online  And  Satyam  Infoway  Enter  Into  Agreement  To  Offer  Co-  Branded  Version
 Of  AOL  Instant  Messenger  Service  (press  release),  July  12,  2000.  54
 AOL  obtained  ICQ  when  it  bought  Mirabilis  for  $287  million  in  June,  1998.  See  Bernhard  Warner,  I  Seek  Revenue  ?  Chat  App  Goes  Portal,  THE  STANDARD,  Feb.  22,  1999,  at  http://  www.  industrystandard.  net/  article/
 display/  0%  2C1151%  2C3586%  2C00.  html  (visited  Aug.  24,  2000).  55
 See  Section  IV.  B,  infra.  (Instant  Messaging  and  Advanced  IM-  Based  High-  Speed  Services)  56
 Applicants  March  21  Supplemental  Information  at  5.  57
 Id.  58
 America  Online,  Inc.,  America  Online  Launches  AOL-  TV    The  First  Interactive  Television  Service  for  the  Mass  Market  (press  release),  June  19,  2000.
 59  AOL  Members  pay  $14.  95  per  month  for  service,  while  non-  members  must  pay  $24.95  monthly.  See  America
 Online,  Inc.,  at  http://  www.  aoltv.  com  (visited  Nov.  28,  2000).  60
 See  America  Online,  Inc.,  at  http://  store.  aolshopdirect.  com  (visited  Nov.  28,  2000).  61
 Reshma  Kapadia,  AOLTV  To  Take  to  the  Air  Monday,  ZDNET,  June  16,  2000,  at  http://  www.  zdnet.  com/  zdnn/  stories/  news/  0,4586,  2589185,  00.  html  (visited  Aug.  21,  2000).
 62  America  Online,  Inc.,  America  Online,  Inc.,  Announces  Key  AOL  TV  Partnerships  (press  release),  May  11,  1999.
 63  AOL  1999  10-  K  at  4.
 64  America  Online,  Inc.,  AOLs  Digital  City  Personalized  E-  Letter  Hits  1  Million  Mark  (press  release),  Sept.  6,
 2000.  65
 America  Online,  Inc.,  AOL  Digital  City  Kicks  Off  Major  Expansion  to  Widen  Lead  in  Fast-  Growing  Local  Online  Market  (press  release),  Mar.  21,  2000.
 66  AOL  Time  Warner  Inc.,  Form  S-  4  Registration  Statement  (filed  Feb.  11,  2000)  at  125.
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 listen  to  music  organized  into  channels,  and  to  purchase  the  music  directly  through  the  web  site.  67  WINamp  is  a  branded  MP3  player  that  allows  users  to  listen  to  and  download  music.  68  The  WINamp  web
 site  also  hosts  numerous  Internet  radio  stations.  69
 32.  AOL  International  Group.  The  AOL  International  Group  oversees  the  AOL  and  CompuServe  services  outside  the  United  States.  70  AOL  and  CompuServe  offer  their  branded  services
 through  joint  ventures  or  distribution  arrangements  in  Australia,  Austria,  Canada,  France,  Germany,  Japan,  the  Netherlands,  Sweden,  Switzerland,  and  the  United  Kingdom.  71  America  Online  Latin  America,
 Inc.  is  a  leading  Latin  American  Internet  and  interactive  service  provider.  72  AOL  owns  approximately  80%  of  America  Online  Latin  America.  73
 33.  Enterprise  Solutions  Business  Products  and  Services.  The  Netscape  Enterprise  Group  is  the  primary  product  group  in  AOLs  Enterprise  Solutions  division.  74  The  Netscape  Enterprise  Group
 develops,  markets,  sells  and  supports  a  broad  suite  of  enterprise  software  that  consists  of  electronic  commerce  infrastructure  and  electronic  commerce  applications  targeted  primarily  at  corporate  intranets
 and  extranets,  as  well  as  the  Internet.  75  In  November  1998,  AOL  entered  into  a  strategic  electronic  commerce  alliance  with  Sun  MicroSystems,  which  is  now  referred  to  as  the  Sun-  Netscape  Alliance.  The
 alliance  builds  and  markets  on  a  collaborative  basis  end-  to-  end  electronic  commerce  solutions  to  help  business  partners  and  other  companies  put  their  businesses  online.  76
 34.  Ownership  Interest  in  General  Motors  Corporation-  Hughes  Electronics  Corporation.  In  1999,  AOL  invested  $1.5  billion  in  General  Motors  Corporation  (  GM),  the  parent  company  of  Hughes
 Electronics  Corporation  (  Hughes),  to  accelerate  the  development  of  Direct  Broadcast  Satellite  (  DBS)  as  a  platform  for  the  next  generation  of  Internet  services.  77  This  investment  is  in  the  form  of
 GMs  Series  H  6.25%  Automatically  Convertible  Preference  Stock.  78  Hughes  is  the  parent  company  of  DirecTV,  the  countrys  largest  DBS  provider,  and  DirectPC,  a  high-  speed  satellite  ISP.  79
 67  AOL  1999  10-  K  at  4.
 68  Id.
 69  Id.
 70  Id.
 71  Id.
 72  America  Online,  Inc.,  AOL  Latin  America  Information:  Frequently  Asked  Questions,  at
 http://  corp.  aol.  com/  ir/  aol&  latin-  faq.  html?  (visited  Aug.  24,  2000).  73
 Id.  74
 AOL  1999  10-  K  at  5.  75
 AOL  1999  10-  K  at  5.  76
 Id.  77
 Applicants  March  21  Supplemental  Information  at  11.  78
 Applicants  March  21  Supplemental  Information  at  12.  See  General  Motors  Corporation,  SEC  Form  8-  K  (filed  Aug.  23,  1999)  at  Appendix  D  at  Section  3(  j).
 79  DBS  operators  provide  programming  via  satellite  to  subscribers  that  own  or  lease  small-  diameter  receiving  dishes.
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 35.  Telephony.  AOL  has  ownership  stakes  in  two  companies  that  offer  telephony  services,  Talk.  Com,  Inc.  and  Net2Phone,  Inc.  80  AOL  owns  6.26%  of  Talk.  com.  81  Talk.  com  offers  local
 telecommunications  services,  including  outbound  long-  distance  service,  local  service,  inbound  toll-  free  service,  and  dedicated  data  line  services.  82  Among  its  calling  plans  is  AOL  Long  Distance,  a  plan  offered
 exclusively  to  AOL  members.  83  AOL  also  owns  4.63%  of  Net2Phones  capital  stock.  84  AOLs  ownership  of  this  stock  gives  it  5.14%  of  the  total  voting  power  of  the  company.  85  Net2Phone  provides
 Internet  telephony,  a  service  that  allows  users  to  make  low-  cost  telephone  calls  over  the  Internet.  86  It  also  provides  technology  to  integrate  live  voice  capabilities  into  the  Web.  87
 36.  Time  Warner.  Time  Warner  is  a  worldwide  media  and  entertainment  company.  It  creates  and  distributes  branded  content  through  the  business  interests  described  in  detail  in  this  section.  Time
 Warner  reported  overall  1999  revenues  of  $27.3  billion,  and  operating  income  of  $7.3  billion.  88
 37.  Cable  Systems  and  MVPD  Services.  Time  Warner,  the  second  largest  cable  provider  in  the  country,  serves  12.7  million  subscribers  through  cable  systems  that  pass  approximately  21  million
 homes.  89  Time  Warner  cable  systems  serve  approximately  18.9  %  of  the  67  million  cable  subscribers  nationwide  and  15.4%  of  the  82  million  subscribers  to  multichannel  video  programming  distribution
 (  MVPD)  systems  nationwide.  90
 80  Response  to  June  9,  2000,  Request  for  Further  Information  In  the  Matter  of  Applications  of  America  Online,  Inc.
 and  Time  Warner  Inc.  for  Transfers  of  Control,  CS  Docket  No.  00-  30,  Attachment  (June  26,  2000)  (  Applicants  First  Response)  at  27,  transmitted  by  letter  from  Peter  Ross,  Esq.,  Wiley,  Rein  and  Fielding,  Counsel  for  AOL,  and
 Arthur  Harding,  Esq.,  Fleischman  and  Walsh,  L.  L.  P.,  Counsel  for  Time  Warner,  to  Royce  Dickens,  Deputy  Chief,  Policy  and  Rules  Division,  FCC  Cable  Services  Bureau,  dated  June  26,  2000.
 81  Id.
 82  Id.
 83  Talk.  Com,  Inc.,  at  http://  www.  talk.  com/  (visited  Aug.  23,  2000).
 84  Applicants  First  Response  at  30.
 85  Applicants  First  Response  at  31.  As  of  August  11,  2000,  AT&  T  had  a  32%  economic  interest  in  Net2Phone,  and
 a  39%  voting  stake  in  the  company.  See  Net2Phone,  Inc.,  AT&  T  Completes  Net2Phone  Investment  (press  release),  Aug.  11,  2000.
 86  Applicants  First  Response  at  30.
 87  Id.
 88  See  Time  Warner  Inc.,  Time  Warner  Businesses  Report  Record  1999  and  Fourth  Quarter  Results  (press  release),
 Feb.  2,  2000.  89
 Applicants  March  21  Supplemental  Information  at  8.  90
 MVPDs  include  cable,  DBS,  multichannel  multipoint  distribution  services  (  MMDS),  and  satellite  master  antenna  television  (  SMATV)  providers.  See  Annual  Assessment  of  the  Status  of  Competition  in  Markets  for  the
 Delivery  of  Video  Programming,  CS  Docket  No.  99-  230,  Sixth  Annual  Report  (  1999  Competition  Report),  15  FCC  Rcd  978,  980    3  (generally  describing  the  various  types  of  MVPDs).  MMDS  providers  offer  programming
 via  microwave  facilities  (the  service  is  often  referred  to  as  "wireless  cable  service").  SMATV  operators,  also  known  as  "private  cable  operators,"  also  frequently  use  microwave  facilities  to  transmit  programming  to  subscribers  without
 crossing  rights-  of-  way.  SMATV  subscribers  usually  reside  in  multiple  dwelling  units  (  MDUs).  1999  Competition  Report,  15  FCC  Rcd  at  1090  Tbl.  C-  1.
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 38.  Time  Warners  cable  systems  are  held  through  three  entities  managed  by  Time  Warner  Cable:  Time  Warner  Entertainment  (  TWE),  Time  Warner  Entertainment    Advance/  Newhouse  Partnership
 (  TWE-  A/  N),  and  TWI  Cable,  Inc.  (  TWI  Cable).  91  TWE  is  a  limited  partnership;  Time  Warner  owns  74.5%  of  TWE.  The  remaining  25.5%  is  owned  by  AT&  T  as  a  result  of  its  purchase  of  MediaOne  Group,
 Inc.  92  TWE  serves  approximately  4.2  million  basic  cable  subscribers.  93  TWI  Cable,  which  serves  approximately  1.8  million  subscribers,  is  an  indirect  wholly-  owned  subsidiary  of  Time  Warner.  94  TWE-A/
 N  is  a  general  partnership  owned  by  TWE,  TWI  Cable,  and  Advance/  Newhouse  Partnership.  95  TWE-A/  N  serves  approximately  6.7  cable  million  subscribers.  96  Time  Warners  partnership  interest  in  TWE-A/
 N,  held  through  TWE  and  TWI  Cable,  totals  approximately  67%.  97
 39.  Internet  Services.  Time  Warner  controls  Road  Runner,  a  joint  venture  that  provides  high-speed  Internet  access  and  content  optimized  for  broadband  networks  to  more  than  1.1  million
 subscribers,  98  of  whom  more  than  719,000  are  served  by  Timer  Warner  Cable  systems.  99  Road  Runner  is  available  in  cable  systems  passing  more  than  19.5  million  homes.  100  As  of  December  31,  1999,  after
 conversion  of  all  preferred  interests,  Road  Runner  was  owned  8.  6%  by  TWI  Cable,  20%  by  TWE,  26.3%  by  TWE-  A/  N,  25.1%  by  AT&  T,  and  10%  each  by  Microsoft  and  Compaq.  101  Pursuant  to  a  consent
 decree  with  the  United  States  Department  of  Justice  (  DOJ),  entered  into  as  a  condition  of  the  AT&  T-MediaOne  merger,  102  AT&  T  must  divest  its  direct  interest  in  Road  Runner  no  later  than  December  31,
 2001.  Time  Warner  and  AT&  T  recently  announced  a  restructuring  of  Road  Runner  that  is  the  first  step  in
 91  Applicants  March  21  Supplemental  Information  at  28.
 92  Paul  Kagan  Assoc.,  Inc.,  10-  Year  Cable  TV  Industry  Projections,  Cable  TV  Investor,  June  19,  2000,  at  15;  see
 also  AT&  T-  MediaOne  Order,  15  FCC  Rcd  at  9816    4.  As  a  non-  severable  condition  of  the  Commissions  grant  of  AT&  Ts  acquisition  of  MediaOne,  AT&  T  must  either  a)  divest  its  interest  in  TWE;  b)  terminate  its  involvement  in
 TWEs  video  programming  activities;  or  c)  divest  its  interests  in  other  cable  systems,  such  that  it  will  have  attributable  ownership  interests  in  cable  systems  serving  no  more  than  30%  of  MVPD  subscribers  nationwide  by
 May  19,  2001.  Id.  On  December  15,  2000,  AT&  T  notified  the  Commission  of  its  intention  to  divest  either  its  programming  assets  or  its  interest  in  TWE.  For  a  further  discussion  of  AT&  Ts  compliance  election,  see  Section
 IV.  F.,  infra,  (Coordination  with  AT&  T).  93
 Id.  at  8.  94
 Applicants  March  21  Supplemental  Information  at  9.  95
 Id.  at  9.  96
 Id.  at  8.  97
 Id.  at  9.  98
 Road  Runner  Corp.,  Road  Runner  Sets  Record  Third  Quarter  (press  release),  Oct.  16,  2000.  99
 Kinetic  Strategies,  Inc.,  Cable  Modem  Market  Stats  &  Projections,  CABLE  DATACOM  NEWS,  Nov.  8,  2000,  at  http://  CableDatacomNews.  com/  cmic/  cmic16.  html  (visited  Dec.  28,  2000).
 100  Road  Runner  Corp.,  Road  Runner  Sets  Record  Third  Quarter  (press  release),  Oct.  16,  2000.
 101  Time  Warner  Inc.,  Filing  10-  K  for  the  Year  Ended  Dec.  31,  1999  (Mar.  30,  1999)  (  Time  Warner  1999  10-  K)  at
 I-  19.  AT&  T  acquired  its  25.  1%  interest  in  Road  Runner  when  it  merged  with  MediaOne.  See  AT&  T-  MediaOne  Order,  15  FCC  Rcd  at  9819-  20    5.
 102  See  United  States  v.  AT&  T  Corp.  and  MediaOne  Group,  Inc.,  Case  No.  1:  00CV01176,  Complaint  and  Proposed
 Final  Judgment  (D.  D.  C.,  filed  May  25,  2000)  (  DOJ  Consent  Decree).  The  DOJ  Consent  Decree  does  not  affect  AT&  Ts  indirect  interest  in  Road  Runner  through  its  ownership  in  TWE.
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 AT&  Ts  divestiture  of  its  interest  in  Road  Runner  in  compliance  with  the  DOJ  Consent  Decree.  The  restructuring  is  anticipated  to  be  completed  by  April  2001.  103
 40.  Video  Programming  Networks.  Time  Warner  holds  interests  in  numerous  national,  international  and  regional  programming  networks.  104  These  interests  are  divided  into  three  entities:  TBS
 Entertainment,  CNN  News  Group,  and  Home  Box  Office  (  HBO).  TBS  Entertainment  and  CNN  News  Group  are  each  indirectly  wholly  owned  by  Time  Warner.  CNN  News  Group  includes  CNN,  CNN
 Headline  News,  CNN/  SI,  and  CNNfn.  105  CNN,  a  24-  hour  per  day  cable  television  news  service,  is  available  to  more  than  77  million  U.  S.  MVPD  subscribers.  106  In  1999,  CNN  had  nine  of  the  ten  highest-rated
 regularly  scheduled  basic  cable  news  programs.  107  TBS  Entertainment  includes  TBS,  TNT,  Turner  Classic  Movies,  Cartoon  Network  and  Turner  South.  108  Three  of  TBS  Entertainments  stations  were
 among  the  five  top-  rated  basic  cable  networks  in  1999.  109  TBS  and  TNT  each  are  available  to  over  75  million  subscribers.  110  Additionally,  through  wholly  owned  subsidiaries  of  TBS,  Time  Warner  owns
 three  Atlanta-  based  sports  franchises:  the  Atlanta  Braves  of  Major  League  Baseball,  the  Atlanta  Hawks  of  the  National  Basketball  Association,  and  the  Atlanta  Thrashers  of  the  National  Hockey  League.  111
 HBO  is  wholly  owned  by  TWE.  112  HBO  offers  premium  programming  channels  such  as  Home  Box  Office  and  Cinemax.  These  channels  had  almost  36  million  subscribers  in  1999.  113  In  addition,  Time
 Warner  Cable  operates  24-  hour  local  news  channels  in  New  York  City;  Tampa  Bay;  Orlando;  Rochester,  New  York;  and  Austin,  Texas.  114
 41.  Publishing  Interests.  Time  Warners  publishing  division  includes  magazines,  book  publishing,  book-  of-  the-  month  clubs,  and  interactive  media  sites.  Time,  Inc.  publishes  36  magazines  that
 reach  approximately  200  million  readers.  115  These  magazines  include  Time,  People,  Sports  Illustrated,  Money,  and  Fortune.  116  Each  of  these  magazines  also  has  an  affiliated  website.  117  In  1999,  Time  Warner
 103  AT&  T  Corp.,  Road  Runner  Joint  Venture  To  Be  Dissolved  (press  release),  Dec.  18,  2000.  See  also  Time  Warner
 Inc.,  Time  Warner  To  Increase  Road  Runner  Ownership  and  Manage  Its  Operations  (press  release),  Dec.  18,  2000.  104
 Application  at  4.  105
 Applicants  March  21  Supplemental  Information  at  9.  106
 Time  Warner  1999  10-  K  at  I-  4.  107
 Time  Warner  Inc.,  Cable  Networks,  at  http://  www.  timewarner.  com/  about/  cablenets  (visited  Aug.  18,  2000).  108
 Id.  109
 See  Time  Warner  Inc.,  Cable  Networks,  at  http://  www.  timewarner.  com/  about/  cablenets/  turnerent/  index.  html  (visited  Aug.  18,  2000).
 110  Time  Warner  1999  10-  K  at  I-  3.
 111  Time  Warner  1999  10-  K  at  I-  6.
 112  Applicants  March  21  Supplemental  Information  at  9.
 113  See  Time  Warner  Inc.,  Cable  Networks,  at  http://  www.  timewarner.  com/  about/  cablenets/  hbo/  index.  html  (visited
 Aug.  18,  2000).  HBO  also  owns  a  50%  interest  in  Comedy  Central,  a  basic  cable  television  service,  available  in  62  million  homes,  and,  through  TWE,  Time  Warner  also  has  a  50%  interest  in  Court  TV,  which  is  available  in
 approximately  37.  5  million  homes.  113  114
 Time  Warner  1999  10-  K  at  I-  20.  115
 Id.  116
 See  Time  Warner  Inc.,  Publishing:  Time,  Inc.,  at  http://  www.  timewarner.  com/  corp/  about/  publishing/  timeinc/  compbrandprod.  html  (visited  Aug.  18,  2000).
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 magazines  accounted  for  22.  6%  of  total  advertising  revenue  in  consumer  magazines,  as  measured  by  the  Publishers  Information  Bureau.  118
 42.  Music.  Time  Warners  music  division,  Warner  Music  Group  (  WMG),  consists  of  interests  in  recorded  music  and  music  publishing.  119  WMG  includes  record  labels  such  as  Atlantic,  Elektra,  Rhino,
 Sire,  Warner  Bros.  Records,  and  Warner  Music  International.  120  The  Applicants  have  worked  together  to  cross-  promote  WMG  properties.  A  WMG  subsidiary  and  AOL's  Spinner.  com,  an  Internet  streaming
 music  service,  cross-  promoted  a  recording  earlier  this  year,  and  cross-  promoted  musicians  on  one  of  Spinner.  com's  channels.  121  Maverick  Recording  Co.,  another  WMG  record  label,  and  AOL  have
 partnered  to  provide  music  and  premiere  recordings  on  AOL's  Entertainment  Channel  and  Spinner.  com.  122
 43.  Filmed  Entertainment.  Time  Warners  filmed  entertainment  businesses  primarily  consist  of  the  production  and  distribution  of  films  and  television  programming.  123  Its  component  companies  include
 Warner  Bros.  Pictures,  New  Line  Cinema,  Castle  Rock,  Warner  Home  Video,  and  Telepictures  Productions.  During  1999,  Warner  Bros.  Pictures  released  25  motion  pictures  for  theatrical
 distribution.  124  Through  its  other  film  lines,  Time  Warner  released  more  than  20  additional  films  in  1999.  125  Time  Warners  television  programming  interests  include  ownership  of  a  library  containing  5,700
 feature  films,  32,000  television  titles,  12,000  animated  titles,  and  1,500  animated  shorts.  126  Warner  Bros.  Television  (  WBTV)  produces  various  primetime  dramatic  and  comedy  programming  for  major
 networks.  127
 44.  The  WB  Television  Network.  Time  Warner  is  the  majority  owner  of  The  WB  Television  Network  (  The  WB).  128  The  WB  is  a  broadcast  network  that  reaches  83%  of  all  U.  S.  households.  129  The
 (  continued  from  previous  page)  117  See  Time  Warner  Inc.,  Public  Archive,  at  http://  www.  timewarner.  com/  corp/  about/
 pubarchive/  websites.  html#  publishing  (visited  Aug.  21,  2000).  118
 Time  Warner  1999  10-  K  at  I-  7.  119
 Applicants  March  21  Supplemental  Information  at  8.  120
 Id.  121
 America  Online,  Inc.,  Warner  Bros.  Records  and  AOLs  Spinner.  com  Present  Faith  Hill  Live  Online!  (press  release),  Mar.  2,  2000.
 122  America  Online,  Inc.,  Alanis  Morissette  Sets  Precedent  With  Worldwide  Debut  of  New  Video  Exclusively  Online
 (press  release),  June  25,  1999;  America  Online,  Inc.,  AOL,  Inc.  s  Spinner.  com  Announces  World  Premiere  of  Maverick  Records  Meshell  Ndegocellos  Latest  Single  (press  release),  Aug.  11,  1999.
 123  Applicants  March  21  Supplemental  Information  at  8.
 124  Time  Warner  1999  10-  K  at  I-  13.
 125  Id.  at  I-  13.
 126  Id.  at  I-  13.
 127  Id.  at  I-  14.
 128  Id.  at  I-  16.  Tribune  Broadcasting  holds  a  22.  25%  interest  in  The  WB,  and  key  employees  of  The  WB  hold  an
 11%  interest  in  the  network.  129
 Id.  at  I-  15.
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 WB  broadcasts  13  hours  of  series  programming  per  week;  its  childrens  network,  Kids  WB!,  airs  19  hours  of  programming  per  week.  130
 45.  Telephony.  Time  Warner  provides  both  residential  and  business  telephony  services.  Time  Warner  residential  telephony  service  is  offered  by  Time  Warner  Cable  (  TWC).  TWC  has  offered
 circuit-  switched  service  in  Rochester,  New  York  since  1994.  TWC  also  provides  residential  telephony  service  in  Portland,  Maine  to  a  limited  number  of  its  cable  customers  in  that  market.  131  In  February  1999,
 eleven  months  prior  to  the  announcement  of  the  intended  AOL  and  Time  Warner  merger,  Time  Warner  and  AT&  T  signed  a  preliminary  letter  of  intent  for  a  cable  telephony  joint  venture.  While  the  joint
 venture  has  not  yet  been  launched,  Time  Warner  and  AT&  T  continue  to  have  ongoing  discussions  regarding  the  provision  of  residential  telephony  to  Time  Warners  cable  subscribers.  132  Time  Warner  and
 AT&  T  have  also  signed  joint  marketing  agreements  to  provide  incentives  to  individuals  in  Albany  and  Syracuse,  New  York  to  subscribe  to  both  Time  Warner  cable  service  and  AT&  T  long  distance  service.  133
 According  to  Time  Warner,  AT&  T  and  Time  Warner  Cable  will  offer  other  long  distance  and  cable  television  incentives  and  will  engage  in  [additional]  joint  telemarketing  efforts.  134  Finally,  Time  Warner,
 through  its  subsidiary  Time  Warner  Connect,  has  received  certification  as  a  competitive  local  exchange  carrier  (  LEC),  allowing  it  to  offer  residential  telephony  in  California,  Florida,  Ohio  and  Texas.  135
 46.  Time  Warner  serves  businesses  through  Time  Warner  Telecom,  Inc.  (  TWT),  a  facilities-based  communications  provider  serving  large  businesses.  136  TWT  offers  businesses  last  mile
 broadband  connections  for  data,  high-  speed  Internet,  local  voice  and  long-  distance  services.  137  TWT  is  certified  to  offer  telecommunications  services  in  21  metropolitan  areas  in  12  states.  138  As  of  December
 31,  1999,  TWTs  network  included  almost  8,900  route  miles,  333,00  fiber  miles  and  offered  service  to  5,566  buildings.  139  During  1999,  TWTs  investment  in  its  communications  networks  exceeded  $556
 million.  140  TWT  anticipated  that  it  would  commit  approximately  $350  million  in  2000  to  fund  its  capital  expenditures  for  current  operating  areas  its  expansion  plans.  141
 130  Id.  at  I-  15-  16.
 131  Applicants  First  Response  at  22.
 132  Id.
 133  Id.  at  14.  See  also  Time  Warner  Inc.,  AT&  T  and  Time  Warner  Cable  Announce  Joint  Marketing  Agreement
 (press  release),  Mar.  8,  2000.  134
 Id.  135
 Id.  136
 Applicants  First  Response  at  23.  Time  Warner  owns  47.  85%  of  the  equity  in  TWT,  and  66.  86%  of  TWTs  voting  power.  See  id.  at  23,  26.
 137  Applicants  First  Response  at  23.
 138  Id.  at  26.
 139  Id.  at  24.
 140  Id.  at  24.
 141  Id.
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 B.  Other  Proceedings  Relevant  to  the  Application  to  Transfer  Licenses.
 47.  Federal  Trade  Commission  Review.  In  addition  to  Commission  review,  the  proposed  merger  is  subject  to  review  by  the  FTC.  The  FTC  recently  approved  the  merger,  subject  to  certain  conditions.  142
 The  FTC  Consent  Agreement  requires,  among  other  provisions  discussed  below:  (1)  that  AOL  Time  Warner  make  available  to  subscribers  at  least  one  unaffiliated  ISP  on  Time  Warners  cable  systems  before
 AOL  itself  begins  offering  service;  that  AOL  Time  Warner  allow  two  other  unaffiliated  ISPs  onto  its  cable  systems  within  90  days  after  AOLs  commencement  of  service;  and  that  AOL  Time  Warner
 negotiate  in  good  faith  for  non-  discriminatory  access  to  its  cable  systems  with  any  ISPs  requesting  such  access;  (2)  that  AOL  Time  Warner  not  interfere  with  content  passed  along  the  bandwidth  contracted  for
 by  unaffiliated  ISPs,  or  discriminate  on  the  basis  of  affiliation  in  the  transmission  of  content  that  AOL  Time  Warner  has  contracted  to  deliver  to  subscribers  over  their  cable  systems;  and  (3)  that  AOL  Time
 Warner  market  and  offer  AOLs  DSL  services  in  the  same  manner  and  at  the  same  retail  price  in  Time  Warner  cable  areas  where  affiliated  cable-  based  Internet  access  service  is  available,  as  in  those  areas
 where  affiliated  cable-  based  Internet  access  service  is  not  available.  143  The  FTC  also  required,  in  a  separate  order,  that  AOL  Time  Warner  hold  separate  Road  Runner  and  AOL  until  such  time  that  it  offers
 over  all  of  its  cable  properties  an  unaffiliated  ISP.  144
 48.  European  Commission  Review.  On  October  11,  2000,  the  European  Commission  (the  EC)  granted  conditional  approval  to  the  Applicants  proposed  merger.  145  The  ECs  approval  was  conditioned
 upon  AOLs  agreement  to  sever  all  structural  links  between  itself  and  the  German  multi-  media  company  Bertelsmann  AG.  146  The  EC  did  not  address  concerns  with  respect  to  the  European  market  for  residential
 high-  speed  Internet  access,  stating  that  the  Applicants  do  not  have  a  broadband  infrastructure  in  Europe.  147
 49.  Local  Franchising  Authority  Review.  As  of  September  14,  2000,  Applicants  had  completed  initial  regulatory  filings  with  approximately  1,150  local  franchising  authorities.  148  Pursuant  to  Section
 617  of  the  Communications  Act,  local  franchising  authorities  with  jurisdiction  to  review  transfers  or  sales  of  cable  systems  have  120  days  from  the  date  of  Applicants  request  for  a  franchise  transfer  to  render  a
 decision.  149  As  of  September  14,  the  Applicants  had  received  approval  from,  or  did  not  need  to  receive  approval  from,  communities  covering  approximately  99.  63%  of  total  subscribers  served  by  Time  Warner
 142  See  FTC  Consent  Agreement  and  Federal  Trade  Commission  Office  of  Public  Affairs,  FTC  Approves  AOL/  Time
 Warner  Merger  with  Conditions  (press  release),  Dec.  14,  2000  (describing  FTC  action).  (FTC  Press  Release)  143
 Id.  at  2.  144
 Federal  Trade  Commission,  Order  To  Hold  Separate  in  the  Matter  of  America  Online,  Inc.,  and  Time  Warner  Inc.,  Docket  No.  C-  3989,  rel.  Dec.  14,  2000.
 145  European  Commission,  Commission  Gives  Conditional  Approval  to  AOL/  Time  Warner  Merger  (press  release),
 Oct.  11,  2000.  146
 Id.  147
 Id.  148
 Letter  from  Arthur  Harding,  Wiley,  Rein  and  Fielding,  Counsel  for  Time  Warner  Inc.,  to  Magalie  Roman  Salas,  Secretary,  FCC,  dated  Sept.  14,  2000  (  Harding  Sept.  14  Letter).
 149  47  U.  S.  C.    537;  47  C.  F.  R.    76.  502.
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 Cable.  150  Three  communities  denied  the  request  to  transfer.  151  Subsequently,  one  of  these  communities  reconsidered  and  granted  approval.  152
 C.  The  Merger  Transaction  and  the  Application  to  Transfer  Licenses
 50.  Proposed  Transaction.  On  January  10,  2000,  AOL  and  Time  Warner  agreed  to  merge  in  a  stock-  for-  stock  transaction  whereby  each  will  become  a  wholly  owned  subsidiary  of  AOL  Time
 Warner.  153  Under  the  merger  agreement,  Time  Warner  and  AOL  stock  will  be  converted  into  AOL  Time  Warner  stock  at  fixed  exchange  ratios:  Time  Warner  shareholders  will  receive  45%  of  the  new
 corporation,  and  AOL  shareholders  will  receive  55%,  each  on  a  fully  diluted  basis.  154  Upon  the  mergers  completion,  ownership  and  control  of  all  entities  holding  FCC  licenses  are  to  be  transferred  from  Time
 Warner  and  AOL  individually  to  the  newly  formed  AOL  Time  Warner.  155  Currently,  Time  Warner  holds  numerous  Commission  licenses  associated  with  its  cable  television  systems,  broadcast  stations,  and
 telephony  ventures.  156
 51.  The  merger  would  join  the  nations  largest  ISP,  AOL,  with  the  nations  second  largest  cable  operator,  Time  Warner.  The  Applicants  believe  that  the  combined  company  will  spur  the  development  of
 residential  broadband  service,  and  bring  next-  generation  multimedia  content  and  powerful  e-  commerce  applications  to  consumers.  157  The  Applicants  also  contend  that  their  combination  will  create  new
 opportunities  for  interactive  entertainment,  news,  online  services,  music,  publishing,  and  film  distribution.  158  The  Applicants  aver  that  their  merger  will  lead  to  a  solution  to  the  cable  access  issue,
 and  to  the  provision  of  multiple  ISPs  over  the  cable  platform.  159  In  particular,  AOL  and  Time  Warner  point  to  their  Memorandum  of  Understanding  Regarding  Open  Access  Business  Platforms  (the  MOU),
 150  Harding  Sept.  14  Letter.
 151  Id.
 152  Letter  from  Arthur  Harding,  Wiley,  Rein  and  Fielding,  Counsel  for  Time  Warner  Inc.,  to  Magalie  Roman  Salas,
 Secretary,  FCC,  dated  Dec.  5,  2000  (  Harding  Dec.  5  Letter).  Cary,  North  Carolina  and  Biddeford,  Maine  are  the  communities  that  denied  the  transfer.  Id.  In  addition,  one  community  that  had  not  granted  approval  as  of  Sept.  14,
 2000  subsequently  granted  its  consent.  Id.  153
 Time  Warner  Inc.,  America  Online  and  Time  Warner  Will  Merge  (press  release),  Jan.  10,  2000;  see  also  Application  at  4-  5.
 154  Application  at  5.
 155  Application  at  4-  5.  See  Application  at  Attachment  1,  for  a  full  listing  of  licenses  held  by  AOL  and  Time
 Warner.  156
 Time  Warners  cable  systems  hold  more  than  150  Cable  Television  Relay  Service  (CARS)  Licenses.  See  Application  at  Appendix  1.  CARS  licenses  are  used  for  the  transmission  of  television  and  related  audio  signals  .  .  .
 and  cablecasting  from  the  point  of  reception  to  a  terminal  point  from  which  the  signals  are  distributed  to  the  public  by  cable.  See  47  C.  F.  R.    78.  1.  Thus,  CARS  licenses  can  be  an  integral  part  of  a  cable  systems  plant,  allowing
 the  cable  system  to  distribute  cable  programming  to  its  entire  service  regardless  of  certain  physical  obstacles  to  transmission.  Time  Warner  subsidiaries  also  hold  six  licenses  under  section  214  of  the  Communications  Act.  The
 licenses  permit  the  holders  to  provide  common  carrier  services  between  the  United  States  .  .  .  and  a  foreign  point.  See  47  C.  F.  R.    63.  18.  AOL  holds  five  land  mobile  wireless  licenses.  Application  at  Attachment  1.
 157  Application  at  9.
 158  Id.  at  11.
 159  Id.  at  14.
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 into  which  the  Applicants  entered  shortly  after  agreeing  to  merge,  as  a  turning  point  in  the  effort  to  promote  a  vigorously  competitive  marketplace  for  broadband  Internet  services.  160
 IV.  ANALYSIS  OF  POTENTIAL  PUBLIC  INTEREST  HARMS
 52.  Parties  opposing  the  merger  have  alleged  that  the  combination  of  AOL  and  Time  Warner  will  harm  the  public  interest  with  respect  to  the  provision  of  various  services.  We  address  below  the  effects  of
 the  merger  on  only  those  services  that  may  be  affected  adversely  by  the  merger,  based  on  commenters  allegations  and  our  own  analysis.  Specifically,  we  examine  the  mergers  potential  effects  on  (1)  high-speed
 Internet  access  services,  (2)  services  based  on  instant  messaging,  (3)  interactive  television  services,  (4)  electronic  programming  guides,  (5)  carriage  of  television  broadcast  signals,  (6)  increased
 concentration  among  MVPDs,  and  (7)  competition  among  MVPDs.  In  addition,  we  examine  the  mergers  potential  public  interest  harms  in  light  of  AOL  Time  Warners  ownership  and  contractual  relationships
 with  AT&  T  Corp.  161
 A.  High-  Speed  Internet  Access  Services
 53.  In  this  section,  we  examine  the  effects  of  the  proposed  merger  on  competition  in  residential  high-  speed  Internet  access  services.  162  We  again  confront  in  the  merger  context  whether  to  impose  some
 conditions  regarding  access  to  the  cable  platform  for  unaffiliated  ISPs  seeking  to  provide  these  services.  The  Applicants  have  argued  that  (i)  this  case  is  indistinguishable  from  prior  cases  such  as  AT&  T-MediaOne
 in  which  the  Commission  declined  to  require  AT&  T  to  open  its  cable  networks  to  unaffiliated  ISPs,  and  (ii)  imposing  an  access  condition  here  is  inconsistent  with  the  Commissions  pending  Notice  of
 Inquiry  on  high-  speed  Internet  access  (  Cable  Access  NOI),  163  which  explores  the  need  for  rules  of  general  applicability.  We  disagree.
 54.  We  find  that  the  circumstances  presented  by  these  applications  are  dramatically  different  from  those  presented  in  our  former  cases,  and  compel  a  different  result.  AOL  is  by  far  the  largest
 narrowband  ISP  and  has  been  the  leading  advocate  and  supporter  of  the  open  access  movement.  The  proposed  merger  represents  a  substantial  shift  in  strategy  for  AOL  and  a  dramatic  change  in  the  ISP/  cable
 system  landscape.  AOL  seeks  to  purchase  the  second  largest  cable  system  in  the  country  and  would  obtain  in  the  transaction  programming  assets  that  could  give  it  even  greater  bargaining  power  to  negotiate
 access  to  other  cable  systems.  After  the  merger,  AOL  would  have  a  unique  concentration  of  assets  (vast  narrowband  membership  and  the  product  that  has  created  it,  access  to  Time  Warner  cable  systems,  and
 extensive  Time  Warner  content  assets)  that  could  well  give  it  sufficient  power  to  bargain  its  way  onto  all  other  platforms  (indeed  at  preferential  terms)  without  any  change  in  government  regulation.
 160  Applicants  March  21  Supplemental  Information  at  23.
 161  The  City  of  Daytona  Beach  raises  certain  concerns  about  local  franchise  matters  that  we  do  not  address  because
 they  are  not  merger-  specific.  See  Letter  from  Richard  F.  Quigley,  Assistant  Manager  for  Support/  Technology  Services,  City  of  Daytona  Beach,  to  Magalie  Roman  Salas,  Secretary,  FCC,  dated  Aug.  18,  2000  (  Daytona  Beach
 Aug.  18  Ex  Parte),  at  7  (advocating  a  merger  condition  requiring  AOL  Time  Warner  to  set  aside  channel  capacity  and  facilities  for  public  access,  educational  and  government  (  PEG)  channels).
 162  We  describe  these  services  more  fully  below.
 163  See  Inquiry  Concerning  High-  Speed  Access  to  the  Internet  Over  Cable  and  Other  Facilities,  GN  Docket  No.  00-185,
 Notice  of  Inquiry  (  Cable  Access  Notice  of  Inquiry  or  Cable  Access  NOI),  FCC  00-  355  (rel.  Sept.  28,  2000).
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 55.  None  of  the  prior  mergers  involved  a  comparable  combination  of  assets  or  a  comparable  potential  impact  on  competition  among  broadband  ISPs.  Moreover,  while  the  access  issue  affects  the
 whole  industry,  as  our  Cable  Access  NOI  indicates,  this  merger  would  place  AOL  Time  Warner  in  a  unique  position  that  may  justify  conditions  inapplicable  to  others.
 56.  As  further  elaborated  below,  we  find  that,  absent  mitigating  conditions,  the  proposed  merger  would  undermine  competition  in  the  provision  of  residential  high-  speed  Internet  access  services.  We  find
 in  particular  that  these  services  constitute  a  relevant  product  market  distinguishable  from  residential  narrowband  Internet  access  services.  We  also  find  that  the  proposed  merger  would  give  AOL  Time
 Warner  both  the  ability  and  the  incentive  to  discriminate  against  unaffiliated  ISPs  and  alternative  (non-cable)  high-  speed  platforms  within  Time  Warner  cable  territories,  and  to  obtain  exclusive  or  preferential
 carriage  for  its  own  Internet  access  services  from  other  cable  providers.  As  a  result,  the  proposed  merger  would  frustrate  statutory  goals  and  Commission  policies  designed  to  ensure  that  the  American  public  has
 access  to  a  diversity  of  information  sources  and  to  widely  available  advanced  services.
 57.  We  conclude,  however,  that  these  potential  harms  will  be  substantially  averted  by  the  terms  of  the  FTC  Consent  Agreement.  164  The  FTC  Consent  Agreement  requires,  among  other  provisions
 discussed  below,  (1)  that  AOL  Time  Warner  make  available  to  subscribers  at  least  one  unaffiliated  ISP  on  Time  Warners  cable  systems  before  AOL  itself  begins  offering  service;  that  AOL  Time  Warner  allow
 two  other  unaffiliated  ISPs  onto  its  cable  systems  within  90  days  after  AOLs  commencement  of  service;  and  that  AOL  Time  Warner  negotiate  in  good  faith  for  non-  discriminatory  access  to  its  cable  systems  with
 any  ISPs  requesting  such  access;  (2)  that  AOL  Time  Warner  not  interfere  with  content  passed  along  the  bandwidth  contracted  for  by  unaffiliated  ISPs,  or  discriminate  on  the  basis  of  affiliation  in  the
 transmission  of  content  that  AOL  Time  Warner  has  contracted  to  deliver  to  subscribers  over  their  cable  systems;  and  (3)  that  AOL  Time  Warner  market  and  offer  AOLs  DSL  services  in  the  same  manner  and  at
 the  same  retail  price  in  Time  Warner  cable  areas  where  affiliated,  cable-  based  Internet  access  service  is  available  as  in  those  areas  where  affiliated,  cable-  based  Internet  access  service  is  not  available.  165
 Because  we  conclude  that  the  FTC  Consent  Agreement  will  not  avert  all  the  potential  harms  to  the  public  interest  that  would  result  from  the  proposed  merger,  we  impose  certain  additional  conditions  to  ensure
 that  AOL  Time  Warner  does  not  disadvantage  unaffiliated  ISPs  on  its  cable  systems  through  several  indirect  means  not  squarely  addressed  by  the  FTC  Consent  Agreement.
 58.  The  decisions  we  make  in  this  proceeding  do  not  necessarily  portend  any  specific  policy  determinations  in  future  proceedings,  such  as  the  Cable  Access  NOI  or  the  ITV  NOI,  166  which  will  be
 based  on  the  record  in  those  proceedings.  If  the  Commission  were  to  determine  in  the  context  of  those  proceedings  that  rules  of  general  applicability  were  warranted,  this  Order  does  not  determine  or  prejudge
 whether  the  conditions  we  adopt  here  should  apply  industry-  wide.  The  assessment  of  what  types  of  generally  applicable  rules,  if  any,  would  be  appropriate  will  flow  from  the  record  developed  in  those
 proceedings.  Should  those  proceedings  ultimately  result  in  rules  of  general  applicability  or  yield  any  findings  on  market  definition  contrary  to  our  finding  here,  the  Commission  may  revisit  the  merger
 conditions  imposed  in  this  section,  either  on  its  own  motion  or  upon  the  Applicants  request.
 59.  Our  authority  to  address  the  mergers  impact  on  competition  for  high-  speed  Internet  access  services  derives  from  our  statutory  duty  to  ensure  that  the  proposed  transaction  serves  the  public
 164  See  FTC  Consent  Agreement;  FTC  Press  Release.
 165  FTC  Press  Release  at  2.
 166  See  Section  IV.  D,  infra  (Interactive  Television  Services).
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 interest.  167  As  discussed  in  Section  II  above,  we  conduct  our  public  interest  inquiry  by  determining,  among  other  things,  whether  the  proposed  transaction  would  substantially  frustrate  or  impair  the
 Commissions  implementation  or  enforcement  of  the  Communications  Act,  or  would  interfere  with  the  objectives  of  the  Act  or  of  other  statutes.  168  Several  such  objectives  are  relevant  to  our  analysis  here.
 First,  in  adopting  the  1996  Act,  Congress  established  a  clear  national  policy  to  promote  the  continued  development  of  the  Internet  and  to  preserve  the  vibrant  and  competitive  free  market  that  presently
 exists  for  the  Internet  and  other  interactive  computer  services  unfettered  by  Federal  or  State  regulation.  169  Concurrently,  Congress  charged  the  Commission  with  encourag[  ing]  the  deployment  on
 a  reasonable  and  timely  basis  of  advanced  telecommunications  capability  to  all  Americans.  170  The  principal  purpose  of  such  capability  is  to  facilitate  the  use  of  advanced  services,  of  which  residential  high-speed
 Internet  access  services  are  one  kind.  171  Finally,  it  has  long  been  a  basic  tenet  of  national  communications  policy  that  the  widest  possible  dissemination  of  information  from  diverse  and
 antagonistic  sources  is  essential  to  the  welfare  of  the  public.  172  This  national  policy  to  promote  the  publics  access  to  a  diversity  of  viewpoints  from  a  multiplicity  of  sources  finds  expression  in  statutory
 law  as  well  as  in  previous  decisions  of  this  Commission.  173
 60.  Our  authority  to  review  the  impact  of  the  proposed  transaction  on  the  public  interest  goes  hand  in  hand  with  broad  authority  to  attach  conditions  to  the  proposed  transfer  of  lines  and  licenses  to
 ensure  that  the  transfer  actually  serves  the  public  interest.  Section  303(  r)  of  the  Act  authorizes  the  Commission  to  prescribe  restrictions  or  conditions,  not  inconsistent  with  law,  that  may  be  necessary  to
 167  47  U.  S.  C.    214(  a),    310(  d);  see  also  id.    303(  r).
 168  AT&  T-  MediaOne  Order,  15  FCC  Rcd  at  9820-  21    9.  In  conducting  our  public  interest  inquiry,  we  also  examine
 whether  the  proposed  transaction  would  result  in  a  violation  of  the  Communications  Act  or  any  other  applicable  statutory  provision,  and  whether  it  would  result  in  a  violation  of  the  Commissions  rules.  Id.  The  record  does  not
 indicate  that  the  proposed  transaction  would  result  in  any  such  violations  with  respect  to  residential  high  speed  Internet  access  services.
 169  47  U.  S.  C.    230(  b)(  1)-(  2).
 170  Id.    157  nt.;  see  also  id.    1  (FCC  was  created  so  as  to  make  available,  so  far  as  possible,  to  all  people  of  the
 United  States  .  .  .  a  rapid,  efficient,  Nationwide,  and  world-  wide  wire  and  radio  communication  service  with  adequate  facilities  at  reasonable  charges).  Congress  defined  advanced  telecommunications  capability  as  high-speed,
 switched,  broadband  telecommunications  capability.  47  U.  S.  C.    157  nt.  171
 See,  e.  g.,  Second  Inquiry  Concerning  the  Deployment  of  Advanced  Telecommunications  Capability  Pursuant  to  Section  706  of  the  Telecommunications  Act  of  1996,  CC  Docket  No.  98-  146,  Second  Report,  FCC  00-  290  (rel.  Aug.
 21,  2000)  at    3  (  Second  706  Report)  (noting  that  [  w]  ith  advanced  telecommunications  capability  consumers  can  take  advantage  of  advanced  services  that  allow  residential  and  business  consumers  to  create  and  access  content,
 sophisticated  applications,  and  high-  bandwidth  services).  172
 Turner  Broadcasting  System,  Inc.  v.  FCC,  512  U.  S.  622,  663  (1994)  (internal  quotation  marks  omitted).  173
 See,  e.  g.,  47  U.  S.  C.    257(  b)  (noting  that  one  of  the  policies  and  purposes  of  the  Communications  Act  is  to  favor[  ]  diversity  of  media  voices);  id.    521  nt  (codifying  findings  and  policy  underlying  Cable  Television
 Consumer  Protection  and  Competition  Act  of  1992)  (  There  is  a  substantial  governmental  and  First  Amendment  interest  in  promoting  a  diversity  of  views  provided  through  multiple  technology  media.);  AT&  T-  MediaOne  Order,
 15  FCC  Rcd  at  9818-  20    3-  5  (considering  proposed  mergers  effects  on  diversity  and  competition  in  video  programming  and  its  effects  on  openness  and  diversity  of  broadband  Internet  content).  We  note  that  we  are  not
 here  determining  the  proper  legal  classification  of  Internet  services  provided  by  cable  operators.  See  Cable  Access  NOI  (soliciting  comments  on  proper  legal  classification  of  such  services).  Our  determination  not  to  address  that
 issue  in  this  proceeding  is  consistent  with  our  determination  not  to  do  so  in  AT&  T-  MediaOne.  See  AT&  T-  MediaOne  Order,  15  FCC  Rcd  at  9872    126.
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 carry  out  the  provisions  of  the  Act.  174  Similarly,  Section  214(  c)  of  the  Communications  Act  authorizes  the  Commission  to  attach  to  the  certificate  such  terms  and  conditions  as  in  its  judgment  the  public
 convenience  and  necessity  may  require.  175
 61.  We  find  that,  absent  mitigating  conditions,  the  proposed  transaction  would  interfere  with  each  of  the  objectives  discussed  above.  The  merger  would  imperil  the  continued  existence  of  a  vibrant  and
 competitive  free  market  for  development  of  the  Internet  because  AOL  Time  Warner  would  have  the  ability  and  the  incentive  to  discriminate  against  unaffiliated  ISPs  on  its  own  cable  platform,  and  to  obtain
 exclusive  carriage  for  its  Internet  access  services  on  the  networks  of  other  cable  providers.  176  These  outcomes  would  also  thwart  the  deployment  of  advanced  telecommunications  capability  to  all  Americans
 by  limiting  choice  in  the  realm  of  residential  high-  speed  Internet  access  services  and,  potentially,  by  threatening  the  survival  of  ISPs  unaffiliated  with  AOL  Time  Warner  as  consumers  migrate  from
 narrowband  to  high-  speed  services.  177  These  outcomes  would  likewise  diminish  the  publics  ability  to  obtain  information  from  diverse  sources,  as  customers  of  the  nations  second  largest  cable  operator  (AOL
 Time  Warner)  would  have  little  choice  but  to  access  the  Internet  through  service  providers  affiliated  with  that  entity.  178  Furthermore,  as  we  discuss  below,  discrimination  by  AOL  Time  Warner  against
 unaffiliated  ISPs  in  the  market  for  residential  high-  speed  Internet  access  services  would  facilitate  discrimination  by  that  company  in  favor  of  its  own  broadband  content,  a  result  that  could  constrain
 consumers  access  to  the  widest  possible  array  of  information  over  high-  speed  technology.  179  If,  in  contrast,  AOL  Time  Warner  were  obligated  to  carry  multiple,  unaffiliated  ISPs  over  its  network  on  non-discriminatory
 terms,  those  ISPs  could  serve  as  an  alternative  outlet  for  non-  AOL  Time  Warner  content,  making  it  more  likely  that  AOL  Time  Warners  affiliated  ISPs  would  feature  such  content  themselves  to
 remain  competitive.  For  all  of  these  reasons,  we  conclude  that  our  duty  to  ascertain  that  the  proposed
 174  47  U.  S.  C.    303(  r).
 175  Id.    214(  c).
 176  Discrimination  by  AOL  Time  Warner  against  unaffiliated  ISPs  on  the  merged  companys  cable  platform  could
 take  the  form  of  an  outright  refusal  to  carry  such  ISPs,  or  it  might  occur  more  subtly  --  for  example,  by  degrading  unaffiliated  ISPs  quality  of  service,  limiting  their  features  and  functionalities,  or  discriminating  against  them  in
 terms  and  conditions  of  access.  AOL  Time  Warner  could  also  facilitate  discrimination  against  unaffiliated  ISPs  on  the  platforms  of  other  cable  operators  by  using  its  leverage  over  video  programming  to  obtain  (via  explicit  contract
 or  tacit  agreement)  exclusive  or  preferential  treatment  for  AOL  Internet  access  services  that  would  be  denied  to  its  competitors.
 177  See  Letter  from  Stephen  Heins,  Director  of  Marketing,  NorthNet,  to  Robert  Pitofsky,  Chairman,  FTC,  and
 William  E.  Kennard,  Chairman,  FCC,  dated  Oct.  10,  2000  (  NorthNet  Oct.  10  Ex  Parte)  at  7  (noting  that  [  m]  any  independent  ISPs  have  concluded  that  the[]  terms  [proposed  by  Time  Warner]  present  no  reasonable  basis  for
 independent  ISPs  to  compete  on  a  commercially  viable  basis,  and  concluding  that  [  b]  y  offering  terms  that  are  totally  unacceptable,  Time  Warner  keeps  its  network  effectively  closed);  Letter  from  Earl  W.  Comstock,  Esq.,  Sher
 &  Blackwell,  Counsel  for  EarthLink,  to  Magalie  Roman  Salas,  Secretary,  FCC,  dated  Oct.  18,  2000  (  EarthLink  Oct.  18  Ex  Parte)  at  1  (arguing  that  the  terms  of  Time  Warners  recent  proposals  would  make  the  arrangements
 economically  infeasible  for  ISPs  not  affiliated  by  ownership  with  the  applicants).  178
 More  subtle  discrimination  by  AOL  Time  Warner  would  also  narrow  the  publics  access  to  information  from  diverse  sources,  though  in  more  subtle  ways:  AOL  Time  Warners  cable  customers  would  have  a  choice  between
 using  affiliated  ISPs  on  the  one  hand  or  unaffiliated  ISPs  relegated  to  offering  an  inferior  product  on  the  other.  179
 Discrimination  by  AOL  Time  Warner  against  unaffiliated  ISPs  with  respect  to  carriage  on  the  companys  cable  network  would  facilitate  discrimination  by  AOL  Time  Warner  in  favor  of  its  own  broadband  content  by  enabling  the
 merged  firm  to  exclude  non-  AOL  Time  Warner  content  from  its  Internet  access  services  without  facing  competitive  pressure  from  other  ISPs  on  the  same  cable  network  who  would  presumably  supply  non-  AOL  Time  Warner  content.
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 transaction  serves  the  public  interest  requires  us  to  condition  our  approval  on  the  terms  we  describe  below.  We  have  narrowly  tailored  these  terms  to  augment  the  terms  in  the  FTC  Consent  Agreement,  and
 to  avoid  duplication  of  those  terms.  Each  of  the  conditions  we  impose  is  designed  to  ensure  that  the  transaction  does  not  interfere  with  the  aforementioned  statutory  objectives.
 1.  Background
 62.  Internet  access  services  consist  principally  of  connectivity  to  the  Internet  provided  to  end  users.  180  These  end  users  may  be  residential  consumers,  businesses,  content  providers,  or  application
 providers.  In  this  analysis,  we  focus  on  Internet  access  services  provided  to  residential  consumers.
 63.  The  majority  of  residential  and  small  business  consumers  who  purchase  Internet  access  services  do  so  from  ISPs  offering  relatively  low-  speed  access  (typically  between  28  and  56  kilobits  per
 second  (  kbps))  over  local  telephony  plant,  otherwise  known  as  narrowband  (or  dial-  up)  service.  181  Customers  of  these  ISPs  typically  pay  $22  per  month  or  less  for  unlimited  usage.  182  Major  nationwide
 dial-  up  ISPs  include  AOL,  AT&  Ts  WorldNet,  MSN,  and  EarthLink.  LECs  operating  within  their  service  territories,  Erols,  and  thousands  of  other  ISPs  offer  service  locally  or  regionally.  183  High-  speed
 (or  broadband)  Internet  access  is  available  through  several  different  technologies,  including  cable,  digital  subscriber  line  (  DSL),  184  fixed  terrestrial  wireless,  and  satellite.  185  In  general,  high-  speed  access
 enables  consumers  to  communicate  over  the  Internet  at  speeds  that  are  many  times  faster  than  the  speeds  offered  through  dial-  up  telephone  connections.  With  high-  speed  Internet  access,  consumers  can  send  and
 view  content  with  little  or  no  transmission  delay,  utilize  sophisticated  real-  time  applications,  and  take  advantage  of  other  high-  bandwidth  services.
 64.  Cable  operators  that  provide  high-  speed  Internet  access  services  to  their  subscribers  often  do  so  by  purchasing  some  components  of  such  services  from  another  company.  In  particular,  a  cable
 180  We  refer  to  Internet  access  services,  in  the  plural,  to  reflect  the  fact  that  such  services  offer  differing  speeds  of
 access;  technical  performance;  price;  availability  of  customer  support;  and  extent  of  content.  Our  use  of  the  term  Internet  access  services  is  meant  to  encompass  services  provided  not  only  by  ISPs,  but  also  by  so-  called  online
 service  providers  (  OSPs),  such  as  AOL,  which  combine  content  with  Internet  access  services.  181
 While  the  fastest  of  narrowband  modems  have  the  theoretical  capability  to  support  56  kbps  downstream,  Commission  regulations  limit  narrowband  modems  to  53  kbps.
 182  See  ISP  Buyers  Guide:  Dial-  Up  ISPs,  CNET  INTERNET,  at  http://  home.  cnet.  com/  internet/  0-  3762-  7-2518427.
 html?  tag=  st.  int.  3762-  7-  2518426txt.  3762-  7-  251842  (visited  Dec.  5,  2000).  183
 NorthNet  indicates  that  there  are  7,  000  or  so  ISPs  throughout  the  United  States.  See  NorthNet  Oct.  10  Ex  Parte  at  1.
 184  Generally,  unless  we  state  otherwise,  our  references  to  DSL  throughout  this  Order  refer  to  asymmetric  DSL
 (  aDSL).  Asymmetric  DSL  is  the  most  common  variant  of  DSL  used  by  residential  customers,  and  is  available  at  various  speeds  ranging  up  to  6.1  mbps  downstream  and  640  kbps  upstream.  See  Second  706  Report,  FCC  00-  290  at
   36;  id.  at    47.  Presently,  at  lowest  cost,  aDSL  service  usually  provides  transmission  at  384-  640  kbps  downstream  and  90-  128  kbps  upstream.
 185  The  Commissions  Second  706  Report  contains  a  detailed  description  of  high-  speed  Internet  access  via  various
 technologies.  The  characteristics  of  the  services  offered  via  these  respective  technologies  may  vary.  See  generally  Second  706  Report.  The  Report  defines  high-  speed  services  as  those  services  with  over  200  kbps  capability  in  at
 least  one  direction.  Id.  at  8.  It  distinguishes  such  services  from  advanced  services,  which  it  defines  as  the  subset  of  high  speed  services  capable  of  200  kbps  or  greater  transmission  in  both  directions.  Id.  (emphasis  in
 original).
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 operator  typically  contracts  with  an  Internet  connectivity  provider  (such  as  Road  Runner,  Excite@  Home,  or  High-  Speed  Access  Corporation)  186  to  link  its  cable  headend  to  the  Internet,  which  entails  providing
 routers,  servers,  and  a  dedicated  Internet  connection.  187  The  cable  operator,  in  turn,  generally  retains  responsibility  for  installing  the  modems  upon  which  end  users  rely,  for  upgrades  to  the  cable  system
 plant,  and  for  marketing.  The  cable  operator  and  the  Internet  connectivity  provider  often  divide  billing  and  technical  support  functions.  From  the  perspective  of  the  consumer,  these  services  form  one  product  --
 residential  high-  speed  Internet  access  service.
 65.  Presently,  the  majority  of  residential  high-  speed  Internet  users  connect  to  the  Internet  via  cable.  The  main  competitor  to  cable  in  the  market  for  residential  high-  speed  Internet  services  is  currently
 DSL,  which  LECs  provide  over  existing  telephone  plant.  188  As  of  November  2000,  there  were  approximately  3  million  customers  in  the  United  States  accessing  the  Internet  via  cable  189  and  more  than
 1.7  million  accessing  it  via  DSL  lines.  190  Although  DSL  subscriptions  appear  to  be  growing  at  a  faster  rate  than  cable  Internet  subscriptions,  191  analysts  differ  as  to  whether  and  how  quickly  DSL  will  catch  up
 with  cable.  192  Excite@  Home  and  Road  Runner  are  the  two  largest  high-  speed  ISPs,  serving  a  majority  of  all  high-  speed  subscribers.  193  The  remaining  subscribers  are  splintered  among  a  handful  of  other  cable
 186  We  note  that  Excite@  Home  and  Road  Runner  also  function  as  high-  speed  ISPs.
 187  A  cable  headend  is  the  origination  point  for  signals  in  the  cable  system.  It  has  parabolic  or  other  appropriately
 shaped  antennas  for  receiving  satellite-  delivered  program  signals,  high-  gain  directional  antennas  for  receiving  distant  TV  broadcast  signals,  directional  antennas  for  receiving  local  signals,  machines  for  playback  of  taped
 programming  and  commercial  insertion,  and  studios  for  local  origination  and  community  access  programming.  Walter  Ciciora  et  al.,  MODERN  CABLE  TELEVISION  TECHNOLOGY  12  (1999).  The  headend  also  houses  all  equipment
 for  connection  of  the  cable  system  to  the  Internet.  Id.  188
 With  the  addition  of  certain  electronics  to  the  telephone  line,  carriers  can  transform  the  copper  loop  that  already  provides  voice  service  into  a  conduit  for  high-  speed  data  traffic.
 189  Kinetic  Strategies,  Inc.,  Cable  Modem  Market  Stats  &  Projections,  CABLE  DATACOM  NEWS,  Nov.  8,  2000,  at
 http://  www.  cabledatacomnews.  com/  cmic/  cmic16.  html  (visited  Nov.  14,  2000).  190
 TeleChoice,  Inc.,  TeleChoice  DSL  Deployment  Summary    Updated  11/  13/  00,  at  http://  www.  xdsl.  com/  content  /resources/  deployment_  info.  asp  (visited  Nov.  14,  2000).  Of  these  customers,  approximately  67%,  or  1,  160,000,  are
 residential.  We  note  that  the  Commission  has  undertaken  a  semi-  annual  data  collection  concerning  high-  speed  Internet  access  subscribers.  See  Federal  Communications  Commission,  High-  Speed  Services  for  Internet  Access:
 Subscribership  as  of  June  30,  2000,  at  http://  www.  fcc.  gov/  Bureaus/  Common_  Carrier/  Reports/  FCC-State_  Link/  IAD/  hspd1000.  pdf.  The  foregoing  report  found  one  million  DSL  subscribers  and  2.2  million  cable
 modem  subscribers  as  of  June  30,  2000.  We  use  other  publicly  available  sources  here  because  they  are  more  recent.  191
 Second  706  Report,  FCC  00-  290  at    191-  96.  In  the  past  18  months,  numerous  companies  have  made  substantial  investments  in  DSL.  For  example,  SBC  Corp.  has  announced  plans  to  invest  $6  billion  in  an
 infrastructure  deployment  throughout  its  13-  state  region  in  order  to  make  DSL  available  to  nearly  77  million  homes.  See  SBC  Communications,  Inc.,  SBC  Set  to  Trial  DSL  Neighborhood  Broadband  Gateways  (press  release),  Aug.  23,
 2000;  SBC  Communications,  Inc.,  SBC  Launches  $6  billion  Broadband  Initiative  (press  release),  Oct.  18,  1999.  192
 See  Confidential  Appendix  IV-  A-  1,  Note  1.  193
 Excite@  Home  has  approximately  1.7  million  subscribers  in  the  United  States.  See  http://  www.  corporate-ir.  net/  ireye/  ir_  site.  zhtml?  ticker=  ATHM&  script=  410&  layout=-  6&  item_  id=  131059  (visited  Nov.  14,  2000).
 RoadRunner  has  1.1  million  subscribers  in  the  United  States.  See  Road  Runner  Corp.,  Road  Runner  Sets  Record  Third  Quarter  (press  release),  Oct.  16,  2000.
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 operators  that  do  not  offer  Internet  access  services  through  Road  Runner  or  Excite@  Home,  and  a  number  of  DSL,  fixed  wireless,  and  direct  broadcast  satellite  (  DBS)  competitors.  194
 66.  Residential  high-  speed  Internet  access  services  are  also  provided  through  satellite  technology,  which  employs  a  radio  relay  station  in  orbit  above  the  earth  to  receive,  amplify,  and  redirect  signals.
 Satellite-  based  Internet  access  services  are  offered  by  DBS  providers  such  as  DirecTV,  and  may  be  offered  within  the  next  several  years  by  low  earth  orbit  (  LEO)  satellites  deployed  by  firms  such  as
 Teledesic.  At  present,  satellite-  based  Internet  access  services  can  supply  high-  speed  transmission  only  in  the  downstream  direction,  that  is,  from  the  Internet  to  the  end  users  home;  the  end  user  must  use
 narrowband  telephone  lines  for  the  upstream  transmission  of  data  from  the  home  to  the  Internet.  195  Although  satellite  providers  are  working  to  address  this  deficiency,  two-  way  high-  speed  transmission
 facilitated  by  satellite  may  not  be  widely  available  for  several  years.  196  As  of  today,  DBS  providers  offering  the  one-  way  technology  have  captured  only  a  very  small  share  of  the  market  for  residential
 high-  speed  Internet  access  services.  197
 67.  Finally,  residential  high-  speed  Internet  access  services  are  also  being  offered  --  albeit  on  a  much  smaller  scale  as  yet  --  through  fixed  wireless  technologies,  including  local  multipoint  distribution
 systems  (  LMDS)  and  multichannel  multipoint  distribution  systems  (  MMDS).  Fixed  wireless  technology  typically  employs  microwave  transmission  facilities  to  transmit  data  to  and  from  residential
 consumers.  Although  several  firms  have  made  significant  investments  to  develop  fixed  wireless  technology,  high-  speed  Internet  access  services  using  such  technology  is  not  yet  widely  available  to
 consumers,  and  may  not  be  commercially  deployed  for  use  by  residential  consumers  on  a  large  scale  in  the  immediate  future.  198
 2.  Discussion
 a.  Relevant  Markets
 68.  The  possibility  that  AOL  Time  Warner  would  engage  in  anticompetitive  conduct  must  be  evaluated  in  the  context  of  relevant  markets.  A  relevant  market  is  the  smallest  market  --  defined  in  terms
 of  both  the  pertinent  product  and  the  pertinent  geographical  area  --  for  which  the  elasticity  of  demand  is  sufficiently  low  that  a  firm  supplying  the  entire  market  could  profitably  reduce  output  and  elevate  its  price
 194  See  Kinetic  Strategies,  Inc.,  Commercial  Cable  Modem  Launches  in  North  America,  CABLE  DATACOM  NEWS,  at
 http://  CableDatacomNews.  com/  cmic/  cmic7.  html  (visited  Nov.  14,  2000)  (listing  cable  high-  speed  Internet  launch  locations  and  ISPs).  Examples  of  other  ISPs  serving  cable  subscribers  include  the  ISP  Channel  and  Adelphia
 PowerLink  serving  Adelphia  customers,  and  High  Speed  Access  serving  Charter  customers.  195
 One  company,  StarBand,  in  partnership  with  Microsoft  and  Gilat-  to-  Home,  offers  two-  way  satellite  transmission  for  Internet  access,  but  the  speeds  generally  do  not  reach  or  exceed  200  kbps  in  both  directions  except  during  off-peak
 hours  (midnight  to  six  in  the  morning).  Conversation  with  StarBand  Customer  Service,  Dec.  4,  2000  at  1-  877-827-  4290;  see  also  http://  www.  starband.  com  (visited  Dec.  4,  2000).
 196  But  see  Peter  S.  Goodman,  Dishing  Up  a  New  Link  to  the  Internet,  WASH.  POST,  Nov.  6,  2000,  at  A1  (reporting
 inception  of  two-  way  high-  speed  service  by  Starband/  Gilat-  to-  Home).
 197  Second  706  Report,  FCC  00-  290  at    111.
 198  The  most  significant  firms  in  upperband  fixed  wireless  services  are  Teligent,  Inc.  and  Winstar  Communications
 Inc.,  which  target  business  (not  residential)  customers.  The  most  significant  firms  in  lowerband  MMDS  fixed  wireless  services  are  WorldCom  and  Sprint.  Second  706  Report,  FCC  00-  290  at    42-  55,  107-  10.
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 substantially  over  a  sustained  period  of  time.  199  In  defining  the  relevant  market,  it  is  useful  to  analyze  whether  the  firm  at  issue  could  profitably  impose  a  small  but  significant  and  non-  transitory  increase  in
 price,  i.  e.,  could  raise  prices  without  losing  a  significant  portion  of  sales  to  competitors.  200
 69.  We  begin  by  addressing  whether  high-  speed  Internet  access  services,  as  distinct  from  narrowband  services,  constitute  the  relevant  product  market  in  determining  the  effects  of  the  proposed
 merger  on  the  public  interest.  201  We  conclude  that  they  do.  202  We  find  particularly  significant  the  fact  that  high-  speed  Internet  access  services  include  features  unavailable  over  narrowband,  such  as  access  to
 high-  bandwidth  content  that  is  impractical  over  dial-  up  connections.  Analysts  agree  that  over  time  the  Internet  will  become  a  more  absorbing  experience,  in  which  dynamic  content  supplements  and  supplants
 static  pages  of  information.  203  Even  at  present,  the  experience  of  surfing  the  Internet  is  more  immediate  and  efficient  over  high-  speed  connections,  at  which  users  can  move  between  texts  as  if  they  were  flipping
 pages  of  a  book.  Increasingly  the  Internet  is  also  becoming  a  multimedia  experience,  complete  with  film  and  audio  clips  as  well  as  other  high-  bandwidth  applications.  Full-  screen  video  is  already  commonly
 available  over  the  Internet,  and  other  applications,  such  as  video-  on-  demand,  telemedicine,  full-  featured  software  applications,  and  distance  learning  are  available  or  under  development.  204  Such  applications  so
 199  William  M.  Landes  &  Richard  A.  Posner,  Market  Power  in  Antitrust  Cases,  94  HARV.  L.  REV.  937  (1981).
 200  See  generally  Horizontal  Merger  Guidelines  Issued  by  the  U.  S.  Department  of  Justice  and  the  Federal  Trade
 Commission,  57  Fed.  Reg.  41,  552  (dated  Apr.  2,  1992,  as  revised  Apr.  8,  1997).  201
 Although  the  record  in  this  proceeding  does  not  reflect  much  debate  over  this  question,  it  has  engendered  considerable  disagreement  in  other  recent  proceedings  before  the  Commission.  See,  e.  g.,  AT&  T-  MediaOne  Order,
 15  FCC  Rcd  at  9866    116  (noting  rigorous  debate  on  the  record  regarding  whether  a  separate  market  exists  for  residential  high-  speed  Internet  access  service).
 202  As  we  explain  further  below,  our  finding  in  this  proceeding  that  residential  high-  speed  Internet  access  services
 constitute  a  product  market  distinct  from  narrowband  services  will  not  restrict  the  Commissions  ability  to  consider  market  definition  questions  that  may  arise  in  the  context  of  the  Notice  of  Inquiry  concerning  high-  speed  Internet
 service  or  any  other  future  Commission  proceeding.  As  we  have  previously  noted,  [  a]  n  individual  proceeding  in  which  the  Commission  defines  relevant  product  and  geographic  markets,  such  as  a  proposed  license  transfer,  may
 present  facts  pointing  to  narrower  or  broader  product  markets  than  those  defined  in  a  proceeding  that  does  not  focus  on  license  transfers.  In  the  Matter  of  Implementation  of  Section  6002(  b)  of  the  Omnibus  Budget  Reconciliation
 Act  of  1993,  FCC  00-  29  (Aug.  18,  2000)  (  Fifth  Annual  CMRS  Competition  Report)  at  3  n.  4.  Moreover,  we  recognize  that  the  exercise  of  defining  relevant  markets  is  inherently  dynamic,  reflecting  ongoing  changes  in  the
 costs  of  providing  various  services  and  in  the  tastes  and  preferences  of  consumers.  It  would  be  particularly  appropriate  to  revisit  issues  of  market  definition  in  a  period  of  rapid  technological  change  and  service  convergence,
 as  the  factual  predicates  underlying  a  market  definition  in  one  proceeding  may  no  longer  be  valid  at  the  time  of  another  proceeding.
 Separately,  we  note  that  the  FTC,  in  its  analysis  of  the  proposed  merger,  concludes  that  a  relevant  input  market  consisting  of  ISP  purchases  of  high-  speed  data  transmission  services  also  exists.  See  Federal  Trade
 Commission,  In  the  Matter  of  America  Online,  Inc.  and  Time  Warner  Inc.,  Docket  No.  C-  3989  (  FTC  Complaint)  at  3,  5,  6.  We  find  that  any  concerns  we  share  with  respect  to  this  market  are  adequately  addressed  in  our  analysis  of
 the  consumer  market  for  high-  speed  Internet  access  services,  which  is  usually  supplied  using  these  transmission  services  as  an  input.
 203  See,  e.  g.,  George  Gilder,  TELECOSM:  HOW  INFINITE  BANDWIDTH  WILL  REVOLUTIONIZE  OUR  WORLD  252  (2000);
 Francois  Bar  et  al.,  Access  and  Innovation  Policy  for  the  Third-  Generation  Internet,  TELECOMMUNICATIONS  POLICY,  July-  Aug.  2000,  at  7;  Carol  Wilson,  Broadband:  Get  Ready  for  the  Gale,  ZDNN,  June  26,  1999,  at
 http://  www.  zdnet.  com/  zdnn/  stories/  news/  0,4586,  2281301,  00.  html  (visited  Nov.  14,  2000).  204
 See  RealNetworks,  Inc.,  Full  Screen  Video  with  RealPlayer  Plus  5.0,  G2,  7,  and  8,  at  http://  service.  real.  com/  fullscreen/  default.  html  (visited  Nov.  14,  2000)  (full  screen  video);  Pixelon,  Inc.,  at
 (continued)
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 completely  change  the  experience  of  using  the  Internet  that  the  difference  can  be  likened  to  the  contrast  between  looking  at  a  still  photograph  and  watching  a  movie.  205  The  existence  of  high-  speed  transmission
 is  necessary  to  spur  development  of  such  applications,  and  consumers  with  narrowband  connectivity  are  unable  to  experience  (or  in  some  instances  even  access)  such  content  in  the  manner  intended,  i.  e.,  rapidly
 and  in  real-  time.  206
 70.  Another  factor  supporting  our  conclusion  that  high-  speed  Internet  access  services  constitute  a  discrete  market  is  the  high  consumer  costs  involved  in  switching  to  a  high-  speed  platform.  Consumers
 switching  to  high-  speed  service  from  dial-  up  (or  between  high-  speed  services)  experience  costs  significantly  higher  than  those  involved  in  switching  between  dial-  up  providers.  Switching  between  dial-up
 services  typically  entails  a  telephone  call,  a  software  download,  and  rarely,  a  one-  time  connection  fee  on  the  order  of  $25.  207  In  contrast,  switching  from  dial-  up  to  high-  speed  service  often  entails  several
 telephone  calls,  at  least  one  installation  visit  from  a  high-  speed  service  provider,  and  a  fee  on  the  order  of  several  hundred  dollars  to  cover  the  cost  of  the  installation  and  a  high-  speed  modem.  208  Furthermore,
 switching  to  high-  speed  service  may  also  necessitate  upgrading  the  end  users  PC  to  one  with  the  requisite  microprocessing  capacity  and  an  Ethernet  port  for  cable  modem  attachment;  such  an  upgrade  may
 increase  the  cost  of  switching  by  a  thousand  dollars  or  more.  209
 (  continued  from  previous  page)  http://  www.  pixelon.  com  (visited  Nov.  14,  2000)  (same);  Infovalue  Computing,  Inc.,  at  http://  www.  infovalue.  com
 (visited  Nov.  14,  2000)  (video-  on-  demand  applications);  University  of  Virginia,  at  http://  www.  telemed.  virginia.  edu/  (visited  Nov.  14,  2000)  (telemedicine);  Arizona  State  University,  ASU  Distance  Learning  Technology,  at
 http://  www-  distlearn.  pp.  asu.  edu  (visited  Nov.  14,  2000)  (distance  learning).  205
 Indeed,  narrowband  users  cannot  watch  television-  or  film-  quality  video  clips  via  the  Internet  unless  they  download  such  clips  in  their  entirety  in  advance  before  playing  them,  a  process  that  is  prohibitively  time-  consuming
 over  narrowband  connections  for  all  but  the  shortest  clips.  Users  with  high-  speed  Internet  access,  in  contrast,  can  obtain  streaming  software  that  enables  them  to  view  television-  and  film-  quality  video  clips  with  little  or  no  delay
 after  clicking  on  an  appropriate  link.  206
 See,  e.  g.,  Dain  Rauscher  Wessels,  Bullish  on  Broadband,  June  8,  2000,  at  22;  Kathy  Kincade,  Top  10  Telemedicine  Programs  for  1999:  Experience  Pays  Off,  TELEHEALTH  MAGAZINE,  at
 http://  www/  telehealthmedmag.  com  (visited  May  19,  2000).  207
 See,  e.  g.,  EarthLink,  Inc.,  at  http://  www.  earthlink.  net/  join  (visited  Nov.  14,  2000).  EarthLink  normally  charges  a  $25  set-  up  fee,  but  that  fee  is  waived  if  the  customer  signs  up  over  the  Internet.
 208  See  Second  706  Report,  FCC  00-  290  at  App.  C.,    10  &  nn.  2,  8;  see  also  Deja.  com,  Inc.,  Bell  South:  User
 Reviews,  at  http://  www.  deja.  com/  products/  at_  a_  glance/  glance.  xp?  PDID=  8378  (visited  Nov.  14,  2000)  (describing  difficulties  such  as  numerous  installation  visits  and  customer  service  telephone  calls,  neither  of  which  guaranteed
 full  and  successful  installation);  United  States  General  Accounting  Office,  Telecommunications:  Technological  and  Regulatory  Factors  Affecting  Consumer  Choice  of  Internet  Providers,  GAO-  01-  93,  Oct.  2000,  at  18  (indicating  that
 both  DSL  and  cable  modem  service  require  a  higher  price  than  dial-  up  Internet  access  service,  and  that  DSL  involves  additional  installation  fees);  Excite@  Home,  Inc.,  at  http://  www.  home.  com/  xfooter/  pricing.  html  (visited
 Dec.  4,  2000)  (indicating  that  Excite@  Home  costs  between  $39.  95  and  $44.95  per  month,  dial-  up  costs  between  $14.95  and  $21.95,  and  DSL  costs  between  $39.95  and  $189.  96  (with  additional  ISP  charges);  but  including  the  cost
 of  a  second  phone  line  in  calculating  cost  of  dial-  up  service);  Road  Runner  Corp.,  at  http://  rrcorp.  central.  rr.  com/  hso/  explore_  pricing.  asp  (visited  Dec.  4,  2000)  (indicating  similar  monthly  fees);  Verizon
 Communications,  Inc.,  at  http://  www.  bell-  atl.  com/  infospeed/  more_  info/  pricing.  html  (visited  Dec.  4,  2000)  (indicating  that  Verizon  offers  DSL  service  starting  at  $39.  95  per  month  with  no  installation  or  equipment  charges  if
 the  customer  self-  installs  the  service,  and  a  $120.  00  installation  charge  if  a  technician  visit  is  required).  209
 See  Walter  S.  Mossberg,  Those  in  the  Market  for  a  PC:  Heed  the  Fall  Buyer's  Guide,  Oct.  19,  2000,  at  (continued)
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 71.  The  record  developed  in  AT&  T-  MediaOne  also  supports  our  definition  of  the  relevant  market  for  high-  speed  Internet  access  services.  In  that  proceeding,  numerous  commenters  raised  the  issue  of
 market  definition,  and  all  who  addressed  the  issue  (other  than  AT&  T  and  MediaOne)  maintained  that  residential  high-  speed  Internet  access  services  constitute  a  market  separate  from  narrowband  services.  210
 The  commenters  cited  the  following  reasons  (among  others):
   High-  speed  Internet  access  services  support  all  the  content  and  applications  that  narrowband  access  services  do,  but  also  allow  access  to  services  that  will  never  be  technically  feasible  over
 narrowband.  211
   High-  speed  access  services  are  always  on,  a  feature  currently  unavailable  over  narrowband  access  services.  212
   Preliminary  quantitative  studies  indicate  that  narrowband  and  high-  speed  access  services  occupy  separate  markets.  213
 These  reasons  corroborate  our  finding  in  this  proceeding  that  a  separate  market  for  high-  speed  Internet  access  services  does  exist.
 72.  We  also  find  it  noteworthy  that  AOL  itself  argued  in  the  AT&  T-  TCI  merger  proceeding  that  high-  speed  Internet  access  services  occupy  a  market  separate  from  narrowband  services,  and  that  AOL
 does  not  contradict  its  earlier  position  here.  214  AOLs  comments  in  AT&  T-  TCI  did  not  include  a  formal
 (  continued  from  previous  page)  http://  ptech.  wsj.  com./  archive/  ptech-  20001019.  html  (visited  Jan.  2,  2001)  (noting  that  high-  speed  connections
 typically  require  an  Ethernet  port).  Some  consumers  with  older  computers  may  need  to  upgrade  their  computers  in  order  to  meet  the  minimum  technical  requirements  for  high-  speed  access  service.  For  instance,  ZDNET  reports  that,
 The  basic  requirements  for  a  system  to  work  with  todays  cable  modems  are  either  a  PC  with  at  least  a  66  Mhz  486  processor  or  a  Macintosh  with  at  least  a  68040  processor,  and  16  Mb  of  memory.  Of  course  performance  will
 improve  with  faster  processors  and  more  RAM  on  either  platform.  The  Road  Runner  service  recommends  32  Mb  of  RAM  and  a  166  Mhz  Pentium  or  250  Mhz  PowerMac.  ZDNET,  What  You  Need  and  Getting  Connected,  at
 http://  www.  zdnet.  com/  zdhelp/  stories/  main/  0,  5594,  2278598-  4,00.  html  (visited  Dec.  4,  2000).  Technical  requirements  for  DSL  are  similar.  See  id.
 210  Applications  for  Consent  to  Transfer  of  Licenses  and  Section  214  Authorizations  from  MediaOne  Group,  Inc.,
 Transferor,  to  AT&  T  Corp.,  Transferee,  CC  Docket  No.  99-  251,  Bell  Atlantic  Comments  at  28-  34;  id.,  GTE  Comments  at  14-  29;  id.,  MCI  Comments  at  9;  id.,  U  S  West  Comments  at  14-  15;  id.,  Declaration  of  Rubinfield  and
 Sidak  (Attachment  to  GTE  Comments)  at  11.  But  see  id.,  AT&  T  Reply  Comments  at  69,  71-  75  (arguing  that  high-speed  and  narrowband  Internet  access  services  constitute  part  of  the  same  market).
 211  Id.,  Bell  Atlantic  Comments  at  30;  id.,  GTE  Comments  at  14-  18  &  Appendix  B  at  11  (Declaration  of  Rubinfeld
 and  Sidak);  id.,  U  S  West  Comments  at  14-  15.  212
 Id.,  Bell  Atlantic  Comments  at  30;  id.,  GTE  Comments  at  14.  213
 Id.,  Declaration  of  Rubinfeld  and  Sidak  (Attachment  to  GTE  Comments)  at  8  (citing  Declaration  of  Professor  Jerry  A.  Hausman  at    4-  10  (Attachment  to  Comments  of  America  Online,  Inc.,  in  Applications  for  Consent  to  the
 Transfer  of  Licenses  and  Section  214  Authorizations  from  Tele-  Communications,  Inc.,  Transferor,  to  AT&  T  Corp.,  Transferee,  CS  Dkt.  No.  98-  178));  see  also  Hal  R.  Varian,  Estimating  the  Demand  for  Bandwidth,  Aug.  1999,  at
 http://  www.  sims.  berkeley.  edu/~  hal/  Papers  /wtp/  wtp.  pdf.  214
 Applications  for  Consent  to  the  Transfer  of  Licenses  and  Section  214  Authorizations  from  Tele-  Communications,  Inc.,  Transferor,  to  AT&  T  Corp.,  Transferee,  Comments  of  America  Online,  passim.
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 market  definition,  but  they  referred  repeatedly  to  the  merged  firms  potential  position  as  the  dominant  provider  of  .  .  .  broadband  data  transport  215  in  the  nascent  broadband  marketplace.  216  While  AOL  and
 Time  Warner  do  not  maintain  in  this  proceeding  that  there  is  a  separate  market  for  high-  speed  Internet  access  services,  they  do  not  deny  the  existence  of  such  a  market.  217
 73.  Finally,  we  note  that  the  Department  of  Justice  (  DOJ),  analyzing  the  relevant  market  in  the  course  of  its  review  of  the  AT&  T-  MediaOne  merger,  found  that  high-  speed  Internet  access  services
 occupy  a  market  separate  from  narrowband  services.  DOJ  defined  this  separate  market  as  one  encompassing  the  aggregation,  promotion,  and  distribution  of  broadband  content  and  services;  218  under
 its  analysis,  the  market  includes  the  transmission  facilities  used  for  distribution  of  broadband  content  and  services,  as  well  as  portals  that  aggregate  and  market  that  content.  219  DOJ  further  found  that  narrowband
 Internet  service  is  not  a  substitute  for  broadband  service,  as  [  m]  uch  of  this  broadband  content  will  not  be  readily  accessible  or  attractive  to  narrowband  users,  because  of  the  much  longer  times  that  are  needed  to
 transmit  the  data  through  narrowband  facilities.  220
 74.  The  relevant  geographic  markets  for  residential  high-  speed  Internet  access  services  are  local.  221  That  is,  a  consumers  choices  are  limited  to  those  companies  that  offer  high-  speed  Internet
 access  services  in  his  or  her  area,  and  the  only  way  to  obtain  different  choices  is  to  move.  While  high-speed  ISPs  other  than  cable  operators  may  offer  service  over  different  local  areas  (e.  g.,  DSL  or  wireless),
 or  may  offer  service  over  much  wider  areas,  even  nationally  (e.  g.,  satellite),  a  consumers  choices  are  dictated  by  what  is  offered  in  his  or  her  locality.
 b.  Applicants  Roles  in  the  Relevant  Market
 75.  AOL  is  the  largest  provider  of  narrowband  Internet  access  services  in  the  United  States  and  worldwide.  The  Companys  flagship  AOL  service  provides  Internet  access  to  more  than  26  million
 subscribers  around  the  globe.  AOL  also  owns  another  ISP,  CompuServe  (acquired  in  1998),  that  serves  more  than  2.8  million  customers.  222  AOL  is  the  only  narrowband  ISP  with  a  double  digit  worldwide
 215  Id.  at  16.
 216  Id.  at  32.
 217  The  Applicants  contend  that  regardless  whether  the  relevant  market  is  defined  to  include  narrowband  and
 broadband  Internet  access  services  or  broadband  Internet  access  services  alone,  the  proposed  merger  would  not  undermine  competition.  See  Applicants  Reply  Comments  at  21-  23.
 218  DOJ  Consent  Decree  at    25  (Competitive  Impact  Statement).
 219  Id.  at    25-  27.
 220  Id.  at    22.
 221  We  note  that  the  FTC,  in  the  complaint  underlying  its  order  approving  the  AOL-  Time  Warner  merger,  identified
 the  relevant  geographic  markets  as  Time  Warner  cable  service  areas  and  the  United  States.  FTC  Complaint  at  5.  We  construe  the  FTCs  reference  to  the  United  States  to  denote  non-  Time  Warner,  local  cable  service  areas
 throughout  the  United  States,  and  we  therefore  perceive  no  inconsistency  between  the  FTCs  delimitation  of  the  relevant  geographic  markets  and  our  own.  We  further  note  that  both  the  FTCs  definition  of  the  relevant  geographic
 markets  and  ours  recognize  that  the  competitive  effects  of  the  merger  will  differ  between  Time  Warner  cable  service  areas  and  other  service  areas.
 222  See  America  Online,  Inc.,  AOL  Gears  Up  For  Holiday  Shopping  Blitz  With  Best  Partners,  Most  Convenient
 Tools,  And  Industrys  Leading  E-  Commerce  Performance  (press  release),  Nov.  15,  2000.
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 market  share,  and  boasts  a  customer  base  nearly  five  times  larger  than  its  nearest  competitor,  EarthLink.  223  Time  Warner  does  not  provide  narrowband  Internet  service.
 76.  Time  Warner  owns  the  second  largest  cable  network  in  the  United  States,  one  that  serves  approximately  13  million  subscribers  and  passes  nearly  21  million  homes.  224  When  the  Application  was
 filed,  85  percent  of  its  network  already  supported  high-  speed  Internet  access  services,  and  Time  Warner  claimed  that  the  remainder  would  do  so  by  the  end  of  2000.  225  Time  Warner  provides  high-  speed  Internet
 access  services  to  its  cable  customers  through  an  exclusive  contract  with  Road  Runner,  the  nations  second  largest  provider  of  such  services  in  the  residential  market.  226  That  contract  expires  in  December
 2001.  227  Road  Runner  currently  serves  more  than  1.1  million  cable  modem  customers  228  --  more  than  26  percent  of  all  residential  high-  speed  Internet  access  subscribers  --  of  whom  approximately  719,000,  or  65
 percent,  reside  in  communities  served  by  Time  Warner  cable  systems.  229
 77.  Although  the  vast  majority  of  AOL  subscribers  access  the  Internet  by  means  of  dial-  up  connections,  the  company  has  sought  to  provide  high-  speed  Internet  access  services  across  a  variety  of
 platforms.  230  AOL  has  agreements  with  several  LECs  to  deliver  its  Internet  service  via  DSL,  and  with
 223  See  Internet.  com  Corporation,  Top  US  ISPs  by  Subscriber,  at  http://  www.  isp-  planet.  com/  research/  rankings_  usa.
 html  (visited  Nov.  15,  2000).  We  note  that  submissions  of  Disney  and  EarthLink  contend  that  AOLs  worldwide  market  share  is  as  high  as  50  percent.  See  Written  Ex  Parte  Filing  of  The  Walt  Disney  Company  (July  25,  2000)
 (  Disney  July  25  Ex  Parte),  transmitted  by  letter  from  Lawrence  R.  Sidman  et  al.,  Esq.,  Verner,  Liipfert,  Bernhard,  McPherson  &  Hand,  Counsel  for  The  Walt  Disney  Company,  to  Magalie  Roman  Salas,  Secretary,  FCC,  dated  July
 25,  2000,  at  15  (citing  Yankee  Group,  AOL  Time  Warner  in  the  Context  of  Consumer  Online  Migration  (2000));  EarthLink  Oct.  18  Ex  Parte  at  2.  For  an  explanation  of  Disneys  market  share  calculation,  see  Letter  from  Marsha  J.
 McBride,  Vice  President  Government  Relations,  The  Walt  Disney  Company,  to  Magalie  Roman  Salas,  Secretary,  FCC,  dated  Nov.  27,  2000  (  Disney  Nov.  27  Ex  Parte)  at  2.
 224  Applicants  March  21  Supplemental  Information  at  8.
 225  Time  Warner  Inc.,  Time  Warner  Cable,  Overview,  at  http://  www.  timewarner.  com/  corp/  about/  cablesys/  index.  html
 (visited  July  31,  2000).  226
 Road  Runner  is  a  joint  venture  among  Time  Warner,  affiliates  of  MediaOne  Group,  Inc.,  Microsoft  Corp.,  Compaq  Corp.  and  the  Advance/  Newhouse  Partnership.  Time  Warner  currently  holds  a  40  percent  ownership  stake
 in  Road  Runner;  however,  in  a  press  release  issued  on  December  18,  2000,  Time  Warner  announced  that  it  would  increase  this  stake  and  manage  Road  Runners  operations.  See  Time  Warner  Inc.,  Time  Warner  To  Increase  Road
 Runner  Ownership  and  Manage  its  Operations  (press  release),  Dec.  18,  2000  (  Time  Warner  Dec.  18  Press  Release).  The  restructuring  is  intended  to  satisfy  the  Consent  Decree  obtained  by  the  United  States  Department  of
 Justice  against  AT&  T  Corp.,  requiring  that  MediaOne  (recently  acquired  by  AT&  T)  divest  its  ownership  interest  in  Road  Runner  on  or  before  December  31,  2000.  See  DOJ  Consent  Decree;  see  also  Time  Warner  Dec.  18  Press
 Release  (noting  that  the  Road  Runner  restructuring  .  .  .  result[  s]  from  a  Consent  Decree  between  AT&  T  and  the  Department  of  Justice  in  connection  with  AT&  Ts  acquisition  of  MediaOne  Group).  Time  Warners  move  to
 increase  its  ownership  stake  in  Road  Runner  --  which  will  be  completed  by  April  2001  --  will  also  end  the  arrangement  providing  Road  Runner  with  exclusive  carriage  on  Time  Warner  cable  systems.  See  Time  Dec.  18
 Warner  Press  Release.  227
 As  mentioned  in  the  preceding  note,  however,  Time  Warners  announced  restructuring  of  Road  Runner  would  end  the  exclusive  contract  between  the  two  entities  by  April,  2001.  See  Time  Warner  Press  Release.
 228  Road  Runner  Corp.,  Road  Runner  Sets  Record  Third  Quarter  (press  release),  Oct.  16,  2000.
 229  See  Kinetic  Strategies,  Inc.,  Cable  Modem  Market  States  &  Projections,  CABLE  DATACOM  NEWS,  Nov.  8,  2000,
 at  http://  cabledatacomnews.  com/  cmic/  cmic16.  html  (visited  Nov.  14,  2000).  230
 AOL  has  formed  a  strategic  alliance  with  Hughes  Electronic  Corp.  to  make  its  high-  speed  Internet  service  (  AOL-  Plus)  available  via  the  DirectPC  satellite  Internet  network.  In  addition,  AOL  has  formed  such  alliances
 (continued)
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 DBS  provider  DirecTV  to  deliver  its  Internet  service  via  DirecPC.  231  The  record  demonstrates  that  AOLs  efforts  to  date  to  migrate  consumers  to  its  high-  speed  service  have  yielded  only  modest  results.  232
 AOL  has  previously  been  unsuccessful  in  gaining  access  to  cable  systems.  233  This  merger,  however,  would  give  AOL  direct  ownership  of  a  high-  speed  cable  network.  Upon  acquiring  Time  Warner  cable
 systems,  AOL  would  be  in  a  position  to  use  its  established  brand  name  and  proven  marketing  acumen  to  migrate  many  of  its  narrowband  customers  to  high-  speed  service,  234  and  to  market  AOL  Internet  access
 services  to  Time  Warner  cable  subscribers.  235  Thus,  the  merger  would  create  the  opportunity  for  AOL  to  use  cross-  promotional  strategies  and  its  control  over  Time  Warner  cable  networks  to  add  millions  of
 subscribers  to  its  high-  speed  service.  236
 (  continued  from  previous  page)  with  several  DSL  providers,  including  SBC  Communications,  Inc.,  Bell  Atlantic  (now  called  Verizon)  and  GTE
 (since  acquired  by  Bell  Atlantic  and  now  part  of  Verizon).  Finally,  AOL  has  announced  agreements  with  Sprint  PCS,  Nokia,  Motorola,  Research  in  Motion,  BellSouth  and  Arch  Communications  to  make  AOLs  Internet  services
 available  through  wireless  devices.  Applicants  March  21  Supplemental  Information  at  17-  18;  see  also  Confidential  Appendix  IV-  D-  3.
 231  AOLs  high-  speed  product  is  called  AOL  Plus,  and  provides  subscribers  with  enhanced  content  including
 video,  games,  music  and  online  shopping  features.  See  Applicants  March  21  Supplemental  Information  at  Attachment  1.
 232  See  Confidential  Appendix  IV-  A-  2,  Note  1.
 233  See  id.  Note  2.
 234  See,  e.  g.,  Sanford  C.  Bernstein  &  Co.,  Inc.  and  McKinsey  &  Co.,  Inc.,  Broadband!  A  Joint  Industry  Study,  Jan.
 2000,  (  Bernstein  and  McKinsey  --  Broadband!)  at  24  (  AOL  counts  fully  half  of  the  current  online  subscribers  as  its  customers,  giving  it  the  opportunity  to  shift  many  customers  from  slow-  to  high-  speed  service.  This  is
 particularly  significant  in  light  of  our  survey  finding  .  .  .  that  the  heaviest  users  of  the  Internet  are  also  the  most  interested  in  high-  speed  service.  AOLs  customers  average  nearly  one  hour  a  day  online,  twice  as  much  as  the
 average  online  household.  This  supports  the  AOL  claim  that  AOLs  dial-  up  subscribers  can  be  easily  migrated  to  a  high-  speed  platform.);  see  also  Confidential  Appendix  IV-  A-  2,  Note  3.
 235  An  estimated  8  million  Time  Warner  cable  subscribers  do  not  subscribe  to  AOL.  Tom  Wolzien  and  Ray  Haddad,
 AOL/  Time  Warner:  Finding  the  First  $1  billion  or  so  in  Synergies,  Bernstein  Research,  Apr.  2000,  at  10.  Bernstein  also  estimates  that  85%  of  AOL  subscribers  are  cable  subscribers.  Id.  Other  sources  indicate  that,  as  of  November
 2000,  there  were  approximately  4.16  million  residential  high-  speed  Internet  access  services  subscribers.  (This  figure  includes  only  cable  and  DSL  subscribers;  the  number  of  fixed  wireless  and  satellite  residential  subscribers  is  quite
 small.  All  cable  high-  speed  Internet  service  subscribers  are  treated  as  residential,  but,  following  industry  estimates,  only  67%  of  DSL  subscribers  are  counted  as  residential.)  See  Kinetic  Strategies,  Inc.,  Cable  Modem  Market  Stats
 and  Projections,  CABLE  DATACOM  NEWS,  Nov.  8,  2000,  at  http://  CableDatacomNews.  com/  cmic/  cmic16.  html  (visited  Nov.  14,  2000)  (providing  cable  subscription  estimates);  TeleChoice,  Inc.,  TeleChoice  DSL  Deployment
 Summary    Updated  11/  13/  00,  at  http://  www.  xdsl.  com/  content/  resources/  deployment_  info.  asp  (visited  Nov.  14,  2000)  (providing  DSL  subscription  estimates).
 236  In  addition,  following  the  merger,  AOL  Time  Warner  would  have  access  to  1.1  million  Road  Runner  subscribers,
 which  amounts  to  approximately  26%  of  the  approximately  4.16  million  residential  high-  speed  Internet  access  services  subscribers.  See  Road  Runner  Corp.,  Road  Runner  Sets  record  Third  Quarter  (press  release),  Oct.  16  2000.
 If  AOL  were  to  gain  access  to  AT&  Ts  high-  speed  subscribers,  see  Confidential  Appendix  IV-  A-  2,  Note  4,  its  reach  would  increase  to  almost  48%  of  residential  high-  speed  subscribers.  See  Kinetic  Strategies,  Inc.,  Cable  Modem
 Market  Stats  &  Projections,  CABLE  DATACOM  NEWS,  Nov.  8,  2000,  at  http://  www.  cabledatacomnews.  com/  cmic/  cmic16.  html  (visited  Nov.  14,  2000).  These  numbers  may  actually  understate  AOLs  post-  merger  market
 power,  however,  because  the  markets  in  question  are  local,  not  national.  The  record  demonstrates  that  a  very  high  percentage  of  homes  passed  by  data-  ready  Time  Warner  cable  systems  do  not  also  have  access  to  DSL.  See
 Confidential  Appendix  IV-  A-  1,  Note  1.  (continued)
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 78.  In  acquiring  Time  Warner,  AOL  would  obtain  not  only  a  vast  network  of  cable  systems,  but  also  an  enormous  library  of  multimedia  content.  Time  Warner  and  its  content  affiliates  comprise  the
 largest  traditional  media  company  in  the  world.  237  This  company  owns  four  of  the  top  fifteen  video  programming  services  (CNN,  TNT,  TBS,  Cartoon  Network)  and  the  largest  premium  TV  network
 (HBO).  238  Time  Warner  also  operates  a  broadcast  network  (The  WB)  239  and  one  of  the  largest  movie  and  television  studios  (Warner  Bros.).  240
 79.  Similarly,  AOL  is  more  than  just  an  ISP.  AOL  owns  many  leading  Internet  brands  and  applications,  including:
   AOL  Instant  Messenger  (  AIM)  and  AOL  Buddy  List  services,  and  ICQ  instant  messaging  service.  241
   AOL.  com  and  Netscape  Netcenter,  two  leading  Internet  portals.  AOL.  com  has  nearly  32  million  unique  monthly  visitors,  while  Netscape  Netcenter  has  almost  20  million  unique
 visitors.  242  In  any  given  month,  nearly  77  percent  of  all  Internet  subscribers  will  visit  an  AOL  site,  243  with  AOL  members  spending  an  average  of  64  minutes  per  day  online.  244
   Spinner  and  WINamp,  leading  Internet  music  properties  with  42  million  customer  relationships.  245
   Digital  City,  the  leading  local  online  network,  with  more  than  five  million  unique  visitors  in  May,  2000.  246
   AOL  MovieFone,  the  nations  largest  online  movie  listing  guide  and  ticketing  service,  which  attracts  20  percent  of  all  moviegoers.  247
 (  continued  from  previous  page)
 237  See  Time  Warner  Inc.,  Time  Warner  1999  Fact  Book,  at  http://  www.  timewarner.  com/  corp/  about/
 pubarchive/  factbook/  1999fb.  pdf  (visited  July  31,  2000).  238
 AOL  Time  Warner:  Worlds  First  Internet-  Age  Media  and  Communications  Company,  BUS.  WIRE,  Jan.  10,  2000.  239
 David  Lieberman,  Inside  the  AOL  Media  Giant,  USA  TODAY,  Jan.  11,  2000,  at  1A.  240
 Media  Owners  Index,  Time  Warner,  COLUMBIA  JOURNALISM  REV.,  at  http://  www.  cjr.  org/  owners/  time-warner.  asp  (visited  July  31,  2000).  Time  Warner  also  owns  significant  print  media,  including  Time  Magazine,
 People,  Sports  Illustrated,  Fortune  and  some  twenty-  eight  other  magazines.  See  Application  at  4.  241
 See  Section  IV.  B.,  infra  (Instant  Messaging  and  Advanced  IM-  Based  High-  Speed  Services),  for  a  detailed  analysis  of  AOLs  IM  service.
 242  AOL,  Time  Warner  Merger    Road  to  Convergence,  BUS.  WIRE,  Jan.  10,  2000.
 243  Media  Metrix,  Media  Metrix  Releases  the  Top  50  Web  and  Digital  Media  Properties  For  June  2000  and  Reveals
 Number  One  Web  Sites  Within  New  Categories  (press  release),  July  20,  2000.  244
 America  Online,  Inc.,  Data  Points,  at  http://  www.  corp.  AOL.  com/  press/  press_  datapoints.  html  (visited  Jan.  16,  2001).
 245  Id..
 246  Lehman  Brothers  June  29  Report  at  41.
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   MapQuest.  com,  which  delivers  more  than  150  million  maps  and  driving  instructions  each  month.  248
   Netscape  Communicator  client  software,  including  the  Netscape  Navigator  browser,  claiming  millions  of  users.
 It  has  been  asserted  that  through  its  family  of  brands,  AOL  now  has  an  unduplicated  reach  of  roughly  80  percent  of  all  Internet  users  in  the  United  States,  by  far  the  greatest  on  the  Web.  249
 c.  Potential  Public  Interest  Harms
 80.  Commenters  raise  a  variety  of  competitive  concerns  stemming  from  the  merged  companys  potential  to  control  Internet  transmission  facilities,  access,  portals,  content  and  applications.  Generally
 speaking,  these  concerns  may  be  summarized  as  follows:  Unless  appropriate  restrictions  are  placed  on  the  proposed  merger,  AOL  Time  Warner  will  have  both  the  ability  and  the  incentive  to:  (a)  discriminate
 against  unaffiliated  ISPs  on  its  own  cable  network;  250  (b)  facilitate  discrimination  against  unaffiliated  ISPs  on  other  cable  operators  networks  by  leveraging  control  over  Time  Warner  video  programming  to  obtain
 exclusive  or  preferential  carriage  rights  for  AOLs  high-  speed  Internet  access  service  on  those  networks;  251  (c)  limit  consumers  access  to  the  widest  possible  array  of  content  on  the  Internet  by  denying
 unaffiliated  content  providers  placement  on  AOL  Time  Warners  high-  speed  Internet  access  service  and  denying  unaffiliated  ISPs  access  to  AOL  Time  Warner  content;  252  and  (d)  discriminate  against  alternative
 high-  speed  platforms  by  withholding  AOL  Internet  access  service  from  high-  speed  platforms  that  compete  with  cable.  253  We  address  each  of  these  concerns  below.
 81.  As  a  threshold  matter,  we  will  address  the  argument  that  regardless  of  the  magnitude  of  the  harms,  imposing  conditions  in  this  merger  would  be  inconsistent  with  the  Commission  precedent  in
 (  continued  from  previous  page)  247  America  Online,  Inc.,  Data  Points,  at  http://  www.  corp.  AOL.  com/  press/  press_  datapoints.  html  (visited  Jan.  16,
 2001).  248
 Lehman  Brothers  June  29  Report  at  45.  249
 Lehman  Brothers  June  29  Report  at  22.  250
 See,  e.  g.,  SBC  Comments  at  1,  19-  22;  Consumers  Union  Comments  at  31-  32;  BellSouth  Reply  Comments  at  14;  EarthLink  Oct.  18  Ex  Parte  at  1;  Letter  from  Stephen  Heins,  Director  of  Marketing,  NorthNet,  to  James  Bird,  Senior
 Counsel,  FCC,  dated  Oct.  20,  2000  (  NorthNet  Oct.  20  Ex  Parte)  at  2;  NorthNet  Oct.  10  Ex  Parte  at  3-  5;  Consumers  Union  Reply  Comments  at  8-  12;  Letter  from  David  Gusky,  Executive  Vice  President,
 Telecommunications  Resellers  Association,  to  William  E.  Kennard,  Chairman,  FCC,  dated  April  11,  2000  (  TRA  Apr.  11  Ex  Parte)  at  2.
 251  See  ACA  Comments  at  4-  5,  11-  12.
 252  See,  e.  g.,  Disney  Reply  Comments  at  11-  14;  Letter  from  Lawrence  R.  Sidman,  Esq.,  Verner,  Liipfert,  Bernhard,
 McPherson  &  Hand,  Counsel  for  The  Walt  Disney  Company,  to  Magalie  Roman  Salas,  Secretary,  FCC,  dated  July  11,  2000  (  Disney  July  11  Ex  Parte)  at  1;  BellSouth  Reply  Comments  at  15;  Consumers  Union  Comments  at  31-
 32;  Letter  from  Henry  Bauman  et  al.,  Legal  Department,  National  Association  of  Broadcasters,  to  William  E.  Kennard,  Chairman,  FCC,  dated  May  19,  2000  (  NAB  May  11  Ex  Parte)  at  1-  3;  Letter  from  Sandra  L.  Wagner,
 Vice  President,  Federal  Regulatory  Affairs,  SBC  Telecommunications,  Inc.,  to  Magalie  Roman  Salas,  Secretary,  FCC,  dated  May  5,  2000  (  SBC  May  5  Ex  Parte)  at  3.
 253  See  SBC  Comments  at  19-  22;  see  also  Consumers  Union  Comments  at  28-  29  (arguing  that  proposed  merger
 would  lead  AOL  to  withdraw  support  from  DSL  platform).
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 AT&  T-  MediaOne  and  the  pending  Cable  Access  NOI.  The  Applicants  first  contend  that  the  Commissions  merger  review  process  is  an  inappropriate  forum  to  determine  whether  AOL  Time  Warner
 should  be  required  to  negotiate  non-  discriminatory  agreements  with  unaffiliated  ISPs  for  access  to  its  cable  network.  254  Instead,  the  Applicants  argue,  the  Commission  should  address  that  question  through  a
 rulemaking  proceeding  that  would  set  open  access  policy  for  the  entire  cable  industry.  255  We  disagree.  The  Commission  has  a  statutory  duty  to  determine  whether  the  proposed  transaction  would  serve  the
 public  interest,  and  may  not  approve  it  absent  such  a  finding.  256  We  cannot  abdicate  this  duty  on  the  basis  of  speculation  that  a  future  proceeding  might  be  able  to  remedy  harms  to  the  public  interest  that  we
 believe  would  result  from  a  proposed  merger.  As  we  explain  below,  the  unconditioned  merger  of  AOL  and  Time  Warner  would  create  a  company  with  a  unique  incentive  and  ability  to  thwart  competition  in  the
 market  for  residential  high-  speed  Internet  access  services  --  an  outcome  that  would  undermine  important  national  policy  objectives.  257
 82.  Furthermore,  we  are  not  convinced  that  a  proceeding  resulting  from  the  Cable  Access  NOI  could  adequately  redress  the  public  interest  harms  that  would  result  from  the  proposed  transaction.  First,
 should  it  be  a  rulemaking  proceeding,  such  a  proceeding  is  designed  to  formulate  rules  of  general  applicability,  and  therefore  would  not  necessarily  produce  requirements  containing  the  level  of  specificity
 needed  to  resolve  the  unique  concerns  that  arise  from  this  proposed  merger.  The  marriage  of  AOL  and  Time  Warner  would  wed  the  nations  leading  ISP  with  its  second  largest  cable  provider  and  would
 thereby  yield  a  company  with  unprecedented  potential  to  dominate  the  market  for  residential  high-  speed  Internet  access  services.  258  The  record  demonstrates  that  the  Applicants  have  already  begun  to
 contemplate  using  their  combined  potential  in  a  manner  that  would  render  unaffiliated  ISPs  in  that  market  unable  to  compete  effectively.  259
 83.  We  believe  that  in  order  to  prevent  these  trends  from  accelerating  after  the  merger,  we  must  impose  specific  conditions  on  our  approval  --  conditions  that  a  rulemaking  proceeding  would  be  ill-  suited
 to  effectuate.  Second,  we  believe  that  the  conditions  we  impose  must  precede  the  merger  itself  in  order  to
 254  See,  e.  g.,  Letter  from  Peter  D.  Ross,  Esq.  Wiley,  Rein  &  Fielding,  Counsel  for  America  Online,  to  Magalie
 Roman  Salas,  Secretary,  FCC,  dated  Sept.  20,  2000  (  Applicants  Sept.  19  Ex  Parte)  at  1-  2.  255
 See,  e.  g.,  id.  As  earlier  mentioned,  the  Commission  recently  took  the  first  step  toward  such  a  rulemaking  proceeding  when  it  issued  its  Cable  Access  NOI.
 256  See  Section  II,  supra  (Public  Interest  Framework);  see  also  47  U.  S.  C.    214(  a);  id.    310(  d);  id.    303(  r).
 257  These  policy  objectives  include  the  promotion  of  a  competitive  free  market  for  Internet  services,  see  47  U.  S.  C.  
 230(  b)(  1)-(  2),  the  deployment  on  a  reasonable  and  timely  basis  of  advanced  telecommunications  capability  to  all  Americans,  see  id.    157  nt.,  and  the  widest  possible  dissemination  of  information  from  diverse  and  antagonistic
 sources  to  the  American  public,  see  Turner  Broadcasting  System,  Inc.  v.  FCC,  512  U.  S.  622,  663  (1994).  258
 We  note  that  this  proposed  merger  would  create  a  combined  entity  with  both  the  incentive  and  the  ability  to  quickly  foreclose  competition  in  the  market  for  residential  high-  speed  Internet  access  services  by  obtaining
 favorable  treatment  on  cable  systems  owned  by  Time  Warner,  AT&  T,  and  other  cable  operators.  AOLs  enormous  base  of  existing  narrowband  customers  and  its  proven  marketing  acumen  would  be  combined  with  preferential
 access  to  Time  Warner  cable  systems  and,  in  all  likelihood,  to  the  facilities  of  AT&  T  and  other  cable  operators.  Such  a  combination  would  likely  enable  AOL  to  rapidly  assemble  a  strong  base  of  subscribers  to  its  high-  speed
 Internet  access  services.  Although  the  AT&  T-  MediaOne  merger  presented  the  possibility  that  Excite@  Home  and  Road  Runner,  the  nations  two  largest  broadband  ISPs,  could  theoretically  foreclose  competition  for  high-  speed
 Internet  access  services  through  post-  merger  coordination,  the  DOJ  Consent  Decree  required  AT&  T  to  divest  its  interest  in  Road  Runner  to  prevent  coordination  between  these  two  ISPs.
 259  See  Confidential  Appendix  IV-  A-  2,  Notes  5  and  6.
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 be  effective.  The  record  suggests  that  if  AOL  Time  Warner  were  permitted  to  discriminate  against  unaffiliated  ISPs  in  the  terms  and  conditions  of  access  to  its  cable  network,  many  such  ISPs  would  be
 unable  to  compete  effectively,  permitting  the  merged  entity  and  its  affiliated  ISPs  to  attain  a  market-dominant  position  for  residential  high-  speed  Internet  access  services  within  one  to  two  years.  260
 84.  Moreover,  our  approval  of  the  AT&  T-  MediaOne  merger  without  any  condition  pertaining  to  Internet  access  services  was  predicated  in  part  on  our  perception  that  alternative  high-  speed  platforms  --
 especially  DSL  --  were  rapidly  gaining  strength  as  viable  competitors  to  cable,  thereby  mitigating  the  anticompetitive  potential  of  the  acquisition.  261  We  reasoned  that  AOLs  aggressive  support  of  DSL  would
 no  doubt  serve  as  a  powerful  impetus  for  incumbent  LECs  to  deploy  DSL  technology  in  residential  markets.  262  By  giving  AOL  access  to  Time  Warners  cable  facilities  and  enhancing  its  ability  to  gain
 access  to  the  facilities  of  AT&  T  and  other  cable  operators,  the  merger  would  diminish  AOLs  reliance  on  DSL  as  a  means  of  reaching  subscribers  263  and  would  give  AOL  Time  Warner  an  incentive  to  steer
 subscribers  away  from  DSL  and  toward  cable  in  Time  Warner  service  areas.  264  In  addition,  the  record  in  this  proceeding  demonstrates  that  the  availability  of  DSL  in  Time  Warner  service  areas  may  not  be
 sufficiently  widespread  to  constrain  the  merged  firm  in  the  market  for  residential  high-  speed  Internet  access  services,  at  least  in  the  short  term.  265  For  these  reasons  we  reject  the  arguments  that  the
 260  See  id.;  see  also  NorthNet  Oct.  10  Ex  Parte  at  7  (  There  is  no  intention  or  possibility  of  allowing  competitors
 onto  [Time  Warner  cable  networks]  on  [Time  Warners  proposed]  terms.  By  offering  terms  that  are  totally  unacceptable,  Time  Warner  keeps  its  network  effectively  closed.);  EarthLink  Oct.  18  Ex  Parte  at  1  (Time  Warners
 proposed  conditions  make  interconnection  economically  infeasible  for  unaffiliated  ISPs).  261
 AT&  T-  MediaOne  Order,  15  FCC  Rcd  at  9866-  68    116-  19;  id.  at  9871  123.  The  Applicants  raise  this  point  in  an  October  5,  2000  ex  parte  letter,  in  which  they  point  to  Commission  findings  that  there  is  significant  actual  and
 potential  competition  from  alternative  high-  speed  Internet  access  providers  and  unaffiliated  ISPs,  and  that,  in  the  AT&  T-  MediaOne  merger,  we  relied  on  AT&  Ts  and  MediaOnes  promise  to  open  their  platform.  The  Applicants
 further  contend  that  competition  in  this  market  has  increased,  that  AOL  and  Time  Warner  have  committed  to  open  access  to  Time  Warner  cable  systems,  and  that  the  DOJ  Consent  Decree  in  AT&  T-  MediaOne,  by  requiring  AT&  Ts
 divestiture  of  Road  Runner,  prevents  a  decrease  in  consumer  choice  of  ISPs.  See  Letter  from  Peter  D.  Ross,  Esq.,  Wiley,  Rein  &  Fielding,  Counsel  for  America  Online,  and  Arthur  H.  Harding,  Esq.,  Fleischman  and  Walsh,  L.  L.  P.,
 Counsel  for  Time  Warner,  to  Deborah  Lathen,  Chief,  Cable  Services  Bureau,  FCC,  dated  Oct.  5,  2000  (  Applicants  Oct.  5  Ex  Parte).  As  we  explain  in  this  section,  we  find  that  this  merger  presents  fundamentally  different  issues  and
 potential  harms  than  those  in  AT&  T-  MediaOne.  262
 See  AT&  T-  MediaOne  Order,  15  FCC  Rcd  at  9867-  68    117  and  accompanying  notes.  263
 We  recognize,  however,  that  AOL  will  continue  to  have  an  incentive  to  market  its  service  over  DSL  in  pursuit  of  its  AOL  Anywhere  strategy.
 264  See  Section  IV.  A.  2.  c.(  iv),  infra  (High-  Speed  Internet  Access  Services).  Although  the  Commissions  recently
 issued  Second  Annual  Report  on  the  Deployment  of  Advanced  Services  indicates  that  DSL  subscribership  has  grown  significantly  in  the  past  year  and  is  likely  to  rival  cable  modem  subscribership  in  the  next  three  to  five  years,
 see  Second  706  Report,  FCC  00-  290  at  79    191,  our  analysis  in  this  proceeding  must  take  into  account  the  likelihood  that  the  proposed  merger  would  catapult  AOL  into  a  dominant  position  in  the  market  for  residential  high-speed
 Internet  access  services  before  DSL  or  other  broadband  alternatives  are  widely  available  to  consumers.  Although  AOL  cannot  provide  service  on  Time  Warners  cable  facilities  until  Time  Warners  exclusive  arrangement
 with  Road  Runner  expires  or  terminates,  a  press  release  issued  by  Time  Warner  on  December  18,  2000,  indicates  that  Time  Warner  expects  to  terminate  the  exclusivity  arrangement  by  April  2001.  See  Time  Warner  Inc.,  Time
 Warner  to  Increase  Road  Runner  Ownership  and  Manage  its  Operations  (press  release),  Dec.  18,  2000.  265
 Such  detailed  data  were  not  available  in  the  AT&  T-  MediaOne  proceeding.
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 Commission  may  not  redress  potential  harms  in  the  market  for  residential  high-  speed  Internet  access  services.
 (i)  Potential  Discrimination  Against  Unaffiliated  ISPs  on  AOL  Time  Warners  Cable  Network
 85.  Several  commenters  contend  that  a  combined  AOL  Time  Warner  would  engage  in  anticompetitive  behavior  in  an  attempt  to  dominate  the  market  for  residential  high-  speed  Internet  access
 services.  266  In  particular,  commenters  express  concern  that  AOL  Time  Warner  would  discriminate  against  unaffiliated  ISPs  by  refusing  to  carry  them  on  its  cable  network;  by  offering  them  carriage  on
 unfavorable  terms  that  would  render  it  impossible  for  them  to  remain  in  business;  by  limiting  their  online  features  and  functionalities;  and  by  degrading  their  quality  of  service.  267  Numerous  parties  to  this
 proceeding  advocate  the  imposition  of  an  open  access  condition  on  the  merging  parties.  268  We  note  at  the  outset  that,  judging  from  the  record  in  this  proceeding,  these  commenters  concerns  are  persuasive.
 We  conclude,  however,  that  they  are  substantially  addressed  by  the  terms  of  the  FTC  Consent  Agreement.  As  the  FTC  Consent  Agreement  may  not  entirely  mitigate  AOL  Time  Warners  ability  to  discriminate
 against  unaffiliated  ISPs  on  its  cable  network  through  indirect  means,  we  impose  certain  additional  conditions  on  the  proposed  transaction  to  avert  that  result.  We  conclude  that  these  conditions  are
 necessary  to  ensure  that  the  proposed  merger  does  not  result  in  harms  to  the  public  interest  that  would  outweigh  its  potential  public  interest  benefits.
 86.  Our  conclusion  that  conduct  restrictions  are  necessary  to  address  the  potential  harms  described  above  rests  on  two  findings:  (i)  that  the  merged  company  would  have  the  incentive  to
 discriminate  against  unaffiliated  ISPs  on  its  cable  network  and  (ii)  that  it  would  have  ability  to  do  so  in  a  manner  that  would  undermine  competition  in  the  relevant  market.  We  begin  by  noting  that  AOL  itself
 has  argued  in  other  contexts  that  a  vertically  integrated  cable  operator  offering  high-  speed  Internet  access  services  would  have  precisely  such  incentive  and  ability.  269  Our  findings,  however,  do  not  depend  on
 AOLs  prior  observations.  The  record  in  this  proceeding  points  to  several  factors  that  would  give  the  merged  firm  an  incentive  to  discriminate.  AOL,  with  26  million  narrowband  subscribers,  has  a  manifest
 incentive  to  migrate  those  subscribers  to  high-  speed  Internet  access  services  as  an  ever-  greater  proportion
 266  See,  e.  g.,  SBC  Comments  at  1,  19-  22;  Consumers  Union  Comments  at  31-  32;  BellSouth  Reply  Comments  at  14;
 EarthLink  Oct.  18  Ex  Parte  at  1;  NorthNet  Oct.  20  Ex  Parte  at  2;  NorthNet  Oct.  10  Ex  Parte  at  3-  5;  Consumers  Union  Reply  Comments  at  8-  12;  TRA  Apr.  11  Ex  Parte  at  2.
 267  See,  e.  g.,  NorthNet  Oct.  10  Ex  Parte  at  2-  7;  EarthLink  Oct.  18  Ex  Parte  at  1.
 268  See,  e.  g.,  Memphis  Networx  Comments  at  7-  9;  SBC  Comments  at  35-  36;  Letter  from  Emy  Tseng  et  al.,  on  behalf
 of  students  from  the  Massachusetts  Institute  of  Technology  and  Harvard  University,  to  Magalie  Roman  Salas,  Secretary,  FCC,  dated  May  1,  2000  (  MIT-  Harvard  Students  May  1  Ex  Parte),  at  2-  3;  Letter  from  Elliot  Noss,
 President  and  CEO,  Tucows,  Inc.,  to  Magalie  Roman  Salas,  Secretary,  FCC,  dated  July  31,  2000,  at  2;  BellSouth  Comments  at  22-  23;  Letter  from  Rob  Todd,  Member,  Houston  City  Council,  to  Magalie  Roman  Salas,  Secretary,
 FCC,  dated  May  10,  2000  (  Houston  City  Council  May  10  Ex  Parte),  at  1;  NorthNet  Oct.  10  Ex  Parte  at  2-  7;  EarthLink  Oct.  18  Ex  Parte  at  1;  Daytona  Beach  Aug.  18  Ex  Parte  at  7;  Letter  from  Douglas  L.  Young,  Executive
 Director  of  Business  Development,  HJN  Telecom,  Inc.,  dated  Nov.  22,  2000  (  HJN  Nov.  22  Ex  Parte),  at  3;  Petition  of  City  of  Hawthorne,  California  et  al.,  for  Special  Relief  (Sept.  29,  2000)  (  California  Cities  Sept.  29
 Petition)  at  1-  2,  transmitted  by  letter  from  William  M.  Marticovena,  Esq.,  Rutan  &  Tucker,  to  FCC,  dated  Sept.  28,  2000.
 269  See  Joint  Applications  of  AT&  T  Corp.  and  Tele-  Communications,  Inc.  for  Transfer  of  Control  to  AT&  T  of
 Licenses  and  Authorizations  Held  by  TCI  and  Its  Affiliates  or  Subsidiaries,  CS  Docket  No.  98-  178  (October  29,  1998),  Comments  of  America  Online,  Inc.,  passim.
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 of  Internet  content  falls  into  the  broadband  category.  270  AOL  has  a  complementary  incentive  to  ensure  that  as  its  subscribers  switch  to  high-  speed  access  services,  they  remain  customers  of  AOL  (or  one  of  its
 affiliates)  and  do  not  select  a  competing  high-  speed  ISP.  Excluding  unaffiliated  ISPs  from  the  merged  companys  cable  network,  or  discriminating  against  them  in  more  subtle  ways,  would  help  achieve  that
 objective.  AOL  Time  Warner  would  also  have  an  incentive  to  discriminate  against  unaffiliated  ISPs  for  an  additional,  independent  reason:  the  natural  inclination  to  maximize  the  value  of  its  cable  network  by
 converting  its  captive  base  of  Time  Warner  cable  customers  into  customers  of  ISPs  affiliated  with  the  merged  firm.  271  This  objective,  too,  would  be  facilitated  by  discriminating  against  unaffiliated  ISPs  with
 respect  to  carriage  on  AOL  Time  Warner  cable  networks.  272
 87.  We  also  find  that  AOL  Time  Warner  would  have  the  ability  to  discriminate  against  unaffiliated  ISPs.  This  is  well-  documented  in  the  record.  As  earlier  mentioned,  the  proposed  transaction
 would  give  the  merged  company  ownership  of  the  nations  second  largest  cable  network.  Such  ownership  would  enable  AOL  Time  Warner  to  deny  unaffiliated  ISPs  carriage  on  this  network  at  will.  273  Due  to  the
 size  of  the  network  and  its  dominance  in  the  geographic  areas  to  which  it  extends,  AOL  Time  Warners  ownership  rights  would  also  empower  the  merged  company  to  deal  with  unaffiliated  ISPs  requesting
 carriage  by  offering  them  take  it  or  leave  it  agreements  based  on  terms  that  would  render  it  difficult  if  not  impossible  for  these  ISPs  to  provide  service  over  cable  profitably.  274  And  of  course,  AOL  Time
 Warners  physical  control  over  the  network  would  allow  it  to  limit  the  online  features  and  functionalities  of  unaffiliated  ISPs  or  to  degrade  their  quality  of  service,  conceivably  in  ways  that  would  escape  easy
 detection.  275
 270  Virtually  every  projection  for  Internet  access  subscribers  shows  a  decline  in  narrowband  subscribership  and
 growth  in  broadband  subscribership  over  time.  See,  e.  g.,  Cable  Services  Bureau,  Broadband  Today:  A  Staff  Report  to  William  E.  Kennard,  Chairman,  Federal  Communications  Commission,  Oct.  1999  (  Broadband  Today),  at
 Appendix  A.  Thus,  AOL  would  have  to  increase  its  broadband  presence  as  the  number  of  its  narrowband  subscribers  drops  merely  to  maintain  its  current  market  position.  Some  of  the  potential  implications  of  closed  high-speed
 Internet  access  networks  are  discussed  in  Earl  W.  Comstock  &  John  W.  Butler,  Access  Denied:  The  FCCs  Failure  to  Implement  Open  Access  to  Cable  As  Required  By  the  Communications  Act,  8  COMMLAW  CONSPECTUS  5
 (2000).  271
 As  an  initial  matter,  the  merged  company  would  have  this  incentive  because  it  would  receive  two  revenue  streams  (ISP  service  and  transmission)  from  subscribers  to  its  affiliated  ISP  service,  but  only  one  revenue  stream
 (transmission)  from  subscribers  to  unaffiliated  ISPs.  272
 Cf.  Time  Warner  Entertainment  Co.  v.  United  States,  211  F.  3d  1313,  1322  (D.  C.  Cir.  2000)  (reasoning  that  Congresss  concern  that  cable  operators  have  the  incentive  and  ability  to  favor  their  affiliated  programmers  is
 well  grounded  in  the  evidence  and  a  bit  of  economic  common  sense)  (internal  quotation  marks  and  citation  omitted).
 273  At  present,  neither  the  1996  Act  nor  Commission  rules  would  prevent  AOL  Time  Warner  from  denying
 unaffiliated  ISPs  carriage  on  its  cable  network  at  its  discretion.  As  earlier  mentioned,  the  Commission  recently  initiated  a  Notice  of  Inquiry  inviting  comment  on,  among  other  matters,  whether  cable  operators  should  be  obligated
 to  provide  open  access  to  ISPs  requesting  interconnection  with  their  cable  networks.  See  Cable  Access  NOI.  274
 For  further  discussion,  see  Confidential  Appendix  IV-  A-  2,  Notes  5  and  6.  This  problem  is  exacerbated  by  the  fact  that  DSL,  the  primary  competitor  to  cable  for  residential  high-  speed  Internet  access  services,  is  not  available  to
 many  households  at  present.  One  analyst  estimates  that  less  than  50%  of  households  have  access  to  DSL  due  to  distance  and  network  limitations.  See  Bernstein  and  McKinsey  --  Broadband!  at  9.  Another  analyst  estimates  that,
 By  year  end  2000,  we  expect  that  total  DSL  service  will  be  available  to  more  than  50%  of  all  telephone  lines.  Dain  Rauscher  Wessels,  Bullish  on  Broadband,  Jun.  8,  2000,  at  59.
 275  Disney  Reply  Comments  at  12-  14.  Disney  further  discussed  and  expanded  upon  this  point  in  later  ex  parte
 (continued)
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 88.  Finally,  we  note  that  the  proposed  merger  would  strengthen  AOL  Time  Warners  ability  to  discriminate  against  unaffiliated  ISPs  on  its  cable  network  by  bringing  AOL  and  Road  Runner  under
 common  ownership.  276  Road  Runner  is  the  nations  second  largest  high-  speed  ISP.  277  The  elimination  of  potential  competition  between  AOL  and  Road  Runner  in  the  market  for  residential  high-  speed  Internet
 access  services  would  significantly  enhance  AOL  Time  Warners  power  in  this  market.  And  by  adding  to  the  merged  firms  lead  in  subscribership  for  residential  high-  speed  Internet  access  services,  it  would
 diminish  AOL  Time  Warners  incentive  to  adopt  an  open  access  regime  with  respect  to  its  cable  network.  278
 89.  The  Applicants  maintain  that,  far  from  having  an  incentive  to  discriminate  against  unaffiliated  ISPs,  a  combined  AOL  Time  Warner  would  have  an  incentive  to  permit  these  ISPs  to
 interconnect  with  its  cable  network  so  as  to  encourage  the  adoption  of  open  access  policies  by  other  cable  providers.  279  AOL  Time  Warner  would  need  to  promote  the  adoption  of  such  policies,  the
 Applicants  maintain,  in  order  to  ensure  the  availability  of  AOL  Internet  services  on  other  cable  platforms.  Time  Warners  cable  network  currently  serves  less  than  20%  of  all  cable  subscribers  nationwide  --  a
 (  continued  from  previous  page)  filings,  especially  in  regard  to  the  return  path  for  interactive  television.  See  Supplemental  Memorandum  of  The
 Walt  Disney  Company  Prepared  by  Eric  Haseltine,  Ph.  D.  (Sept.  25.,  2000),  transmitted  by  letter  from  Marsha  J.  McBride,  Vice  President  for  Government  Relations,  The  Walt  Disney  Company,  to  Magalie  Roman  Salas,  Secretary,
 FCC,  dated  September  26,  2000  (  Disney  Sept.  26  Ex  Parte  at  Haseltine  Memo);  Ex  Parte  Submission  of  The  Walt  Disney  Company:  Deployment  of  Interactive  Television  Technology  and  Return  Path  Discrimination  (Oct.  25,
 2000)  (  Disney  Oct.  25  Ex  Parte)  at  4-  5,  transmitted  by  letter  from  Lawrence  R.  Sidman  et  al.,  Esq.,  Verner,  Liipfert,  Bernhard,  McPherson  &  Hand,  Counsel  for  The  Walt  Disney  Company,  to  FCC,  dated  Oct.  25,  2000.  The
 Disney  Oct.  25  Ex  Parte  filing  indicates  that  cable  modem  equipment  in  the  headend  can  be  used  to  delay  or  completely  delete  unaffiliated  content  using  capabilities  included  in  the  cable  industrys  DOCSIS  1.  1  Specification.
 Disney  Oct.  25  Ex  Parte  at  5.  The  filing  quotes  Cisco  Systems,  a  supplier  of  such  technology,  as  putting  absolute  control  over  the  delivery  of  content  in  the  hands  of  the  cable  operator.  Id.,  quoting  Cisco  Systems  White  Paper,
 Controlling  Your  Network    A  Must  for  Cable  Operators  at  3  (1999);  see  also  Consumers  Union  Comments  at  105-07.
 276  See  Confidential  Appendix  IV-  A-  2,  Note  7.  Under  the  terms  of  an  Order  to  Hold  Separate  issued  by  the  FTC  in
 conjunction  with  the  FTC  Consent  Agreement,  the  merged  firm  must  operate  AOL  and  Road  Runner  in  a  separate  and  independent  manner  until  AOL  itself  gains  access  to  Time  Warner  cable  systems.  See  FTC  Order  to  Hold
 Separate  at  5.  AOL,  in  turn,  is  barred  by  the  FTC  Consent  Agreement  itself  from  accessing  Time  Warner  cable  systems  until  EarthLink  has  obtained  such  access.  See  FTC  Consent  Agreement  at  II.  A-  B.  The  combined  effect  of
 the  FTC  Order  to  Hold  Separate  and  the  FTC  Consent  Agreement  is  to  prevent  the  merged  firm  from  integrating  AOL  and  Road  Runner  until  it  has  begun  to  open  its  cable  systems  to  unaffiliated  ISPs.  Once  it  has  done  so,
 however,  it  is  free  to  integrate  the  two  ISPs.  277
 See  Internet.  com  Corporation,  Top  US  ISPs  by  Subscriber,  at  http://  www.  isp-  planet.  com/  research/  rankings_  usa.  html  (visited  Nov.  15,  2000).  This  web  site  contains  a  list  of  all  ISPs  in  the  country.  Road  Runner  is
 the  number  two  high-  speed  ISP  listed  (after  Excite@  Home),  and  ranks  number  thirteen  overall.  See  id.  278
 To  the  extent  AOL  Time  Warner  would  have  any  incentive  to  adopt  an  open  access  regime  with  respect  to  its  cable  network,  such  an  incentive  would  be  based  on  the  merged  firms  desire  to  attract  the  business  of  unaffiliated
 ISPs  dominant  in  certain  niches  within  the  residential  high-  speed  Internet  access  market.  The  greater  AOL  Time  Warners  own  dominance  across  those  niches,  the  lesser  its  incentive  to  permit  unaffiliated  ISPs  to  interconnect  with
 its  network.  279
 See  Applicants  March  21  Supplemental  Information  at  24;  Applicants  Reply  Comments  at  5,  11.
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 figure  which,  arguably,  underscores  how  dependent  AOL  Time  Warner  would  be  on  other  cable  providers  for  access  rights.  280
 90.  Notwithstanding  the  Applicants  reasoning,  we  are  not  convinced  that  AOL  Time  Warner  would  need  to  refrain  from  discriminating  against  unaffiliated  ISPs  on  its  own  cable  platform  in  order  to
 secure  carriage  for  AOL  Internet  services  on  the  platforms  of  other  cable  providers.  We  find  it  implausible  that  AOL  Time  Warner  --  with  the  leading  brand  among  ISPs  as  well  as  the  largest  library  of
 proprietary  content  in  the  world  at  its  disposal  --  would  be  unable  to  leverage  these  resources  and  others  to  obtain  carriage  for  AOL  Internet  services  on  the  facilities  of  unaffiliated  cable  operators.  Despite
 AOLs  previous  difficulties  in  obtaining  access  to  cable  lines,  the  addition  of  Time  Warners  content  and  other  resources  greatly  increases  the  merged  companys  leverage  in  this  area.  And  we  are  equally  certain
 that  the  merged  firm  would  be  able  to  obtain  such  carriage  regardless  of  whether  it  were  to  discriminate  against  unaffiliated  ISPs  on  its  own  platform.  Accordingly,  we  reject  Applicants  contention  that  AOL
 Time  Warner  would  not  discriminate  because  of  a  putative  need  to  support  industry-  wide  open  access  policies.
 91.  The  Applicants  primary  response  to  commenters  contentions  that  the  merged  firm  would  discriminate  against  unaffiliated  ISPs  on  its  cable  network  is  that  AOL  and  Time  Warner  have  issued  a
 joint  Memorandum  of  Understanding  (the  MOU)  voluntarily  committing  themselves  to  negotiate  commercial  agreements  under  which  unaffiliated  ISPs  may  connect  with  Time  Warners  cable  network  on
 a  non-  discriminatory  basis.  281  Applicants  contend  that  adherence  to  the  MOU  should  not  become  a
 280  See  Paul  Kagan  Assocs.,  Inc.,  Top  Cable  System  Operators  as  of  March  2000,  Cable  TV  Investor,  June  9,  2000,
 at  11.  281
 Memorandum  of  Understanding  Between  Time  Warner  Inc.  and  America  Online,  Inc.  Regarding  Open  Access  Business  Practices  (Feb.  29,  2000)  (  MOU)  at  1-  2.  The  MOU  expresses  the  Applicants  commitment  to:
   Form  an  agreement  as  quickly  as  possible  to  provide  high-  speed  AOL  service  on  Time  Warner  cable  systems;  that  agreement  will  be  used  as  a  model  for  agreements  with  other  ISPs.
   Negotiate  commercial  agreements  with  unaffiliated  ISPs  so  that  consumers  need  not  purchase  service  from  affiliated  ISPs.  There  will  be  no  fixed  limit  on  the  number  of  ISPs  using  Time  Warner  cable
 systems;  however,  that  number  may  be  limited  based  on  considerations  of  quality  of  service  and  technical  limitations.
   Actively  encourage  other  cable  operators  to  provide  consumers  with  a  choice  of  high-  speed  ISPs.
   Not  discriminate  on  the  basis  of  whether  an  ISP  is  affiliated  with  AOL  Time  Warner.  While  the  economic  arrangements  between  Time  Warner  and  connecting  ISPs  may  differ  depending  on  a  number
 of  factors  (such  as  the  speed,  marketing  commitments,  and  the  nature  and  tier  of  service  that  unaffiliated  ISPs  may  desire),  variations  in  the  economic  arrangements  (and  in  ISP  traffic)  will  not  be
 based  on  affiliation  or  non-  affiliation.
   Not  block  or  limit  video  streaming.
   Allow  ISPs  to  connect  to  Time  Warner  cable  systems  without  purchasing  high-  speed  backbone  transport  from  AOL  Time  Warner.
   Offer  ISPs  the  choice  to  partner  with  AOL  Time  Warner  on  a  national,  regional  or  local  basis,  without  red-  lining.
 (continued)
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 condition  of  merger  approval.  282  They  assert  that  a  government  mandate  regarding  ISP  access  would  be  wholly  inappropriate  and,  in  any  event,  should  be  considered  (if  at  all)  only  in  a  proceeding  of  general
 applicability  such  as  the  Cable  Access  NOI.  283
 92.  We  find  that  if  unaffiliated  ISPs  were  permitted  to  offer  their  services  over  AOL  Time  Warners  cable  network  on  non-  discriminatory  terms  and  conditions,  the  mergers  potential  to  undermine
 competition  in  the  relevant  market  would  be  mitigated.  284  Unaffiliated  ISPs  in  areas  served  by  AOL  Time  Warners  cable  network  would  have  the  opportunity  to  compete  fairly  on  price  and  quality,  and  residential
 consumers  in  these  areas  would  be  able  to  choose  a  high-  speed  ISP  based  on  the  best  combination  of  those  characteristics.  Market  forces,  not  control  of  a  bottleneck  facility,  would  determine  the  firms  that
 would  succeed  in  the  relevant  market,  thereby  enhancing  efficiency  and  consumer  welfare.
 93.  However,  we  are  not  convinced  that  the  MOU  alone  will  achieve  these  goals  and  mitigate  the  potential  harms  to  competition  that  we  have  described.  Broadly  speaking,  our  concerns  are  twofold.
 First,  even  if  it  were  legally  enforceable,  the  MOU  by  itself  would  fail  to  offer  unaffiliated  ISPs  adequate  protection  against  discrimination  by  a  merged  AOL  Time  Warner.  Second,  the  MOU  on  its  own  is  not
 legally  enforceable,  and  reports  regarding  the  terms  of  access  that  Time  Warner  has  proposed  to  certain  unaffiliated  ISPs  cast  doubt  on  the  companys  commitment  to  implement  the  principles  underlying  the
 MOU  in  a  manner  that  would  avert  the  mergers  potential  deleterious  effects  on  the  relevant  market.  We  discuss  each  of  these  concerns  in  turn.
 94.  Although  the  MOU  represents  a  commendable  statement  of  principles,  it  does  not  address  several  specific  areas  in  which  unaffiliated  ISPs  connecting  to  Time  Warner  cable  networks  could  be
 treated  less  favorably  than  affiliated  ISPs.  For  example,  it  seems  likely  that  in  many  cases,  Time  Warner  cable  subscribers  who  desired  cable-  based  high-  speed  Internet  access  services  would  call  Time  Warner
 with  their  initial  inquiries.  Such  inquiries  would  give  Time  Warner  the  opportunity  to  steer  prospective  customers  toward  affiliated  ISPs  (such  as  AOL,  CompuServe,  or  Road  Runner),  a  practice  the  MOU  does
 nothing  to  prohibit.  The  MOU  also  leaves  unaffiliated  ISPs  vulnerable  to  discrimination  by  AOL  Time  Warner  in  other  facets  of  their  business.  In  particular,  it  does  not  prohibit  AOL  Time  Warner  from
 requiring  unaffiliated  ISPs  to  display  an  AOL  Time  Warner  brand  or  presence  on  the  customers  first  screen  as  a  condition  of  carriage;  does  not  prohibit  AOL  Time  Warner  from  disadvantaging  unaffiliated
 ISPs  by  offering  them  logistically  unfavorable  connection  points;  and  does  not  prohibit  AOL  Time  Warner  from  restricting  the  features  and  functionalities  available  to  unaffiliated  ISPs  in  several  technical
 areas  (such  as  caching  capability;  multicasting;  address  management;  and  interaction  with  customer
 (  continued  from  previous  page)    Allow  both  the  cable  operator  and  the  ISP  the  opportunity  for  a  direct  relationship  with  the  consumer.
 Both  the  cable  operator  and  the  ISP  will  be  allowed  to  market  and  sell  high-  speed  service  directly  to  customers;  if  the  cable  operator  sells  high-  speed  Internet  access  services  to  the  customer,  the  cable
 operator  will  be  responsible  for  billing  and  collection;  if  the  ISP  sells  its  service  to  the  customer,  the  ISP  will  be  responsible  for  billing  and  collection  if  the  ISP  so  chooses.
 Id.  282
 See  Applicants  Reply  Comments  at  16-  18,  29-  30;  Applicants  Sept.  19  Ex  Parte  at  1-  2.  283
 See  Applicants  Sept.  19  Ex  Parte  at  1-  2.  284
 Such  a  non-  discrimination  requirement  would  not  prevent  AOL  Time  Warner  from  facilitating  discrimination  against  unaffiliated  ISPs  on  the  networks  of  other  cable  operators  by  obtaining  exclusive  or  preferential  deals  for
 access  by  its  own  Internet  services  to  other  operators  networks.  We  address  this  potential  harm  below.
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 premises  equipment).  Perhaps  most  importantly  in  light  of  the  subtle,  technically  sophisticated  ways  in  which  the  merged  entity  might  disfavor  non-  affiliates,  the  MOU  does  not  provide  a  mechanism  through
 which  unaffiliated  ISPs  could  verify  that  they  were  being  treated  in  a  non-  discriminatory  manner  --  for  example,  a  mechanism  giving  ISPs  or  a  neutral  arbitrator  a  right  to  review  confidential  agreements
 between  AOL  Time  Warner  and  affiliated  ISPs,  as  well  as  data  on  AOL  Time  Warners  actual  network  operations.
 95.  Even  if  the  MOU  did  not  contain  these  vulnerabilities,  we  would  still  be  concerned  about  the  proposed  mergers  potential  to  harm  competition  in  the  market  for  residential  high-  speed  Internet  access
 services.  That  is  because  the  MOU  is  not  legally  enforceable,  and  reports  regarding  the  terms  of  carriage  that  Time  Warner  has  proposed  to  certain  unaffiliated  ISPs  raise  doubt  regarding  the  companys
 commitment  to  implement  the  principles  underlying  the  MOU  on  a  voluntary  basis  and  in  a  manner  that  would  avert  the  mergers  harmful  effects.  According  to  these  reports,  Time  Warners  proposals  to
 unaffiliated  ISPs  have  conditioned  access  to  Time  Warners  cable  network  on  (i)  a  co-  branding  presence  on  the  top  half  of  the  ISPs  home  page  featuring  links  to  Time  Warner  content  and  services;  (ii)  Time
 Warners  right  to  terminate  the  ISPs  carriage  if  the  ISP  fails  to  meet  subscription  targets  set  by  Time  Warner;  (iii)  Time  Warners  right  to  set  the  total  price  for  Internet  access  paid  by  the  ISPs  customer;  and
 (iv)  a  fee  consisting  of  75  percent  of  the  ISPs  subscription  revenues,  25  percent  of  the  ISPs  cable-  access  advertising,  web-  hosting,  and  e-  commerce  revenues,  a  $50,000  up-  front  deposit,  and  a  minimum  monthly
 payment  of  $30  for  each  customer  that  switches  from  an  ISP  affiliated  with  Time  Warner  to  the  unaffiliated  ISP.  285  Time  Warner  contends  that  these  conditions  are  not  unreasonable  and  merely
 replicate  the  business  model  that  governs  its  provision  of  cable  service.  286  Time  Warner  points  out,  for  example,  that  it  already  sets  the  price  for  video  programming  supplied  to  consumers  even  though  much  of
 the  programming  is  supplied  by  unaffiliated  entitities.  287  Likewise,  it  shares  advertising  revenues  with  video  programmers  in  the  form  of  local  advertising  spots  that  programmers  reserve  for  Time  Warners
 use.  288  Notwithstanding  Time  Warners  explanation  of  these  provisions,  we  believe  that  these  conditions  conflict  with  the  principles  of  non-  discrimination  and  open  access  underlying  the  MOU.  Particularly
 troubling  are  the  pricing  conditions.  As  we  discuss  in  the  Confidential  Appendix,  these  conditions  may  well  prevent  unaffiliated  ISPs  from  profitably  offering  service  over  AOL  Time  Warners  systems.  289  To
 the  extent  that  they  do  so,  the  conditions  flatly  contradict  the  most  basic  commitment  of  the  MOU,  namely  that  Consumers  will  not  be  required  to  purchase  service  from  an  ISP  that  is  affiliated  with  AOL
 Time  Warner  in  order  to  enjoy  high-  speed  Internet  access  services  over  AOL  Time  Warner  cable  systems.  290
 285  See  Letter  from  Stephen  Heins,  Director  of  Marketing,  NorthNet,  to  Magalie  Roman  Salas,  Secretary,  FCC,  dated
 Oct.  6,  2000  (containing  Term  Sheet  proposal  of  Time  Warner  to  NorthNet  (  NorthNet  Term  Sheet));  Confidential  Appendix  IV-  A-  2,  Notes  5  and  8;  see  also  Brian  Williams  &  Jim  Wagner,  Cable  Contracts  Belie  Time  Warner
 Assurances,  INTERNETNEWS,  Oct.  2,  2000;  Cathy  Yang,  ISPs  to  AOL  Time  Warner:  You  Call  This  Open  Access?,  BUSINESS  WEEK,  Sept.  29,  2000.
 286  See  Letter  from  Arthur  H.  Harding,  Esq.,  Fleischman  and  Walsh,  L.  L.  P.,  Counsel  for  Time  Warner  Inc.,  to
 Magalie  Roman  Salas,  Secretary,  FCC,  dated  Oct.  30,  2000  (Time  Warner  Oct.  30  Ex  Parte)  at  1-  2.  287
 See  id.  288
 See  id.  289
 See  Confidential  Appendix  IV-  A-  2,  Notes  5  &  6.  290
 MOU  at  1    2.
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 96.  Although  we  conclude  that  the  MOU  by  itself  constitutes  an  insufficient  safeguard  against  potential  discrimination  by  AOL  Time  Warner  against  unaffiliated  ISPs  on  its  cable  network,  we  believe
 that  FTC  Consent  Agreement  will  substantially  mitigate  the  risk  of  such  discrimination.  That  decree  requires,  among  other  things,  that  AOL  Time  Warner  open  its  cable  systems  on  a  non-  discriminatory
 basis  to  at  least  three  unaffiliated  ISPs  --  the  first  of  which,  EarthLink,  must  begin  offering  service  on  Time  Warners  cable  systems  before  AOL  itself  may  do  so;  and  the  latter  two,  which  remain  as-  yet
 undetermined,  must  have  secured  agreements  to  offer  service  on  Time  Warners  cable  systems  within  90  days  of  the  time  that  AOL  itself  commences  service  on  those  systems.  291  The  FTC  Consent  Agreement
 further  stipulates  that  the  FTC  pre-  approve  the  agreements  between  AOL  Time  Warner  and  each  of  the  three  unaffiliated  ISPs  to  be  granted  immediate  access  to  Time  Warner  cable  systems,  and  that  the
 agreements  themselves  include  detailed  safeguards  protecting  these  ISPs  against  discrimination  by  AOL  Time  Warner  on  the  basis  of  affiliation.  292  Additionally,  the  FTC  Consent  Agreement  requires  AOL  Time
 Warner  to  negotiate  in  good  faith,  and  enter  into  arms  length  commercial  agreements,  with  any  other  unaffiliated  ISPs  seeking  access  to  its  cable  systems;  and  it  forbids  AOL  Time  Warner  from  declining  to
 negotiate  or  enter  such  agreements,  or  from  imposing  terms  and  conditions  in  such  agreements,  based  on  ISPs  non-  affiliation  with  the  merged  firm.  293  The  FTC  Consent  Agreement  also  requires  AOL  Time
 Warner  to  provide  any  unaffiliated  ISP  on  its  cable  system  with  the  same  point  of  connection  to  its  cable  network  that  the  merged  firm  provides  to  affiliated  ISPs,  should  an  unaffiliated  ISP  request  access  to  that
 connection  point.  294
 97.  We  are  convinced  that  the  foregoing  requirements  will  substantially  ensure  that  unaffiliated  ISPs  are  able  to  offer  their  services  over  AOL  Time  Warners  cable  system  on  non-  discriminatory  terms
 and  conditions.  However,  we  are  concerned  that  AOL  Time  Warner  will  have  insufficient  incentives  to  enter  contracts  with  local  or  regional  ISPs  that  are  unaffiliated  with  the  merged  firm.  We  note  that  the
 FTC  Consent  Agreement  requires  AOL  Time  Warner  to  negotiate  in  good  faith  with  any  unaffiliated  ISP  seeking  access  to  its  cable  systems.  Therefore,  we  reiterate  here  that  AOL  Time  Warner  must  engage
 with  local  and  regional  ISPs  in  a  good  faith,  non-  discriminatory  manner.  295  The  requirements  we  discuss  below  regarding  choice  of  ISPs,  first  screen,  billing,  technical  performance,  and  disclosure  of  contracts
 are  particularly  relevant  to  the  ability  of  smaller  ISPs  to  negotiate  carriage  arrangements  on  non-discriminatory  terms,  and  we  expect  that  AOL  Time  Warner  will  negotiate  in  good  faith  to  reach  contract
 provisions  that  are  consistent  with  the  commercial  viability  of  these  entities.
 98.  In  addition,  the  record  in  this  proceeding  reveals  several  indirect  means  through  which  the  merged  firm  could  afford  preferential  treatment  based  on  affiliation  to  ISPs  on  its  cable  systems  that  are
 not  expressly  proscribed  by  the  FTC  Consent  Agreement.  In  particular,  commenters  have  expressed  concern  that  AOL  Time  Warner  would  condition  access  to  its  cable  systems  on  an  ISPs  placement  of
 291  FTC  Consent  Agreement  at  II.  A-  D;  FTC  Press  Release  at  2-  3.
 292  In  particular,  the  FTC  Consent  Agreement  mandates  that  the  agreements  between  AOL  Time  Warner  and  each  of
 the  three  unaffiliated  ISPs  include  a  most  favored  nation  clause  requiring  that  if  AOL  executes  an  agreement  with  another  cable  provider  for  carriage  of  AOL,  the  unaffiliated  ISP  be  given  an  opportunity  to  opt  in  to  the  same  rates
 and  terms  secured  by  AOL  in  its  agreement  with  the  other  cable  provider.  FTC  Consent  Agreement  at  II.  C.  1;  FTC  Press  Release  at  3.  The  FTC  Consent  Agreement  also  requires  that  the  agreements  between  AOL  Time  Warner  and
 each  of  the  three  unaffiliated  ISPs  include  requirements  that  AOL  Time  Warner  provide  the  same  levels  of  service  and  network  flow  data  to  the  unaffiliated  ISPs  as  it  does  to  its  affiliated  ISPs.  FTC  Consent  Agreement  at  II.  C.  2-  3.
 293  FTC  Consent  Agreement  at  II.  E;  FTC  Press  Release  at  3.
 294  FTC  Consent  Agreement  at  III.  B;  FTC  Press  Release  at  4.
 295  See  note  497,  infra.
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 Time  Warner  content  on  its  first  screen.  296  Commenters  have  also  expressed  concern  that  AOL  Time  Warner  would  preclude  ISPs  on  its  cable  systems  from  establishing  direct  billing  relationships  with
 subscribers,  even  when  those  ISPs  were  responsible  for  acquiring  the  subscribers  in  the  first  place.  297  These  measures,  even  if  imposed  in  a  facially  neutral  manner  on  affiliated  and  unaffiliated  ISPs,  would  in
 fact  disadvantage  unaffiliated  ISPs  alone:  affiliated  ISPs  would  suffer  neither  from  placement  of  Time  Warner  content  on  their  first  screen  nor  from  the  absence  of  a  direct  billing  relationship  with  subscribers,
 as  any  revenue  they  lost  from  these  measures  would  be  made  up  by  the  parent  company.  Accordingly,  we  will  impose  narrowly  tailored  conditions,  described  below,  to  prevent  AOL  Time  Warner  from
 disadvantaging  unaffiliated  ISPs  on  its  cable  systems  through  such  indirect  means.
 99.  Commenters  have  also  expressed  concern  that  AOL  Time  Warner  would  discriminate  against  unaffiliated  ISPs  on  its  cable  network  in  the  technical  performance  it  affords  to  these  ISPs.  298  In
 particular,  commenters  fear  that  AOL  Time  Warner  would  provide  unaffiliated  ISPs  with  inferior  Quality  of  Service  mechanisms,  caching  capability,  technical  support,  multicasting  capability,  address
 management,  and  other  technical  functionality  of  the  cable  system  that  affects  customers  experience  with  their  ISP.  Although  we  believe  that  the  FTC  Consent  Agreement  would  prohibit  AOL  Time  Warner  from
 entering  into  contract  terms  that  discriminated  on  the  basis  of  affiliation  with  respect  to  technical  performance,  we  note  that  the  decree  does  not  explicitly  forbid  AOL  Time  Warner  from  actually
 providing  inferior  technical  performance  to  unaffiliated  ISPs  where  no  contract  term  governs.  We  are  convinced  that  discrimination  against  unaffiliated  ISPs  with  respect  to  technical  performance  would  be
 sufficiently  harmful  to  such  ISPs  that  a  remedy  is  warranted.  Accordingly,  we  will  impose  a  condition  requiring  AOL  Time  Warner,  in  all  contracts  with  unaffiliated  ISPs  for  access  to  its  cable  networks,  to
 warrant  that  it  will  not  discriminate  on  the  basis  of  affiliation  with  respect  to  technical  performance.
 100.  Finally,  we  also  impose  two  additional  conditions.  First,  we  will  prohibit  AOL  Time  Warner  from  restricting  the  ability  of  current  or  prospective  customers  to  select  and  initiate  service  from
 296  See,  e.  g.,  NorthNet  Oct.  10  Ex  Parte  at  4;  see  also  Disney  Reply  Comments  at  14.  But  see  Applicants  Responses
 to  Written  FCC  Questions  Dated  August  25,  2000  Concerning  the  February  29,  2000  Memorandum  of  Understanding  and  Multiple  ISP  Access  (  Applicants  Aug.  25  MOU  Responses)  at  13,  transmitted  by  letter  from
 Craig  A.  Gilley,  Esq.,  Fleischman  and  Walsh,  L.  L.  P.,  Counsel  for  Time  Warner  Inc.,  to  Magalie  Roman  Salas,  Secretary,  FCC,  dated  Sept.  6.,  2000.
 297  See,  e.  g.,  EarthLink  Oct.  18  Ex  Parte  at  2;  cf.  NorthNet  Oct.  10  Ex  Parte  at  4  (discussing  efforts  by  Time  Warner
 cable  to  assert  control  over  customer  relationship  in  negotiations  with  unaffiliated  ISPs  for  access  to  Time  Warner  cable  systems).  But  see  Applicants  Aug.  25  MOU  Responses  at  15  (promising  that  each  ISP  offered  on  [Time
 Warner  cable]  systems  will  have  the  opportunity  to  establish  direct  billing  relationships  with  customers).  298
 See,  e.  g.,  Disney  Reply  Comments  at  12-  13;  NorthNet  Oct.  10  Ex  Parte  at  5-  7;  see  also  Letter  from  Richard  Cotton,  Executive  Vice  President  and  General  Counsel,  and  Diane  Zipursky,  Vice  President,  Washington  Law  and
 Policy,  National  Broadcasting  Company,  Inc.,  to  Magalie  Roman  Salas,  Secretary,  FCC,  dated  July  24,  2000  (  NBC  July  24  Ex  Parte)  at  3-  6  (discussing  means  of  technological  discrimination  available  to  cable  providers).  One
 commenter  also  complains  that  installing  AOL's  software  (versions  5.0  and  6.0)  alters  users'  computer  settings,  preventing  or  impeding  them  from  accessing  other  ISPs.  Letter  from  Kenneth  F.  Yates,  Esq.,  Yates  and  Schneider,
 to  Magalie  Roman  Salas,  Secretary,  FCC,  dated  Dec.  26,  2000,  at  1-  2.  Yates,  writing  on  behalf  of  a  class  of  competing  ISPs  that  have  filed  a  class-  action  law  suit  against  AOL  regarding  this  issue,  claims  that  AOL  is  acting
 anticompetitively  by  writing  its  software  in  the  aforementioned  manner.  Yates  requests  that  we  require  AOL  to  modify  its  software  to  avoid  automatically  changing  a  users  default  dial-  up  number.  See  id.  at  3.  However,  Yates
 does  not  allege  that  the  proposed  merger  would  affect  in  any  way  AOL's  incentives  with  regard  to  how  it  writes  its  dial-  up  software.  Additionally,  as  noted,  the  allegations  regarding  AOLs  dial-  up  software  are  the  subject  of
 pending  litigation.  For  these  reasons,  we  do  not  believe  that  this  proceeding  is  the  appropriate  forum  to  resolve  concerns  about  AOLs  dial-  up  service,  and  we  decline  to  impose  the  requested  merger  condition.
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 any  unaffiliated  ISP  that  has  contracted  for  access  to  the  merged  firms  cable  systems;  and  we  will  require  AOL  Time  Warner  to  provide  customers  who  contact  Time  Warner  cable  representatives  seeking  Internet
 access  services  with  a  neutral  means  of  selecting  an  ISP  (that  is,  a  means  that  does  not  discriminate  in  favor  of  affiliated  ISPs  on  the  basis  of  affiliation).  Second,  we  will  prohibit  AOL  Time  Warner  from
 entering  into  any  contract  with  an  ISP  for  connection  with  AOL  Time  Warners  cable  systems  that  prevents  that  ISP  from  disclosing  the  terms  of  the  contract  to  the  Commission  under  the  Commissions
 confidentiality  procedures.  Both  conditions,  we  conclude,  are  necessary  to  fully  effectuate  the  commitment  to  non-  discriminatory  treatment  of  unaffiliated  ISPs  that  the  Applicants  have  undertaken  in
 the  MOU  and  that  the  FTC  Consent  Agreement  substantially  accomplishes.
 (ii)  Potential  Discrimination  Against  Unaffiliated  ISPs  on  non-AOL  Time  Warner  Cable  Networks
 101.  ACA,  in  its  initial  comments,  expressed  concern  that  the  proposed  merger  would  give  AOL  Time  Warner  the  incentive  and  the  ability  to  require  other  cable  operators  to  carry  AOLs  Internet
 access  services  as  a  condition  of  obtaining  Time  Warner  video  programming.  299  ACA  sought  a  commitment  from  the  Applicants  that  they  would  not  engage  in  such  tactics.  300  Subsequently,  Time
 Warner  representatives  stated  at  the  Commissions  en  banc  hearing  in  this  proceeding  that  the  merged  firm  would  not  condition  access  to  its  programming  on  carriage  of  AOL.  301  ACA  then  released  a
 statement  indicating  its  satisfaction  with  the  Applicants  pledge.  302
 102.  While  we  commend  Time  Warner  for  its  representations  at  the  en  banc  hearing,  we  remain  concerned  that  the  merger  would  give  AOL  Time  Warner  the  incentive  to  seek  exclusive  or
 preferential  carriage  rights  for  AOL  on  non-  Time  Warner  cable  systems.  The  merged  company  would  have  an  incentive  to  pursue  such  arrangements  wherever  preferential  carriage  rights  were  essential  to  the
 success  of  its  entry  strategy  for  AOL  Plus,  or  wherever  it  encountered  difficulty  obtaining  carriage  rights  altogether.  303  If  the  merged  firms  efforts  on  behalf  of  AOL  were  to  induce  anticompetitive  behavior  by
 other  cable  operators  regarding  carriage  of  non-  AOL  Time  Warner  ISPs,  the  public  interest  would  clearly  be  harmed.  304
 299  ACA  Comments  at  1-  2.
 300  Id.;  ACA  Reply  Comments  at  5.
 301  See  Testimony  of  Richard  D.  Parsons,  President,  Time  Warner  Inc.,  FCC  En  Banc  Hearing,  CS  Docket  No.  00-  30
 (July  27,  2000),  Tr.  at  178-  79  (  Parsons  En  Banc  Testimony).  In  response  to  Commissioner  Tristanis  question  as  to  whether  AOL  Time  Warner  would  require  carriage  of  AOL  services  as  a  condition  of  access  to  Time  Warner
 programming,  Mr.  Parsons  replied,  We  will  not.  We  will  not  tie  them  together  in  that  way.  We  had  thought  .  .  .  we  were  clear  in  our  previous  submissions.  Obviously,  we  werent.  .  .  [but]  were  being  unequivocal  now.  We  will  not
 tie  them.  Id.;  see  also  Applicants  Reply  Comments  at  44-  46  (stating  that  it  would  not  be  in  Time  Warners  best  interest  to  limit  the  reach  of  its  programming  by  tying  it  to  carriage  of  AOL;  other  programming  in  the  marketplace
 would  then  replace  Time  Warners  programming).  302
 ACA,  American  Cable  Association  Backs  Time  Warner/  AOL  Merger  (press  release),  July  27,  2000.  303
 Cf.  Confidential  Appendix  IV-  A-  1,  Note  1;  id.  IV-  A-  2,  Note  2.  304
 We  are  mindful  that  efforts  by  AOL  Time  Warner  to  obtain  carriage  for  the  merged  companys  ISP  on  the  networks  of  other  cable  providers  would  not  necessarily  be  harmful  to  the  public  interest.  Indeed,  such  efforts  could
 facilitate  the  deployment  of  advanced  telecommunications  capability  to  all  Americans  and  promote  the  existence  of  a  diversity  of  information  sources  in  cyberspace.  As  such,  these  efforts  could  benefit  the  public  interest,  so  long  as
 they  did  not  induce  anticompetitive  behavior  by  other  cable  providers.
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 103.  We  find  it  unnecessary  to  address  AOL  Time  Warners  ability  to  obtain  exclusive  or  preferential  carriage  rights  for  AOL,  however,  because  we  are  satisfied  that  the  FTC  Consent  Agreement
 adequately  addresses  the  potential  harm  with  which  we  are  concerned.  In  particular,  the  decree  prohibits  AOL  Time  Warner  from  entering  into  any  agreement  with  a  cable  provider  that  would  interfere  with  the
 cable  providers  ability  to  enter  into  an  agreement  with  another  ISP.  305  This  provision  will  prevent  AOL  Time  Warner  from  entering  agreements  with  other  cable  providers  that  would  restrict  the  rates,  terms,  or
 conditions  of  service  that  these  providers  could  offer  to  ISPs  competing  with  AOL.
 (iii)  Potential  Harms  to  Diversity  of  Internet  Content
 104.  Several  commenters,  notably  Disney  and  NBC,  argue  that  a  merged  AOL  Time  Warner  could  utilize  its  control  over  high-  speed  distribution  to  favor  its  affiliated  content  and  to  discriminate
 against  unaffiliated  content  providers,  306  thus  limiting  the  publics  access  to  a  diversity  of  information  sources.  307  According  to  the  commenters,  such  discrimination  could  be  accomplished  through  router
 technology  in  a  way  that  would  be  undetectable  to  consumers.  For  example,  routers  could  be  programmed  to  provide  high  bit  rates  and  superior  customer  performance  for  AOL  Time  Warner
 channels,  programs  and  services,  and  slower  bit  rates  and  inferior  customer  performance  for  content  provided  by  unaffiliated  sources.  308  In  addition,  Disney  asserts  that  AOL,  as  a  condition  for  purchasing
 placement  on  the  AOL  website,  requires  that  content  providers  disable  hyperlinks  to  unaffiliated  websites  (including  other  areas  of  the  content  providers  own  web  sites),  and  requires  a  commitment  that  no  more
 than  a  set  percentage  of  traffic  at  a  site  within  the  AOL  network  can  be  diverted,  via  links,  to  sites  outside  the  AOL  network.  309  If  these  claims  are  valid,  the  merger  could  harm  consumers  by  enhancing
 AOL  Time  Warners  incentive  and  ability  to  limit  access  to  Internet  content  not  affiliated  with  the  merged  company.
 305  FTC  Consent  Agreement  at  III.  E.
 306  By  unaffiliated  content  providers,  we  mean  content  providers  in  which  the  merged  firm  has  no  ownership
 interest  or  contractual  relationship.  307
 Disney  Reply  Comments  at  2;  NBC  July  24  Ex  Parte  at  5-  6;  Letter  from  Henry  L.  Bauman  et  al.,  Legal  Department,  National  Association  of  Broadcasters,  to  William  E.  Kennard,  Chairman,  FCC,  dated  May  19,  2000
 (  NAB  May  19  Ex  Parte),  at  2-  3.  On  May  10,  2000,  Senators  Mike  DeWine  and  Herb  Kohl  sent  a  letter  to  FCC  Chairman  William  Kennard  and  FTC  Chairman  Robert  Pitofsky  expressing  similar  concerns.  In  addition,  several
 individuals  who  use  AOL  and  Road  Runner  filed  comments  objecting  to  alleged  instances  of  censorship  by  these  ISPs.  See  Petition  To  Deny  of  Thomas  Lewis  Bonge,  dated  Sept.  15,  2000  (  Bonge  Petition),  at  10-  13  (claiming
 that  Road  Runner  deleted  as  unauthorized  commercial  speech  petitioners  chat  room  posting  referencing  an  Internet  music  site),  transmitted  by  letter  from  Thomas  Lewis  Bonge  to  FCC,  dated  Sept.  15,  2000;  Letter  from  James  D.
 Russell,  Ph.  D.,  to  Magalie  Roman  Salas,  Secretary,  FCC,  dated  Aug.  22,  2000  (  Russell  Letter)  at  1-  2  (claiming  that  AOL  deleted  as  hate  speech  certain  postings  concerning  Vice  Presidential  candidate  Joseph  Lieberman);  Letter
 from  Frank  Messman  to  Magalie  Roman  Salas,  Secretary,  FCC,  dated  Aug.  24,  2000  (  Messman  Letter)  at  1  (same).  These  commenters  also  allege  that  Road  Runner  and  AOL  have  cancelled  the  accounts  of  users  who  posted
 messages  deemed  unacceptable  by  the  ISPs.  See  Bonge  Petition  at  11-  12;  Russell  Letter  at  1-  2;  Messman  Letter  at  1.  They  ask  the  Commission  to  prohibit  AOL  Time  Warner  from  restricting  ISP  users  speech.  While  we  recognize
 the  importance  of  citizens  ability  to  freely  communicate  with  each  other,  this  proceeding  is  not  the  appropriate  forum  for  the  resolution  of  the  complex  legal  and  policy  questions  that  these  commenters  present.  The
 aforementioned  commenters  have  not  alleged  that  the  merger  will  in  any  way  affect  AOLs  or  Road  Runners  ability  or  incentive  to  regulate  users  speech.  Accordingly,  we  do  not  address  these  issues  further  in  this  proceeding,  and
 we  reject  the  aforementioned  commenters  proposed  merger  conditions.  308
 See  Disney  Reply  Comments  at  12-  14;  Disney  Oct.  25  Ex  Parte  at  4-  5;  Consumers  Union  Comments  at  105-  07.  309
 Disney  July  25  Ex  Parte  at  19.
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 105.  The  Applicants  assert  that  their  primary  economic  incentive  is  to  increase  subscribership  by  distributing  the  widest  possible  variety  of  content  to  the  widest  possible  audience,  and  that  therefore
 they  have  no  incentive  to  discriminate  against  unaffiliated  content  providers.  310  With  respect  to  Disneys  argument  in  particular,  the  Applicants  emphasize  that  AOL  does  not  restrict  a  users  ability  to  reach  any
 site  on  the  World  Wide  Web  by  typing  in  a  URL.  311
 106.  The  record  in  this  proceeding  provides  some  evidence  that  AOL  already  seeks  to  limit  its  members  access  to  unaffiliated  content  on  the  World  Wide  Web.  For  example,  AOL  requires  that
 content  appearing  on  AOL  websites  have  only  a  limited  number  of  hyperlinks  to  unaffiliated  content.  312  Furthermore,  while  it  is  true  that  AOL  users  can  access  unaffiliated  content  by  typing  the  URL  for  any
 site  on  the  World  Wide  Web  into  the  AOL  browser,  a  user  must  know  the  correct  URL  in  order  to  complete  that  operation,  and  must  take  the  time  to  do  so  --  factors  which,  Disney  and  NBC  maintain,
 make  typing  a  URL  an  inadequate  substitute  for  clicking  a  hyperlink.  313
 107.  Nevertheless,  we  decline  to  impose  the  remedial  conditions  proposed  by  Disney  and  NBC,  for  two  reasons.  First,  as  we  discuss  below,  we  believe  that  if  unaffiliated  ISPs  receive  non-discriminatory
 access  to  Time  Warner  cable  systems  --  a  result  effectuated  by  the  FTC  Consent  Agreement,  and  reinforced  by  certain  conditions  we  impose  in  this  proceeding  --  the  merged  firms
 incentive  and  ability  to  withhold  unaffiliated  content  from  its  subscribers  will  be  substantially  mitigated.  Second  and  relatedly,  the  FTC  Consent  Agreement  explicitly  forbids  AOL  Time  Warner  from  interfering
 in  any  way  with  content  passed  through  Time  Warner  cable  conduits  being  used  by  unaffiliated  ISPs  that  have  contracted  for  access  to  them.  314  These  provisions  ensure  that  unaffiliated  ISPs  on  Time  Warners
 cable  systems  will  have  unimpeded  access  to  unaffiliated  content  should  they  choose  to  provide  it  --  thus  effectively  ensuring  that  Time  Warner  cable  subscribers  will  have  access  to  such  content  as  well.
 108.  Other  commenters,  especially  BellSouth  and  SBC,  argue  that  a  combined  AOL  Time  Warner  would  have  both  the  incentive  and  the  ability  to  discriminate  against  alternative,  non-  cable
 platforms  for  high-  speed  Internet  service  (such  as  DSL)  by  withholding  valuable  affiliated  content  from  ISPs  that  utilize  these  alternative  platforms,  especially  in  areas  served  by  Time  Warner  cable  systems.  315
 Were  the  combined  company  to  discriminate  in  this  manner,  these  commenters  allege,  competing  ISPs  (as  well  as  competing  high-  speed  platforms)  would  be  placed  at  a  disadvantage,  thereby  limiting  consumers
 ability  to  choose  among  varied  and  diverse  sources  of  broadband  Internet  content.  316
 310  Applicants  Reply  Comments,  passim.
 311  Applicants  Reply  Comments  at  2,  36-  40.
 312  See  Disney  July  25  Ex  Parte  at  19.  Disney  states  that  AOL  consistently  demands  that  companies  purchasing
 space  on  the  AOL  website  desist  from  including  links  to  websites  outside  the  walled  garden  .  .  .  .  At  times,  AOL  requires  a  commitment  that  no  more  than  a  set  percentage  of  traffic  at  a  site  within  the  AOL  network  can  be
 diverted  from  there  via  links  to  sites  outside  the  AOL  Network.  Id.  313
 NBC  contends  that  a  merged  company  could  steer  consumers  to  affiliated  content  by  only  providing  direct  links  to  affiliated  programming,  and  even  by  downgrading  the  speed  with  which  consumers  can  access  certain  web  sites.
 NBC  July  24  Ex  Parte  at  6;  see  also  Disney  July  25  Ex  Parte  at  19.  314
 FTC  Consent  Agreement  at  III.  A;  FTC  Press  Release  at  4.  315
 SBC  Comments  at  19-  22;  BellSouth  Reply  Comments  at  14-  18.  316
 SBC  Comments  at  19-  22;  BellSouth  Reply  Comments  at  14-  18.
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 109.  The  Applicants  maintain  in  response  that  their  commitment  to  maximizing  subscribership  means  that  AOL  Time  Warner  would  distribute  its  own  affiliated  content  on  all  high-  speed  Internet
 platforms,  including  DSL,  satellite,  and  wireless.  317
 110.  The  record  in  this  proceeding  demonstrates  that  the  Applicants  contemplate  giving  some  popular  Time  Warner  programming  and  content  exclusive  placement  on  AOL  websites.  318  It  further
 demonstrates  that  the  Applicants  contemplate  moving  certain  Time  Warner  content  from  unaffiliated  portals  to  AOLs  portal.  319  The  merger  would  certainly  enhance  AOLs  ability  to  secure  exclusive
 contracts  for  Time  Warner  content,  and  AOL  would  have  an  incentive  to  grant  such  exclusivity  due  to  the  competitive  advantage  it  would  gain  by  offering  popular  content  on  an  exclusive  basis.  Although  there
 are  thousands  of  content  sources  on  the  World  Wide  Web,  Internet  users  look  to  a  relatively  limited  number  of  sources  to  access  that  content.  320  This  proposition  is  demonstrated  by  the  dominance  of  a
 small  number  of  major  portals  (led  by  AOL)  in  terms  of  Internet  traffic.  321
 111.  Notwithstanding  the  likelihood  that  the  proposed  merger  would  lead  to  AOLs  securing  exclusive  or  preferential  access  to  some  Time  Warner  content,  we  find  the  record  insufficient  to  justify  a
 requirement  of  equal  access  to  such  content.  In  particular,  we  are  not  persuaded  that  AOLs  ability  to  obtain  exclusive  or  preferential  access  to  such  content  in  the  wake  of  the  merger  would  harm  the  public
 interest  in  a  manner  sufficiently  grave  to  warrant  the  remedy  commenters  seek,  which  is  far-  reaching.
 112.  Finally,  we  believe  that  the  AOL  Time  Warners  incentive  and  ability  to  engage  in  Internet  content  discrimination  will  be  largely  mitigated  if  unaffiliated  ISPs  are  given  non-discriminatory
 access  to  Time  Warners  cable  systems,  as  the  FTC  Consent  Agreement  requires.  Were  AOL  Time  Warner  to  withhold  desirable  unaffiliated  content  from  subscribers  to  its  affiliated  ISPs  (as
 Disney  and  NBC  fear),  these  subscribers  would  be  able  to  select  an  alternative,  unaffiliated  ISP  on  Time  Warners  cable  network  without  incurring  substantial  switching  costs.  And  were  AOL  Time  Warner  to
 withhold  desirable  affiliated  content  from  subscribers  to  unaffiliated  ISPs  on  competing  platforms  (as  BellSouth  and  SBC  fear),  it  would  sacrifice  a  potentially  significant  source  of  revenue.  Therefore,  we
 find  that  commenters  concerns  with  respect  to  potential  content  discrimination  are  adequately  addressed  by  the  provisions  in  the  FTC  Consent  Agreement  and  this  Order  ensuring  that  unaffiliated  ISPs
 receive  non-  discriminatory  access  to  Time  Warner  cable  systems.
 (iv)  Potential  Harms  to  Unaffiliated  Broadband  Platforms
 113.  Commenters  claim  that  the  proposed  merger  would  impair  the  viability  of  DSL  as  a  competitive  alternative  to  cable  for  the  delivery  of  residential  high-  speed  Internet  access  services.  322
 Based  on  the  record  in  this  proceeding,  we  do  not  believe  that  the  merger  would  threaten  the  continued  existence  of  DSL.  We  do  find,  however,  that  the  merger  could  undermine  the  availability  of  residential
 high-  speed  Internet  access  services  over  DSL  by  creating  an  incentive  for  AOL  Time  Warner  to  steer
 317  Applicants  Reply  Comments,  passim.
 318  See  Confidential  Appendix  IV-  A-  2,  Note  9.
 319  Id.
 320  BellSouth  Reply  Comments  at  9.
 321  Internet  traffic  for  the  top  50  digital  media  and  web  properties,  measured  in  terms  of  unique  visitors  per  month,
 is  tracked  by  Media  Metrix  at  http://  www.  mediametrix.  com/  home.  jsp?  language=  us.  322
 See,  e.  g.,  SBC  Comments  at  21-  22;  BellSouth  Reply  Comments  at  15,  21-  22;  Consumers  Union  Comments  at  33.
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 cable  customers  seeking  Internet  access  in  Time  Warner  service  areas  to  the  cable  platform.  Nonetheless,  we  are  satisfied  that  this  outcome  will  be  averted  by  the  requirements  of  the  FTC  Consent  Agreement.
 114.  Cable  operators  have  been  early  leaders  in  deploying  residential  high-  speed  Internet  access  services.  Cables  early  rollout  encouraged  deployment  of  alternative  platforms;  as  the
 Commission  has  observed,  the  expansion  of  DSL  in  the  past  two  years  by  incumbent  LECs  is  primarily  a  reaction  to  other  companies  entry  into  broadband.  323  As  of  November  2000,  cable  retained  a  substantial
 edge  over  DSL  as  measured  by  the  number  of  residential  subscribers  to  each  platform.  324
 115.  AOL  currently  markets  its  high-  speed  Internet  access  service  (  AOL  Plus)  over  DSL  through  non-  exclusive  strategic  alliances  with  SBC  (including  Ameritech)  as  well  as  Bell  Atlantic  and
 GTE  (both  now  components  of  Verizon  Communications).  325  Taken  together,  AOLs  agreements  with  these  companies  give  it  an  almost  nationwide  DSL  footprint.  326  AOLs  effort  to  obtain  such  a  nationwide
 DSL  footprint  has  been  credited  with  making  DSL  highly  competitive  with  cable  due  to  the  attractiveness  of  AOLs  content.  327
 116.  Thus  far,  AOL  has  been  unable  to  offer  AOL  Plus  over  cable,  though  the  company  has  sought  a  presence  on  that  platform  through  negotiations  with  cable  companies  and  its  past  advocacy  of
 open  access.  328  The  merger  would  enable  AOL  to  offer  its  high-  speed  Internet  access  services  to  Time  Warners  nearly  13  million  cable  subscribers  as  soon  as  Time  Warners  exclusive  contract  with  Road
 323  Implementation  of  the  Local  Competition  Provisions  of  the  Telecommunications  Act  of  1996,  CC  Docket  No.-  96-98,
 Third  Report  and  Order  and  Fourth  Further  Notice  of  Proposed  Rulemaking,  15  FCC  Rcd  at  3696,  3840  n.  642  (1999).  In  the  past  two  years,  numerous  companies  have  made  substantial  investments  in  DSL.  For  example,  SBC
 Corp.  has  announced  its  intention  to  invest  $6  billion  in  an  infrastructure  deployment  throughout  its  13  state  region,  in  order  to  make  DSL  available  to  nearly  77  million  homes.  SBC  Communications,  Inc.,  SBC  Set  to  Trial  DSL
 Neighborhood  Broadband  Gateways  (press  release),  Aug.  23,  2000;  see  also  SBC  Communications,  Inc.,  SBC  Launches  $6  billion  Broadband  Initiative  (press  release),  Oct.  18,  1999.
 324  As  of  November  2000,  there  were  an  estimated  3  million  residential  cable  modem  customers  in  the  United  States
 compared  with  approximately  1,160,000  residential  DSL  subscribers.  See  Kinetic  Strategies,  Inc.,  Cable  Modem  Market  Stats  &  Projections,  CABLE  DATACOM  NEWS,  Nov.  8,  2000,  at  http://  www.  cabledatacomnews.  com/  cmic/
 cmic16.  html  (visited  Nov.  14,  2000);  see  also  TeleChoice,  Inc.,  TeleChoice  DSL  Deployment  Summary    Updated  11/  13/  00,  at  http://  www.  xdsl.  com/  content  /resources/  deployment_  info.  asp  (visited  Nov.  14,  2000).
 325  Applicants  March  21  Supplemental  Information  at  17.
 326  Applicants  Third  Response  at  11-  12  &  ex.  3.  16;  see  also  Confidential  Appendix  IV-  A-  2,  Notes  1  and  10.
 327  See  Consumers  Union  Comments  at  27-  28  (citing  Nico  DeTourn,  Industry  News:  AT&  T  Reaches  Out,  THE
 MOTLEY  FOOLS  INTERNET  REPORT,  July  10,  1999,  at  10).  Additionally,  in  AT&  T-  MediaOne,  we  noted  that  ISPs  lacking  direct  access  to  provide  broadband  services  over  cable  systems  were  entering  into  alliances  with  alternative
 broadband  providers,  thereby  accelerating  the  deployment  of  these  technologies.  AT&  T-  MediaOne  Order,  15  FCC  Rcd  at  9867-  68    117.
 328  Applicants  March  21  Supplemental  Information  at  30  (citing  AOL  Time  Warner  Filing  S-  4,  Feb.  11,  2000  at
 37);  see  also  Applicants  Second  Response  at  13;  Kinetic  Strategies,  Inc.,  America  Onlines  Broadband  Coup,  CABLE  DATACOM  NEWS,  at  http://  www.  cabledatacomnews.  com/  best_  of/  bocdnl10.html  (visited  Aug.  14,  2000);
 Confidential  Appendix  IV-  A-  2,  Note  2;  see  also  Applications  for  Consent  to  Transfer  of  Licenses  and  Section  214  Authorizations  from  MediaOne  Group,  Inc.,  Transferor,  to  AT&  T  Corp.,  Transferee,  CC  Docket  No.  99-  251,  AOL
 Comments  at  12-  17  (comments  of  AOL  in  previous  merger  supporting  government-  mandated  open  access  to  cable  systems);  Applications  for  Consent  to  the  Transfer  of  Licenses  and  Section  214  Authorizations  from  Tele-Communications,
 Inc.,  Transferor,  to  AT&  T  Corp.,  Transferee,  CS  Dkt.  No.  98-  178,  AOL  Comments  at  30-  39  (same).
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 Runner  expires.  329  AOLs  access  to  this  customer  base  would  not  be  significantly  slowed  by  technical  obstacles,  as  eighty-  five  percent  of  Time  Warners  cable  plant  has  already  been  upgraded  to  two-  way,  750
 MHz  hybrid  fiber/  coaxial  (HFC)  networks.  330  AOL  has  indicated  that  it  would  offer  AOL  Plus  to  Time  Warner  cable  customers  at  the  earliest  possible  juncture.  331
 117.  Because  the  proposed  transaction  would  give  AOL  ownership  of  a  cable  network,  the  merged  firm  could  maximize  its  profits  by  maximizing  the  number  of  Time  Warner  cable  subscribers
 receiving  AOLs  residential  high-  speed  Internet  access  services  over  Time  Warners  cable  facilities  instead  of  DSL.  This  conclusion  follows  from  the  simple  fact  that  customers  in  Time  Warner  service
 areas  who  received  AOLs  high-  speed  Internet  access  services  over  cable  would  pay  the  merged  firm  for  Internet  access,  for  content,  and  for  transmission,  whereas  customers  in  the  same  service  areas  who
 received  AOLs  services  over  DSL  would  pay  the  merged  firm  only  for  the  first  two  components.  332  Every  customer  in  a  Time  Warner  service  area  who  elected  to  receive  AOLs  high-  speed  Internet  access
 services  over  DSL  instead  of  cable,  in  other  words,  would  cost  the  merged  firm  one  stream  of  revenue.
 118.  For  this  reason,  commenters  fear  that  AOL  --  which  played  an  important  role  in  promoting  DSL  before  the  proposed  merger  --  would  withdraw  support  from  that  platform  post-  merger
 and  steer  customers  who  could  receive  its  high-  speed  Internet  access  services  over  either  DSL  or  cable  to  the  latter.  333  AOL  could  withdraw  its  support  from  DSL  in  a  number  of  ways.  Most  dramatically,  it
 could  refuse  to  offer  AOL  Plus  over  DSL  altogether.  Alternatively,  as  SBC  contends,  AOL  could  restrict  the  availability  of  AOL  Plus  over  DSL  to  geographic  markets  where  that  service  could  not  be  delivered
 over  Time  Warners  cable  facilities.  334  If  it  sought  a  more  subtle  means  to  withdraw  support  from  DSL,  AOL  could  continue  to  offer  its  Internet  access  services  over  that  platform,  but  do  so  at  higher  prices  or
 on  less  favorable  terms  than  would  be  available  over  Time  Warner  cable.
 119.  In  response  to  commenters  concerns,  AOL  asserts  that  it  intends  to  offer  its  residential  high-  speed  Internet  access  services  across  all  platforms,  in  keeping  with  its  AOL  Anywhere  strategy.  335
 AOL  Chairman  Steve  Case  stated  at  the  en  banc  hearing  in  this  proceeding  that  it  is  in  [AOL  Time  Warners]  interest  to  work  as  forcefully  as  we  can  to  establish  arrangements  with  all  the  cable  companies
 to  deploy  cable  broadband,  as  well  as  [with]  all  the  DSL  companies,  satellite  companies,  [and]  wireless  companies,  so  we  really  have  a  national  footprint,  with  a  tapestry  of  broadband  solutions.  336  AOL  claims
 329  Kinetic  Strategies,  Inc.,  America  Onlines  Broadband  Coup,  CABLE  DATACOM  NEWS,  at  http://  www.  cable
 datacomnews.  com/  best_  of/  bocdnl10.  html  (visited  Aug.  14,  2000).  According  to  a  press  release  issued  by  Time  Warner  on  December  18,  2000,  the  exclusivity  arrangement  between  Time  Warner  and  Road  Runner  will  be
 terminated  by  April,  2001.  See  Time  Warner  Dec.  18  Press  Release.  330
 Time  Warner  Inc.,  Time  Warner  Cable,  Overview,  at  http://  www.  timewarner.  com/  corp/  about/  cablesys/  index.  html  (visited  July  31,  2000).
 331  See  Confidential  Appendix  IV-  A-  2,  Note  11.
 332  SBC  Comments  at  21.
 333  Id.  at  20.  SBC  claims  that  the  proposed  merger  would  give  AOL  a  strong  incentive  generally  to  favor  cable
 over  DSL  or  satellite  throughout  the  country;  it  claims  that  the  incentive  will  be  overwhelming  in  all  geographic  markets  where  AOL/  Time  Warner  is  itself  the  local  provider  of  cable  service.  Id.  at  20-  21.
 334  Id.
 335  Applicants  March  21  Supplemental  Information  at  18.
 336  Testimony  of  Steve  Case,  Chairman  and  CEO,  America  Online,  Inc.,  FCC  En  Banc  Hearing,  CS  Docket  No.  00-
 3-  (July  27,  2000),  Tr.  at  43  (  Case  En  Banc  Testimony).
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 that  it  must  provide  its  services  over  as  many  distribution  platforms  as  possible  in  order  to  reach  the  greatest  number  of  consumers;  337  maximizing  the  number  of  consumers  that  view  AOL  content,  the
 company  maintains,  will  increase  subscription  revenue,  advertising  revenue  and  revenue  from  e-commerce  transactions.  338  AOL  further  contends  that  if  it  failed  to  offer  AOL  Plus  on  multiple  broadband
 platforms  within  Time  Warner  service  areas,  consumers  would  likely  subscribe  to  an  ISP  other  than  AOL  in  lieu  of  being  forced  onto  cable.  339  The  Applicants  observe  that  within  Time  Warner  franchise  areas,  a
 substantial  percentage  of  consumers  do  not  subscribe  to  cable,  and  that  refusing  to  offer  AOL  Plus  over  alternative  platforms  could  foreclose  AOL  from  signing  up  these  potential  subscribers.  340
 120.  Although  the  record  supports  AOLs  general  commitment  to  offering  its  services  over  DSL,  we  nonetheless  conclude  that  the  merged  firm  would  have  a  clear  economic  incentive  to  favor  cable
 as  its  platform  of  choice  with  respect  to  customers  in  Time  Warner  service  areas  who  could  obtain  residential  high-  speed  Internet  access  services  over  either  conduit.  341  The  record  does  not  support  a
 conclusion  that  AOL  Time  Warner  would  discriminate  against  DSL  by  refusing  to  offer  high-  speed  Internet  access  services  over  that  platform  altogether.  On  the  contrary,  as  the  Applicants  aver,  it  would
 be  consonant  with  AOL  Time  Warners  economic  interest  to  offer  such  services  over  DSL  in  order  to  reach  as  many  eyeballs  as  possible.  342  However,  the  merged  firms  incentive  to  offer  AOL  Anywhere
 would  not  negate  its  incentive  to  steer  customers  to  the  platform  the  Applicants  would  own  where  customers  could  choose  that  platform.
 121.  If  AOL  Time  Warner  acted  upon  this  latter  incentive  and  withdrew  its  full-  fledged  support  from  the  DSL  platform  in  Time  Warner  cable  service  areas,  the  result  would  be  to  retard  the
 growth  of  DSL  as  a  competitor  to  cable.  343  We  believe  such  a  result  would  be  against  the  public  interest.  Robust  competition  between  cable  and  DSL  platforms  is  important  to  promote  the  continued
 development  of  the  Internet,  344  to  preserve  the  vibrant  and  competitive  free  market  that  presently  exists  for  the  Internet  and  other  interactive  computer  services,  345  and  to  encourage  the  deployment  on  a
 reasonable  and  timely  basis  of  advanced  telecommunications  capability  to  all  Americans.  346  We  are
 337  Applicants  Second  Response  at  10-  11;  id.  at  13  (  A  merged  AOL  Time  Warner  will  continue  the  same  strategy
 of  seeking  to  make  the  AOL  ISP  service  available  over  as  many  platforms  as  possible.).  338
 Applicants  March  21  Supplemental  Information  at  17;  see  also  Jeff  Camp  et  al.,  The  Broadband  Report:  Reaping  What  You  Sow:  ROI  in  the  Broadband  Market,  Morgan  Stanley  Dean  Witter,  May  2000,  at  57  (  We  expect
 that  AOL  Time  Warner  will  offer  to  sell  content  over  DSL  and  satellite  systems,  as  well  as  cable.).  339
 Applicants  Second  Response  at  11.  340
 Applicants  March  21  Supplemental  Information  at  19.  341
 Should  the  Applicants  enter  into  an  agreement  with  AT&  T  to  be  the  favored  or  exclusive  ISP  over  AT&  T  cable  systems,  additional  incentives  would  be  created  which  could  encourage  the  Applicants  to  steer  customers  to  the
 cable  platform  rather  than  DSL.  See  Confidential  Appendix  IV-  A-  2,  Note  4.  342
 See  Applicants  Sept.  19  Ex  Parte  at  2.  343
 We  do  not  find  that  this  would  cause  a  specifically  quantifiable  level  of  harm  to  DSL.  As  noted  above,  numerous  incumbent  and  competitive  LECs  have  invested  heavily  in  DSL.  These  include  companies  with  whom  AOL  has
 ongoing  contracts  to  market  high-  speed  service,  and  those  without  agreements  with  AOL,  and  it  is  not  clear  that  these  companies  will  pull  back  from  aggressively  promoting  DSL.  However,  as  we  note,  we  do  believe  that  by
 favoring  the  cable  platform,  AOL  Time  Warner  could  hinder  DSLs  growth  to  some  extent.  344
 47  U.  S.  C.    230(  b)(  1).  345
 Id.    230(  b)(  2).
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 convinced  that  a  decision  by  AOL  Time  Warner  to  withdraw  support  from  DSL  --  even  if  it  were  limited  to  Time  Warner  cable  service  areas,  and  even  if  its  ultimate  effect  were  only  to  slow  DSLs  continued
 growth  --  would  amount  to  a  public  interest  harm.
 122.  Nonetheless,  we  are  satisfied  that  this  harm  will  be  adequately  ameliorated  by  the  requirements  in  the  FTC  Consent  Agreement.  As  earlier  mentioned,  these  requirements,  augmented  by
 the  conditions  we  impose  in  this  proceeding,  will  allow  unaffiliated  ISPs  to  offer  residential  high-  speed  Internet  access  services  over  Time  Warner  cable  on  a  non-  discriminatory  basis.  With  unaffiliated  ISPs
 able  to  market  their  services  over  AOL  Time  Warners  cable  platform  as  well  as  DSL,  the  merged  firm  will  have  an  incentive  to  offer  its  Internet  access  services  over  DSL  in  order  to  provide  prospective
 customers  with  the  same  range  of  conduit  options  its  competitors  do.  AOL  Time  Warner  will  likewise  have  an  incentive  to  offer  its  Internet  access  services  over  DSL  in  order  to  replace  ISP  customers  lost  to
 unaffiliated  ISPs  on  its  cable  platform.
 123.  The  FTC  Consent  Agreement  also  addresses  the  possibility  that  AOL  Time  Warner  will  withdraw  support  from  DSL  in  Time  Warner  cable  service  areas  more  directly:  by  requiring  the  merged
 firm  to  market  its  Internet  access  service  over  DSL  in  the  same  manner  and  at  the  same  retail  price  in  Time  Warner  service  areas  where  AOL  or  affiliated  ISP  service  is  available  over  cable  as  in  Time  Warner
 service  areas  where  AOL  or  affiliated  ISP  service  is  not  available  over  cable.  347  These  requirements  effectively  forbid  AOL  Time  Warner  from  steering  customers  toward  the  cable  platform  in  Time  Warner
 cable  service  areas,  and  ensure  that  the  merged  firms  support  for  DSL  service  will  not  vary  where  cable  and  DSL  platforms  compete  head  to  head.
 124.  We  are  not  persuaded  that  further  requested  remedies  are  appropriate.  Memphis,  Light,  Gas  and  Water  Division  (  MLG&  W)  and  Memphis  Networx  (jointly  referred  to  as  Memphis
 Commenters)  ask  the  Commission  to  condition  its  license  transfer  approval  on  the  Applicants  taking  a  neutral  stance  to  the  entry  of  facilities-  based  network  providers  in  areas  in  which  Time  Warner  provides
 telecommunications  and  cable  services.  348  MLG&  W  is  a  division  of  the  City  of  Memphis,  Tennessee,  that  supplies  electricity,  natural  gas  and  water  to  approximately  400,000  customers.  349  Through  a  joint
 venture  with  a  third  party,  MLG&  W  formed  Memphis  Networx  to  build  a  physical  network  that  will  provide,  among  other  things,  residential  high-  speed  Internet  access  services.  350  The  Memphis
 Commenters  allege  that  Time  Warner,  which  holds  the  cable  franchise  in  Memphis,  has  sought  to  prevent  Memphis  Networx  from  building  its  competitive  network,  and  has  gone  to  extraordinary  lengths  to
 protect  its  dominant  position  in  the  Memphis  broadband  market.  351  The  Applicants  respond  that  Time  Warners  concerns  about  Memphis  Networxs  proposed  network  predate  the  proposed  merger,  and  would
 be  unaffected  by  a  combination  of  the  firms.  352  Time  Warner  also  argues  that  its  concerns  about  Memphis  Networxs  proposed  network  are  legitimate,  and  that  to  the  extent  the  Memphis  Commenters
 (  continued  from  previous  page)  346  47  U.  S.  C.    157  nt.
 347  FTC  Consent  Agreement  at  IV.  A-  B;  FTC  Press  Release  at  4.
 348  Memphis  Networx  Comments  at  7.
 349  MLG&  W  Comments  at  3.
 350  Id.  at  3.
 351  Id.  at  3;  see  also  Memphis  Networx  Comments  at  3.
 352  Applicants  Reply  Comments  at  52.
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 object  to  the  manner  in  which  Time  Warner  has  acted  upon  its  concerns,  such  objections  should  be  addressed  to  local  decision-  makers.  353
 125.  MLG&  Ws  undertaking  may  promote  competition  for  high-  speed  Internet  access  services  and  facilitate  the  deployment  of  these  services  to  under-  served  areas.  354  Nevertheless,  the  Memphis
 Commenters  have  not  demonstrated  that  Time  Warners  opposition  to  their  plan  is  anticompetitive  or  unlawful.  They  have  also  failed  to  demonstrate  that  the  proposed  merger  would  increase  the  likelihood  of
 anticompetitive  or  unlawful  behavior  by  the  Applicants.  As  we  have  previously  noted,  where  a  merger  is  not  the  cause  of  .  .  .  [a]  competitive  threat  .  .  .  the  .  .  .  license  transfer  proceeding  is  not  the  appropriate
 forum  to  address  the  issue.  355
 3.  Conditions
 126.  Commenters  argue  that  the  MOU  is  insufficient  to  prevent  the  proposed  merger  from  harming  the  public  interest  because  it  is  unenforceable  and  vague  with  respect  to  how  the  principle  of
 non-  discrimination  will  be  implemented.  356  Although  we  commend  the  Applicants  for  proffering  the  MOU,  as  we  have  earlier  explained  we  agree  with  the  commenters  that  the  MOU  by  itself  affords
 insufficient  protection  against  the  potential  harms  to  the  public  interest  that  could  result  from  the  proposed  merger.  357  The  FTC  Consent  Agreement,  on  the  other  hand,  substantially  addresses  these
 harms,  as  we  have  already  described.  The  conditions  we  impose  below  are  narrowly  tailored  to  augment  that  decree  by  preventing  AOL  Time  Warner  from  utilizing  certain  indirect  means  to  disadvantage
 unaffiliated  ISPs  on  its  cable  systems  due  to  their  lack  of  affiliation.
 A.  Choice  of  ISPs:  AOL  Time  Warner  shall  not  restrict  the  ability  of  any  current  or  prospective  ISP  customers  to  select  and  initiate  service  from  any  unaffiliated  ISP  which,  pursuant  to  a
 contract  with  AOL  Time  Warner,  has  made  its  service  available  over  AOL  Time  Warners  cable  facilities  (  Participating  ISP).  AOL  Time  Warner  shall  allow  customers  to  select  a  Participating  ISP  by  a  method
 that  does  not  discriminate  in  favor  of  AOL  Time  Warners  affiliates  on  the  basis  of  affiliation.  At  a  minimum,  AOL  Time  Warner  shall  allow  customers  to  obtain  a  list  of  Participating  ISPs  by  calling  their
 local  AOL  Time  Warner  cable  system  and  requesting  such  a  list.  Whenever  a  customer  requests  a  listing  of  Participating  ISPs,  AOL  Time  Warner  shall  provide  the  list  in  a  reasonable  and  timely  manner.  358  Such
 353  Id.
 354  In  addition  to  creating  an  alternative  platform,  one  of  Memphis  Networxs  corporate  goals  is  closing  the  digital
 divide  by  providing  residential  high-  speed  Internet  access  to  under-  served  consumers,  particularly  in  rural  areas  and  central  cities.  MLG&  W  Comments  at  5.
 355  See  AT&  T-  MediaOne  Order,  15  FCC  Rcd  at  9878-  79    143.
 356  SBC  Comments  at  20;  BellSouth  Reply  Comments  at  22-  23.
 357  At  least  one  competitive  ISP  has  claimed  that  the  MOU  is  not  being  implemented  as  promised.  A  spokesman  for
 EarthLink  recently  said  that  Time  Warner  has  offered  such  unfriendly  terms  for  access  to  its  cable  plant  that  it  is  difficult,  if  not  impossible  for  competing  ISPs  to  enter  the  cable  access  market.  Specifically,  EarthLink  alleged
 that  Time  Warner  requires  unfair  revenue  sharing,  requires  a  substantive  presence  on  the  ISPs  start  page,  and  does  not  allow  unaffiliated  ISPs  full  access  to  their  customers  for  billing  and  other  purposes.  COMM.  DAILY  (Sept.  29,
 2000).  See  also  Aaron  Pressman,  Lost  Lessons  at  Time  Warner,  THE  STANDARD,  Sept.  29,  2000,  http://  www.  thestandard.  com/  article/  display/  0,  1151,  18993,  00.  html?  nl=  dnt  (visited  Sept.,  2000).  EarthLink  has  since
 entered  an  agreement  with  AOL  Time  Warner  for  access  to  the  latters  cable  networks.  358
 The  use  of  AOL  Time  Warner  in  this  sentence  refers  to  the  division  of  AOL  Time  Warner  that  operates  its  cable  systems.
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 list  shall  not  discriminate  in  favor  of  AOL  Time  Warners  affiliates  on  the  basis  of  affiliation.  AOL  Time  Warner  shall  not  prohibit  ISPs  from  marketing  their  services  to  AOL  Time  Warner  cable  customers.  359
 B.  First  Screen:  AOL  Time  Warner  shall  permit  each  Participating  ISP  to  determine  the  contents  of  its  subscribers  first  screen  and  shall  not  require  a  Participating  ISP  to  include  any  content  as  a
 condition  of  obtaining  access  to  AOL  Time  Warner  cable  systems;  provided  that  AOL  Time  Warner  and  any  Participating  ISP  may  agree  that  the  ISP  will  include  specified  content  or  links  on  its  first  screen.  360
 AOL  Time  Warner  shall  not  require  any  high-  speed  Internet  access  cable  customer  to  go  through  an  affiliated  ISP  to  reach  any  Participating  ISP  from  which  the  customer  purchases  service.
 C.  Billing:  AOL  Time  Warner  shall  permit  each  ISP  to  have  a  direct  billing  arrangement  with  those  high-  speed  Internet  access  subscribers  to  whom  the  ISP  sells  service.  AOL  Time  Warner  may
 offer  a  billing  service  to  any  Participating  ISP,  but  shall  not  require  any  ISP  to  purchase  this  service  as  a  condition  of  obtaining  access.
 D.  Technical  Performance:  All  contracts  between  AOL  Time  Warner  and  unaffiliated  ISPs  for  access  to  Time  Warners  cable  systems  shall  contain  a  clause  warranting  that,  to  the  extent  AOL  Time
 Warner  provides  any  Quality  of  Service  mechanisms,  caching  services,  technical  support  customer  services,  multicasting  capabilities,  address  management  and  other  technical  functions  of  the  cable  system
 that  affect  customers  experience  with  their  ISP,  AOL  Time  Warner  shall  provide  them  in  a  manner  that  does  not  discriminate  in  favor  of  AOL  Time  Warners  affiliated  ISPs  on  the  basis  of  affiliation.
 E.  Rights  to  Disclose  Contracts  to  the  Commission:  AOL  Time  Warner  shall  not  enter  into  any  contract  with  any  ISP  for  connection  with  AOL  Time  Warners  cable  systems  that  prevents  that  ISP
 from  disclosing  the  terms  of  the  contract  to  the  Commission  under  the  Commissions  confidentiality  procedures.
 F.  Enforcement:  With  respect  to  any  dispute  concerning  AOL  Time  Warners  compliance  with  these  conditions,  the  following  procedures  shall  apply.  These  procedures  are  designed  to  resolve  any
 disputes  within  sixty  (60)  days  of  the  filing  of  the  Complaint  and  to  have  them  resolved  by  the  Chief,  Cable  Services  Bureau  (  Chief).
 1.  No  less  than  ten  (10)  business  days  before  filing  a  complaint  with  the  Commission,  the  complainant  shall  notify  AOL  Time  Warner  of  its  intention  to  file  the  complaint.  This  is
 intended  to  afford  the  parties  a  final  opportunity  to  resolve  their  dispute  without  resort  to  our  processes.
 2.  Within  twenty  (20)  days  after  public  notice  of  the  filing  of  the  complaint,  any  interested  party  shall  file  an  answer.  Within  ten  (10)  days  after  the  filing  of  the  answer,  the
 complainant  may  file  its  reply.  The  complainant  and  AOL  Time  Warner  shall  each,  with  its  first  filing,  furnish  a  detailed  report,  technical  or  otherwise,  describing  the  conduct  or
 events  that  are  the  subject  of  the  filing.  All  filings  shall  be  made  with  Commission  Secretary  and  shall  be  concurrently  served  on  the  Chief.
 359  This  provision  (  Choice  of  ISPs)  is  not  intended  to  restrict  AOL  Time  Warners  ability  to  market  its  own
 products  to  prospective  or  current  ISP  customers.  360
 For  purposes  of  this  paragraph,  the  first  screen  is  the  screen  that  comes  up  first  when  the  user  initiates  interaction  with  his  or  her  ISP,  for  example  by  clicking  on  the  ISPs  desktop  icon  or  accessing  the  ISP  via  the  World
 Wide  Web.
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 3.  In  resolving  these  filings,  the  Chief  shall  apply  the  following  principles:  (a)  The  general  pleading  rules  set  forth  in  Parts  1  and  76  of  our  rules  shall  apply  to  the  extent  they  are
 consistent  with  the  specific  requirements  of  the  proceedings  provided  for  herein;  361  (b)  complaints  of  misconduct  by  AOL  shall  be  filed  within  one  year  of  the  occurrence  of  the
 alleged  misconduct;  (c)  discovery  shall  be  at  the  discretion  of  the  Chief  and  may  be  requested  by  a  party  in  one  of  its  filings  provided  for  above;  and  (d)  the  complainant  shall
 bear  the  burden  of  proof  in  the  proceeding  it  commences.  362
 4.  The  Chief  shall  sustain  or  dismiss  the  complaint  within  sixty  (60)  days  of  the  filing  of  the  complaint.
 127.  We  conclude  that  these  requirements,  in  conjunction  with  the  FTC  Consent  Agreement,  adequately  address  the  potential  harms  to  the  public  interest  raised  by  the  proposed  merger.  363  If  and
 when  the  Commission  adopts  any  rules  of  general  applicability  concerning  ISPs  access  to  cable  system  facilities,  any  such  rules  will  apply  to  AOL  Time  Warner  to  the  extent  they  do  not  conflict  with  the
 conditions  set  forth  herein.  364  AOL  Time  Warner  may  file  a  petition  at  any  time  after  the  issuance  of  such  rules,  or  after  the  issuance  of  any  Commission  finding  on  market  definition  that  is  contrary  to  the  findings
 set  forth  herein,  seeking  modification  or  termination  of  these  conditions.  The  Commission  may,  on  its  own  motion,  modify  or  terminate  the  conditions  set  forth  above  at  any  time  if  it  finds  such  requirements
 are  no  longer  necessary  to  mitigate  or  prevent  potential  public  interest  harms.  365
 B.  Instant  Messaging  and  Advanced  IM-  Based  High-  Speed  Services.
 128.  In  this  section  we  analyze  Instant  Messaging  (  IM),  new  IM-  based  services,  and  advanced  IM-  based  high-  speed  services  (  AIHS)  366  from  the  perspective  of  our  well-  settled  statutory
 obligations.  Based  on  the  following  analysis,  and  to  ensure  the  public  interest  as  set  forth  in  47  U.  S.  C.    230(  b)  and  157  and  elsewhere  in  the  Communications  Act  is  protected,  we  impose  conditions  on  the
 merged  parties.
 361  47  C.  F.  R.  pts.  1,  76.
 362  See  Implementation  of  the  Satellite  Home  Viewer  Improvement  Act  of  1999:  Retransmission  Consent  Issues:
 Good  Faith  Negotiation  and  Exclusivity,  CS  Docket  No.  99-  363,  First  Report  and  Order,  15  FCC  Rcd  5445,  5477-  83  (2000).
 363  In  particular,  we  decline  to  mandate  open  access  to  AOL  Time  Warners  cable  systems  or  to  require  that  the
 merged  firm  divest  itself  of  Road  Runner,  as  requested  by  Consumers  Union  and  other  commenters.  See  Consumers  Union  Comments  at  157;  see  also  BellSouth  Reply  Comments  at  22-  23  (requesting  that  Commission  condition
 merger  approval  on  open  access  requirement);  SBC  Comments  at  29,  32,  35-  36  (requesting  that  Commission  condition  merger  approval  on  open  access  requirement  and  divestiture  of  Road  Runner).
 364  In  the  event  of  any  conflict  between  these  conditions  and  any  rules  of  general  applicability  the  Commission  may
 promulgate,  these  conditions  will  govern  unless  otherwise  specified  by  the  Commission.  365
 The  conditions  set  forth  above  are  not  intended  to  require  AOL  Time  Warner  to  offer  any  ISP  connection  to  its  cable  systems,  but  instead  to  ensure  that  if  and  when  the  merged  firm  does  agree  to  offer  ISPs  such  connection,  it
 does  so  in  conformity  with  the  requirements  we  delineate  herein.  366
 IM-  based  services  are  relatively  new  but  have  shown  enormous  growth  in  popularity  in  recent  years.  Their  key  characteristics  are  the  capabilities  to  detect  whether  other  users  of  the  system  (whose  names  are  kept  in  a  Names  and
 Presence  Database)  are  present  online  and  to  exchange  messages  with  them  in  real  time.  These  features,  besides  being  useful  in  their  own  right,  are  predicted  to  have  vast  potential  as  a  platform  for  the  development  of  additional
 applications  in  the  future,  particularly  as  users  obtain  high-  speed  Internet  access.
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 129.  We  conclude  the  market  in  text-  based  instant  messaging  is  characterized  by  strong  network  effects,  i.  e.,  a  services  value  increases  substantially  with  the  addition  of  new  users  with  whom
 other  users  can  communicate,  and  that  AOL,  by  any  measure  described  in  the  record,  is  the  dominant  IM  provider  in  America.  We  further  find  AOL  has  consistently  resisted  interoperability  with  other  non-licensed
 IM  providers.  367  AOLs  market  dominance  in  text-  based  messaging,  coupled  with  the  network  effects  and  its  resistance  to  interoperability,  establishes  a  very  high  barrier  to  entry  for  competitors  that
 contravenes  the  public  interest  in  open  and  interoperable  communications  systems,  the  development  of  the  Internet,  consumer  choice,  competition  and  innovation.  368  We  also  find  that  a  Names  and  Presence
 Database  (  NPD)  is  currently  an  essential  input  for  the  development  and  deployment  of  many,  if  not  most,  future  high-  speed  Internet-  based  services  that  rely  on  real-  time  delivery  and  interaction.
 130.  Given  these  findings,  the  combination  of  Time  Warners  high-  speed  information  transmission  assets  and  its  programming  content  with  AOLs  current  IM  market  dominance,  substantially
 increases  the  probability  that  AOLs  dominance  in  the  narrowband  text-  messaging  world  will  persist  in  the  world  of  high-  speed  interactive  services.  For  these  reasons,  we  impose  conditions  to  ensure  that  the
 factors  described  in  paragraph  129  above  regarding  narrowband  text-  messaging  will  not  be  reproduced  and  compounded  by  this  merger.
 131.  We  find  that  the  public  interest  is  served  by  interoperability  among  NPD-  based  services,  first  and  foremost  because  interoperability  will  bring  concrete  and  significant  improvements  to  all
 consumers.  With  interoperability,  communication  between  users  that  was  inconvenient  becomes  convenient,  communication  that  was  impossible  becomes  possible,  and  new  entrants  are  enabled  to  bring
 their  innovations  and  creativity  promptly  to  the  largest  possible  number  of  users.  Interoperability  of  NPD-  based  services  will  open  new  possibilities  for  communication  for  persons  who  are  deaf  or  hard  of
 hearing,  persons  with  speech  and/  or  learning  disabilities,  persons  with  cognitive  limitations,  and  others  for  whom  voice  communication  is  problematic    who  may  come  to  rely  on  IM  as  a  basic  means  of
 communication.  They  will  be  able  not  only  to  use  new  services,  but  also  to  interact  with  the  perhaps  150  million  users  of  IM  all  over  the  world.  These  improvements,  in  turn,  will  make  these  services  more
 valuable  to  previously  uninterested  persons,  drawing  them  to  become  users.  369  As  we  explain  in  detail  below,  the  network  effects  of  the  business,  instead  of  entrenching  the  largest  incumbent,  will  work  to  the
 benefit  of  all  users.  The  rewards  of  success  in  the  marketplace  will  go  to  the  provider  who  offers  the  most  value  to  consumers  rather  than  automatically  to  the  first  provider  who  amassed  a  large  body  of  users.
 Alternately,  if  a  single  provider  achieves  dominance  by  relying  on  network  effects  and  refusing  to  interoperate,  actual  and  potential  competing  providers  will  be  driven  from  and  kept  out  of  the  market,
 resulting  in  a  loss  in  competition,  innovation,  and  consumer  welfare.  Interoperability  would  also  continue
 367  Users  of  AOLs  IM  service  cannot  currently  send  or  receive  messages  to  or  from  those  who  use  other  IM  services
 --  i.  e.,  the  services  are  not  interoperable.  AOL  contends  its  historical  resistance  to  interoperability  is  rooted  in  its  belief  that  it  currently  cannot  adequately  protect  its  customers  privacy  and  security.  See  infra  para.  170.
 368  Recent  literature  suggests  that  near  monopoly  outcomes  in  markets  exhibiting  strong  network  effects  are  tipped
 markets.  See,  e.  g.,  Andrew  Watson,  Predatory  Pricing  in  the  Software  Industry,  23  RUTGERS  L.  REC.  1  (1998)  (citing  David  S.  Evans  and  Richard  Schmalensee,  A  Guide  to  the  Antitrust  Economics  of  Networks,  10  Spring
 ANTITRUST  36,  36-  37  (1996)).  Because  our  public  interest  authority  is  informed  by  market  analysis  but  not  determined  by  it,  we  express  no  opinion  whether  the  factual  conclusions  in  this  Order  can  be  characterized  as
 amounting  to  a  tipped  market  or  not.  369
 See  Jim  Hu,  AOLs  Lead  in  Instant  Messaging  Arena  Dwindles,  CNET  NEWS.  COM,  Nov.  16,  2000  (  Instant  messaging  proponents  claim  the  technology  could  be  as  pervasive  and  influential  as  the  telephone  if  a  common
 communication  standard  is  established.),  attached  to  Letter  from  Peter  D.  Ross,  Esq.,  Wiley,  Rein  &  Fielding,  Counsel  for  AOL,  to  Magalie  Roman  Salas,  Secretary,  FCC,  dated  Nov.  17,  2000  (  AOL  Nov.  17  Ex  Parte).
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 the  long-  standing  tradition  of  the  Internet  being  open  and  interoperable.  In  sum,  interoperability  will  benefit  consumers  and  be  in  the  public  interest  because  (i)  it  enables  each  user  to  communicate  with  the
 largest  number  of  other  users  through  one  source,  thus  maximizing  efficiency;  (ii)  it  leads  to  more  product  and  service  choices  and  convenience  for  users;  (iii)  it  leads  to  more  competition,  thus  avoiding
 the  need  for  regulation;  and  (iv)  it  leads  to  more  innovation.
 132.  We  begin  with  a  description  of  current  and  anticipated  Instant  Messaging  and  NPD-  based  services  and  of  our  authority  to  examine  the  impact  of  the  proposed  merger  on  these  services  in  reviewing
 the  applications  in  this  case.  We  then  explain  the  "network  effects"  characteristics  of  these  services,  and  the  conditions  under  which  an  unregulated  market  is  and  is  not  likely  to  lead  to  interoperability  among
 competing  providers.  We  then  find  that  the  proposed  merger  would  give  AOL  Time  Warner  substantial,  and  perhaps  insurmountable,  advantages  in  providing  advanced  IM-  based  services  over  the  high-  speed
 Internet  platform.
 133.  While  we  recognize  a  number  of  factors  that  signal  caution  here,  including  the  relative  novelty  of  the  services  and  the  need  to  resolve  security  and  privacy  concerns,  we  must  also  weigh  the
 danger  of  inaction  where  the  window  of  opportunity  to  preserve  competition  and  protect  the  other  policies  of  the  Communications  Act  may  be  narrow  because  the  markets  are  changing  rapidly.  On  balance,  we
 find  it  appropriate  to  impose  a  narrow  condition  specifically  tailored  to  address  the  potential  harm  to  Communications  Act  objectives  created  by  the  combination  of  assets  that  will  be  permitted  by  granting
 the  pending  license  transfer  applications.
 1.  Background
 134.  IM,  in  its  simplest  form,  enables  the  almost  instantaneous  exchange  of  short,  private,  individualized  text  messages  over  the  Internet  between  two  users  who  are  online  simultaneously  and  are
 either  in  a  chat  room  370  or  on  each  others  buddy  lists.  371  Each  Internet  user  may  maintain  a  buddy  list  consisting  of  the  IM  names  of  the  other  users  with  whom  he  or  she  may  wish  to  communicate  via
 IM.  A  user  may  have  several  IM  names  or  identities,  such  as  one  for  work  and  another  for  business.  Typically,  when  a  user  turns  on  her  Internet  access  service,  a  box  appears  on  the  screen  containing  the
 names  of  those  users  who  are  on  her  buddy  list  and  are  also  online.
 135.  A  typical  exchange  begins  when  a  user  (  the  sender)  sees  from  her  buddy  list  that  another  user  (  the  recipient)  is  online.  The  sender  then  brings  up  the  IM  box  on  her  computer  screen,
 types  the  recipients  IM  name,  types  a  message  (  Hi,  how  are  you  this  morning?),  and  then  clicks  Send  or  an  analogous  command  that  sends  the  message  to  the  recipient  over  the  Internet.  An  instant  later,  the
 senders  IM  name  and  message  appear  on  the  recipients  Internet  screen  and  the  recipient  may  reply.  The  general  purpose  and  effect  of  IM  is  to  allow  almost  instantaneous  communication  between  two  persons,
 each  of  whom  sees  the  others  IM  name  on  her  screen  and  also  sees  that  the  other  is  online.  IM  enables  them  to  communicate  by  exchanging  personalized  text  messages  privately  and  with  a  degree  of
 informality  and  immediacy  much  like  that  of  a  face-  to-  face  conversation  or  telephone  call.  Because  IM
 370  Typical  chat  rooms  are  groups  of  persons  who  have  joined  a  group  because  of  a  common  interest  and  who  are
 online  at  the  same  time.  Each  person  in  a  room  may  send  a  text  message,  which  almost  immediately  appears  on  the  screens  of  all  persons  in  the  room.  Usually,  ISPs  limit  the  number  of  persons  in  a  chat  room  at  the  same  time  in
 order  to  keep  that  chat  manageable.  IM,  in  the  context  of  a  chat  room,  occurs  when  one  person  in  it  wishes  to  exchange  text  messages  with  another  person  in  it,  but  privately  and  without  the  others  in  the  chat  room.
 371  Tribal  Voice  Comments  at  2.
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 messages  are  in  text  and  are  typically  short,  the  speed  (or  latency)  demands  of  the  service  are  relatively  modest  and  well  within  the  narrowband  best  efforts  Internet  of  today.
 136.  IM  is  especially  beneficial  to  persons  who  are  deaf  or  hard  of  hearing,  persons  with  speech  and/  or  learning  disabilities,  persons  with  cognitive  limitations,  and  persons  for  whom  voice
 communication  is  otherwise  problematic.  As  a  mass  medium  for  the  almost  instantaneous  exchange  of  text  messages,  as  opposed  to  voice  messages,  IM  can  be  as  useful  to  these  persons  as  telephone  service  is
 to  persons  who  do  not  have  such  limitations.  372
 137.  Following  AOLs  pioneering  efforts,  IM  became  a  mass  market  product  in  the  late  1990s.  373  In  the  short  time  since  then,  IM  has  mushroomed  into  a  highly  popular  service,  with  an
 estimated  150  million  users  worldwide  on  AOLs  IM  services  alone.  374  More  than  30  million  individuals  use  IM  at  least  once  a  month,  and  AOL  transmits  almost  five  times  as  many  IMs  a  day  as  it  does  e-mails.
 375  From  all  appearances,  the  market  is  nowhere  near  saturation.
 138.  An  essential  input  376  to  an  IM  service  is  the  providers  NPD.  377  The  names  and  presence  indication,  as  displayed  on  the  senders  and  recipients  buddy  lists  and  screens,  enable  each  to  know  the
 others  IM  name  and  when  he  or  she  is  online  or  available.  The  actual  NPD  consists,  first,  of  a  database  of  the  users  unique  IM  names  and  addresses  and,  second,  of  a  presence  detection  function,  which  is  the
 IM  providers  knowledge,  and  its  ability  to  inform  others,  that  a  certain  user  is  online  and  therefore  available  to  engage  in  instant  messaging.  The  NPD  is  more  than  simply  a  customer  list.  It  is  a  working
 part  of  an  electronic  communications  network  for  persons  who  have  requested  participation  in  the  network  and  actually  use  it  to  exchange  communications  in  real  time  with  other  users.
 372  Testimony  of  Ross  Bagully,  President  and  CEO,  Tribal  Voice,  FCC  En  Banc  Hearing,  CS  Docket  No.  00-  30
 (July  27,  2000)  (  Bagully  En  Banc  Testimony),  Tr.  at  151  ([  T]  here  are  28  million  deaf  and  hearing  impaired  American  citizens  who  rely  on  instant  messaging  services,  much  like  most  of  us  use  the  telephone,  .  .  .);  Letter
 from  Nancy  J.  Bloch,  Executive  Director,  National  Association  of  the  Deaf,  to  William  E.  Kennard,  Chairman,  FCC,  dated  July  26,  2000.
 373  Letter  from  George  Vradenburg  III,  Senior  Vice  President,  Global  and  Strategic  Policy,  AOL,  to  Deborah
 Lathen,  Chief,  Cable  Services  Bureau,  FCC,  dated  Sept.  29,  2000,  at  3  (  AOL  Sept.  29  Ex  Parte).  374
 Some  observers  put  the  total  number  of  registered  IM  service  users  under  AOLs  control  at  over  150  million.  Tribal  Voice  Comments  at  1-  2  (120  million);  Julia  Angwin,  Instant  Messaging  Services  at  AOL  Quietly  Linked,
 WALL  ST.  J.,  Oct.  26,  2000,  at  B-  1,  B-  4  (138  million);  Jim  Lynch,  Instant  Messaging  Roundup,  MSNBC  Technology,  Aug.  18,  2000,  at  http://  www.  msnbc.  com/  news/  447786.  asp  (visited  Aug.  28,  2000)  (more  than  150
 million  users);  Nick  Wingfield,  Changing  Chat,  WALL  ST.  J.,  Sept.  18,  2000,  at  R-  28  (154  million  registered  users).  375
 IM  Interoperability:  The  Need  for  Minimum  Safeguards  at  2,  White  Paper  filed  herein  (  First  IM  White  Paper)  under  Letter  from  Ross  Bagully,  President  and  CEO,  Tribal  Voice,  and  Margaret  Heffernan,  President  and  CEO,
 iCast,  to  Magalie  Roman  Salas,  Secretary,  FCC,  dated  Sept.  5,  2000  (  Tribal  Voice  and  iCast  Sept.  5  Ex  Parte);  Nick  Wingfield,  Changing  Chat,  WALL  ST.  J.,  Sept.  18,  2000,  at  R-  28.
 376  An  essential  input  is  a  component  of  a  service  or  product  without  which  the  service  or  product  cannot  be  created
 and  provided  to  others.  For  example,  a  channel  tuner  is  an  essential  input  to  a  television  set  and  a  compressor  is  an  essential  input  to  a  refrigerator.
 377  See,  e.  g.,  Letter  from  Karen  B.  Possner,  Vice  President    Strategic  Policy,  BellSouth  Corp.,  to  Magalie  Roman
 Salas,  Secretary,  FCC,  dated  Oct.  10,  2000,  Attachment  (BellSouths  Views  on  the  Effect  of  the  Proposed  America  Online-  Time  Warner  Merger  on  Instant  Messaging  and  Related  Capabilities)  at  1.
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 139.  Each  IM  provider  has  its  own  NPD,  which  constitutes  the  total  universe  of  persons  with  whom  that  providers  users  can  engage  in  instant  messaging.  Until  recently,  IM  providers  did  not  share
 access  to  their  NPDs  with  other  providers.  Some  providers  are  starting  to  do  so.  Such  sharing  makes  possible  interoperability,  which  is  the  ability  of  users  of  one  IM  service  to  engage  in  instant  messaging
 with  users  of  another  IM  service.
 140.  Many  new  services  and  applications  based  on  simple  text  IM  are  being  developed.  378  A  few  companies,  including  AOL,  are  already  providing  them  to  their  IM  users.  379  Many  experienced
 industry  observers  believe  that  these  new  services,  including  AIHS,  will  be  popular.  380
 141.  The  new  IM-  based  services  include  sending,  along  with  a  text  message,  attachments  such  as  documents;  using  IM  as  a  way  to  access  shopping,  personal  homepages,  and  calendars;  381  using
 presence  detection  as  a  trigger  to  perform  intelligent  agent  functions  such  as  selective  message  routing  and  instant  alerts,  automatic  responses,  filtering  out  unwanted  messages,  382  sending  individual  users
 advertising,  and  time-  sensitive  personalized  information  such  as  news  bulletins  on  pre-  chosen  subjects,  383  stock  quotes,  and  travel  arrangements;  384  and  ordinary  web  surfing.  385  Some  of  these  new  services  are
 378  Confidential  Appendix  IV-  B-  1,  Note  1.
 379  AOL  provides  IM  in  basically  three  ways.  First,  it  includes  IM  in  its  basic  proprietary  Internet  access  service.
 Second,  AOL  Instant  Messenger,  or  AIM,  is  available  at  no  charge  to  subscribers  to  other  Internet  access  services.  Third,  AOL  acquired  an  IM  company  called  ICQ,  which  it  has  kept  separate  from  its  other  services.  See
 Confidential  Appendix  IV-  B-  1,  Note  2.  380
 See  Jim  Hu,  AOLs  Lead  in  Instant  Messaging  Arena  Dwindles,  CNET  NEWS.  COM,  Nov.  16,  2000  (  Instant  messaging  proponents  claim  the  technology  could  be  as  pervasive  and  influential  as  the  telephone  if  a  common
 communication  standard  is  established.),  attached  to  AOL  Nov.  17  Ex  Parte;  Louise  Rosen,  Why  IM  Matters  So  Much,  UPSIDE  TODAY,  Sept.  19,  2000,  at  http://  www.  upside.  com/  Ebiz/  39c289380.  html  (visited  Sept.  19,  2000)  (  IM
 can  drive  up  a  sites  traffic  and  brand  awareness.  It  will  be  an  important  feature  of  interactive  television;  it  .  .  .  can  add  real-  time  customer  services  to  a  site.).  See  Confidential  Appendix  IV-  B-  1,  Note  3.
 381  iCast  Comments  n.  5;  Tribal  Voice  Comments  at  2;  Disney  July  25  Ex  Parte  at  21-  22;  Ariana  Eunjung  Cha,  AOL
 Unmoved  in  Software  Dispute,  WASH.  POST,  Aug.  24,  2000,  at  A-  1,  -14;  Jim  Lynch,  Instant  Messaging  Roundup,  MSNBC  Technology,  Aug.  18,  2000,  at  http://  www.  msnbc.  com/  news/  447786.  asp  (visited  Aug.  28,  2000).
 382  eWeek,  Dennis  Fisher,  Small  Talk  Goes  Big  Bucks,  ZDNet,  at  http://  www.  zdnet.  com/  eweek/  stories/
 general/  0,  1101,2631584.  00.  html  (visited  Oct.  30,  2000).
 383  See,  e.  g.,  Tribal  Voice  Comments  at  6-  7;  iCast  Comments  at  8  and  nn.  17-  18;  America  Online,  Inc.,  America
 Online  and  Time  Warner  Announce  New  Content  and  Promotional  Agreements  (press  release),  Feb.  16,  2000  (visited  Aug.  1,  2000)  (ICQ  and  CNN  Interactive  will  develop  a  co-  branded  news  offering  to  be  distributed  through
 .  .  .  the  ICQ  client.).  384
 iCast  Comments  at  8  and  nn.  17-  18.  The  presence  detection  aspect  of  IM  would  enable  an  IM  provider,  for  example,  to  send  the  latest  news  to  an  IM  user  who  has  just  come  online  or  to  advise  a  user  with  a  ticket  on  a  7
 oclock  flight  that  a  seat  on  a  6  oclock  flight  has  just  become  available  and  can  be  reserved  if  the  user  replies  within  the  next  minute.  See,  e.  g.,  Randall  E.  Stross,  America's  Bad  Call:  We're  Way  Behind  Others  When  It  Comes  to  Web
 Phones,  U.  S.  NEWS  &  WORLD  REP.,  Sept.  4,  2000,  at  2000  WL  7718658  (  Japanese  Web  phones,    like  high-  speed  PCs,  appear  always  on  and  offer  a  daily  cartoon,  weather  reports,  horoscopes,  train  schedules,  bank  account
 information,  and  stock  quotes  .  .  .  .  Japan  Airlines  already  sells  20,000  tickets  a  month  on  the  service,  a  feat  enabled  by  designers  who  figured  out  ways  to  let  users  get  to  schedules  in  two  clicks.  By  contrast,  an  American  punching  a
 Web  phone  needs  seven  [clicks]  just  to  get  a  flight  number).  385
 See  Barbara  Darrow,  Instant  Messaging  Market  in  Flux,  TECHWEB,  Dec.  5,  2000,  at  http://  www.  techweb.  com/  wire/  story/  TWB200011204S0018  (visited  Dec.  5,  2000)  (  a  group  of  buddies  can  cruise
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 appearing  on  wireless  devices  such  as  cellphones  and  Personal  Digital  Assistants  such  as  Palm  Pilots  and  Pocket  PCs.  386  These  new  services  are  also  expected  to  be  included  in  interactive  television  to
 allow,  among  other  things,  text  chatting  (for  example,  among  faraway  friends  watching  the  same  football  game),  obtaining  information  (for  example,  getting  the  statistics  of  a  football  player  who  has  just  come  on
 the  field)  and  shopping  on  the  Internet  (for  example,  for  a  team  mascot  or  some  other  souvenir  of  a  football  game).  387
 142.  Some  of  these  new  IM-  based  services  --  and  perhaps  the  most  important  ones  in  the  long  term  --  are  bandwidth-  intensive  and  therefore  will  work  best  with  high-  speed  Internet  access.  These
 AIHS  include  time-  sensitive,  latency-  dependent  applications  such  as  talking  (e.  g.,  a  Talk  Feature  that  enables  users  to  engage  in  live  conversation  online  and  is  included  in  AIM  4.1),  game-  playing  (e.  g.,
 features  in  AOLs  New  Windows  AIM  4.3,  388  buddies  jointly  playing  along  with  popular  quiz  shows  such  as  Jeopardy!  or  Who  Wants  to  Be  a  Millionaire?,  or  enacting  their  own  versions  of  those  shows
 online,  independent  of  television  broadcasts),  and  buddies  sending  each  other  brief  music  and  video  clips.
 143.  Even  more  bandwidth-  intensive  will  be  video  conferencing  via  IM,  389  which  at  least  one  study  group  predicts  will  be  a  major  success  in  the  marketplace.  390  Also,  many  kinds  of  streaming  video
 (  continued  from  previous  page)  websites  together);  William  Whyman,  Instant  Messaging:  the  Next  Web  Killer  App?,  Precursor  Group,  July  31,
 2000.  386
 See,  e.  g.,  Irene  M.  Kunii,  Look  Whos  Going  Courting  in  Japan,  BUSINESS  WEEK,  Aug.  7,  2000,  at  2000  WL  24484561  (  The  speculation  is  that  AOL  content  could  be  available  on  i-  mode  phones  if  a  deal  is  reached,  possibly
 in  August.  .  .  .  [AOL]  sees  wireless  gadgets  overtaking  the  PC  as  the  most  popular  way  to  access  the  Net  in  the  coming  years.  .  .  .  AOL  has  developed  unique  services  that  could  be  transplanted  to  the  wireless  Net,  such  as
 instant  messaging,  which  could  be  used  as  a  locator  device  in  the  future.  It  could  enable  delivery  of  AOL's  international  content  to  i-  mode  users,  .  .  .  .).  In  addition,  IM  will  be  available  via  wireless  devices.  See,  e.  g.,  Neil
 Irwin,  AOL  Debuts  E-  Mail/  IM  Pager,  WASHTECH.  COM,  Dec.  1,  2000,  at  http://  washtech.  com/  news/  media/  5560-1.  html  (visited  Dec.  1,  2000);  New  Media,  COMM.  DAILY,  Oct.  20,  2000  (  Sprint  PCS  unveiled  plans  to  make  AOL
 Instant  Messenger  available  on  its  Internet-  enabled  phones,  providing  text-  to-  text  messaging  service,  nearly  2  days  after  AT&  T  Wireless  announced  similar  plans  for  short-  message  service  .  .  .  Announcements  mark  first  forays  by
 U.  S.  carriers  into  instant  text-  messaging  on  wireless  phones,  service  that  has  seen  particularly  rapid  growth  in  Asia  and  Europe.).
 387  See  also  Letter  from  Margaret  Heffernan,  President  and  CEO,  iCast,  to  Magalie  Roman  Salas,  Secretary,  FCC,
 dated  Oct.  10,  2000  (  iCast  Oct.  10  Ex  Parte),  Attachment  (Testimony  of  Ms.  Heffernan  before  the  House  Subcommittee  on  Telecommunications,  Trade  and  Consumer  Protection,  Oct.  6,  2000)  at  2  (  Heffernan  House
 Testimony);  Letter  from  Margaret  Heffernan,  President  and  CEO,  iCast,  to  Magalie  Roman  Salas,  Secretary,  FCC,  dated  Oct.  5,  2000  (  iCast  Oct.  5  Ex  Parte),  Attachment  (Instant  Messaging  Is  an  Important  Platform  for  Both
 Current  and  Next  Generation  Internet  Applications)  (  Instant  Messaging  Is  an  Important  Platform)  passim;  Louise  Rosen,  Why  IM  Matters  So  Much,  UPSIDE  TODAY,  Sept.  19,  2000,  at  http://  www.  upside.  com/  Ebiz/  39c289380.  html
 (visited  Sept.  19,  2000);  Holly  Becker  and  Kevin  Sullivan,  America  Online,  Lehman  Brothers  June  29  Report,  at  42.  388
 America  Online,  Inc.,  AOL  Instant  Messenger,  New  Windows  AIM  4.3    Available  Now,  at  http://  www.  aol.  com/  aim/  home.  html,  (visited  Nov.  17,  2000)  (  Play  online  games  against  your  AIM  Buddies);
 Letter  from  Peter  D.  Ross,  Esq.,  Wiley,  Rein  &  Fielding,  counsel  for  AOL,  to  Magalie  Roman  Salas,  Secretary,  FCC,  dated  Oct.  19,  2000  (  AOL  Oct.  19  Ex  Parte),  Attachment  (Microsoft  Windows  Me  web  page  (  With  MSN
 Messenger  Service  in  Windows  Me,  you  can:  .  .  .  Invite  a  friend  to  play  a  DirectPlay  game  directly  from  within  MSN  messenger  Service.)).
 389  AOL  Oct.  19  Ex  Parte,  Attachment  (Microsoft  Windows  Me  web  page  (  With  MSN  Messenger  Service  in
 Windows  Me,  you  can:  .  .  .  Go  instantly  from  a  text  chat  to  a  video  conversation  with  NewMeeting  3.1.));  Stephanie  Sanborn,  Novell  Updates  Instantme,  Net  Publisher,  INFOWORLD  DAILY  NEWS,  Aug.  1,  2000,  at  2000  WL
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 broadband  content  will  likely  be  delivered  via  IM  to  both  home  and  business  users  in  forms  such  as  long  video  entertainment  and  business  documents  in  video  form.  391  Finally,  AIHS  on  interactive  television
 could  include  IM  chat  buddies  jointly  seeing  streaming  video  highlights  of  a  football  players  best  plays.  392
 (  continued  from  previous  page)  22975572  (  Available  as  a  free  download  on  Aug.  4,  instantme  2.0  .  .  .  includes  the  option  of  extending  IM
 communications  with  audio  and  video  IM  technology  from  CuSeeMe  Networks.  .  .  .  The  inclusion  of  audio  and  video  IM  technology  will  give  businesses  users  the  chance  to  do  a  quick  video  conference  on  a  point-  to-  point
 basis,  Gailey  said.);  Instant  Messaging  Is  an  Important  Platform  at  1  (  IM  is  a  natural  platform  for  .  .  .  video-  based  conferencing  .  .  .),  Attachment  to  iCast  Oct.  5  Ex  Parte.  See  also  Kate  Gerwig,  Akamai  Targets  Content  Delivery
 At  Business  Users,  CMP  TECHWEB,  June  7,  2000,  at  2000  WL  2666827  (  Akamai's  conference  casting  pairs  traditional  telephony  with  Internet-  based  streaming  media  technology  to  deliver  what  is  designed  to  be  a  more  cost-effective
 way  to  provide  audio  and  video  conferencing.  .  .  .  The  service  also  has  features  such  as  on-  demand  replay,  instant  messaging,  and  polling,  which  are  not  available  in  traditional  audio  or  video  conference  calls.);  Steve
 Gillmor  and  Jeff  Angus,  Exchange  2000  Finally  Delivers  Collaboration,  INFORMATION  WEEK,  Dec.  13,  1999,  at  1999  WL  21900099  (  The  addition  of  a  spectrum  of  collaborative  features  may  be  the  most  important  change  in  the
 new  Exchange.  .  .  .  Beta  3  has  instant  messaging  and  real-  time  data  and  video  conferencing  services  that  can  be  deployed  across  the  intranet.);  Instant  Messaging  Is  an  Important  Platform  at  2  (  Lotus  and  Novell  .  .  .  also  plan  to
 add  .  .  .  video  .  .  .  versions  thereby  allowing  business  to  hold  meetings  with  multiple  people  instant  messaging  each  other.),  Attachment  to  iCast  Oct.  5  Ex  Parte.
 390  Some  28  Pct  of  World  Mobile  Subscribers  Seen  Using  3G  Services  by  2010    Study,  AFX  NEWS,  Oct.  11,  2000,
 ([  A]  ccording  to  a  study  published  online  today  by  the  UMTS  Forum[,]  .  .  .  six  service  categories  that  will  generate  the  majority  of  revenues  in  3G's  early  years  .  .  .  include  .  .  .  access  to  multimedia  instant  messaging  services  .  .  .  and
 rich  voice  services  such  as  video  conferencing  and  voice  over  IP.).  391
 See  Instant  Messaging  Is  an  Important  Platform  at  1  (  IM  is  a  natural  platform  for  .  .  .  video-  related  services  and  applications  .  .  .),  2  (  as  broadband  technology  is  more  widely  deployed,  video  services  could  also,  in  a
 competitive  market,  be  expected  to  be  available  over  the  IM  platform.  (footnote  omitted)),  Attachment  to  iCast  Oct.  5  Ex  Parte;  Louise  Rosen,  Why  IM  Matters  So  Much,  UPSIDE  TODAY,  Sept.  19,  2000,  at
 http://  www.  upside.  com/  Ebiz/  39c289380.  html  (visited  Sept.  19,  2000)  (  So  what  does  the  future  hold  for  IM?  .  .  .  [S]  treaming  media  .  .  .  );  William  Whyman,  Instant  Messaging:  the  Next  Web  Killer  App?,  Precursor  Group,  July
 31,  2000  (IM  can  support  .  .  .  the  ability  to  drag  and  drop  video  .  .  .  files);  First  IM  White  Paper  at  2,  Attachment  to  Tribal  Voice  and  iCast  Sept.  5  Ex  Parte;  Letter  from  Johnny  Scarborough,  Jr.,  Vice  President,  Advanced
 Technology,  iCast,  to  Magalie  Roman  Salas,  Secretary,  FCC,  dated  July  25,  2000,  Untitled  Attachment  at  5  (  IM  enables  richer  communication  .  .  .  video,  file  sharing)  and  7  (  Tomorrow  .  .  .  Content  licensing  (music,  news,
 video))  (  iCast  July  25  Ex  Parte).  392
 AOL  itself  is  promoting  many  kinds  of  streaming  video,  especially  on  high-  speed  platforms  (xDSL,  high-  speed  cable  modems,  etc.),  as  part  of  its  latest  and  upcoming  offerings  of  Internet  access.  The  offerings  include  IM,
 although  AOL  is  not  specifically  touting  streaming  video  in  connection  with  it.  See,  e.  g.,  AOL  and  RealNetworks  Announce  Strategic  Agreement  to  Deliver  Streaming  Digital  Media  Through  AOL  Services,  NEW  MEDIAMUSIC.  COM
 HEADLINES  TODAY,  July  13,  2000,  at  http://  www.  newmedia  .  .  .  71300.  html  (  high-  quality  streaming  digital  media,  compelling  audio  and  VHS  video  quality)  (visited  Dec.  27,  2000);  John  Townley,  AOL  Plus  Provides  Enhanced
 Streaming  Broadband,  INTERNETNEWS    ISP  NEWS,  April  4,  2000,  at  http://  www.  internetnews.  com/  isp-news/  article/  0,,  8_  333621,  00.  html  (streaming  video  news  coverage  from  Fox  News  and  Sports,  streaming,  dynamic
 mapping  images  from  weather.  com,  streaming  video  sports  highlights,  streaming  market  analysis  and  video  wrap-ups)  (visited  Dec.  27,  2000);  John  Townley,  AOL  to  Deploy  Akamai  Servers,  INTERNETNEWS    STREAMING  MEDIA
 NEWS,  Feb.  16,  2000,  at  http://  www.  newmediamusic.  com/  ps/  real_  aol_  71300.  html  (  large  audio  and  video  streaming  events)  (visited  Dec.  7,  2000).
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 144.  Quality  of  Service  (  QoS)  will  be  especially  important  for  AIHS.  393  This  is  because  delivering  AIHS,  compared  to  simple  text  IM,  is  relatively  complicated  and  susceptible  to  degradation;
 and  because  slow  or  choppy  delivery  can  degrade  the  value  of  an  AIHS  seriously  or  totally.
 145.  Despite  the  quantum  leap  that  all  these  new  services  represent  beyond  IM,  they  are  like  IM  in  one  respect.  That  is,  a  provider  of  AIHS  depends  on  its  NPD  as  much  as  a  provider  of  IM  does.  394
 Absent  interoperability,  an  AIHS  providers  database  of  users  names  is  the  total  universe  with  whom  one  user  can  swap  video  clips,  engage  in  video  conferencing,  and  so  on.
 2.  Discussion
 146.  Authority.  The  Public  Interest.  We  are  obligated  under  the  Communications  Act  to  ensure  that  the  transfer  of  control  of  Time  Warners  cable  licenses  serves  the  public  interest.  395  We
 determine  the  public  interest  with  reference  to  the  policies  and  goals  of  the  Communications  Act  and  related  statutes.  Thus,  as  stated  in  Section  II,  Public  Interest  Framework,  we  examine  whether  a
 transaction  would  substantially  frustrate  the  Commissions  implementation  or  enforcement  of,  or  interfere  with  the  objectives  of,  the  Communications  Act  or  related  statutes.  Accordingly,  in  conducting  our  public
 interest  analysis,  we  do  not  examine  those  issues  that  are  not  communications-  related.  396  But  where  an  issue  may  be  said  to  be  fairly  related  to  the  policies  and  goals  set  forth  in  the  Communications  Act  and
 related  statutes,  as  is  the  effect  of  the  merger  of  AOL  and  Time  Warner  on  advanced  IM  services,  we  are  required  to  satisfy  ourselves  that  the  public  interest  would  be  served  by  our  approval  of  the  transaction
 before  us.
 147.  Our  authority  to  examine  the  public  interest  effects  associated  with  the  combination  of  AOLs  NPD  and  Time  Warners  assets  and  to  place  any  necessary  conditions  on  our  approval  of  the
 transfer  of  Time  Warners  licenses  rests  on  several  statutory  grounds.  Sections  214(  a)  and  310(  d)  of  the  Communications  Act  require  the  Commission  to  determine  whether  the  Applicants  have  demonstrated
 that  the  public  interest  would  be  served  by  transferring  control  over  Time  Warners  licenses  and  authorizations.  397  Further,  we  have  broad  authority  to  attach  conditions  to  a  transfer  of  lines  and  licenses
 to  ensure  that  the  public  interest  is  served  by  the  transaction.  Section  303(  r)  of  the  Act  authorizes  the  Commission  to  prescribe  restrictions  or  conditions,  not  inconsistent  with  law,  that  may  be  necessary  to
 carry  out  the  provisions  of  the  Act.  398  Similarly,  Section  214(  c)  of  the  Communications  Act  authorizes
 393  QoS  refers  to  all  indicia  of  quality  in  interconnection  and  access  arrangements,  including:  the  good  faith  with
 which  they  are  described,  offered  and  made  available  by  their  possessor  (in  this  case,  AOL  Time  Warner);  their  technical  capacity  and  functionality;  their  reliability;  their  performance  characteristics,  including  security  from  any
 change  in  content  or  display;  any  price;  and  the  promptness  of  their  installation,  maintenance,  repair,  and  disconnection.
 394  An  NPD  used  for  AIHS  could  also  perform  functions  not  needed  in  IM,  such  as  advising  a  user  wanting  a  video
 conference  with  another  user  about  the  other  users  video  conferencing  equipment  and  whether  their  equipment  is  compatible.
 395  47  U.  S.  C.    310(  d).
 396  For  example,  while  in  a  merger  of  two  taxi  companies,  we  might  be  required  to  approve  the  transfer  of  control  of
 various  radio  licenses,  in  making  our  decision  we  would  not  examine  the  effect  of  the  merger  on  taxi  service  to  the  public.  That  task  is  for  others.
 397  47  U.  S.  C.    214(  a)  and  310(  d).
 398  47  U.  S.  C.    303(  r).
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 the  Commission  to  attach  to  the  certificate  such  terms  and  conditions  as  in  its  judgment  the  public  convenience  and  necessity  may  require.  399
 148.  Moreover,  IM,  new  IM-  based  services  (including  AIHS  in  particular),  and  AOLs  NPD  are  subject  to  our  jurisdiction  under  Title  I  of  the  Communications  Act.  400  Our  jurisdiction  flows  from  at
 least  three  sections  of  the  Communications  Act.  Section  1  of  the  Communications  Act  established  the  Commission  "[  f]  or  the  purpose  of  regulating  interstate  and  foreign  commerce  in  communication  by  wire
 and  radio  so  as  to  make  available,  so  far  as  possible,  to  all  the  people  of  the  United  States  .  .  .  adequate  facilities  at  reasonable  charges  .  .  .  ."  401  Similarly,  Section  2  gives  us  jurisdiction  over  "all  interstate  and
 foreign  communication  by  wire  or  radio"  and  "all  persons  engaged  within  the  United  States  in  such  communication  .  .  ."  402  Finally,  Section  3  defines  "communication  by  wire"  and  "communication  by
 radio"  as  including  "the  transmission  .  .  .  of  writing,  signs,  signals,  pictures  and  sounds  of  all  kinds  .  .  .  including  all  instrumentalities,  facilities,  apparatus,  and  services  (among  other  things,  the  receipt,
 forwarding,  and  delivery  of  communications)  incidental  to  such  transmission."  403  We  find  that  IM  and  AIHS  fall  well  within  Section  3s  definitions  of  radio  and  wire  communication,  as  does  the  NPD  as  an
 instrumentality,  facility,  apparatus,  or  service  incidental  to  the  IM  and  AIHS.  Accordingly,  the  Commission  has  Title  I  jurisdiction  over  IM  and  AIHS  services.  404  This  being  clear,  we  need  not  classify
 IM  and  AIHS  as  information  services,  cable  services,  or  telecommunications  services  (as  some  allege)    the  Commission  has  subject  matter  jurisdiction  over  them.
 149.  While  several  commenters  agree  that  the  Commission  has  clear  jurisdiction  to  impose  conditions  on  IM  here,  citing,  inter  alia,  Sections  1,  2,  230(  b)(  2),  310(  d),  and  256,  and  Title  VI  of  the
 Communications  Act,  405  AOL  argues  that  there  is  no  such  jurisdictional  nexus.  406  AOLs  argument,  despite  its  jurisdictional  phraseology,  amounts  to  a  claim  that  its  position  on  the  merits  is  correct,  namely
 that  the  IM  business  is  competitive  and  the  IM  issues  raised  in  this  proceeding  are  not  merger-  specific.  As  we  find  below,  however,  the  IM  business  is  not  competitive,  and  AOLs  acquisition  of  Time  Warners
 content,  cable  assets  and  control  of  Road  Runner  will  be  contrary  to  the  public  interest.
 150.  In  deciding  whether  the  transfer  of  control  of  the  licenses  and  authorizations  at  issue  here  is  in  the  public  interest,  as  discussed  above  in  Section  II,  we  consider,  inter  alia,  whether  the  merger
 399  47  U.  S.  C.    214(  c).
 400  47  U.  S.  C.    151  et  seq.
 401  47  U.  S.  C.    151.
 402  47  U.  S.  C.    152.
 403  47  U.  S.  C.    153.
 404  Cf.  Implementation  of  Sections  255  and  251(  a)(  2)  of  the  Communications  Act  of  1934,  as  Enacted  by  the
 Telecommunications  Act  of  1996;  Access  to  Telecommunications  Service,  Telecommunications  Equipment  and  Customer  Premises  Equipment  by  Persons  with  Disabilities,  WT  Dkt.  No.  96-  198,  Report  and  Order  and  Further
 Notice  of  Inquiry,  FCC  99-  181,    96-  98  (rel.  Sept.  29,  1999).  405
 See,  e.  g.,  Tribal  Voice  and  iCast  Sept.  5  Ex  Parte,  at  22-  27,  29-  33;  iCast  Oct.  10  Ex  Parte  at  1-  7.  These  commenters  further  claim  that  the  Commissions  ancillary  jurisdiction  authority  also  provides  grounds  for  imposing
 a  condition  on  IM  interoperability.  Tribal  Voice  and  iCast  Sept.  5  Ex  Parte  at  27-  29.  406
 AOL  Sept.  29  Ex  Parte.  iCast  replies  that  AOLs  submission,  when  read  carefully,  does  not  dispute  the  Commissions  jurisdiction  to  impose  IM-  related  conditions.  Rather,  according  to  iCast,  AOLs  arguments  consist  of
 reasons  why  the  Commission  should  choose  not  to  exercise  such  jurisdiction  in  this  instance  --  reasons  that  iCast  strongly  disputes.  iCast  Oct.  10  Ex  Parte,  at  1.
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 would  interfere  with  the  policies  and  objectives  of  the  Communications  Act.  Several  policies  and  objectives  are  implicated  by  this  merger.  First,  in  enacting  the  Telecommunications  Act  of  1996,  407
 Congress  established  a  clear  national  policy  that  competition  leading  to  deregulation,  rather  than  continued  regulation  of  dominant  firms,  shall  be  the  preferred  means  for  protecting  consumers.  408
 Further,  to  promote  the  policies  of  the  Communications  Act,  we  may  plan  in  advance  of  foreseeable  events  instead  of  waiting  to  react  to  them.  409  We  may  therefore  examine  and  place  conditions  on  a
 merger  to  ensure  that  it  will  not  impede  the  development  of  future  competition  but  will,  in  fact,  enhance  competition.  410  Congress  expressed  its  preference  for  similar  policies  with  respect  to  the  Internet.
 Section  230(  b)  of  the  Communications  Act  provides  that  it  is  a  policy  of  the  United  States  to  promote  the  continued  development  of  the  Internet  and  other  interactive  computer  services  and  other  interactive
 media  and  to  preserve  the  vibrant  and  competitive  free  market  that  presently  exists  for  Internet  and  other  interactive  computer  services,  unfettered  by  Federal  or  State  regulation.  411  Finally,  Congress  has
 charged  the  Commission  with  encouraging  the  deployment  on  a  reasonable  and  timely  basis  of  advanced  telecommunications  capability  to  all  Americans.  412
 151.  Several  commenters  argue  that  we  may  impose  conditions  on  IM  services  to  remedy  anticompetitive  harms,  and  that  doing  so  would  be  consistent  with  our  prior  decision  in  WorldCom-MCI.
 413  In  WorldCom-  MCI,  we  held  that  because  the  merger  raised  anticompetitive  concerns  regarding
 the  Internet  backbone  service  market,  it  was  necessary  for  the  Commission  to  review  the  applicants  proposed  divestiture  of  one  of  their  Internet  backbone  services  to  ensure  that  those  anticompetitive
 concerns  were  met,  even  though  the  applicants  did  not  need  our  approval  to  complete  that  divestiture.  414  AOL  finds  the  analogy  to  Internet  backbone  service  to  be  inapposite,  claiming  that  IM  is  not  a  facility  or
 transmission  service  that  the  Commission  regulates,  but  an  information  service  that  the  Commission  has  chosen  not  to  regulate.  415  Those  commenters  who  seek  to  impose  a  condition  on  IM  or  AIHS  also  cite
 Section  230(  b)  of  the  Communications  Act  as  support.  416  We  agree,  in  part  because  our  decision  in  WorldCom-  MCI  417  supports  our  examining  this  merger  to  ensure  that  it  does  not  have  an  anticompetitive
 407  Telecommunications  Act  of  1996,  Pub.  L.  No.  104-  104,  110  Stat.  56.
 408  Joint  Statement  of  Managers,  S.  Conf.  Rep.  No.  104-  230  at  1  (1996).
 409  See  United  States  v.  Southwestern  Cable  Co.,  392  U.  S.  157,  177  (1968),  quoting  Amendment  of  Subpart  L,  Part
 11  to  Adopt  Rules  &  Regulations  to  Govern  the  Grant  of  Authorizations  in  the  Business  Radio  Service  for  Microwave  Stations  to  Relay  Television  Signals  to  Community  Antenna  Systems,  First  Report  and  Order,  38  FCC
 683,  701  (1965).  410
 See  WorldCom-  MCI  Order,  13  FCC  Rcd  at  18034-  35    14;  Bell  Atlantic-  NYNEX  Order,  12  FCC  Rcd  at  19987  2.
 411  47  U.  S.  C.    230(  b)(  1),  (2).  See  also  Access  Charge  Reform;  Price  Cap  Performance  Review  for  Local  Exchange
 Carriers;  Transport  Rate  Structure  and  Pricing;  End  User  Common  Line  Charges,  First  Report  and  Order,  12  FCC  Rcd  15982,  16133    344  (1997).
 412  Section  706  of  the  Telecommunications  Act  of  1996,  Pub.  L.  104-  104,  Title  VII,    706,  110  Stat.  153,  set  forth
 at  47  U.  S.  C.    157  nt.  413
 WorldCom-  MCI  Order,  13  FCC  Rcd  at  18103-  04    142.  414
 Id.  at  18104  n.  381.  415
 AOL  Sept.  29  Ex  Parte,  at  16.  416
 Tribal  Voice  and  iCast  Sept.  5  Ex  Parte  at  29-  33;  iCast  Oct.  10  Ex  Parte  at  5-  6.  417
 WorldCom-  MCI  Order,  13  FCC  Rcd  at  18103-  04    142.
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 effect  on  the  provision  of  AIHS.  The  fact  that  we  have  chosen  not  to  subject  IM  and  AIHS  to  traditional  regulation  does  not  mean  that  the  mergers  effects  on  these  services  escapes  our  inquiry.  418  In  fact,
 exactly  the  opposite  is  true.  Because  we  have  jurisdiction  over  IM  and  AIHS  but,  mindful  of  Congresss  intent,  have  chosen  not  to  regulate  them,  it  is  all  the  more  important  that  we  ensure  that  this  merger  does
 not  cause  any  anticompetitive  harms  with  regard  to  these  services.  Only  in  this  way  can  we  preserve  the  vibrant  and  competitive  free  market  that  presently  exists  for  Internet  and  other  interactive  computer
 services  and  ensure  that  competition,  rather  than  regulation,  protects  consumers.
 152.  Relevant  Markets.  After  reviewing  all  the  parties  submissions  and  making  our  own  analysis  of  the  businesses  in  question  and  relevant  economic  principles,  we  find  that  the  area  of  our
 concern  is  NPD  services    interactive  communication  services  which,  as  we  described  above,  depend  on  an  NPD  for  real  time  communication  between  and  among  users.  Today,  the  principal  services  of  this
 type  are  IM,  the  emerging  new  IM-  based  services,  and  AIHS  in  particular.  In  the  following  paragraphs,  we  find  that  the  database  of  names  and  the  presence  detection  ability  of  an  NPD  cause  services  that
 depend  on  an  NPD  to  be  characterized  by  strong  network  effects.  These  and  other  aspects  of  NPD  services  cause  them  to  have  few,  if  any,  substitutes.  419  We  further  recognize  that  IM  services  are  evolving
 rapidly,  and  we  expect  that  this  evolution  will  continue  as  more  home  users  come  to  use  high-  speed  platforms  for  Internet  access.  420  A  more  precise  definition  of  the  relevant  market  is  not  necessary  here,
 where  the  Commission  can  accurately  assess  the  competitive  impact  of  the  merger  without  such  a  detailed  analysis.  421
 153.  General  Characteristics  of  NPD  Services.  Network  Effects.  Certain  services,  such  as  telephone  services,  become  more  attractive  to  customers  as  more  customers  use  them,  a  phenomenon
 called  network  effects.  Network  effects  tend  to  be  strongest  in  businesses  whose  main  output  or  product  is  access  to  other  persons,  as  is  the  case  with  telephone  service.
 154.  Often,  in  businesses  with  strong  network  effects,  each  of  several  providers  creates  its  own  network  that  is  potentially  incompatible  with  the  others.  If  each  of  the  networks  is  of  roughly  equal  size,
 then  no  provider  dominates  the  market  and  each  has  an  incentive  to  interoperate  --  to  make  its  service  compatible  --  with  the  others.  In  such  an  equilibrium,  interoperability  gives  each  providers  users  access
 418  By  traditional  regulation,  we  mean  ongoing  scrutiny,  intense  in  the  case  of  dominant  providers,  of  entry  and
 exit,  prices,  and  service  offerings  and  quality.  419
 For  example,  in  an  IM  chat  in  a  Civil  War  chat  room  between  Johnny  Reb  and  Yankee  Doodle  Dandy,  those  two  individuals  may  not  know  each  others  names  and  telephone  numbers.  Each  may  have  come  into  contact  with
 the  other  simply  by  being  simultaneously  in  the  Civil  War  chat  room.  Therefore,  the  conversation  they  conduct  via  instant  messaging  would  probably  not  have  occurred  on  the  telephone  network.
 420  Since  the  early  1980's  at  very  least,  economists  and  antitrust  practitioners  have  recognized  the  existence  of
 "innovation  markets"  in  which  identifiable  firms  engage  in  research  and  development  on  new  products  that  are  intended  to  appeal  to  the  same  buyers.  It  may  even  be  that  none  of  these  emerging  products  have  been  created.
 See,  e.  g.,  Daniel  Rubinfeld,  Competition,  Innovation,  and  Antitrust  Enforcement  in  Dynamic  Network  Industries,  March  24,  1998,  Speech  at  Software  Publishers  Assn;  Christine  A.  Varney,  Why  Innovation  Market  Analysis
 Makes  Sense,  March  15,  1995,  Speech  at  Antitrust  1995  Conference,  at  1995  WL  112078;  Richard  J.  Gilbert  and  Steven  C.  Sunshine,  Incorporating  Dynamic  Efficiency  Concerns  in  Merger  Analysis:  The  Use  of  Innovation
 Markets,  65  ANTITRUST  L.  J.  569  (1995).  421
 See  AT&  T-  TCI  Order,  14  FCC  Rcd  3160,  3205    92  (1999);  AT&  T-  MediaOne  Order,  15  FCC  Rcd  at  9866    116.  See  also  FCC  v.  RCA  Commun.  Inc.,  346  U.  S.  86,  96-  97  (1953)  (FCC  not  required  to  base  its  public  interest
 analysis  on  the  type  of  tangible  evidence  appropriate  for  judicial  determination,  but  is  permitted  to  rely  on  its  expertise  to  make  predictive  judgments).
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 to  a  larger  universe  of  other  users  and  that  makes  each  service  more  valuable  to  its  users.  422  This  equilibrium  leads  to  effective  competition  and  benefits  consumers.
 155.  A  different  outcome,  and  one  less  beneficial  for  consumers,  can  also  occur  in  markets  with  strong  network  effects.  If  one  provider  achieves  a  larger  market  share,  either  through  superior
 performance  or  a  first  mover  advantage,  423  then  it  may  not  have  an  incentive  to  interoperate.  If  that  provider  wants  to  dominate  the  market,  it  can  adopt  a  strategy  of  refusing  to  interoperate  with  the  other,
 smaller  providers.  This,  compared  to  a  strategy  of  interoperation,  will  make  its  service  less  valuable  and  will  hurt  its  users.  But  while  these  ill  effects  will  be  relatively  slight,  because  the  users  will  still  be  able  to
 reach  most  other  users,  refusing  to  interoperate  will  hurt  the  smaller  providers  and  their  users  greatly,  because  their  users  will  not  be  able  to  reach  most  other  users.  The  largest  providers  refusal  to
 interoperate  will  lead  to  users  switching  to  it  from  the  smaller  providers,  which  will  further  swell  the  dominant  providers  NPD  and  shrink  the  smaller  ones.  424  This  will  continue  until  the  largest  providers
 network  is  the  dominant  one,  perhaps  yielding  the  provider  monopoly  control  of  the  market.  From  that  point  onwards,  the  dominant  network  remains  dominant,  not  necessarily  because  it  charges  the  lowest
 prices,  offers  the  best  quality,  or  innovates  fastest  with  the  features  that  customers  want  most,  but  simply  because  in  the  past  it  gained  the  most  users.  425
 156.  Where  there  is  no  interoperability,  the  network  effects  of  a  service  can  be  mitigated  if  competing  providers  or  users  of  another  service  can  provide  an  adapter.  An  adapter  is  a  facility  or
 activity  that  enables  users  of  one  service  to  benefit,  in  full  or  in  part,  from  the  network  effects  of  another.  426  The  absence  of  an  adapter  can  lead  to  inconvenience  and  inefficiency.  For  example,  in  the
 early  20th  century,  a  telephone  subscriber  who  wanted  access  to  every  other  telephone  subscriber  had  to  establish  accounts  with  several  telephone  companies,  have  several  telephones  and  telephone  directories,
 and  perhaps  consult  the  directories  each  time  he  wanted  to  call  someone  to  find  out  which  system(  s)  that
 422  If  any  one  provider  decided  not  to  interoperate,  then  its  users  would  find  themselves  cut  off  from  the  majority  of
 other  users.  They  would  quickly  defect  to  another  provider  who  did  interoperate,  thereby  gaining  access  to  all  users  other  than  those  on  the  non-  interoperating  service.  The  holdout  service  would  quickly  lose  all  its  users  or  be  forced
 to  change  its  decision  and  interoperate.  Thus,  in  this  situation  it  is  not  profitable  for  any  provider  to  refuse  to  interoperate.
 423  A  first  mover  advantage  is  an  advantage  that  may  accrue  to  the  first  firm  to  introduce  a  new  service,  such  as  low
 marketing  costs  resulting  from  a  lack  of  rivals.  Dennis  W.  Carlton  and  Jeffrey  M.  Perloff,  MODERN  INDUSTRIAL  ORGANIZATION  at  113  (1994).
 424  Of  course,  unique  features  that  are  especially  attractive  to  small  groups  of  users  may  win  them  away  from  the
 service  that  is  most  popular.  For  example,  a  small  closed  service  may  be  preferable  to  users  who  desire  greater  privacy  and  security.  Other  factors  may  also  make  other  small  services  preferable  to  small  groups  of  users.
 425  Ultimately,  new  technology  may  overcome  the  dominant  providers  power,  as  the  telephone  did  to  the  telegraph
 and  airplanes  and  automobiles  did  to  railroads.  Many  years  can  pass,  however,  before  a  new  technology  appears  with  enough  advantages  to  overcome  the  entrenched  one.  That  technology,  too,  may  be  deployed  by  the  dominant
 incumbent,  who  will  deploy  it  slower  than  a  new  entrant  would.  Finally,  some  technologies  persist  for  very  long  times,  such  as  the  QWERTY  keyboard.
 1.  426  For  example,  when  three  different  speeds  were  in  use  for  phonographic  records  (33  1/  3,  45,  and  78  rpms),  one  adapter  was  a  record  player  that  could  operate  at  all  three  speeds.  Another  was  the  small  plastic  disks
 that  fitted  in  the  wide  holes  at  the  center  of  45  rpm  records  and  made  them  useable  on  record  players  that  had  thin  spindles.
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 person  subscribed  to.  Most  consumers  preferred  that  all  telephone  systems  be  interconnected  and  unified.  427  These  conditions  led  to  monopoly  and,  ultimately,  federal  and  state  regulation.
 157.  The  dominant  provider  of  a  service  with  network  effects  can  exploit  its  dominant  position  as  it  offers  new  services  that  also  have  network  effects.  The  provider  can  do  so  by  making  its  new  service
 compatible  with  its  existing  one  (  backward  compatibility).  This  extends  the  network  effects  of  the  existing  service  into  the  new  business  and  helps  to  migrate  the  providers  users  from  its  existing  service  to
 the  new  one.  Backward  compatibility  is  efficient  to  the  extent  that  it  allows  users  to  benefit  from  both  the  features  of  the  new  service  and  the  network  effects  of  the  old  service.  If,  however,  it  occurs  where  there
 is  no  interoperability,  then  backward  compatibility  can  serve  to  lengthen  and  widen  the  dominant  providers  power,  to  the  harm  of  consumers  and  efficiency.  The  actual,  or  even  potential,  introduction  of
 new  backward  compatible  services  by  the  largest  provider  can  also  stifle  innovation,  as  potential  entrants  will  be  unlikely  to  invest  in  new  services,  knowing  the  disadvantage  that  they  have  in  competing  with  the
 largest  provider.
 158.  Findings  About  NPD  Services.  We  find  that  NPD  services  exhibit  strong  network  effects.  Our  first  basis  for  this  finding  is  simply  that  IM  strongly  fits  the  above  definition  of  a  business  that  is
 characterized  by  network  effects.  If  an  NPD  service  has  only  one  user,  the  service  is  useless  to  her  because  she  is  the  only  user  in  the  NPD  and  there  is  no  one  with  whom  to  engage  in  instant  messaging.
 When  a  second  user  joins  the  service,  NPD  grows  and  the  IM  service  based  on  it  becomes  useful.  428  Each  additional  user  makes  the  NPD  larger  and  the  IM  service  based  on  it  more  useful  to  both  its  existing  users
 and  to  potential  users.  Most  users  of  IM  want  to  be  able  to  compose  their  buddy  lists  from,  and/  or  engage  in  IM  with,  the  largest  number  of  other  users.  Therefore,  when  choosing  between  rival  IM  services,  a
 typical  new  user  will  place  the  greatest  value  on  the  service  with  the  largest  NPD  (and  therefore  the  most  users)  and  will  choose  that  service.  In  all  these  hypothetical  situations,  the  underlying  value  (or  lack  of
 value)  in  an  IM  service  resides  in  the  NPD.
 159.  Second,  many  observers  agree  that  IM  services  exhibit  strong  network  effects.  429  Third,  although  AOLs  filings  before  us  almost  deny  that  there  are  any  network  effects  in  IM,  or  that  any  such
 effects  benefit  only  AOL,  430  its  promotions  attempt  to  attract  new  users  by  proclaiming  how  many  millions  of  registered  IM  users  it  already  has.  Specifically,  the  top  paragraph  of  its  own  web  page  for
 427  Milton  Mueller,  Jr.,  UNIVERSAL  SERVICE:  COMPETITION,  INTERCONNECTION,  AND  MONOPOLY  IN  THE  MAKING  OF
 THE  AMERICAN  TELEPHONE  SYSTEM  at  134  (  More  often  than  not,  voters,  city  councils,  and  statewide  referenda
 weighed  in  on  the  side  of  universal  service  and  consolidation.),  136-  45  (1997).  428
 IM,  in  this  respect,  is  like  the  telephone,  of  which  AT&  T  once  said:  A  telephone  --  without  a  connection  at  the  other  end  of  the  line    is  not  even  a  toy  or  a  scientific  instrument.  It  is  one  of  the  most  useless  things  in  the  world.
 Its  value  depends  on  the  connection  with  the  other  telephone    and  increases  with  the  number  of  connections.  AT&  T  Corp.,  Annual  Report  for  the  Year  Ending  Dec.  31,  1908,  at  21.
 429  E.  S.  Browning  and  Greg  Ip,  Six  Key  Myths  That  Led  the  Boom  In  Tech  Stocks,  ASIAN  WALL  ST.  J.,  Oct.  17,  2000,
 at  2000  WL-  WSJA  23750599;  Dan  Carney  and  Catherine  Yang,  Is  AOLs  Instant  Messaging  an  Unfair  Advantage?,  BUSINESS  WEEK,  July  3,  2000,  at  2000  WL  7827524;  Matt  Carolan,  IMUnified  Good,  Government  Bad,
 INTERACTIVE  WEEK  FROM  ZDWIRE,  July  25,  2000,  at  2000  WL  4067383;  Alan  Murray,  Changing  Code:  For  Policy  Makers,  Microsoft  Suggests  a  Need  to  Recast  Models,  WALL  ST.  J.,  June  9,  2000,  at  2000  WL-  WSJ  3032437;
 William  Whyman,  Instant  Messaging:  the  Next  Web  Killer  App?,  Precursor  Group,  July  31,  2000  (  AOLs  IM  is  a  closed  service  using  proprietary  protocols.  With  dominant  market  share  this  creates  huge  network  effects.).
 430  AOL  Sept.  29  Ex  Parte  at  1.
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 AIM  4.1  entices  users  with  [  f]  ind  out  what  over  64  million  people  already  know,  .  .  .  (underlining  in  original).  431  Accordingly,  we  find  that  NPD  services  are  characterized  by  strong  network  effects.
 160.  We  find  that  AOL  is  by  far  the  leading  provider  of  IM  today.  Many  commentators  have  concluded  that  it  dominates  IM.  432  AOL  was  the  first  company  to  successfully  market  IM  to  the  mass
 market  and  thus  gained  a  significant  first  mover  advantage.  According  to  all  observers,  AOL  has  a  mass  of  users  --  and,  therefore,  an  NPD  --  that  is  several  times  larger  than  any  other  providers  and  is  larger
 than  all  other  providers  combined.  433  And  AOLs  presence  in  IM  is  still  growing.  434  Furthermore,  small  IM  providers  have  recently  exited  the  market.  435
 161.  Independent  companies  have  recognized  the  strength  of  AOL's  IM  by  signing  deals  with  AOL.  These  include  both  Sprint  and  AT&  T  agreeing  to  make  AOL's  IM  available  to  their  wireless
 customers  436  and  Sears  agreeing  to  use  instant  messaging  to  connect  Sears  customers  with  Sears  customer  service  representatives.  437  EarthLink,  a  major  direct  competitor  of  AOL  in  the  ISP  business,  has
 continued  a  licensing  arrangement  with  AOL.  EarthLink  would  be  expected  to  compete  with  AOL  in  IM  if  that  were  possible.  Finally,  the  continuing  strength  of  AOL's  IM  has  been  recognized  by  a  number  of
 431  AOL,  New  AIM  4.1  Available  Now,  at  http://  www.  aol.  com/  aim/  (visited  Oct.  11,  2000).  See  Confidential
 Appendix  IV-  B-  2,  Note  1.  432
 See,  e.  g.,  Julia  Angwin,  Instant  Messaging  Services  at  AOL  Quietly  Linked,  WALL  ST.  J.,  Oct.  26,  2000,  at  B-  1  (referring  to  AOLs  dominance  of  instant-  messaging  technology);  Louise  Rosen,  Why  IM  Matters  So  Much,
 UPSIDE  TODAY,  Sept.  19,  2000,  at  http://  www.  upside.  com/  Ebiz/  39c289380.  html  (visited  Sept.  19,  2000  (AOL  vastly  outnumbering  its  competitors'  numbers);  Nick  Wingfield,  Changing  Chat,  WALL  ST.  J.,  Sept.  18,  2000,  at
 R-  28  (in  IM,  AOL  has  become  the  undisputed  heavyweight),  B-  38  (referring  to  AOLs  domination  of  the  market  for  IM);  Prepared  Testimony  of  Preston  R.  Padden,  Executive  Vice  President  of  Government  Relations,  The
 Walt  Disney  Co.,  at  3  (  a  near  monopoly  in  Instant  Messaging),  FCC  En  Banc  Hearing,  CS  Docket  No.  00-  30  (July  27,  2000).
 433  See,  e.  g.,  Letter  from  Peter  D.  Ross,  Esq.,  Wiley  Rein  and  Fielding,  Counsel  for  AOL,  to  Ms.  Deborah  Lathen,
 Chief,  Cable  Services  Bureau,  FCC,  dated  Dec.  9,  2000,  Attachments  passim.
 In  a  market  characterized  by  strong  network  effects,  a  provider  with  a  market  share  X  times  the  size  of  another  will,  in  fact,  have  more  than  X  times  the  power  of  the  other.  In  such  markets,  a  participants  relative
 strength  may  be  measured  not  so  much  by  its  market  share  (N)  as  by  N  2  in  the  case  of  one-  to-  one  messaging  and  by  2  N  in  the  case  of  group  communications  such  as  chat  rooms  and  IM  groups.
 434  AOL  Nov.  17  Ex  Parte,  Attachment  (Growth  in  Unique  Visitors  to  Instant  Messaging  Services  2000).
 435  Jim  Hu,  AOLs  Lead  in  Instant  Messaging  Arena  Dwindles,  CNET  NEWS.  COM,  Nov.  16,  2000  (describing  the
 now-  defunct  CMGI-  owned  companies  iCast  and  Tribal  Voice)  (emphasis  in  original),  attached  to  AOL  Nov.  17  Ex  Parte.
 436  See,  e.  g.,  Irene  M.  Kunii,  Look  Whos  Going  Courting  in  Japan,  BUSINESS  WEEK,  Aug.  7,  2000,  at  2000  WL
 24484561;  Neil  Irwin,  AOL  Debuts  E-  Mail/  IM  Pager,  WASHTECH.  COM,  Dec.  1,  2000,  at  http://  washtech.  com/  news/  media/  5560-  1.  html  (visited  Dec.  1,  2000);  New  Media,  COMMUN.  DAILY,  Oct.  20,  2000.
 See  also  America  Online,  Inc.,  Open  IM  Architecture  Design,  at  http://  aim.  aol.  com/  openim,  visited  June  19,  2000  (licensees  of  AOL  include  Lotus,  Lycos,  EarthLink,  and  other  ISPs).
 437  See,  e.  g.,  Michael  Brick,  AOL,  Sears  Form  Alliance,  THESTREET.  COM,  March  14,  2000,  at
 http://  www.  thestreet.  com/  pf/  brknews/  internet/  900219.  html  (visited  Dec.  13,  2000).  By  contrast,  Yahoo!  has  been  able  to  interest  relatively  few  wireless  providers  in  adopting  its  IM.  See,  e.  g.,  New  Interactive  Wireless  Service  from
 Motient  Fortified  With  Yahoo!  Now  Available  to  Consumers  Nationwide  Via  www.  elinkhere.  com,  PR  NEWSWIRE,  Nov.  9,  2000.
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 independent  analysts.  438  All  this  evidence  strengthens  our  conviction  that  AOLs  possession  of  by  far  the  largest  NPD  confers  great  power  on  it.
 162.  AOL  disagrees  with  the  commenters  who  contend  that  it  dominates  IM.  For  example,  AOL  points  to  entry  into  the  IM  business  by  other  providers  and  appears  to  claim  that  it  does  not  benefit
 from  network  effects.  439  We  disagree.  New  entry  may  indicate  competition,  especially  in  a  stable,  mature  business.  IM  is  not  such  a  business,  however,  and  new  entry  into  IM  may  also  be  explained  by
 factors  other  than  healthy  competition.  The  smaller  providers  may  be  able  to  attract  customers  in  a  fast-growing  market  in  which  they  offer  extraordinary  promotional  inducements,  440  may  plan  to  succeed  by
 targeting  niche  groups  441  or  may  be  concentrating  on  very  sophisticated  features  and  functions.  442  Because  their  offerings  are  unlikely  to  tempt  a  significant  number  of  mass  market  users,  however,  they  do
 not  challenge  AOL  directly  or  significantly.  Further,  entry  into  IM  may  have  been  induced,  despite  network  effects,  by  the  prospect  of  interoperability  with  AOL.  This  prospect  has  been  created  by  industry
 efforts;  by  expectations  of  governmental  action  by  this  Commission,  the  Federal  Trade  Commission,  and/  or  Congress;  443  and  by  AOLs  own  public  statements  pledging  to  help  achieve  interoperability.  444
 These  factors  may  induce  entry  especially  by  those  who  believe  that  they  will  have  advantages  post-interoperability  stemming  from  unique  features  and  functions.
 163.  From  among  all  entrants  into  the  IM  business,  AOL  points  especially  to  Microsoft  as  a  significant  rival.  AOL  claims  that  Microsofts  presence,  and  especially  its  recent  growth  in  the  market,
 demonstrates  that  AOL  does  not  dominates  IM.  AOL  points  to  Microsoft  integrating  its  IM  product  into  its  Windows  desktop  and  to  Microsofts  strength  in  desktop  applications  generally.  445  We  note  that
 Microsoft  is  a  potentially  formidable  competitor.  However,  Microsoft  has  not  always  been  able  to  leverage  its  control  of  the  Windows  desktop  into  dominance  of  other  applications.  446  In  addition,  in  IM
 438  Julia  Angwin,  Instant  Messaging  Services  at  AOL  Quietly  Linked,  Linked,  WALL  ST.  J.,  Oct.  26,  2000,  at  B-  1;
 Jim  Lynch,  Instant  Messaging  Roundup,  MSNBC  Technology,  Aug.  18,  2000,  at  http://  www.  msnbc.  com/  news/  447786.  asp  (visited  Aug.  28,  2000);  Nick  Wingfield,  Changing  Chat,  WALL  ST.  J.,
 Sept.  18,  2000,  at  R-  28;  Louise  Rosen,  Why  IM  Matters  So  Much,  UPSIDE  TODAY,  Sept.  19,  2000,  at  http://  www.  upside.  com/  Ebiz/  39c289380.  html  (visited  Sept.  19,  2000).
 439  AOL  Sept.  29  Ex  Parte  at  1.
 440  See  Letter  from  William  L.  Fishman,  Esq.,  Swidler  Berlin  Shereff  Friedman,  LLP,  counsel  for  RCN  Telecom
 Services,  Inc.,  to  Magalie  Roman  Salas,  Secretary,  FCC,  dated  Dec.  21,  2000,  at  3.  See  also  Confidential  Appendix  IV-  B-  2,  Note  2.
 441  Letter  from  Margaret  Heffernan,  President  and  CEO,  iCast,  and  Shai  Buber,  President,  Odigo  Ltd.,  to  Magalie
 Roman  Salas,  Secretary,  FCC,  dated  Oct.  25,  2000,  at  n.  2  (  iCast  and  Odigo  Oct.  25  Ex  Parte).  442
 See  iCast  Comments  at  6;  Tribal  Voice  Comments  at  6-  7  (alleging  that  services  other  than  AOLs  have  better  features  and  are  more  innovative).  The  President  and  CEO  of  iCast  claims  that  an  AOL  employee  told  her  that
 iCasts  application  was  really  cool.  Heffernan  House  Testimony  at  2,  Attachment  to  iCast  Oct.  10  Ex  Parte.  See  also  Jim  Lynch,  Instant  Messaging  Roundup,  MSNBC  Technology,  Aug.  18,  2000,  at
 http://  www.  msnbc.  com/  news/  447786.  asp  (visited  Aug.  28,  2000),  comparing  several  IM  services  based  on  their  features,  appearance,  ease  of  use,  and  other  aspects.  See  Confidential  Appendix  IV-  B-  2,  Note  3.
 443  iCast  and  Odigo  Oct.  25  Ex  Parte  at  2.
 444  Heffernan  House  Testimony  at  2  (  we  were  hopeful  that  AOL  would  allow  us  to  be  interoperable  .  .  .),
 Attachment  to  iCast  Oct.  10  Ex  Parte.  445
 AOL  Oct.  19  Ex  Parte  at  3.  446
 See,  e.  g.,  Dean  Takahashi,  Zap!  Bop!  Its  Web  Comics,  ASIAN  WALL  ST.  J.  at  24  (Apr.  28,  2000),  available  at  (continued)
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 today,  AOL  benefits  from  network  effects  and  first  mover  advantages;  and,  as  we  discuss  below,  the  proposed  merger  would  give  AOL  significant,  additional  advantages  over  Microsoft,  Yahoo!,  and  smaller
 IM  providers.  And  even  if  Microsofts  NPD  did  grow  to  rival  AOLs,  the  result  would  be  merely  a  duopoly,  not  the  healthy  competition  that  exists  today  in  electronic  mail  and  that  we  hope  will  exist  in
 new  IM-  based  services  and  AIHS  in  particular.  447
 164.  AOL  also  claims  that  any  incompatibilities  between  its  and  other  IM  providers  NPDs  are  mitigated  by  an  existing  adapter  for  IM,  namely  that  an  IM  user  may  use  several  IM  services
 simultaneously,  448  and  that  millions  of  users  do  so.  449  AOL  argues,  therefore,  that  there  are  no  barriers  to  entry  into  IM.  450  We  disagree.  We  find  the  ability  of  users  to  use  several  IM  services  is  not  a  substitute
 for  interoperability.  Using  several  IM  services  (and,  therefore,  several  NPDs)  entails  much  inconvenience.  A  user  must  download  several  kinds  of  IM  software;  must  register  and  maintain  accounts,
 unique  names,  and  passwords  with  several  IM  providers;  must  use  each  one  enough  to  become  comfortable  with  its  look  and  feel;  must  keep  several  buddy  lists  and  remember  which  buddies  are  on
 which  IM  service  (and  with  what  names);  and  must  keep  several  IM  sessions  open  simultaneously.  Even  then,  three-  way  communications  are  impossible  unless  all  participants  use  the  same  service.  Indeed,  in
 light  of  these  inconveniences,  the  fact  that  millions  of  people  use  more  than  one  IM  service  (especially  AOL  and  one  or  more  other  services)  indicates  not  easy  adaptation  but  the  great  value  that  users  put  on
 being  able  to  communicate  with  more,  rather  than  fewer,  people.  451  Maintaining  multiple  accounts,  each  with  its  own  IM  software,  will  be  especially  burdensome  in  hand-  held  devices.  They  have  less  storage
 capacity  than  desktop  personal  computers.  452  In  addition,  we  understand  that  wireless  carriers  may  choose  one  software  (e.  g.,  AOLs)  and  make  use  of  others  impossible.  Lack  of  choice  of  IM  services  in
 hand-  held  devices  will  particularly  hurt  persons  with  hearing,  speech,  and  other  disabilities,  to  whom  IM  via  hand-  held  devices  can  be  as  important  as  telephones  and  face-  to-  face  conversations  are  to  persons
 who  do  not  have  hearing  limitations.  In  sum,  we  find  that  the  ability  to  use  several  IM  services  and  NPDs  does  not  effectively  mitigate  the  network  effects  that  favor  AOLs  NPD.
 165.  AOL  further  contends  that  it  does  not  dominate  IM  because  it  is  possible  for  users  to  move  in  a  coordinated  group  from  one  IM  service  to  another.  We  find  this  not  only  inconvenient,  but  in
 most  cases  impossible  as  a  practical  matter.  Only  if  those  who  propose  to  move  have  precisely  the  same  buddy  lists  is  this  solution  possible.  Most  likely,  one  users  buddy  list  does  not  correspond  perfectly  with
 (  continued  from  previous  page)  2000  WL-  WSJA  2938872;  Bob  Trott,  Microsoft  Views  AOL-  Time  Warner  Deal  as  Confirmation  of  Its  Own
 Strategy,  NETWORK  WORLD  FUSION  (Jan.  12,  2000);  Steven  Manes,  Information  Isnt  Everything,  INFORMATIONWEEK  (May  26,  1997),  available  at  1997  WL  7602548.
 447  We  find  similarly  unattractive  the  prospect  of  a  tight  oligopoly  of  three  IM  providers  (AOL,  Microsoft,  and
 Yahoo!)  predicted  by  AOL.  See  Oct.  19  Ex  Parte  and  the  Attachments  thereto.  448
 AOL  Sept.  29  Ex  Parte  at  3,  5-  6.  449
 AOL  Oct.  19  Ex  Parte  at  2-  3  and  attached  charts  and  diagrams.  450
 See,  e.  g.,  Letter,  from  Peter  D.  Ross,  Esq.,  Wiley,  Rein  &  Fielding,  Counsel  for  AOL,  to  Magalie  Roman  Salas,  Secretary,  FCC,  Sept.  19,  2000,  at  4  (  barriers  to  entry  simply  do  not  exist)  (  AOL  Sept.  19  Ex  Parte).
 451  See  Letter  from  Erin  M.  Egan,  Esq.,  Covington  &  Burling,  Counsel  for  Microsoft  Corp.,  to  Magalie  Roman
 Salas,  Secretary,  FCC,  dated  Nov.  20,  2000,  at  1-  2  (  Microsoft  Nov.  20  Ex  Parte).
 452  Letter  from  David  Lawson,  Esq.,  Counsel  for  AT&  T,  to  Magalie  Roman  Salas,  Secretary,  FCC,  dated  Nov.  22,
 2000,  at  2  (  AT&  T  Nov.  22  Ex  Parte).
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 his  or  her  buddies  lists,  in  which  case  moving  requires  that  at  least  some  of  ones  buddies  be  left  behind.  453  Accordingly,  we  find  that  no  adapter  exists  to  mitigate  the  network  effects  of  AOLs  NPD.
 166.  AOL  claims  that  entry  into  IM  would  be  easy  for  any  company  with  a  customer  list,  especially  a  customer  list  as  full  as,  for  example,  that  of  Sears  or  American  Express.  Again,  we  disagree.
 As  we  noted  above,  an  NPD  for  IM  must  be  a  working  part  of  an  electronic  communications  network.  Even  the  lengthy  list  of  an  interactive  web  service  firm  such  as  Amazon,  E-  Bay,  Napster  and  Real  Player
 would  only  be  the  starting  raw  material  for  entry  into  IM.  Any  of  these  would-  be  entrants  would  need  to  master  a  new  business  --  real-  time,  two-  way,  consumer-  to-  consumer  interactive  service.  A  would-  be
 entrant  would  also  need  to  launch  a  major  marketing  campaign  to  interest  its  customers  in  using  its  IM.  Then  millions  of  those  customers  would  need  to  accept  the  invitation,  download  software  into  a  personal
 computer  or  other  interactive  device,  pick  an  IM  name  and  find  their  buddies  on  the  same  service.  From  the  entrants  original  customer  list,  tens  of  millions  of  customers  would  need  to  finish  all  these  steps  for
 the  resulting  IM  NPD  to  rival  AOLs.  We  find  that  there  are  few  companies  that  could  seriously  attempt  such  entry,  and  that  even  they  would  find  many  obstacles  to  successful  entry.
 167.  Finally,  it  might  be  thought  that  in  the  rapidly  changing  technology  of  the  Internet,  even  network  effects  and  AOLs  present  position  in  the  market  would  not  prevent  successful  entry  by  IM
 providers  other  than  AOL,  that  a  new  breakthrough  technology  might  become  available  and  would  be  superior  enough  to  AOLs  service  to  overcome  the  network  effects  flowing  from  its  NPD,  and  cause  users
 to  shift  en  masse  away  from  AOL.  In  some  serial  monopoly  markets,  one  standard  dominates  a  market  for  a  time  and  is  then  overtaken  by  a  new  standard.  454  We  see  no  evidence  at  this  time,  however,  of  such
 a  new  breakthrough  technology  strong  enough  to  overtake  AOLs  NPD.  AOL  has  pointed  us  to  no  such  evidence.  On  the  contrary,  the  evidence  indicates  that  NPD  technology  is  the  best  protocol  for  providing
 address  and  presence  information  for  interactive  services.
 168.  AOLs  Resistance  to  Interoperability.  AOL  has  consistently  resisted  interoperability  of  IM  services.  In  1999,  various  non-  AOL  IM  providers  repeatedly  attempted  to  gain  access  to  AOLs
 proprietary  and/  or  AIM  NPD  in  order  to  interoperate  with  AOL,  and  were  blocked  by  AOL.  455
 169.  AOL  has  stated  that  it  will  seek  interoperability,  but  has  participated  little  in  industry  consultations  aimed  at  industry-  wide  interoperability.  456  According  to  several  observers,  AOL  has
 453  See  Confidential  Appendix  IV-  B-  2,  Note  4.  See  also  AT&  T  Nov.  22  Ex  Parte  at  2.
 454  See,  e.  g.,  Stan  J.  Liebowitz  and  Stephen  E.  Margolis,  WINNERS,  LOSERS  AND  MICROSOFT  at  10-  11,  137  (1999).
 455  iCast  Comments  at  1;  Disney  July  25  Ex  Parte  at  27-  28;  Aaron  Pressman,  Microsoft  Messenger  Finds  Its  Voice  at
 2,  THE  STANDARD,  July  20,  2000,  at  http://  thestandard.  com/  article/  display/  0,  1151,  16984,00.  html?  nl+  dnt  (visited  July  21,  2000).  We  know  of  no  attempt  to  gain  access  to  AOLs  NPD  for  ICQ.
 456  See  IMUnified,  Mission  Statement,  at  http://  www.  imunified.  org/  (visited  Aug.  11,  2000),  concerning  IMUnified,
 a  recently  formed  coalition  of  technology  and  instant  messaging  companies.  They  plan  to  make  each  others  services  interoperable  and  will  strive  to  implement  open  standards-  based  interoperability  for  instant  messaging  as
 these  protocols  emerge  from  the  IETF  standardization  process.  Founding  members  include  AT&  T,  Excite@  Home,  iCast,  Microsoft,  Odigo,  Tribal  Voice  and  Yahoo!.  They  announced  in  late  July  that  we  will  publish  specifications
 that  will  enable  functional  interoperability  among  IMUnified  members  instant  messaging  services  and  that  we  will  implement  during  the  fall  timeframe.  IMUnified,  Roundtable  Q&  A:  Industry  Leaders  Discuss  Goals  of  New
 IMUnified  Coalition,  at  http://  www.  microsoft.  com/  presspass/  features/  2000/  jul00/  07-  25imUnified.  asp  (visited  Aug.  11,  2000).  See  also  Ariana  Eunjung  Cha,  AOL  Unmoved  in  Software  Dispute,  WASH.  POST,  Aug.  24,  2000,  at  A-  1,  -14;
 Jim  Lynch,  Instant  Messaging  Roundup,  MSNBC  Technology,  Aug.  18,  2000,  at  http://  www.  msnbc.  com/  news/  447786.  asp  (visited  Aug.  28,  2000).
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 dragged  its  feet  in  these  consultations.  457  Objective  evidence  supports  this  view.  458  The  body  through  which  the  consultations  were  occurring,  the  Internet  Engineering  Task  Force  (IETF),  found  that  AOLs
 proposal  lacked  specificity,  and  began  pursuing  several  other  proposals.  459  Recently,  the  IETF  suspended  its  efforts,  stating  that  no  consensus  about  how  to  effect  interoperability  could  be  reached.  460  At  the  en
 banc  hearing  in  this  proceeding,  AOL  opined  that  interoperability  could  only  be  achieved  after  lengthy  industry  deliberations  and  has  stated  that  a  technical  standard  could  be  achieved  by  July  2001,  after  which
 testing  would  begin.  461  As  noted  below,  we  will  require  AOL  to  file  a  progress  report  with  the  Commission  every  180  days  with  regard  to  the  actions  it  has  taken  towards  interoperability.
 457  iCast  Comments  at  5,  10;  Letter  from  Ross  Bagully,  President  and  CEO,  Tribal  Voice,  to  Magalie  Roman  Salas,
 Secretary,  FCC,  dated  Aug.  8,  2000,  at  1-  2  (  Tribal  Voice  Aug.  8  Ex  Parte);  Industry  White  Paper  on  AOLs  Submissions  to  the  IETF  &  the  FCC  (  Second  IM  White  Paper)  at  11  n.  19,  14,  Attachment  to  Letter  from  Ross
 Bagully,  President  and  CEO,  Tribal  Voice,  to  Magalie  Roman  Salas,  Secretary,  FCC,  dated  July  21,  2000  (  Tribal  Voice  July  21  Ex  Parte).  Several  observers  appear  to  find  AOLs  original  participation  in  IETF  less  than
 enthusiastic.  Carolyn  Duffy  Marsan,  AOL  Out  of  Instant  Messaging  Standard  Bake-  Off,  Network  World  Fusion  News,  Aug.  7,  2000,  at  http://  www.  newfusion.  com/  cgi-  bin/  mailto/  x.  cgi  (visited  Aug.  15,  2000);  Network  World,
 Front  News  Briefs,  AOL  Touts  Instant  Messaging  Standard,  NETWORK  WORLD,  June  19,  2000,  at  2000  WL  9435687  (  After  a  year  of  dragging  its  feet  on  instant  messaging  interoperability,  AOL  .  .  .);  Lawrence  J,  Magid,
 Instant  Messaging  Users  Victims  as  Giants  Do  Battle,  LOS  ANGELES  TIMES,  Aug.  23,  1999,  at  C-  1,  at  1999  WL  2189129  (  IETF  has  yet  to  receive  AOL's  instant  messaging  protocols,  said  Vijay  Saraswat,  co-  chair  of  the  IETF's
 Instant  Messaging  and  Presence  Protocol  committee.  In  terms  of  moving  the  whole  process  forward,  it  would  be  significantly  helpful  to  have  AOL's  protocols  published,  but  different  companies  choose  to  participate  in  different
 ways,    Saraswat  said);  Charles  Cooper,  The  Messaging  Muddle:  End  the  Bickering,  ZDNET  NEWS,  AUG.  4,  1999,  at  1999  WL  14537884  (  The  IETF,  which  has  been  working  towards  hashing  out  a  consensus  on  messaging  protocols,
 received  encouraging  news  last  week  when  AOL  said  it  would  participate  in  a  working  group  charged  with  drafting  the  outlines  of  a  universal  messaging  protocol.  .  .  .  AOL  could  accelerate  the  process  by  next  publishing  its
 existing  Instant  Messaging  protocols.  That  suggestion  has  so  far  gone  nowhere,  .  .  .).  458
 Between  August  1999  and  October  2000,  industry  members  exchanged  thousands  of  electronic  mails  about  IM  interoperability  through  the  IETF.  Only  eight  were  by  AOL.  Heffernan  House  Testimony  at  5,  Attachment  to  iCast
 Oct.  10  Ex  Parte.  459
 See  also  Carolyn  Duffy  Marsan,  AOL  Out  of  Instant  Messaging  Standard  Bake-  Off,  Network  World  Fusion  News,  Aug.  7,  2000,  at  http://  www.  newfusion.  com/  cgi-  bin/  mailto/  x.  cgi  (visited  Aug.  15,  2000)  (  AOLs  last-  minute
 submission  was  a  general  framework  for  instant  messaging  interoperability  rather  than  a  full-  fledged  protocol,  so  it  was  not  chosen  for  further  consideration.).
 460  Dennis  Fisher,  A  New  Tack  for  IM  Protocol,  EWEEK  FROM  ZDWIRE,  Oct.  22,  2000,  at  2000  WL  18179376.  It  is
 largely  for  this  reason  that  we  choose  a  remedy  other  than  the  ones,  emphasizing  industry  standard  setting  through  the  IETF,  advocated  by  IMUnified  and  its  members.  See,  e.  g.,  Microsoft  Nov.  20  Ex  Parte  at  2.
 461  FCC  En  Banc  Hearing,  CS  Docket  No.  00-  30  (July  27,  2000),  Tr.  at  167-  68:  Chairman  Kennard:  .  .  .  You've
 said  that  you  want  [interoperability]  to  happen  and  that  you  can  do  it.  Could  you  tell  us  for  the  record  when  it  will  get  done?  Mr.  Schuler:  Well,  we  can  tell  you  for  the  record  that  there  are  two  pieces  to  the  puzzle.  One  piece  of
 the  puzzle  is  building  the  technology  that  will  allow  our  servers  to  interoperate  with  other  services  and  incorporate  all  the  controls  that  allow  us  to  protect  our  consumers.  We  think  that's  about  a  12-  month  job.  .  .  .  Chairman
 Kennard:  Twelve  months  from  today.  Mr.  Schuler:  We  are  working  at  it  right  now.  But  there's  another  issue    Chairman  Kennard:  Is  that  a  yes?  Mr.  Schuler:  Well,  yes.  Twelve  months  from  today.  Chairman  Kennard:
 Twelve  months  from  today.  Mr.  Schuler:  But  let  me  clarify.  That's  12  months  to  do  the  technology.  There  is  another  issue  that's  important,  .  .  .  .  the  hackers  and  spammers  are  out  there  figuring  out  how  to  break  it.  .  .  .
 [T]  here  has  to  be  a  period  of  quality  assurance,  a  period  of  us  testing  the  system  and  assuring  that  .  .  .  .  you've  built  the  most  unbreakable  system  possible.  We  do  not  necessarily  agree  with  AOL  that  achieving  interoperability  will
 require  such  a  lengthy  time.  See  also  Confidential  Appendix  IV-  B-  2,  Note  5;  Tribal  Voice  Aug.  8  Ex  Parte  at  1-  2.
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 170.  AOL  claims  that  it  has  been  stymied  in  its  attempts  to  provide  interoperability  by  its  desire  to  protect  the  privacy  and  security  of  its  customers.  462  Other  IM  providers  allege  that  they  already
 have  security  and  privacy  procedures  that  are  at  least  as  great  as  AOLs.  463  We  find  AOLs  claim  unconvincing.  AOL  has  given  us  no  details  about  its  concerns,  or  how  it  currently  protects  its  users.
 While  it  may  be  that  AOL  desires  eventually  to  create  an  interoperable  product  that  protects  subscribers  privacy  and  security,  privacy  and  security  are  matters  that  can  be  negotiated  and  resolved  promptly,  not
 pretexts  for  delaying  interoperability  unnecessarily.  464  Microsoft  and  Yahoo!  express  no  such  disabling  anxieties  about  privacy  and  security,  even  though  they,  like  AOL,  have  reputations,  goodwill,  and
 customer  bases  to  protect,  and  the  technical  expertise  to  distinguish  serious  and  real  problems  from  imaginary  and  minor  ones.  Microsoft  and  Yahoo!,  not  to  mention  many  other  IM  providers,  have  as
 much  incentive  as  AOL  to  implement  interoperability  with  adequate  protections  for  users  privacy  and  security.  Security  concerns  do  not  appear  to  be  the  only  reason  that  AOL  has  resisted  interoperability.
 171.  AOLs  Use  of  Backward  Compatibility.  AOLs  new  IM-  based  services  in  AIM  4.1  include  a  Talk  Feature.  In  introducing  AIM  4.1,  AOL  is  taking  advantage  of  backward  compatibility  by
 making  its  new  features  compatible  with  its  IM  service.  465  AOL  does  this  by  using  the  same  NPD,  the  one  it  originally  built  for  IM,  for  these  new  features.  In  this  way,  a  user  of  AIM  4.1  who  has  high-  speed
 Internet  access  service  is  not  only  able  to  engage  in  AIHS  exchanges  with  other  users  of  AIM  4.1,  but  is  also  able  to  continue  to  engage  in  IM  with  the  much  larger  body  of  AOLs  IM  users  who  continue  to  use
 narrowband  Internet  access  service.  AOL  is  also  using  its  base  of  IM  users  as  a  springboard  for  launching  its  AIHS.  Recently,  in  introducing  AOL  Instant  Messenger  4.3,  AOLs  web  page  warns  that  [  i]  n  order
 to  take  advantage  of  some  of  the  newest  AIM  features,  both  you  and  your  buddies  must  upgrade  to  AIM  4.3.  .  .  .  If  your  buddys  software  is  older,  they  may  not  be  able  to  talk,  share  files,  or  take  advantage  of
 other  new  features.  Send  an  instant  message  to  your  buddies  today  to  let  then  know  about  AIM  4.3.  466
 172.  We  find  it  likely  that  AOL  will,  when  presented  with  other,  similar  opportunities,  continue  to  take  advantage  of  backward  compatibility  as  it  rolls  out  new  AIHS.  Users  of  its  new  high-speed
 services  will  be  able  to  use  AOLs  IM  to  communicate  with  its  existing  customer  base.  In  addition,  narrowband  IM  users  may  be  able  to  adopt  these  new  high-  speed  services,  which  will  enable  them  to
 communicate  with  their  users,  albeit  with  relatively  low  quality.  The  Talk  Feature  of  AIM  4.1  is  a  good  example  of  such  a  feature.  It  can  be  used  by  narrowband  customers,  but  quality  is  higher  for  high-  speed
 customers.  This  difference  will  be  more  evident  for  features  that  require  yet  more  bandwidth,  such  as  videoconferencing.
 462  Compare  Case  En  Banc  Testimony,  Tr.  at  29-  30,  and  Schuler  En  Banc  Testimony,  Tr.  at  164-  65,  with  Bagully
 En  Banc  Testimony,  Tr.  at  154.  See  also  AOL  Sept.  19  Ex  Parte  at  4;  American  Online,  Inc.,  Open  IM  Architecture  Design,  at  http://  aim.  aol.  com/  openim,  visited  June  19,  2000  ([  W]  e  have  resisted  efforts  by  our  competitors  to
 impose  a  quick  fix  system  that  would  jeopardize  our  members  privacy  and  security.).  463
 iCast  July  25  Ex  Parte,  Attachment  at  11-  13.  464
 See  Tribal  Voice  July  21  Ex  Parte,  Attachment  (Second  IM  White  Paper)  at  7-  11.  465
 See  Bernstein  and  McKinsey  --  Broadband!  at  24  (.  .  .  AOL  counts  fully  half  of  the  current  online  subscribers  as  its  customers,  giving  it  the  opportunity  to  shift  many  customers  from  slow-  to  high-  speed  service.  ).
 466  America  Online,  Inc.,  AOL  Instant  Messenger  4.3,  at  http://  www.  aol.  com/  aim40/  html  (visited  Nov.  17,  2000).
 Slightly  earlier,  in  announcing  its  AIM  4.1,  AOL  encouraged  users  to  [  s]  end  an  instant  message  to  your  buddies  today  to  let  them  know  about  AIM  4.  1!  America  Online,  Inc.,  AOL  Instant  Messenger  4.1,  at
 http://  www.  aol.  com/  aim/  aim40.  html  (visited  Oct.  11,  2000).
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 173.  Backward  compatibility  will  have  at  least  two  benefits  for  AOL.  First,  it  will  enable  it  to  offer  new  services  tailored  to  high-  speed  customers  without  losing  the  network  effects  of  the  NPD  that  it
 developed  in  narrowband  IM  services.  That  is,  AOL  will  be  able  to  take  the  value  inherent  in  its  IM  NPD  and  leverage  it  into  its  new  AIHS.  For  example,  users  of  AOLs  AIHS  will,  because  of  the  availability  of
 AOLs  NPD,  be  able  to  send  streaming  video  messages  to  more  other  users,  and  will  be  able  to  receive  them  from  more  other  users,  than  users  of  any  other  AIHS.  AOL  users  will  be  able  to  video  chat  with
 more  buddies,  will  be  able  to  go  web  surfing  via  streaming  video  with  more  other  users,  will  be  able  to  hold  larger  business  meetings  with  documents  displayed  via  streaming  video,  and  will  be  more  likely  to
 quickly  compose  large  groups  for  these  and  other  uses  of  streaming  video.
 174.  Second,  the  benefits  of  providing  backward  compatible  AIHS  may  lead  other  actual  or  potential  providers  of  competitive  but  incompatible  AIHS  to  conclude  that  it  will  be  difficult,  if  not
 impossible,  to  successfully  compete  with  AOL  for  customers.  467  Thus,  AOLs  user  base  and  NPD  in  IM  gives  it  a  unique  first  mover  advantage  into  AIHS.  We  find  that,  with  the  advantages  that  backward
 compatibility  will  give  it,  AOL  will  be  more  able  to  dominate  AIHS,  or  may  be  likely  to  dominate  AIHS,  not  necessarily  on  the  merits  of  its  service,  but  because  of  the  network  effects  inherited  and  leveraged
 from  the  NPD  it  built  up  in  the  IM  business.
 175.  Anticompetitive  Effects  of  the  Proposed  Merger.  As  already  discussed,  AOL  is  by  far  the  largest  IM  provider,  by  virtue  of  its  uniquely  large  NPD,  and  therefore  has  a  strong  incentive  to  resist  and
 delay  interoperating  with  other  IM  providers  NPDs.  Without  interoperability,  users  may  choose  AOLs  IM  simply  because  it  has  the  largest  NPD  and  not  because  it  offers  the  best  value  or  is  most  attractive  for
 some  other  meritorious  reason.  This  puts  a  damper  on  competition  and  innovation,  whether  or  not  the  network  effects  are  so  strong  that  they  cannot  likely  be  overcome  (e.  g.,  by  a  highly  superior  product
 offered  by  a  competitor).  AOL  is  in  fact  strongly  resisting  interoperability,  thus  taking  advantage  of  the  network  effects  of  its  NPD  in  competing  with  other  providers.  As  a  consequence,  all  consumers  and  the
 public  interest  are  being  disserved.  Actual  and  potential  competition  among  IM  providers  is  hampered.
 176.  We  conclude  that  AOL,  through  the  proposed  merger,  will  gain  control  over  many  significant  assets  owned  by  Time  Warner  and  that  these  assets  will  make  AOL  Time  Warner  more  able  or
 more  likely  to  dominate  AIHS  than  it  would  otherwise  be.  468  AOL  Time  Warner  may  well  be  in  a  position  of  unassailable  dominance  in  AIHS  as  a  result  of  the  proposed  merger.
 177.  One,  but  by  no  means  the  only,  relevant  asset  is  the  cable  television  systems  owned  by  Time  Warner.  These  systems  are  now  being  used  to  provide  high-  speed  Internet  access.  A  second  asset
 that  AOL  will  acquire  in  the  proposed  merger  is  Time  Warners  contractual  relations  with  the  approximately  13  million  cable  television  households  in  this  country  that  those  systems  serve.  469
 467  See  AT&  T  Nov.  22  Ex  Parte  at  2-  3.
 468  We  do  not  here  challenge  how  AOL  achieved  its  dominance  of  IM  service,  or  its  deployment  of  AIHS  as  stand-alone
 services.  Indeed,  we  have  engaged  in  numerous  proceedings  to  encourage  the  deployment  of  new  and  innovative  services  to  all  Americans,  and  we  welcome  the  introduction  of  AIHS  and  any  increased  demand  for  high-speed
 services  and  connections  that  may  result  from  the  introduction  of  AIHS.
 469  Time  Warner  Cable  Joins  PowerUP  to  Provide  High  Speed  Access  to  Bridge  the  Digital  Divide:  New
 Partnership  Helps  Underserved  Youth  Succeed  in  the  Digital  Age,  BUSINESS  WIRE,  Oct.  19,  2000.
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 178.  A  third  relevant  Time  Warner  asset  is  Road  Runner,  a  major  high-  speed  ISP,  and  a  fourth  is  Road  Runners  contractual  relations  with  its  subscriber  base,  which  recently  passed  1.1  million.  470
 Road  Runner  is  now  the  exclusive  high-  speed  ISP  on  Time  Warner  cable  systems.  471  In  addition,  approximately  40  percent  of  Road  Runners  customers  are  on  cable  television  systems  other  than  Time
 Warners  that  have  agreed  to  make  Road  Runner  their  exclusive  high-  speed  ISP  through  2001.  472  These  latter  cable  television  systems  serve  more  than  five  million  households.  473  Thus,  by  acquiring  Time
 Warner,  AOL  has  gained  access  to  nearly  20  million  households  who  are  or  will  be  enabled  for  residential  high-  speed  Internet  access  and  to  whom  AOL  Time  Warner  may  now  market  AIHS.  474  Road  Runner
 does  not  now  include  an  IM  service  in  its  home  page  offering,  but  it  is  reasonable  to  expect  it  to  have  one  and  for  that  to  be  AOLs  NPD.  475
 179.  AOL  will  also  acquire  other  relevant  Time  Warner  assets,  such  as  the  significant  content  owned  by  Time  Warner.  This  includes  the  stories  and  photographs  in  Time  Warners  magazines,  such  as
 Time  and  Sports  Illustrated;  the  news,  sports  programs  and  other  information  in  video  form  available  through  CNN;  and  its  extensive  library  of  movies,  television  shows,  popular  music,  and  animated
 entertainment.  This  content  will  be  useful  to  certain  of  AOLs  new  AIHS,  in  particular  sending  individual  users  television-  based  news  stories  on  pre-  selected  subjects  and  allowing  users  to  send  each  other  Time
 Warner-  owned  animation,  movie  and  television  excerpts,  and  music.  The  video  assets  in  particular  are  well  suited  for  AIHS.  AOLs  ownership  of  Time  Warner  will  allow  it  to  make  this  mass  of  content
 available  quickly  to  users  of  AOLs  AIHS.  476  This  content  will  have  already  been  created,  so  the  cost  of  providing  a  copy  of  it  (e.  g.,  a  video  clip  from  CNN  or  a  story  from  Time  Magazine)  to  AOL  will  be,  as  a
 practical  matter,  zero.  The  savings  resulting  from  this  kind  of  vertical  merger  will  thus  be  increased  beyond  their  normal  levels.  477
 470  Road  Runner  Corp.,  Road  Runner  Sets  Record  Third  Quarter  (press  release),  Oct.  16,  2000.
 471  Time  Warner  has  announced  that  this  exclusivity  will  end  in  April  2001.  AT&  T  Corp.,  Road  Runner  Joint
 Venture  To  Be  Dissolved  (press  release),  Dec.  18,  2000.  See  also  Time  Warner  Inc.,  Time  Warner  To  Increase  Road  Runner  Ownership  and  Manage  Its  Operations  (press  release),  Dec.  18,  2000.
 472  See,  e.  g.,  Rebecca  Cantwell,  DOJ  Waves  Road  Runner  Away  From  AT&  T,  INTERACTIVE  WEEK  FROM  ZDWIRE,
 June  5,  2000,  at  2000  WL  4066715  (Road  Runner  is  exclusive  high-  speed  provider  to  Media  One).  473
 Recently,  MediaOne  alone  was  estimated  to  have  5  million  cable  service  customers.  Kelly  Pate,  CSG  Systems  Stock  Dives  Amid  Dispute  with  AT&  T,  DENVER  POST,  Sept.  29,  2000,  at  2000  WL  25829548.
 474  Road  Runner  Goal  One  Million,  TELEVISION  DIGEST,  March  13,  2000,  at  2000  WL  8644906  (in  March  2000,
 new  Road  Runner  Presidents  plan  calls  for  offering  Road  Runner  to  at  least  another  10  million  cable  homes  this  year,  which  would  make  it  available  in  more  than  25  million  homes,  over  80%  of  combined  Time  Warner-MediaOne
 universe.).  475
 See  Confidential  Appendix  IV-  B-  2,  Note  6.  The  FTCs  Order  to  Hold  Separate  will  prevent  such  an  offering  until  AOL  Time  Warner  offers  an  unaffiliated  ISP  on  each  of  its  cable  systems.  Order  To  Hold  Separate.
 To  the  extent  that  the  almost  twenty  million  Time  Warner  and  Road  Runner  households  already  subscribe  to  one  of  AOLs  narrowband  IM  services,  the  backward  compatibility  of  AOL  Time  Warners  AIHS  can  make  the
 latter  services  attractions  apparent  sooner  than  they  otherwise  would  be.  476
 AT&  T  Nov.  22  Ex  Parte  at  2.  477
 See  Letter  from  Dr.  Frederick  R.  Warren-  Boulton,  Microeconomic  Consulting  and  Research  Assocs.,  Inc.,  consultant  for  AT&  T,  to  Magalie  Roman  Salas,  Secretary,  FCC,  dated  Dec.  5,  2000,  at  2.  See  also  Michael  H.
 Riordan  and  Steven  C.  Salop,  Evaluating  Vertical  Mergers:  A  Post-  Chicago  Approach,  63  ANTITRUST  L.  J.  513,  526-  27  (1995)  (  Eliminating  Double  Markup  of  Costs.  When  both  the  input  and  output  markets  are  imperfectly
 (continued)
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 180.  The  combination  of  these  assets  will  likely  give  AOL  Time  Warner  another  first  mover  advantage  in  AIHS.  478  In  contrast,  other  AIHS  providers,  if  they  have  any  access  to  Time  Warners
 systems,  services,  and  content,  will  need  to  negotiate  individual  contracts  for  that  access  and  will  have  to  pay  for  it.  They  will  need  negotiations  with,  and  payments  to,  other  content  owners,  also,  to  bring
 comparable  AIHS  to  their  users.  Given  the  size  and  scope  of  Time  Warners  assets,  many  contracts  and  much  time  would  be  needed  to  make  an  equivalent  AIHS  offering.
 181.  In  sum,  although  Time  Warners  valuable  content,  conduits,  prominent  high-  speed  ISP,  and  ready-  made  customer  base  will  enable  the  merged  firm  to  provide  more  services  to  AOLs  IM
 customers,  this  combination  will  also  make  it  much  easier  for  AOL  Time  Warner  to  leverage  the  network  effects  of  AOLs  NPD  into  AIHS.  The  Applicants  appear  to  be  pointing  to  this  very  phenomenon  as  a
 benefit  of  their  proposed  merger  when  they  state  that  they  plan  to  create  and  deliver  to  consumers  easily  accessible  interactive  services    mixing  and  fusing  content  and  communication  elements    that  today  are
 only  in  their  infancy  or  are  not  yet  on  the  drawing  board.  479
 182.  The  proposed  merger  will  also  give  AOL  the  opportunity  and  incentive  to  impair  the  performance  of  its  rivals  AIHS.  Other  AIHS  providers  will  provide  their  services  over  Time  Warner
 cable  systems  and  Road  Runner.  The  proposed  merger  will  put  AOL  in  control  of  those  assets.  The  merger  will  thus  give  AOL  the  opportunity  to  control  the  quality  of  service  that  its  competitors  receive.  480
 For  example,  AOL  Time  Warner  will  be  able  to  make  its  own  users  video  conferencing  transmissions  quick  and  clear  and  those  of  competitors  slow  and  choppy.  481  AOL  Time  Warner  will  have  the  incentive
 to  engage  in  such  conduct  because  it  will  discourage  consumers  from  using  competitors  AIHS  and  will  draw  them  instead  to  AOL  Time  Warners.  482  Such  conduct  would  be  particularly  destructive  to
 competition  in  AIHS  because,  as  we  have  noted,  QoS  will  be  especially  important  in  those  services.
 (  continued  from  previous  page)  competitive,  output  prices  are  increased  above  the  competitive  level  and  possibly  even  above  the  monopoly  level,  as
 marginal  input  costs  are  marked  up  twice,  once  by  the  input  supplier  and  once  by  the  output  producer.  Under  these  circumstances,  when  the  integrated  firm  can  efficiently  supply  inputs  to  itself,  a  vertical  merger  of  a  firm  with  a
 supplier  of  a  variable  input  can  reduce  output  prices  by  eliminating  one  of  the  two  markups.).  478
 AOL  Time  Warners  first  mover  advantage  will  make  more  difficult  the  task  facing  deployers  of  any  new  breakthrough  technology.
 479  Applicants  Second  Response  at  17.
 480  The  existence  of  high-  speed  services  that  compete  with  cable-  based  high-  speed  services,  such  as  xDSL,  may  not
 dissuade  AOL  from  such  conduct  in  IM.  AOLs  present  position  in  IM  and  its  likely  dominance  of  AIHS  derive  in  large  part  from  its  NPD  and  will  be  felt  on  all  high-  speed  last  miles.  xDSL  and  other  high-  speed  alternatives  to
 cable  will  not  discipline,  and  may  even  extend,  the  anticompetitive  potential  of  AOLs  NPD.  481
 A  promotional  paper  by  Cisco  Systems  states  that,  with  its  network  equipment,  [  s]  ervice  providers  can  up  the  ante  by  giving  customers  guaranteed  and  differentiated  services  through  IP-  based  QoS  product.  Cisco  Systems,
 White  Paper:  Ciscos  Packet  over  SONET/  SDH  (POS)  Technology  Support;  Mission  Accomplished  at  4,  at  http://  www.  cisco.  com/  warp/  public/  cc/  pd/  rt/  12000/  tech/  posdh_  wp.  htm  (visited  Oct.  10,  2000).
 482  Because  we  expect  the  basic  technology  of  AOLs  new  IM-  based  services  to  be  similar  to  others,  AOL  Time
 Warner  will  likely  have  more  of  an  incentive  to  discriminate  against  the  latter  than  it  would  if  their  services  were  sharply  differentiated  and  if  each  appealed  to  different  customers.  In  the  latter  event,  AOL  Time  Warners  incentive
 would  more  likely  be  to  make  all  the  differentiated  services  function  well.  See  Confidential  Appendix  IV-  B-  2,  Note  7.
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 183.  There  is  precedent  for  such  misconduct.  Companies  in  communications  markets  have  been  known  to  acquire  scarce  facilities  that  their  competitors  need  and  to  deny  the  competitors  equal  or
 reasonable  access  to  those  facilities,  and  thus  to  give  themselves  anticompetitive  advantages  or  monopolies.  483  AOL  in  particular  has  a  history  of  denying  its  IM  competitors  any  access  to  its  NPD.
 184.  We  find  the  situation  in  AIHS  different  from  that  which,  in  our  ruling  on  the  merger  of  AT&  T  and  Media  One,  led  us  to  conclude  that  concern  for  the  future  of  competition  in  various  broadband
 services  would  be  premature  and  that  it  would  be  prudent  to  refrain  from  action.  484  There,  we  addressed  the  entire  residential  high-  speed  Internet  access  business.  Here,  our  attention  has  been  sharply  focused  on
 AIHS,  the  NPD  assets  at  its  core,  and  the  particular  abilities  and  incentives  in  AIHS  of  the  two  specific  parties  to  this  proposed  merger.  Seeing  a  foreseeable  and  likely  danger  to  competition  in  AIHS,  we  can
 act  promptly  and  with  confidence.  This  danger  leads  us  to  protect  the  possible  emergence  of  a  competitive  market  and  not  to  wait  for  more  traditional  antitrust  remedies,  which  may  not  be  used  until
 harm  is  done  and  may  take  years  to  undo.
 185.  With  a  dominant  position  in  the  AIHS  business,  AOL  Time  Warner  would  be  likely  to  charge  higher  prices  than  it  otherwise  would  to  end  users,  content  providers,  and/  or  advertisers.  485  AOLs
 domination  may  also  result  in  less  innovation  in  new  IM-  based  services,  and  AIHS  in  particular,  than  there  otherwise  would  be.  We  find  such  harm  both  more  likely  as  a  result  of  the  proposed  merger  than  it
 would  otherwise  be,  and  contrary  to  the  public  interest.  Accordingly,  we  find  that  the  proposed  merger  will  significantly  enhance  AOL  Time  Warners  ability  and  incentive  to  leverage  the  network  effects  of
 AOLs  NPD,  from  its  IM  service,  into  new  IM-  based  services  including  AIHS,  thereby  making  it  more  able  or  likely  to  dominate  those  services  and  to  effectively  foreclose  the  emergence  of  a  competitive
 market.  We  see  no  benefits  from  AOL  Time  Warners  domination  that  will  outweigh  these  harms.
 186.  AOL  implies  that  we  should  address  these  issues  in  a  rulemaking  that  would  apply  to  all  providers  of  IM  and  new  IM-  based  services.  486  The  concerns  we  have  described  above  flow,  specifically
 and  exclusively,  from  AOLs  role,  and  not  from  any  other  companys,  in  services  that  depend  on  an  NPD  after  the  proposed  merger.  Further,  our  concerns  are  time-  sensitive,  focusing  as  they  do  on  current  events
 in  the  emerging  business  of  new  interactive  services.  By  the  time  a  rulemaking  ended,  the  domination  by  AOL  Time  Warner  that  we  today  find  likely  might  well  have  been  achieved  and  be  beyond  correction  by
 marketplace  forces.  Regulation  of  AOL  Time  Warners  offerings  might  be  necessary.  Too  often  in  the
 483  See  generally  United  States  v.  AT&  T,  524  F.  Supp.  1336  (D.  D.  C.  1981)  (detailing  the  discrimination  of  the  Bell
 System  local  telephone  companies  against  its  competitors  in  terminal  equipment,  long  distance,  and  other  products  and  services  for  which  access  to  local  lines  was  necessary).  Similar  concerns  also  underlie  the  provisions
 concerning  program  access  by  cable  television  companies  (Communications  Act    628,  47  U.  S.  C.    548)  and  Bell  re-  entry  into  interexchange  service  (Communications  Act    271-  72,  47  U.  S.  C.    271-  72).  See  also  James  W.
 Olson  and  Lawrence  J.  Spiwak,  Can  Short-  Term  Limits  on  Strategic  Vertical  Restraints  Improve  Long-  Term  Cable  Industry  Market  Performance?,  13  CARDOZO  ARTS  &  ENT.  L.  J.  283  (1995).
 484  AT&  T-  MediaOne  Order,  15  FCC  Rcd  at  9871    123  (  Given  the  nascent  condition  of  the  broadband  industry  and
 the  foregoing  promises  of  competition,  we  find  it  premature  to  conclude  that  the  proposed  merger  poses  a  sufficient  threat  to  competition  and  diversity  in  the  provision  of  broadband  Internet  services,  content,  applications,  or
 architecture  to  justify  denial  of  the  merger  or  the  imposition  of  conditions  to  supplement  the  Justice  Department's  proposed  consent  decree.).
 485  See,  e.  g.,  Heffernan  House  Testimony  at  3  (  By  declining  to  allow  IM  interoperability  and  allowing  rival
 interactive  TV  providers  to  use  AOL  IM  only  upon  payment  of  substantial  license  fees  (or  not  licensed  at  all),  AOL  would  substantially  raise  rival  interactive  TV  providers  costs.),  Attachment  to  iCast  Oct.  10  Ex  Parte.
 486  See  AOL  Sept.  19  Ex  Parte  at  5.
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 history  of  communications,  interoperation  has  required  detailed  government  mandate  and  decades  of  supervision,  487  and  dominant  firms  entry  into  new  markets  has  required  case-  by-  case  permission  after
 intense  scrutiny.  488  We  assiduously  seek  to  avoid  those  outcomes  here,  and  we  earnestly  hope  that  our  light-  handed,  market-  opening  condition  will  lead  to  interoperability  without  further  government  action.
 187.  Interoperability.  We  find  that  the  anticompetitive  dangers  discussed  above  would  be  mitigated  if  there  were  interoperability  between  AOLs  new  IM-  based  services  and  those  of  other
 companies.  This  would  permit  a  user  of  an  AOL  service  and  a  user  of  another  service  to  talk,  play  games,  engage  in  video  conferencing,  etc.,  with  each  other  as  easily  as  each  exchanges  instant  text  messages
 today  with  other  users  of  the  service  to  which  he  or  she  subscribes.  If  there  were  interoperability  of  new  IM-  based  services,  AOL  would  be  less  able  to  leverage  its  leading  position  in  IM  services  into  those  new
 services.
 188.  To  prevent  AOL  Time  Warner,  as  a  result  of  the  proposed  merger,  from  becoming  more  able  or  likely  to  dominate  AIHS,  we  impose  a  prophylactic  condition.  Because  the  domination  that
 concerns  us  would  be  made  likely  by  the  combination  of  AOLs  and  Time  Warners  assets,  we  reject  AOLs  argument  that  its  dispute  with  other  IM  providers  about  interoperability  preceded  and  is  therefore
 immaterial  to  the  proposed  merger.  489  We  have  also  considered  carefully  AOLs  other  cautions  against  intervention  in  the  market,  but  we  find  them  unconvincing.  AIHS  are  novel  services,  but  we  and  many
 others  believe  that  they  will  be  significant  in  the  near  future.  If  they  are  not,  our  intervention  will  cause  little,  if  any,  harm  to  consumers  or  efficiency.  If,  as  AOL  predicts,  Microsoft  and  Yahoo!  effectively
 challenge  AOL  in  IM  and/  or  AOL  Time  Warner  in  AIHS,  then  AOL  will  have  an  incentive  to  achieve  interoperability  and  our  condition  will  not  come  into  operation.  The  risk  of  our  not  intervening  now,
 however,  is  to  risk  the  emergence  of  a  significant  new  business  needing  regulation,  a  result  we  and  Congress  wish  to  avoid  especially  on  the  Internet  and  interactive  services.  For  the  reasons  stated  above,
 we  cannot  be  certain  that  new  entry,  even  by  the  likes  of  Microsoft  and  Yahoo!,  will  discipline  AOL  Time
 487  See,  e.  g.,  AT&  T  Corp.,  Annual  Report  for  the  Year  Ending  Dec.  31,  1913,  at  24-  26  (1914)  (the  Kingsbury
 Commitment,  in  which  AT&  T  committed  to  interconnect  its  long  distance  lines  with  independent  telephone  companies  under  certain  conditions),  cited  in  Milton  Mueller,  Jr.,  UNIVERSAL  SERVICE:  COMPETITION,
 INTERCONNECTION,  AND  MONOPOLY  IN  THE  MAKING  OF  THE  AMERICAN  TELEPHONE  SYSTEM  at  130  n.  1  (1997);  Bell  System  Tariff  Offerings  of  Local  Distribution  Facilities  for  Use  by  Other  Common  Carriers;  and  Letter  of  Chief,
 Common  Carrier  Bureau,  Dated  October  19,  1973,  to  Laurence  E.  Harris,  Vice  President,  MCI  Telecommunications  Corp.,  Docket  No.  19896,  Decision,  46  FCC2d  413  (1974),  affirmed,  Bell  Tel.  Co.  v.  FCC,  503
 F.  2d  1250  (3  rd  Cir.  1974),  cert.  denied,  422  U.  S.  1026  (1975)  (regulating  interconnection  between  dominant  carriers  and  new  entrant  private  line  carriers);  United  States  v.  AT&  T,  552  F.  Supp.  131,  227  (D.  D.  C.  1982),  affirmed,  460
 U.  S.  1001  (1983)  (requiring  Bell  local  companies  to  offer  long  distance  carriers  other  than  AT&  T  interconnection  equal  to  that  offered  to  AT&  T);  Interconnection  Between  Local  Exchange  Carriers  and  Commercial  Mobile  Radio
 Service  Providers;  Equal  Access  and  Interconnection  Obligations  Pertaining  to  Commercial  Mobile  Radio  Service  Providers,  CC  Docket  Nos.  94-  54  and  95-  185,  Notice  of  Proposed  Rulemaking,  11  FCC  Rcd  5020  (1996)  (one  of
 many  proceedings  regulating  interconnection  of  dominant  wireline  carriers  and  relatively  small  mobile  wireless  carriers);  Communications  Act    251,  47  U.  S.  C.    251  (detailed  regulation  of  interconnection  between  dominant
 incumbent  local  exchange  carriers  and  new  entrant  competitive  local  exchange  carriers).  488
 Examples  are  wireline  telephone  companies  entry  into  cellular  service  (see,  e.  g.,  Rogers  Radio  Commun.  Serv.,  Inc.  v.  FCC,  593  F.  2d  1225  (D.  C.  Cir.  1978);  MCI  Cellular  Tel.  Co.  v.  FCC,  738  F.  2d  1322  (D.  C.  Cir.  1984))  and
 enhanced  services  (see,  e.  g.,  California  v.  FCC,  905  F.  2d  1217  (9th  Cir,  1990),  39  F.  3d  919  (9th  Cir.  1994),  cert.  denied,  514  U.  S.  1090  (1995);  and  Bell  incumbent  local  exchange  carrier  entry  into  in-  region  interexchange  service
 (47  U.  S.  C.    271-  72).  489
 Applicants  Reply  Comments  at  47-  49.
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 Warner  in  AIHS.  Finally,  we  are  not  convinced  that  AOLs  expressions  of  concern  with  security  and  privacy  justify  giving  free  rein  to  its  resistance  to  interoperability.
 189.  Accordingly,  we  are  imposing  a  condition  that  is  precisely  and  narrowly  aimed  at  preventing  the  specific  harm  that  the  proposed  merger  will  cause.  It  is  also  directed  at  serving  the  broader
 public  interest  in  encouraging  entry,  competition,  innovation,  the  broader  deployment  of  new  services,  the  lowest  possible  transaction  costs  for  consumers,  and  necessary  protection  of  persons  with  disabilities.
 Our  condition  is  balanced  because  it  contains  ways  for  AOL  to  show  that,  due  to  events  we  do  not  anticipate,  the  condition  is  no  longer  necessary.  Our  condition  gives  AOL  incentives  that  it  does  not  now
 have  to  interoperate  and  thus  to  benefit  consumers,  efficiency  and  the  public  interest.  Our  condition  also  gives  other  IM  and  AIHS  providers  incentives  to  enter  and  remain  in  the  business  that  they  do  not  now
 have.
 190.  As  set  forth  below,  our  condition  gives  AOL  an  incentive  to  interoperate  by  forbidding  it  from  providing  streaming  video  AIHS  applications  until  it  interoperates.  Our  condition  focuses  on
 streaming  video  AIHS  applications,  for  several  reasons.  First,  AOL  is  not  offering  them  as  part  of  its  IM  today.  Second,  as  we  define  them  below,  we  believe  that  the  scope  of  video  AIHS  applications  is
 relatively  clear.  If  our  condition  focused  on  AIHS  applications  that  included  talking  or  game-  playing,  which  AOL  appears  to  be  providing  now  to  some  extent,  there  might  be  difficulty  in  detecting  when  AOL
 had  made  an  advancement  with  these  services.  Third,  AOL  will  be  able  to  provide  streaming  video  AIHS  applications  for  the  first  time  on  the  facilities  of  Time  Warner  that  are  coming  under  AOLs  control  as  a
 result  of  the  proposed  merger.  We  believe  that  it  is  in  these  applications  that  AOL  would  be  positioned  to  gain  the  greatest  anti-  competitive  advantage  as  a  result  of  the  proposed  merger,  by  combining  its  NPD
 with  the  assets  of  Time  Warner.
 3.  Condition
 191.  AOL  Time  Warners  likely  domination  of  the  potentially  competitive  business  of  new,  IM-  based  services,  especially  AIHS  applications  such  as  videoconferencing,  requires  that  we  impose  a
 condition  to  prevent  that  merger-  specific  harm.  490  AOL  Time  Warner  may  not  offer  an  AIHS  application  that  includes  the  transmission  and  reception,  utilizing  an  NPD  over  the  Internet  Protocol  path  of  AOL
 Time  Warner  broadband  facilities,  of  one-  or  two-  way  streaming  video  communication  using  NPD  protocols    including  live  images  or  tape    that  are  new  features,  functions,  and  enhancements  beyond
 those  offered  in  current  offerings  such  as  AIM  4.3  or  ICQ  2000b,  491  unless  and  until  AOL  Time  Warner  has  successfully  demonstrated  it  has  complied  with  one  of  the  following  grounds  for  relief.
 192.  Grounds  for  Relief.  Option  One.  AOL  Time  Warner  may  file  a  petition  demonstrating  that  it  has  implemented  492  a  standard  for  server-  to-  server  interoperability  of  NPD-  based  services  493  that
 has  been  promulgated  by  the  IETF  or  a  widely  recognized  standard-  setting  body  that  is  recognized  as
 490  In  AOL  Time  Warner,  we  include  the  separate  pre-  merger  companies  and  the  post-  merger  company.
 491  We  explicitly  exclude  upgrades  to  AOLs  current  IM  products  that  are  not  otherwise  included  in  AIHS.  We  do
 not  intend  to  include  within  AIHS  streaming  video  communications  not  utilizing  NPD  protocols  or  applications  that  contain  or  are  packaged  with  current  IM.
 492  By  implemented,  we  mean  both  the  creation  and  deployment  of  the  interoperable  application.
 493  Server  to  server  interoperability  is  interoperability  in  which  a  client  interacts  with  other  NPD-  based  services
 through  its  own  server.  Each  server  establishes  communication  with  other  servers,  including  those  controlled  by  other  providers  of  NPD-  based  services,  to  exchange  presence  information  and  names.
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 complying  with  National  Institute  of  Standards  and  Technology  or  International  Organization  for  Standardization  requirements  for  a  standard  setting  body.  At  a  minimum,  AOL  Time  Warner  must
 demonstrate  that  the  adopted  protocol  makes  available  to  another  provider  of  NPD-  based  services  such  data  in  AOL  Time  Warners  NPD(  s)  as  will  enable  the  other  providers  users  to  know  the  addresses  of
 AOL  Time  Warner  users  and  detect  their  presence  online,  to  the  same  extent  that  AOL  Time  Warners  users  know  each  others  addresses  and  detect  each  others  presence  online.  AOL  Time  Warner  must  also
 demonstrate  that  the  protocol  makes  available  to  other  IM  providers  any  other  information  used  by  AOL  Time  Warner  to  implement  and  process  transactions  of  AIHS  services,  to  the  extent  allowed  by  law.  494
 The  adopted  standard  shall  also  ensure  that  AOL  Time  Warner  shall  afford  the  same  quality  and  speed  in  processing  transactions  to  and  from  the  other  provider  as  it  affords  to  its  own  transactions  of  the  same
 type.  495  Other  than  specifying  server-  to-  server  interoperability  as  described  above,  we  do  not  set  any  technical  criteria  for  interoperability.
 193.  Option  Two.  AOL  may  file  a  petition  demonstrating  that  it  has  entered  into  written  contracts  providing  for  server-  to-  server  interoperability  with  significant,  unaffiliated,  actual  or  potential
 competing  providers  of  NPD-  based  services  offered  to  the  public.  496  AOL  must  execute  the  first  such  contract  prior  to  offering  the  video  AIHS  service  described  above.  After  AOL  Time  Warner  executes  the
 first  contract,  an  officer  of  AOL  Time  Warner  shall  certify  to  the  Commission  that  it  is  prepared  to  promptly  negotiate  in  good  faith,  with  any  other  requesting  provider  of  NPD-  based  services.  497
 194.  Within  180  days  of  executing  the  first  contract,  AOL  must  demonstrate  that  it  has  entered  into  two  additional  contracts  with  significant,  unaffiliated,  actual  or  potential  competing  providers.  The
 interoperability  achieved  under  these  contracts  shall  be  identical  to  that  described  under  Option  One
 494  The  other  provider  must  afford  the  same  capabilities  to  AOL.
 495  We  do  not  require  the  AOL  Time  Warner  software  to  read  and  interpret  all  the  data  it  receives  or  to  make  that
 data  comprehensible  to  its  users.  496
 A  potential  competitor  is  an  aggressive,  well  equipped  and  well  financed  company  that  is  engaged  in  the  same  or  related  lines  of  commerce.  United  States  v.  Falstaff  Brewing  Corp.,  410  U.  S.  526,  532  (1973).  See  also  United
 States  v.  Penn-  Olin  Chem.  Co.,  378  U.  S.  158,  174  (1964).  In  this  case,  we  expect  that  the  potential  provider  would  be  a  company  that  is  capable  of  entering  into  an  arms-  length,  commercially  reasonable  and  mutually  beneficial
 contract  with  AOL  and  is  likely  to  become  a  significant  competitor  in  the  near  term  in  providing  NPD  services.  497
 By  negotiate  in  good  faith,  we  mean  that  AOL  Time  Warner:  (1)  may  not  refuse  to  negotiate  with  another  IM  provider  regarding  interoperability;  (2)  must  appoint  a  negotiating  representative  with  authority  to  bargain  and
 conclude  an  agreement  on  interoperability;  (3)  must  agree  to  meet  at  reasonable  times  and  locations  and  may  not  act  in  a  manner  that  would  unduly  delay  the  course  of  negotiations;  (4)  may  not  put  forth  a  single,  unilateral  proposal
 that  is  not  subject  to  negotiation;  (5)  in  responding  to  an  offer  proposed  by  another  IM  provider,  must  provide  considered  reasons  for  rejecting  any  aspects  of  the  other  provider's  offer  or  proposal;  (6)  may  not  enter  into  an
 agreement  that  requires  the  other  IM  provider  to  interoperate  exclusively  with  AOL  Time  Warner  or  authorizes  AOL  Time  Warner  to  deny  interoperability  to  any  other  IM  provider;  and  (7)  must  agree  to  execute  a  written
 agreement  that  sets  forth  the  full  agreement  between  AOL  Time  Warner  and  the  other  IM  provider.  We  add  the  seventh  requirement  to  ensure  that  there  are  no  misunderstandings  as  to  the  obligations  of  the  parties  to  the
 agreement.  In  addition,  because  good  faith  determinations  must  be  grounded  on  particular  facts,  we  will  also  examine  whether,  based  on  the  totality  of  the  circumstances,  AOL  Time  Warner  has  bargained  in  good  faith.  If  we
 find  that  AOL  Time  Warner  has  not  bargained  in  good  faith,  we  will  instruct  AOL  Time  Warner  to  restart  negotiations  with  the  aggrieved  IM  provider,  but  will  not  mandate  that  the  parties  reach  agreement  or  enter  into  a
 contract  on  specific  terms  or  conditions.  Cf.  Implementation  of  the  Satellite  Home  Viewer  Improvement  Act  of  1999,  Retransmission  Consent  Issues:  Good  Faith  Negotiation  and  Exclusivity,  CS  Docket  No.  99-  363,  First  Report  and
 Order,  15  FCC  Rcd  5445  (2000).
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 above  with  identical  terms  and  conditions  for  technical  interoperability.  All  parties  to  a  contract  shall  agree  not  to  alter  the  technical  protocol  without  the  consent  of  all  parties  providing  interoperable  IM
 services  under  these  agreements.  The  contracts  may  contain  different  provisions  for  business  considerations.  AOL  Time  Warner  must  submit  copies  of  these  agreements  for  server-  to-  server
 interoperability  into  the  record  of  this  proceeding  within  10  days  of  execution  of  such  agreement.  AOL  Time  Warner  may  redact  any  proprietary  information  or  terms  not  related  to  technical  interoperability.
 195.  Option  Three.  AOL  Time  Warner  may  seek  relief  from  the  condition  on  offering  AIHS  video  services  by  filing  a  petition  demonstrating  that  imposition  of  the  condition  no  longer  serves  the
 public  interest,  convenience  and  necessity  because  there  has  been  a  material  change  in  circumstance,  including  new  evidence  that  renders  the  condition  on  offering  AIHS  video  services  no  longer  necessary  in
 the  public  interest,  convenience,  and  necessity.  If  AOL  Time  Warner  proffers  market  share  information  as  evidence  that  the  condition  no  longer  is  necessary  in  the  public  interest,  convenience,  and  necessity,
 AOL  Time  Warner  must  demonstrate  that  it  has  not  been  a  dominant  provider  of  NPD  services  for  at  least  four  (4)  consecutive  months.
 196.  Procedure  for  Submission  of  Petition  to  the  Commission.  To  receive  authorization  to  offer  AIHS  video  services  pursuant  to  Options  One  through  Three  above,  AOL  Time  Warner  shall  submit
 a  Petition  to  the  Commission.  The  Petition  shall  be  filed  with  the  Secretarys  office  and  shall  contain  the  factual  and  legal  bases  demonstrating  satisfaction  of  one  of  the  three  options  set  forth  above.  The
 Commission  shall  put  the  Petition  out  for  Notice  and  Comment  with  a  maximum  of  30  days  for  receipt  of  such  comments.  Petitioner  may  submit  a  reply  not  more  than  15  days  after  the  closure  of  the  comment
 period.  Upon  the  timely  filing  of  Petitioners  reply,  the  Petition,  comments  and  reply  shall  be  submitted  to  the  Commission  for  disposition.  The  Commission  shall  issue  its  findings  and  conclusions  not  more
 than  60  days  after  receipt  of  the  matter.  This  timeline  may  be  altered  at  the  discretion  of  the  Commission  upon  a  timely  submitted  request  of  the  Petitioner.  The  findings  of  the  Commission  shall  be  made  upon
 clear  and  convincing  evidence,  and  in  the  absence  of  such  an  evidentiary  showing,  the  condition  shall  not  be  eliminated.
 197.  Reporting  Requirement.  We  also  require  that  AOL  Time  Warner  file  a  progress  report  with  the  Commission,  180  days  after  the  release  of  this  Order  and  every  180  days  thereafter,  describing  in
 technical  depth,  the  actions  it  has  taken  to  achieve  interoperability  of  its  IM  offerings  498  and  others'  IM  offerings.  Such  reports  will  be  placed  on  public  notice  for  comment.  Any  confidential  or  proprietary
 information  contained  in  the  reports  may  be  submitted  to  the  Commission  pursuant  to  the  terms  of  the  protective  order  in  this  proceeding.
 198.  Enforcement.  The  Commission  shall  retain  jurisdiction  over  the  licensees  or  their  successors  for  the  purpose  of  enforcing  the  terms  of  this  condition,  for  a  period  not  to  exceed  five  years.
 The  terms  of  this  condition  shall  be  enforced  pursuant  to  the  Commissions  powers  under  the  Communication  Act.  Any  party  to  the  Order,  or  their  successor  in  interest,  may  petition  this  Commission
 at  any  time  for  relief  from  the  condition  on  offering  AIHS  video  services  imposed  pursuant  to  this  Order.
 199.  In  the  event  that  any  person  wishes  to  bring  to  us  a  dispute  about  AOLs  compliance  with  our  condition,  we  shall  require  that  the  following  procedures  be  followed.  These  procedures  are  designed
 to  resolve  any  disputes  within  sixty  (60)  days  of  the  first  filing.  Within  twenty  (20)  days  after  public
 498  Within  "its  IM  offerings,"  we  include  the  IM  offered  as  part  of  AOL's  basic  proprietary  Internet  access  service,
 AIM,  ICQ,  any  IM  that  is  sponsored  by  AOL  Time  Warner  and  is  included  in  Road  Runner,  and  any  new  IM-  based  service  that  uses  the  NPD  that  AOL  uses  for  its  IM.
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 notice  is  given  of  either  the  filing  of  a  complaint  or  a  showing  by  AOL  Time  Warner,  any  interested  party  shall  file  a  response  (AOL  Time  Warners  answer  to  the  complaint,  another  persons  response  to  AOL
 Time  Warners  alleged  showing).  Within  ten  (10)  days  after  the  filing  of  the  responses,  the  party  that  made  the  first  filing  may  file  its  reply.  499  The  complainant  and  AOL  Time  Warner  shall  each,  with  its
 first  filing,  furnish  a  detailed  report,  technical  or  otherwise,  describing  the  conduct  or  events  that  are  the  subject  of  the  filing.  All  these  filings  shall  be  made  with  the  Commission  Secretary  and  shall  be
 concurrently  served  on  the  Chief,  Cable  Services  Bureau.  500  The  complaint  or  showing,  as  the  case  may  be,  shall  be  dismissed  or  sustained  within  sixty  (60)  days  of  its  filing.
 200.  Sunset.  Five  (5)  years  after  the  date  of  release  of  this  Order,  the  condition  set  forth  in  the  preceding  paragraphs  shall  expire  and  shall  not  restrain  AOL  Time  Warner  from  offering  video  AIHS.
 C.  Video  Programming
 201.  In  this  section,  we  consider  the  proposed  mergers  impact  on  video  programming  sold  by  program  networks  to  MVPDs,  who  then  deliver  the  networks  via  their  distribution  systems  to  their
 subscribers  television  sets.  MVPDs  include  cable,  DBS,  multichannel  multipoint  distribution  services  (  MMDS),  and  satellite  master  antenna  television  (  SMATV)  providers.  501
 202.  Companies  that  own  programming  networks  produce  their  own  programming  and/  or  acquire  programming  produced  by  others,  then  package  this  programming  for  sale  to  MVPDs.  As
 discussed  above,  Time  Warner  has  ownership  interests  in  a  large  number  of  programming  networks,  such  as  CNN,  TBS,  HBO,  Comedy  Central  and  Court  TV,  among  others.
 203.  We  examine  below  whether  the  merger  will  create  public  interest  harms  with  respect  to  electronic  programming  guides  (  EPGs),  the  carriage  of  analog  and  digital  video  signals,  or  AOL  Time
 Warners  post-  merger  ownership  interest  in  DirecTV,  the  nations  largest  DBS  provider.  We  conclude  that  the  merger  will  not  result  in  a  violation  of  the  Communications  Act  or  Commission  rules,  nor  will  it
 interfere  with  our  implementation  of  the  Communications  Act  or  the  Commissions  policy  objectives.  Accordingly,  we  reject  commenters  requests  that  we  impose  conditions  related  to  video  programming.
 1.  Electronic  Programming  Guides
 204.  EPGs  are  on-  screen  directories  of  programming  delivered  through  various  means,  including  cable  plant,  telephone  lines,  and  over-  the-  air  broadcast  signals.  Original-  generation  EPGs  are
 not  interactive,  but  rather  continually  scroll  programming  listings.  These  EPGs  are  generally  delivered  as  discrete  video  programming  channels.  Newer,  interactive  EPGs,  however,  allow  users  to  sort  and  search
 programming,  give  program  descriptions,  provide  reminders  of  upcoming  programming,  and  take  users  to
 499  Cf.  47  C.  F.  R.    76.  7
 500  See  para.  126F,  supra.
 501  See  1999  Competition  Report,  15  FCC  Rcd  at  980    3  (generally  describing  the  various  types  of  MVPDs)
 (Section  628(  g)  of  the  Communications  Act,  47  U.  S.  C.    548(  g),  requires  the  Commission  to  report  annually  to  Congress  on  the  status  of  competition  in  markets  for  the  delivery  of  video  programming).  DBS  operators  provide
 programming  via  satellite  to  subscribers  that  own  or  lease  small-  diameter  receiving  dishes.  MMDS  providers  offer  programming  via  microwave  facilities  (the  service  is  often  referred  to  as  wireless  cable  service).  SMATV
 operators,  also  known  as  private  cable  operators,  also  frequently  use  microwave  facilities  to  transmit  programming  to  subscribers  without  crossing  public  rights-  of-  way.  SMATV  subscribers  usually  reside  in  multiple
 dwelling  units  (  MDUs).
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 programming  they  select.  Interactive  EPGs  can  be  transmitted  via  the  Vertical  Blanking  Interval  (  VBI)  502  of  analog  channels,  or  may  be  transmitted  as  standalone  digital  data  streams.  The  purchasers
 of  EPGs  are  MVPDs  such  as  cable  and  DBS  operators,  and,  potentially,  through  set-  top  boxes,  individual  consumers.  503  The  sellers  of  EPGs  are  EPG  companies.  504  Gemstar,  the  current  market  leader  in  the
 provision  of  EPGs,  has  contracted  with  AT&  T  for  provision  of  EPGs  on  AT&  T  cable  systems.  505  Gemstar  also  has  an  agreement  with  AOL  to  provide  electronic  program  guide  functions  for  AOLTV.  506
 205.  Gemstar  argues  that,  although  it  has  no  complaint  regarding  AOL,  Time  Warner  has  engaged  in  anticompetitive  conduct  by  blocking  subscriber  access  to  Gemstars  Guide  Plus+  EPG.  507  The
 Guide  Plus+  EPG  conveys  programming  information  to  consumers  without  a  monthly  service  charge  and  without  the  need  for  set  top  boxes  or  other  devices.  508  According  to  Gemstar,  Guide  Plus+  works
 only  when  the  television  can  receive  updated  programming  information  transmitted  via  the  vertical  blanking  interval  of  local  television  broadcast  stations.  509  Gemstar  states  that  Time  Warner  strips  out  the
 EPG  data  in  the  VBI,  rendering  Guide  Plus+  useless  to  many  potential  consumers.  510  Prior  to  the  start  of  this  proceeding,  Gemstar  filed  a  petition  for  special  relief  with  the  Commission  regarding  Time  Warners
 502  Newtons  Telecom  Dictionary  (11  th  Ed.  1996)  defines  the  VBI  as:
 The  interval  between  television  frames  in  which  the  picture  is  blanked  to  enable  the  trace  (which  paints  the  screen)  to  return  to  the  upper  left  hand  corner  of  the  screen,  from  where  the  trace
 starts,  once  again  to  paint  a  new  screen.
 This  time  period  is  the  equivalent  of  21  scanning  lines.  The  VBI  is  used  to  transmit  data  to  organize  the  television  picture,  as  well  as  other  data.  Line  21  of  the  VBI  is  reserved  for  distribution  of  closed  captioning  information.  See
 Closed  Captioning  and  Video  Description  of  Video  Programming,  Implementation  of  Section  305  of  the  Telecommunications  Act  of  1996,  Video  Programming  Accessibility,  Report,  MM  Docket  No.  95-  176,  11  FCC  Rcd
 19214  (1996).  503
 Some  set-  top  boxes  and  television  sets  will  have  EPGs  embedded  within  them.  504
 In  addition,  some  ITV  providers  may  provide  interactive  EPGs  as  part  of  their  ITV  service.  EPG  companies  include  Gemstar,  WorldGate  (who  provides  TV  Gateway  for  WorldGate  subscribers)  and  Liberate  Tribune.
 505  We  note  that  on  July  11,  2000,  Gemstar  and  TV  Guide,  Inc.  announced  the  completion  of  their  merger,  in  which  TV
 Guide,  Inc.  will  become  a  wholly  owned  subsidiary  of  Gemstar.  TV  Guide,  Inc.,  Gemstar  International  Group  Limited  and  TV  Guide,  Inc.  Announce  Completion  of  Their  Merger  (press  release)  July  11,  2000.  In  addition,  in  October  2000,
 News  Corp.  increased  its  ownership  interest  in  Gemstar-  TV  Guide  to  43%  by  acquiring  AT&  Ts  Liberty  Media  Groups  21%  ownership  interest.  As  part  of  this  same  transaction,  AT&  Ts  Liberty  Media  Group  will  increase  its
 ownership  interest  in  News  Corp.  to  18%  from  8%.  Ronald  Grover,  What  Does  John  Malone  Really  Want?,  BUSINESS  WEEK,  Oct.  9,  2000,  at  1.
 506  TV  Guide,  Inc.,  Gemstar  International  Group  Limited  and  TV  Guide,  Inc.  Announce  Completion  of  Their  Merger
 (press  release),  July  11,  2000.  507
 Gemstar  Comments  at  3.  508
 Id.  509
 Id.  510
 Id.  Time  Warner  stated  recently  that  it  has  ceased  this  practice  (see  letter  from  Marc  Apfelbaum,  Senior  Vice  President  and  General  Counsel,  Time  Warner  Cable,  to  Stephen  Weiswasser,  Executive  Vice  President  and  General
 Counsel,  Gemstar  Development  Corp,  dated  June  15,  2000).  However,  we  note  that  Gemstar  indicates  that  Time  Warners  current  decision  to  refrain  from  stripping  EPG  data  does  not  alleviate  its  overall  concerns,  characterizing
 Time  Warners  actions  as  a  temporary  cease  fire.  See  Letter  from  Gerald  J.  Waldron  and  Jennifer  A.  Johnson,  Counsel  for  Gemstar-  TV  Guide  International,  Inc.,  to  Magalie  Roman  Salas,  Secretary,  FCC,  dated  January  4,  2001.
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 actions.  511  Gemstar  states  that  it  is  taking  the  additional  step  of  filing  in  this  proceeding  because  it  believes  Time  Warners  past  conduct  with  respect  to  Gemstar  illustrates  Time  Warners  lack  of
 commitment  to  open  access  for  content,  including  EPGs.  512  As  a  result,  Gemstar  asks  that  the  Commission  impose  conditions  on  the  merger  to  ensure  that  Time  Warner  will  keep  its  systems  open  to
 competitive  content  and  service  providers.  513
 206.  In  response  to  Gemstars  comments,  the  Applicants  state  that  this  merger  is  not  the  appropriate  forum  to  litigate  EPG  issues.  514  The  Applicants  assert  that  the  special  relief  proceeding
 initiated  by  Gemstar  is  the  proper  place  to  issue  a  determination  on  the  EPG  dispute.  515
 207.  Gemstar  has  not  shown  that  the  merger  is  likely  to  create  or  exacerbate  competitive  harm.  Its  dispute  with  Time  Warner  predates  the  merger  announcement.  Moreover,  Gemstars  arguments  are
 being  fully  considered  in  the  context  of  its  petition  for  special  relief  asking  that  Time  Warner  cease  stripping  out  the  Guide  Plus+  data,  and  we  find  that  it  would  be  inappropriate  to  address  them  here.  516
 We  therefore  decline  Gemstars  additional  request  for  conditions  on  the  proposed  AOL  Time  Warner  merger.  Furthermore,  we  note  that  the  Commission  has  committed  to  monitor  developments  with  respect
 to  the  availability  of  electronic  programming  guides  to  determine  whether  any  action  is  appropriate  in  the  future.  517  Finally,  the  Commission  has  requested  comment  in  a  pending  rulemaking  proceeding  on
 whether  any  rules  are  necessary  to  ensure  fair  competition  between  EPGs  controlled  by  cable  operators  and  those  that  are  controlled  by  broadcasters.  518
 511  See  In  re  Petition  for  Special  Relief  of  Gemstar,  CSR-  5528-  Z  (filed  Mar.  16,  2000).
 512  Gemstar  Comments  at  4.
 513  Id.  at  7.  See  also  NAB  May  19  Ex  Parte  at  2-  3;  NAB  Oct.  2  Ex  Parte  at  1-  3.
 514  Applicants  Reply  Comments  at  52.
 515  Id.  at  53.  See  also  Letter  from  Daniel  L.  Brenner,  National  Cable  Television  Association  (  NCTA)  to  William
 E.  Kennard,  Chairman,  FCC,  dated  May  36,  2000  (  NCTA  May  26  Ex  Parte),  transmitted  by  letter  from  Daniel  L.  Brenner  to  Magalie  Roman  Salas,  Secretary,  FCC,  dated  May  26,  2000.
 516  See  In  re  Petition  for  Special  Relief  of  Gemstar,  CSR-  5528-  Z  (filed  March  16,  2000).  Gemstar  states  that  it
 incorporates,  by  reference,  its  comments  from  the  special  relief  proceeding  regarding  Time  Warners  refusal  to  carry  EPG-  related  data  in  the  vertical  blanking  interval  of  a  television  broadcast  signal.  In  that  proceeding,  Gemstar
 argued  the  following  points:  (1)  Time  Warners  actions  violate  the  Commissions  rules  and  policies  requiring  mandatory  carriage  of  all  program-  related  material  accompanying  a  broadcast  signal  that  has  must  carry  rights;  (2)
 Time  Warner  is  impeding  the  retail  availability  of  competing  navigation  devices;  and  (3)  Time  Warners  actions  are  contrary  to  other  Commission  rules  and  policies.  The  Commission  is  also  currently  engaged  in  a  proceeding  to
 review  the  effectiveness  of  the  navigation  devices  rules  and  to  consider  whether  any  changes  are  necessary.  See  Implementation  of  Section  304  of  the  Telecommunications  Act  of  1996,  Commercial  Availability  of  Navigation
 Devices,  CS  Docket  No.  97-  80,  Further  Notice  of  Proposed  Rulemaking  and  Declaratory  Ruling,  FCC  00-  341  (rel.  Sept.  18,  2000).  See  also  In  re  Carriage  of  the  Transmission  of  Digital  Television  Broadcast  Stations,  CS  Docket
 No.  98-  120,  Notice  of  Proposed  Rulemaking,  13  FCC  Rcd  15092,  15129    82  (1998).  517
 Implementation  of  Section  304  of  the  Telecommunications  Act  of  1996,  Commercial  Availability  of  Navigation  Devices,  CS  Docket  No.  97-  80,  Report  and  Order  (  Navigation  Devices  Order),  13  FCC  Rcd  14775,  14820    116
 (1998).  518
 In  re  Carriage  of  the  Transmission  of  Digital  Television  Broadcast  Stations,  CS  Docket  No.  98-  120,  Notice  of  Proposed  Rulemaking,  13  FCC  Rcd.  15092,  15129    82  (1998).
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 2.  Broadcast  Signal  Carriage  Issues
 208.  The  National  Association  of  Broadcasters  (  NAB)  and  other  broadcast  groups  are  concerned  about  the  impact  of  the  proposed  merger  on  Time  Warners  carriage  of  analog  and  digital
 television  signals.  519  Specifically,  NAB  urges  the  Commission  to  prohibit  AOL  Time  Warner  from  blocking  access  to  any  part  of  a  broadcast  signal  that  consumers  could  receive  free  over-  the-  air,  such  as
 electronic  program  guide  information.  520  NAB  also  requests  that  the  Commission  require  AOL  Time  Warner  to  carry  the  digital  broadcast  signals  of  local  television  stations  on  its  upgraded  cable  systems.  521
 In  response,  the  National  Cable  Television  Association  (  NCTA)  asserts  that  the  issues  raised  by  NAB  are  not  merger-  specific,  but  rather  apply  to  all  cable  operators.  522  Time  Warner  states  that  it  has
 negotiated  retransmission  consent  agreements  providing  for  carriage  of  both  analog  and  digital  signals  with  each  of  the  four  major  television  networks  (ABC,  CBS,  FOX,  and  NBC).  523  According  to  Time
 Warner,  these  agreements  also  serve  as  templates  for  stations  affiliated  with,  but  not  owned  by,  any  of  the  four  television  networks.  524
 209.  The  record  does  not  indicate  that  the  merger  will  create  or  enhance  AOL  Time  Warners  ability  or  incentive  to  refuse  carriage  of  broadcasters  signals.  We  cannot  conclude,  therefore,  that  the
 merger  would  create  any  public  interest  harm  in  this  regard.  Moreover,  the  issues  raised  by  the  broadcasters  are  already  under  consideration  in  pending  Commission  proceedings  of  general  applicability.
 The  conditional  requirements  suggested  by  NAB  should  be  addressed  in  those  proceedings,  and  not  within  the  confines  of  the  merger  analysis.  As  NCTA  points  out,  the  issues  raised  by  the  broadcasters
 affect  all  cable  operators  and  not  only  Time  Warner.  We  arrived  at  a  similar  conclusion  in  the  AT&  T-TCI  merger,  525  where  NAB  also  requested  digital  broadcast  signal  carriage  as  a  merger  condition.  We
 find  no  reason  to  depart  from  Commission  precedent  in  this  case.  Insofar  as  NABs  concerns  about  the  carriage  of  all  components  of  the  free  analog  broadcast  signal  are  directed  at  EPG  data  carried  on  the
 broadcasters  VBI,  we  note  that  this  particular  matter  will  be  addressed  in  the  Gemstar  special  relief
 519  See  NAB  May  19  Ex  Parte  at  1-  6;  MSTV  Reply  Comments  at  1-  2;  Sinclair  Comments;  Disney  Reply  Comments
 at  18-  19;  Disney  July  25  Ex  Parte  at  35-  37;  Freedom  Broadcasting  Reply  Comments.  520
 NAB  May  19  Ex  Parte  at  2;  MSTV  Reply  Comments  at  2;  Disney  Reply  Comments  at  18-  19.  We  note  that  MSTV,  Disney,  and  Sinclair  have  requested  similar  conditions  as  part  of  the  merger  approval  process.  See  MSTV
 Reply  Comments  at  1  (requesting  conditions  that  would  prohibit  AOL  Time  Warner  from  discriminating  against  the  programming,  navigation  devices  and  other  services  delivered  through  the  broadcast  signal  for  free);  Disney
 Reply  Comments  at  19  (requesting  a  condition  that  requires  AOL  Time  Warner  to  pass  through  unaltered  all  the  free  bits  of  broadcasters);  Sinclair  Comments  at  2  (  The  Commission  should  prohibit  AOL  Time  Warner  from
 degrading  or  blocking  subscriber  access  to  any  part  of  the  digital  broadcast  signal  that  could  be  received  free  over-the-  air.).
 521  NAB  states  that  the  Applicants  request  for  approval  of  the  merger  based  on  assertions  that  the  combined  entity  will
 speed  the  construction  of  digital  broadband  platforms  provides  a  separate  basis  for  the  Commission  to  require  carriage  of  digital  broadcast  signals  on  its  systems.  See  NAB  May  19  Ex  Parte  at  5.  See  also  MSTV  Reply  Comments  at  6
 (  specific  and  enforceable  conditions  must  be  placed  on  AOL  Time  Warner  to  protect  the  publics  access  to  all  of  the  digital  offerings  broadcast  stations  would  deliver  to  consumers  free  of  charge.).
 522  See  NCTA  May  26  Letter  at  2.
 523  See  Applicants  First  Response  at  6.
 524  Time  Warner  adds  that,  in  fact,  negotiations  with  other  major  television  group  owners  are  underway.  Id.
 525  See  AT&  T-  TCI  Order,  15  FCC  Rcd  at  3183    43.
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 proceeding,  where  the  issues  have  been  fully  briefed  and  discussed.  526  The  carriage  of  digital  broadcast  signals  by  Time  Warner  and  other  cable  operators  is  being  considered  in  a  pending  rulemaking
 proceeding  specifically  addressing  digital  must-  carry  issues.  527  The  conclusions  we  reach  in  that  docket  will,  of  course,  apply  to  Time  Warner  as  well  as  all  other  cable  operators.  Accordingly,  we  reject
 commenters  requests  that  we  impose  remedial  conditions  on  AOL  Time  Warner  in  this  proceeding.
 3.  Cable  Horizontal  Ownership  Rules
 210.  Commenters  assert  that  AOLs  indirect  ownership  interest  in  DirecTV,  coupled  with  Time  Warners  cable  holdings,  would  give  the  merged  entity  excessive  purchasing  power  in  the  video
 programming  market  such  that  it  could  harm  video  programmers  and  MVPD  competitors.  528  We  analyze  below  the  potential  harm  that  the  merger  may  cause  in  the  video  programming  market.  We  examine
 specifically  the  question  whether  the  merger  would  violate  the  Commissions  cable  horizontal  ownership  rules,  529  which  we  adopted  pursuant  to  a  statutory  directive.  530  We  find  that  AOLs  ownership  interest  in
 GM  does  not  violate  our  horizontal  ownership  rules  or  the  statute,  nor  does  it  frustrate  the  implementation  of  the  Communications  Acts  goals.
 211.  In  1999,  AOL  made  a  $1.5  billion  investment  in  General  Motors  Corporation  (  GM)  in  exchange  for  2,669,633  shares  of  a  type  of  GM  Preference  Stock  (  Preference  Stock).  531  General
 Motors  invested  this  money  in  its  wholly  owned  subsidiary,  Hughes  Electronics  Corporation  (  Hughes),  which  in  turn  wholly  owns  DirecTV,  a  direct  broadcast  satellite  (  DBS)  company  that  provides
 multichannel  video  programming  to  approximately  8.3  million  consumers  nationwide.  532  Several  commenters  argue  that  AOLs  investment  in  GM  gives  AOL  the  ability  to  influence  DirecTV  and
 DirecTVs  video  programming  purchasing  decisions.  533  Given  that  Time  Warner  is  the  second  largest  cable  operator  in  the  nation,  these  commenters  argue  that  the  proposed  merger  would  increase  the  merged
 firms  size  as  a  multichannel  video  distribution  provider  (  MVPD).  Commenters  contend  that  this  larger,  combined  MVPD  would  have  excessive  purchasing  power  over  suppliers  of  video  programming,
 thereby  harming  suppliers  of  video  programming  and  MVPD  competitors  of  AOL  Time  Warner  seeking
 526  See  In  re  Petition  for  Special  Relief  of  Gemstar,  CSR-  5528-  Z  (filed  March  16,  2000).  See  also  Navigation
 Devices  Order,  13  FCC  Rcd  at  14820    116.  527
 See  In  re  Carriage  of  the  Transmission  of  Digital  Television  Broadcast  Stations,  CS  Docket  No.  98-  120,  Notice  of  Proposed  Rulemaking,  13  FCC  Rcd  15092,  15129    82  (1998).  We  note  that  Sinclair  also  argues  that  the
 Commission  should  ensure  that  consumers  have  access  to  free  over-  the-  air  digital  broadcast  signals  via  antennas  and  that  the  Commission  should  adopt  the  COFDM  digital  broadcast  standard.  Sinclair  Comments  at  3.  We  find  that  these
 matters  are  not  linked  in  any  way  to  either  the  merger  or  the  broadcast  carriage  issues  generally  presented  by  the  parties.  These  matters  are  more  appropriately  dealt  with  in  the  Commissions  periodic  review  of  the  digital  television
 transition.  See  In  the  Matter  of  Review  of  the  Commissions  Rules  and  Policies  Affecting  the  Conversion  to  Digital  Television,  Notice  of  Proposed  Rulemaking,  MM  Docket  No.  00-  39,  FCC  00-  83  (rel.  Mar.  8,  2000).
 528  See  ACA  Comments  at  1.
 529  47  C.  F.  R.    76.503.
 530  See  Section  613(  f)(  1)(  A)  of  the  Communication  Act  of  1934,  as  amended;  Cable  Television  Consumer  Protection
 and  Competition  Act  of  1992    11(  c);  47  U.  S.  C.    533(  f)(  1)(  A).  531
 See  Applicants  March  21  Supplemental  Information  at  11-  12  n.  15.  532
 See  Id.  at  10-  11.  533
 See,  e.  g.,  RCN  Comments  at  6-  7.
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 access  to  the  programming.  534  Accordingly,  the  commenters  request  that  the  Commission  require  AOL  to  divest  its  interest  in  GM  as  a  merger  condition.  535
 212.  In  Section  613(  f)(  1)(  A)  of  the  Communication  Act,  as  amended,  Congress  directed  the  Commission  to  place  limits  on  a  cable  operators  size.  536  Congress  was  concerned  that  concentration  in
 the  cable  industry  could  pose  barriers  to  entry  for  new  programmers  and  a  reduction  in  the  number  of  media  voices  to  consumers.  537  Therefore,  Congress  directed  the  Commission  to  establish  a  horizontal
 ownership  limit  that  would  prevent  a  large  cable  operator  from  using  its  size  to  harm  video  programmers  and  MVPD  competitors  by  virtue  of  its  purchasing  power.  538  Pursuant  to  this  directive,  the  Commission
 promulgated  a  rule  limiting  a  cable  operator  to  30%  of  the  nations  MVPD  subscribers.  539  The  30%  limit  takes  into  account  the  ability  of  a  cable  operator  either  because  of  its  size  .  .  .  or  because  of  joint  actions
 by  a  group  of  operators  of  sufficient  size  to  unfairly  impede  the  flow  of  programming  from  the  video  programmer  to  the  consumer.  540
 213.  The  Commission  established  rules  (the  attribution  rules)  that  determine  whether  a  cable  operator  has  sufficient  influence  or  control  over  an  MVPD  such  that  the  MVPDs  subscribers  should
 count  towards  the  cable  operators  30%  limit.  541  Under  these  rules,  AOLs  Preference  Stock  is  not  attributable  because  nonvoting  equity  is  not  attributable  unless  the  nonvoting  equity  is  worth  more  than
 33%  of  the  total  assets  of  the  MVPD,  which  is  not  the  case  here.  542  The  only  possible  attribution  rule  that  could  be  invoked  here  is  one  that  is  triggered  when  a  cable  operator  holds  5%  or  more  of  the  MVPDs
 voting  equity.  543  However,  even  if  AOLs  Preference  Stock  were  converted  to  voting  equity,  it  would  constitute  approximately  1.76%  of  GMs  voting  equity,  well  below  the  5%  voting  equity  threshold.  544
 Thus,  under  our  attribution  rules,  AOL  does  not  have  an  interest  in  GM  and  its  subsidiary  DirecTV  which  would  de  jure  deem  AOL  to  have  influence  and  control  over  DirecTV  and  its  purchasing  decisions.
 214.  Nevertheless,  RCN  argues  that  the  Commission  should  examine  the  totality  of  the  circumstances  of  the  AOL  and  DirecTV  relationship  to  determine  whether  AOL  has  the  actual  ability  to
 influence  or  control  DirecTV.  545  In  our  order  establishing  the  attribution  rules,  we  declined  to  examine  contract  language  on  a  case-  by-  case  basis  to  determine  whether  the  contract  gives  one  of  the  parties
 534  See  RCN  Comments  at  6-  8;  ACA  Comments  at  13-  14;  Consumers  Union  Comments  at  157.
 535  See  ACA  Comments  at  13-  14;  Consumers  Union  Comments  at  157;  Consumers  Union  Reply  Comments  at  6.
 536  See  47  U.  S.  C.    533(  f)(  1)(  A).
 537  Cable  Act    2(  a)(  4);  47  U.  S.  C.    521  note.
 538  See  47  U.  S.  C.    533(  f)(  2)(  A)&(  B).
 539  See  47  C.  F.  R.    76.  503.
 540  See  In  re  Implementation  of  Section  11(  c)  of  the  Cable  Television  Consumer  Protection  and  Competition  Act  of
 1992:  Horizontal  Ownership  Limits,  MM  Docket  No.  92-  264,  Third  Report  and  Order  (  Horizontal  Third  Report  and  Order),  14  FCC  Rcd  19098,  19114-  19116    39-  43  (1999).
 541  See  47  C.  F.  R.    76.  503  n.  2.
 542  See  47  C.  F.  R.    76.  503  n.  2;  47  C.  F.  R.    76.  501  n.  2(  i).
 543  See  47  C.  F.  R.    76.  503  n.  2;  47  C.  F.  R.    76.  501  n.  2(  a).
 544  See  Applicants  March  21  Supplemental  Information  at  14.
 545  RCN  Comments  at  7  n.  25.
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 thereto  an  attributable  interest.  546  However,  the  Commission  reserved  discretion  to  review  unique  cases  where  there  is  substantial  evidence  that  the  combined  interests  held  are  so  extensive  that  they  raise  an
 issue  of  significant  influence.  547  We  do  not  find  that  this  case  presents  unique  facts  that  would  merit  such  a  review.
 215.  RCN  argues  that  AOLs  investment  in  GM  has  led  to  a  high  degree  of  cooperation,  including  the  launch  of  AOLTV  for  DirecTV  and  an  integrated  AOLTV-  DirecTV  set-  top  box.  548  We  also
 note  that  AOL  and  DirecTV  have  a  number  of  other  contracts  relating  to  DirecTV,  DirecPC  and  AOLs  ISP  services.  549  Nonetheless,  our  review  of  these  contracts  does  not  reveal  that  they  confer  on  AOL
 significant  influence  over  DirecTVs  video  programming  activities.  Therefore,  we  reject  the  arguments  of  commenters  that  AOLs  ownership  interest  in  GM  will  enable  the  merged  firm  to  harm  video  program
 suppliers  and  MVPD  competitors  seeking  access  to  these  suppliers.
 D.  Interactive  Television  Services
 216.  In  this  section  we  consider  whether  the  merger  will  harm  consumers  or  competition  with  respect  to  the  provision  of  interactive  television  (  ITV)  services  in  Time  Warners  cable  system  service
 areas.  Two  objectives  of  the  Communications  Act  appear  to  be  relevant  to  the  provision  of  ITV  services.  First,  the  Commission  has  the  responsibility  to  ensure  that  cable  communications  provide  the  widest
 possible  diversity  of  information  sources  and  services  to  the  public.  550  Second,  the  Commission  is  charged  with  ensuring  the  rapid,  private  deployment  of  advanced  services.  551  As  discussed  in  our  analysis
 546  See  In  re  Implementation  of  the  Cable  Television  Consumer  Protection  and  Competition  Act  of  1992;
 Implementation  of  Cable  Reform  Act  Provisions  of  the  Telecommunications  Act  of  1996:  Review  of  the  Commissions  Cable  Attribution  Rules,  CS  Docket  Nos.  98-  82,  96-  85,  Report  and  Order  (  Attribution  Order),  14
 FCC  Rcd  19014,  19050    92  (1999)  ([  A]  bright-  line  .  .  .  test  is  superior  to  a  case-  by-  case  analysis  because  it  permits  the  planning  of  financial  transactions  and  minimizes  regulatory  costs.).
 547  Id.  at  19050-  51    92.
 548  RCN  Comments  at  6-  7.
 549  See  Confidential  Appendix  at  Section  IV-  C-  1.
 550  See  47  U.  S.  C.    521(  4)  (purpose  of  Title  VI,  Cable  Communications,  of  the  Act  is  to  assure  that  cable
 communications  provide  and  are  encouraged  to  provide  the  widest  possible  diversity  of  information  sources  and  services  to  the  public);  47  U.  S.  C.    532(  a),  (g)  (  diversity  of  information  sources);  see  also  Turner  Broadcasting
 System,  Inc.  v.  FCC,  512  U.  S.  622,  663  (1994)  (quoting  United  States  v.  Midwest  Video  Corp.,  406  U.  S.  649,  668  n.  27  (1972));  Review  of  the  Commissions  Regulations  Governing  Television  Broadcasting,  Television  Satellite
 Stations  Review  of  Policy  and  Rules,  MM  Docket  No.  91-  221,  MM  Docket  No.  87-  8,  Report  and  Order,  14  FCC  Rcd  12903,  12910-  12916  (1999);  Red  Lion  Broadcasting  Co.  v.  FCC,  395  U.  S.  367,  390  (1969)  (  It  is  the  purpose
 of  the  First  Amendment  to  preserve  an  uninhibited  marketplace  of  ideas  in  which  truth  will  ultimately  prevail,  rather  than  to  countenance  monopolization  of  that  market,  whether  it  be  by  the  Government  itself  or  a  private  licensee.);
 Turner  Broadcasting,  512  U.  S.  at  657  (emphasizing  that  [  t]  he  potential  for  abuse  of  this  private  power  over  a  central  avenue  of  communication  cannot  be  overlooked.  The  First  Amendments  command  that  government  not
 impede  the  freedom  of  speech  does  not  disable  the  government  from  taking  steps  to  ensure  that  private  interests  not  restrict,  through  physical  control  of  a  critical  pathway  of  communication,  the  free  flow  of  information  and  ideas.).
 We  also  note  that  IM  Unified  argues  that  the  Commission  has  jurisdiction  over  ITV  because  it  is  a  cable  service.  See  Tribal  Voice  and  iCast  Sept.  5  Letter  at  31.  Because  we  do  not  impose  any  conditions  with  regard  to  ITV,  we
 need  not  resolve  here  the  question  of  our  authority  to  do  so.  However,  we  address  this  issue  in  our  ITV  NOI  proceeding.  See  ITV  NOI,  FCC  01-  15.
 551  See  AT&  T-  MediaOne  Order,  15  FCC  Rcd  at  9821    11;  WorldCom-  MCI  Order,  13  FCC  Rcd  at  18030-  3    9;  see
 also  47  U.  S.  C    254;  Telecommunications  Act  of  1996  (  1996  Act),  Pub.  L.  104-  104,  Title  VII,    706,  Feb.  8,  (continued)
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 of  public  interest  benefits,  552  AOL  and  Time  Warner  bring  together  assets  that  could  engender  a  successful  launch  of  ITV.  AOL  is  the  worlds  largest  aggregator  of  Internet  content  and  interactive
 services,  and  Time  Warner  is  the  nations  second  largest  cable  operator  and  owner  of  a  significant  number  of  the  nations  most  popular  cable  programming  networks.  553
 217.  We  examine  below  whether  the  merged  entity  will  have  the  ability  and  the  incentive  to  engage  in  behavior  that  would  likely  cause  public  interest  harms  with  respect  to  ITV.  We  find  that  AOL
 Time  Warner  would  have  the  potential  ability  to  use  its  combined  control  of  cable  system  facilities,  video  programming  and  the  AOLTV  service  to  discriminate  against  unaffiliated  video  programming  networks
 in  the  provision  of  ITV  services.  We  also  find  that  AOL  Time  Warner  may  have  incentives  to  engage  in  such  discriminatory  behavior.  Nevertheless,  even  if  AOL  Time  Warner  were  to  discriminate,  it  appears
 that  the  terms  of  the  FTC  Consent  Agreement  554  will,  at  present,  substantially  address  concerns  about  the  availability  of  alternatives  for  the  distribution  of  unaffiliated  video  programming  networks  ITV  services.
 Therefore,  we  conclude  that  discrimination  by  the  merged  entity  is  not  likely  to  cause  a  public  interest  harm  that  warrants  denial  of  the  merger  or  the  imposition  of  conditions  that  do  not  apply  industry-  wide.
 Though  we  are  unpersuaded  a  case  has  been  presented  on  this  record  of  merger-  specific  harm,  we  do  believe  important  questions  have  been  raised  that  warrant  further  examination  in  a  proceeding  of  general
 applicability.  In  the  ITV  NOI,  we  will  consider  whether  industry-  wide  rules  are  needed  to  address  any  impediments  to  the  development  of  ITV  services  and  markets.  555
 1.  Background
 a.  The  Components  of  ITV  Service
 218.  Given  the  infancy  of  this  market  and  the  limited  record  before  us,  it  would  be  imprudent  to  endorse  a  comprehensive  definition  of  ITV  services.  At  present,  however,  such  services  appear  to
 include  EPGs,  556  content  that  permits  the  viewer  to  interact  with  the  video  signal  (  interactive  content),  time  shifting,  and  the  overlay  of  communications  services  (chat,  e-  mail  and  instant  messaging)
 functionality  onto  video  programming  provided  by  a  programming  network  (such  as  TBS  or  AMC).  557
 (  continued  from  previous  page)  1996,  110  Stat.  153,  reproduced  in  the  notes  under  47  U.  S.  C.    157;  1996  Act  Preamble.
 552  See  Section  V,  infra.  (Analysis  of  Potential  Public  Interest  Benefits).
 553  Time  Warner  owns  three  of  the  five  most  highly  rated  cable  programming  networks,  as  well  as  the  largest  news
 (CNN)  and  pay  networks  (HBO).  Time  Warner  also  has  significant  publishing,  music,  movie  and  broadcasting  holdings.
 554  See  FTC  Consent  Agreement.
 555  See  ITV  NOI,  FCC  01-  15.
 556  We  discuss  the  provision  of  EPG  services  separately,  above.  Original-  generation  EPG  are  not  interactive,  but
 rather  continually  scroll  programming  listings.  Newer,  interactive  EPGs,  however,  allow  users  to  sort  and  search  programming,  give  program  descriptions,  provide  reminders  of  upcoming  programming,  and  transport  users  to
 programming  they  select.  557
 The  ITV  NOI  will  explore  ITV  services  in  more  detail.  For  purposes  of  this  Order,  we  define  ITV  services  to  include  all  of  these  services.
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 Based  on  this  record,  it  appears  that  three  components  558  are  necessary  for  the  delivery  of  high-  speed  ITV  services  to  consumers:
 219.  (1)  a  transmission  system  (preferably  broadband)  for  the  delivery  of  the  video  signal  and  interactive  content  (  transmission  system),
 220.  (2)  an  Internet  connection  with  sufficient  bandwidth  to  provide  a  suitable  interactive  experience,  with  limited  latency  and  optimal  synchroneity  (  Internet  connection),  and
 221.  (3)  a  processing  capability  (e.  g.,  a  stand-  alone  set-  top  box  (  ITV-  STB),  such  as  those  used  by  WebTV  or  AOLTV,  or  a  box  integrated  with  the  cable  or  DBS  set-  top  box,  that  can
 respond  to  interactive  triggers,  integrate  video  and  enhanced  content,  and  display  the  integrated  product  on  a  television  screen.  559
 222.  Transmission  System.  It  appears  that  cable  facilities  provide  the  optimal  platform  for  the  delivery  of  ITV  services.  The  cable  pipeline  can  permit  interactive  content  to  be  delivered  to  the  viewer
 with  the  video  signal,  thereby  ensuring  that  the  video  programming  and  the  interactive  content  achieve  a  high  level  of  synchroneity  when  blended  in  the  ITV-  STB  for  television  viewing.
 223.  A  video  programming  network  may  send  two  types  of  interactive  content  with  its  video  signal,  the  so-  called  trigger  of  interactive  content  and  interactive  content  itself,  both  of  which  could  be
 based  on  the  ATVEF  protocol  or  any  other  protocol.  560  The  trigger  can  appear  as  an  icon  on  a  viewers
 558  The  ITV  NOI  will  explore  these  components  more  closely.
 559  Cable  operators  and  DBS  providers  traditionally  have  supplied  set-  top  boxes  to  their  subscribers,  typically  on  a
 leased  basis,  in  order  that  their  subscribers  may  view  video  programming.  A  stand-  alone  ITV-  STB  will  not,  by  itself,  enable  a  cable  subscriber  to  view  video  programming.  As  discussed  below,  the  first  deployment  of  AOLTV
 involves  a  stand-  alone  ITV-  STB  that  must  be  connected  to  a  cable  or  DBS  set-  top  box  in  order  to  receive  video  programming.  The  ITV-  STB  then  blends  the  video  programming  with  interactive  programming  that  the  ITV-  STB
 receives  from  a  connection  to  the  Internet,  which  is  currently  a  narrowband  dial-  up  connection.  Next-  generation  ITV-  STB  boxes,  the  focus  of  our  analysis,  will  be  integrated  with  the  cable  or  DBS  set-  top  box  so  that  a  consumer
 utilizes  a  single  box  to  receive  both  video  programming  and  interactive  content,  rather  than  two  separate  boxes.  560
 The  Advanced  Television  Enhancement  Forum  (  ATVEF)  has  made  significant  progress  in  standardizing  protocols  for  the  delivery  of  ITV  information  via  the  video  signal.  When  we  refer  to  the  ATVEF  standard  herein,
 we  intend  to  include  other  such  standards  that  may  be  used  as  ITV  technology  develops.  The  ATVEF  Enhanced  Content  Specification  is  a  standard  that  defines  a  common  set  of  requirements  for  the  creation,  transport,  and
 delivery  of  interactive  television.  ATVEF  is  a  cross-  industry  group  comprised  of  the  major  computer  companies,  television  programmers,  technical  platform  providers,  broadcasters,  and  transport  providers.  See
 http:\\  www.  atvef.  com.  The  ATVEF  content  specifications  provide  creators  of  enhanced  television  content  with  a  mandatory  minimum  format  that  will  be  supported  by  ATVEF-  compliant  receivers  such  as  televisions  or  set-  top
 boxes.  By  conforming  to  the  ATVEF  specifications,  a  content  provider  will  be  able  to  provide  enhanced  television  services  to  the  maximum  number  of  receivers.  A  content  provider  who  chooses  to  create  enhanced  content  that  falls
 outside  of  the  ATVEF  specification  must  work  in  conjunction  with  the  manufacturer  of  the  target  receiver  to  enable  the  additional  enhancements.  Some  European  countries  have  deployed  DVB-  MHP,  another  form  of  ITV.  DVB  (the
 umbrella  organization  of  all  companies  taking  part  in  the  launching  of  digital  TV  in  Europe)  developed  the  Multimedia  Home  Platform  (MHP).  MHP  defines  a  protocol  that  content  providers  can  use  to  develop  interactive
 applications.  The  protocol  also  gives  manufacturers  the  ability  to  build  a  universal  set-  top-  box  that  is  compatible  with  a  wide  array  of  video  interactive  services.
 For  analog  video  signals,  the  ATVEF  interactive  content  is  transmitted  in  the  VBI.  For  digital  video  signals,  the  ATVEF  interactive  content  is  transmitted  in  digital  form  in  the  MPEG  digital  video  stream.  MPEG  will
 (continued)
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 television  screen  and  alerts  the  viewer  to  the  availability  of  interactive  content.  When  a  viewer  clicks  on  the  trigger,  the  trigger  requests  the  interactive  content.  When  the  interactive  content  is  sent  with  the  video
 signal,  the  trigger  causes  a  compatible  ITV  set-  top  box  to  display  the  interactive  content  on  the  television  set.  561
 224.  A  high  level  of  synchroneity  is  necessary  for  certain  forms  of  interactivity.  For  example,  synchroneity  would  be  important  if  secondary  audio,  such  as  a  referees  voice,  were  to  be  delivered  with
 the  video  signal  to  a  viewer  watching  a  sporting  event.  By  sending  the  interactive  content  with  the  video  signal  of  the  television  program,  a  cable  operator  ensures  that  the  ITV  set-  top  box  is  able  to  blend  the
 television  program  and  the  interactive  content  seamlessly,  without  the  level  of  latency  associated  with  interactive  content  delivered  via  the  Internet.
 225.  Internet  Connection.  Although  synchroneity  and  latency  difficulties  can  be  avoided  by  sending  some  interactive  content  with  the  video  signal,  the  amount  of  interactive  content  that  may  be
 delivered  with  the  video  signal  might  be  limited  by  the  video  pipelines  bandwidth  or  capacity.  Under  these  circumstances,  where  the  interactive  content  requires  a  large  amount  of  bandwidth  (or  subscriber-specific
 content),  the  ATVEF  trigger  carried  with  the  video  signal  would  direct  the  ITV-  STB  to  obtain  interactive  content  from  the  Internet.  However,  because  the  ATVEF  (or  similar)  interactive  content
 would  be  delivered  via  the  Internet  and  not  via  the  video  signal,  the  video  programming  and  the  interactive  content  would  have  a  lesser  degree  of  synchroneity.  Therefore,  a  high-  speed  two-  way  Internet
 connection,  such  as  a  DSL  or  cable  Internet  connection,  appears  necessary  in  order  to  provide  large  capacity  interactive  content  to  the  viewer  with  minimum  latency.  While  a  narrowband  Internet
 connection,  i.  e.,  a  dial-  up  telephone  connection,  could  enable  an  interactive  experience,  it  cannot  currently  provide  the  speed  and  bandwidth  that  broadband  paths  would  provide.
 226.  The  ITV  Set-  Top  Box.  An  ITV  set-  top  box  is  the  third  necessary  component  for  ITV  services.  The  ITV  set-  top  box  activates  interactive  content  sent  with  the  video  signal  and  blends  it  with
 the  video  program  signal  for  display  on  the  television  set.  As  noted  above,  an  ITV  subscriber  may  also  direct  the  ITV  set-  top  box  to  obtain  additional  interactive  content  (from  the  Internet)  that  is  designed  to
 accompany  the  television  program  viewed  by  the  subscriber.
 b.  AOLTV
 227.  AOL  offers  ITV  services  via  its  AOLTV  set-  top  boxes.  The  AOLTV  service  provides  interactive  television  programming  in  conjunction  with  video  programming  to  create  interactive  television
 channels.  AOLTV  services  also  currently  include  an  EPG  and  most  features  of  AOLs  ISP  service,  such  as  limited  Web  browsing,  e-  mail,  IM,  and  chat.  AOL  has  deployed  its  AOLTV  set-  top  boxes  in  several
 U.  S.  cities,  including  Phoenix,  Sacramento  and  Baltimore,  for  sale  through  Circuit  City  and  other  retailers.  562  To  receive  the  service,  consumers  in  these  cities  must  purchase  an  AOLTV  set-  top  box  and
 subscribe  to  AOLTV  at  a  rate  of  $14.95  per  month  for  current  AOL  ISP  subscribers  or  $24.95  per  month  for  AOLTV  customers  that  do  not  subscribe  to  the  AOL  ISP  service.  563  The  subscriber  need  not  purchase
 (  continued  from  previous  page)  be  discussed  more  fully  in  the  ITV  NOI.
 561  In  the  alternative,  the  interactive  content  might  be  stored  on  the  Internet,  in  which  case  the  trigger  would  direct
 the  ITV  set-  top  box  to  retrieve  the  content  from  the  Internet  and  display  it  on  the  television  set.  562
 America  Online,  Inc.,  AOL  Launches  AOLTV  (press  release),  June  19,  2000,  at  1.  563
 Mindy  Charski,  AOL  Announces  Interactive  TV  for  Eight  Cities,  ZDNET  NEWS,  June  19,  2000  at  http:\\  www.  zdnet.  com  (visited  Oct.  2,  2000).  The  AOLTV  set-  top  box  retails  for  $249.  00.  Id.
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 the  AOL  ISP  service  (or  any  ISP  service)  in  order  to  receive  AOLTV  because  the  interactive  set-  top  box  interfaces  with  the  Internet  directly  using  standard  Internet  Protocol  (  IP).
 228.  At  present,  the  AOLTV  service  can  be  provided  to  both  cable  and  DirecTV  subscribers,  but  utilizes  only  a  narrowband  telephone  connection  to  the  Internet.  The  current  AOLTV  box  is  not
 integrated  into  a  cable  or  DBS  set-  top  box.  Instead,  the  current  AOLTV  box  receives  video  programming  from  a  separate  cable  or  DBS  set-  top  box,  and  receives  two-  way  narrowband  interactive  services  via  a
 telephone  line.  The  AOLTV  box  then  blends  the  interactive  content  and  the  video  programming  for  viewing  on  the  subscribers  television  set.  At  this  time,  the  interactive  triggers,  the  customers  request  for
 interactivity  and  further  interactive  content  are  transported  to  the  subscribers  television  through  the  AOLTV  set-  top  boxs  connection  to  the  Internet.
 229.  AOL  intends  to  upgrade  its  AOLTV  service  to  a  high-  speed  Internet  platform,  using  cable  modems,  DSL,  and  DBS.  564  As  a  preliminary  step,  AOL  may  continue  to  employ  a  stand-  alone
 ITV-  STB  that  connects  to  a  cable  or  DBS  set-  top  box  that  contains  a  high-  speed  cable  modem,  DSL  line,  or  high  speed  DBS  Internet  connection.  565  AOL  states  that  it  will  complete  this  upgrade  by  integrating
 AOLTV  functionality  into  DBS  set-  top  boxes  that  contain  high-  speed  Internet  connections.  566  AOL  has  had  preliminary  discussions  to  incorporate  its  AOLTV  software  into  the  Time  Warner  cable  set-  top  box,
 and  AOL  and  DirecTV  have  entered  into  an  agreement  in  which  Hughes  will  manufacture  a  set  top  box  that  integrates  DirecTV  and  AOLTV.  567  In  addition,  the  Applicants  state  that  AOLTV  will  incorporate
 additional  features  such  as  personal  video  recording  capability  and  more  advanced  interactive  programming,  including  services  that  would  enable  video  programmers  to  use  and  customize  AOLTV
 features  such  as  chat  for  special  television  events.  568
 c.  Other  ITV  Services  and  ITV  Companies
 230.  ITV  services  can  be  offered  directly  to  consumers  by  the  ITV  service  provider  (such  as  AOLTV  or  WebTV)  or  through  a  partnership  between  a  transport  provider  (such  as  a  cable  or  DBS
 operator)  and  an  ITV  provider  (such  as  WorldGate).  When  ITV  services  are  offered  directly  to  consumers,  typically  consumers  must  purchase  a  set-  top  box  and  then  contract  with  an  ITV  provider  for
 service.  When  ITV  services  are  offered  through  partnerships  between  transport  providers  and  ITV  providers,  often  ITV  components  are  integrated  into  the  transport  providers  set-  top  box,  and  the  service
 is  offered  in  addition  to  the  transport  providers  existing  video  services.  These  services  are  then  marketed  by  the  transport  provider  as  a  premium  offering  supplemental  to  its  existing  array  of  services.  ITV
 providers  may,  in  turn,  rely  on  partnerships  with  other  vendors  for  certain  components  of  the  ITV
 564  Applicants  Second  Response  at  5.
 565  Id.  See  also  Ex  Parte  Comments  of  Applicants  (Aug.  25,  2000)  (  Applicants  Aug.  25  Letter),  Attachment  at  2,
 transmitted  by  letter  from  Peter  D.  Ross  on  behalf  of  AOL  and  Time  Warner  to  Magalie  Roman  Salas,  Secretary,  FCC,  dated  Aug.  25,  2000.
 566  Applicants  Second  Response  at  5,  8.  See  also  Ex  Parte  Comments  of  Applicants  (Aug.  22,  2000)  (  Applicants
 Aug.  22  Letter)  at  8,  transmitted  by  letter  from  Peter  D.  Ross  on  behalf  of  AOL  and  Time  Warner  to  Magalie  Roman  Salas,  Secretary,  FCC,  dated  Aug.  22,  2000.
 567  Applicants  Second  Response  at  8;  Bob  Sullivan,  Broadband  from  the  Sky  Tries  Again,  ZDNET  NEWS,  Aug.  26,
 2000  at  http://  www.  zdnet.  com  (visited  Aug.  29,  2000).  See  also  Confidential  Appendix  IV-  C-  1,  Note  1.  568
 Applicants  Second  Response  at  5.
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 product.  AOL,  for  example,  contracts  with  Philips  Electronics  to  build  its  ITV-  STB  and  licenses  software  for  the  ITV-  STB  from  Liberate.  569
 231.  At  this  early  and  fluid  stage  of  the  ITV  market,  there  are  a  growing  number  of  firms  that  now  provide  or  plan  to  provide  ITV  service.  The  types  of  ITV  services  offered  and  the  business  models
 used  by  these  companies  vary  widely.  For  purposes  of  our  analysis,  it  is  useful  to  examine  a  non-exhaustive  sampling  of  existing  ITV  services  and  business  models.
 232.  ITV  Providers.  Microsoft  Corp.  has  approximately  one  million  users  subscribing  to  its  WebTV  product.  570  WebTV  provides  e-  mail  and  Internet  access,  and  also  enables  interactivity  with
 certain  television  programs.  At  present,  WebTV  customers  must  buy  a  separate  ITV-  STB  for  use  in  conjunction  with  the  box  of  their  selected  MVPD  provider,  though  plans  exist  to  integrate  WebTV
 directly  into  MVPD  set-  top  boxes.  For  example,  EchoStars  Dish  Network  set-  top  boxes  will  include  WebTV  Plus,  which  will  provide  additional  features  such  as  on-  line  banking,  shopping,  and  video
 programming  storage.  571  In  addition,  Microsoft,  Thompson  RCA,  and  DirecTV  announced  plans  to  jointly  create  an  integrated  set  top  box  and  service  that  will  combine  DirecTV  satellite  service  and  a  new
 version  of  WebTV  called  Ultimate  TV.  572  The  Ultimate  TV  product  will  include  personal  video  recording,  picture-  in-  picture  viewing  and  the  ability  to  watch  one  program  while  recording  another.  573
 Microsoft  states  that  it  will  also  offer  two-  way  satellite  service  that  allows  downloading  and  uploading  as  rapidly  as  cable  modems  or  DSL.  574
 233.  As  an  ITV  service  provider,  Microsoft  has  also  established  business  relationships  with  several  cable  MSOs  and  interactive  software  providers.  In  1997,  Microsoft  purchased  an  11.  5%  interest
 in  Comcast  Communications,  575  and  in  1999  it  entered  into  an  agreement  to  supply  the  software  for  7.5  million  of  AT&  Ts  planned  10  million  ITV-  STBs,  although  technical  trials  have  since  been  delayed.  576
 Microsoft  recently  acquired  Peach  Networks,  Ltd.,  which  manufactures  software  for  cable  headends  that  enables  more  advanced  programming  to  run  on  existing  set-  top  boxes.  577  Microsoft  has  also  entered  into
 569  Patricia  Fusco,  AOL  Gunning  for  WebTV,  INTERNET.  COM,  June  16,  2000,  at  http://  www.  internet.  com  (visited
 June  19,  2000).  570
 Ex  Parte  Comments  of  Disney,  Attachment  (Aug.  16,  2000)  (  Myers  Group  Report)  at    30,  transmitted  by  letter  from  Preston  R.  Padden,  Executive  Vice  President,  Government  Relations,  Disney,  to  Magalie  Roman  Salas
 Secretary,  FCC,  dated  Aug.  16,  2000.  571
 Id.  572
 Stephanie  Miles,  Microsoft  Partners  on  Interactive  TV  Project,  CNET  NEWS.  COM,  June  12,  2000,  at  http://  www.  news.  cnet.  com  (visited  Aug.  29,  2000).
 573  Id.
 574  Bob  Sullivan,  Broadband  from  the  Sky  Tries  Again,  ZDNET  NEWS,  Aug.  26,  2000,  at  http://  www.  zdnet.  com
 (visited  Aug.  29,  2000).  575
 Howard  Wolinsky,  Interactive  TV  Revisited,  UPSIDE  TODAY,  July  25,  2000,  at  http://  www.  upside.  com  (visited  July  26,  2000)  (  Wolinsky  Article).
 576  Technical  trials  of  the  AT&  T  ITV  product  have  been  postponed  from  the  planned  summer  2000  launch.  No
 alternative  date  has  been  announced  for  the  launch.  AT&  T  Considers  MS  Set-  Top  Alternatives,  ZDNET  NEWS,  Aug.  29,  2000,  at  http://  www.  zdnet.  com  (visited  Aug.  29,  2000).
 577  Wolinsky  Article;  David  Iler,  Interactive-  TV  Firms  Play  Merger  Game,  MULTICHANNEL  NEWS  ONLINE,  May  1,
 2000,  at  http:\\  www.  multichannel.  com  (visited  Sept.  29,  2000).
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 a  relationship  with  Wink  Communications,  a  provider  of  interactivity  with  video  programming  and  advertising.  578  Microsoft  recently  announced  plans  to  incorporate  its  Microsoft  TV  software  into
 Whistler,  the  next  version  of  the  Windows  2000  operating  system.  579  Under  the  new  plan,  TV  signals  and  interactive  programming  would  be  received  via  a  personal  computer  that  runs  the  Whistler  operating
 system,  using  a  television  set  as  the  monitor.  580
 234.  WorldGate  Communications  provides  ITV  service  through  a  cable  set-  top  box,  581  and  offers  ITV  subscribers  access  to  the  Internet,  e-  mail  and  other  interactive  services.  582  WorldGate  serves
 homes  using  the  facilities  of  several  cable  MVPDs,  including  AT&  T,  Comcast  and  Charter  Communications.  583  As  of  summer  2000,  15,  000  consumers  subscribed  to  the  WorldGate  ITV  service.  584
 235.  ITV  Services  Provided  by  MVPDs.  Cable  and  satellite  MVPDs  are  also  positioning  themselves  to  introduce  their  own  ITV  services.  Cox  Communications  has  partnered  with  Excite@  Home
 to  launch  a  trial  ITV  product  in  San  Diego  in  late  2000.  585  The  Cox-  branded  service  will  provide  video-on-  demand,  Web  browsing  and  e-  mail.  586  AT&  T  also  plans  to  offer  ITV  in  partnership  with
 Excite@  Home.  587  BellSouth  announced  in  August  that  it  would  use  Liberate  to  deliver  ITV  applications  to  some  of  its  customers  in  the  Southeast.  588
 578  Wolinsky  Article.
 579  Stephanie  Miles,  Will  Microsofts  Next  OS  Run  Your  TV?,  CNET  NEWS.  COM,  Sept.  5,  2000,  at
 http://  www.  news.  cnet.  com  (visited  Sept.  6,  2000).  580
 Id.  581
 Myers  Group  Report  at  31.  Rebecca  Cantwell,  Interactive  TV  Takes  a  Variety  of  Shapes,  ZDNET  NEWS:  INTER@  CTIVE  WEEK,  July  9,  2000,  at  http://  www.  zdnet.  com  (visited  Sept.  29,  2000)(  Cantwell  Article).
 582  WorldGate  Communications,  Inc.,  at  http://  www.  wgate.  com\  how\  how.  html  (visited  Nov.  30,  2000).  WorldGate
 Communications,  Inc.  announced  plans  to  add  RespondTVs  enhanced  television  applications  to  the  WorldGate  ITV  product.  WorldGate  Communications,  Inc.,  RespondTV  to  Support  Enhanced  Interactive  Television  Content
 Through  WorldGates  Interactive  TV  Platform  (press  release),  Oct.  24,  2000.  583
 Cantwell  Article;  see  also  WorldGate  Communications,  Inc.,  WorldGate  Reports  Record  Third  Quarter  Results  (press  release),  Nov.  2,  2000;  WorldGate  Communications,  Inc.,  AT&  T  Broadband  and  WorldGate  Announce
 Interactive  Television  Deployment  in  Three  Cities  (press  release),  Nov.  6,  2000.  584
 Cantwell  Article.  WorldGate  plans  to  offer  service  to  115,  000  homes  in  Pennsylvania  in  2001  through  an  agreement  with  cable  operator  Blue  Ridge  Communications.  Id.  In  addition,  in  November  2000,  AT&  T  Broadband
 and  WorldGate  announced  that  the  companies  began  offering  WorldGates  interactive  television  service  in  Cedar  Falls  and  Waterloo,  Iowa,  and  will  next  offer  service  in  Tacoma,  Washington.  WorldGate  Communications,  Inc.,
 AT&  T  Broadband  and  WorldGate  Announce  Interactive  Television  Deployment  in  Three  Cities  (press  release),  Nov.  6,  2000.
 585  Cantwell  Article;  AtHome  Corp.,  Cox  Communications  Signs  Agreement  With  Excite@  Home  For  The
 Development  of  Advanced  TV  Services  (press  release),  Dec.  16,  1999.  586
 Cox  Communications,  Inc.,  Cox  Communications  Updates  Investors  on  Successful  Delivery  of  Advanced  Broadband  Communications  Services  (press  release),  June  1,  2000;  Cantwell  Article.
 587  In  August  2000,  AT&  T  announced  that  it  will  increase  its  economic  interest  in  Excite@  Home  from  24%  to  38%,
 and  will  increase  its  voting  interest  from  56%  to  79%.  Excite@  HomeAnnounces  New  Board  and  Completion  of  Partner  Distribution  Agreement,  AT&  T  Assumes  74  Percent  Voting  Stake,  PR  NEWSWIRE,  Aug.  28,  2000,  at
 http://  www.  prnewswire.  com  (visited  Aug.  30,  2000);  AT&  T  Corp.,  AT&  T  Updates  SEC  Filing  on  Excite@  Home  (press  release),  Jan.  12,  2001.  Excite@  Home  and  AT&  T  stated  that  they  would  work  together  to  deliver  services  to
 (continued)
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 236.  Other  ITV  Services.  The  Applicants  state  that  TiVo  and  RePLAY,  providers  of  personal  video  recording  service  (  PVR),  589  Wink  and  RespondTV  (e-  commerce  providers),  and  EPG  provider
 Gemstar  all  offer  elements  of  ITV  service.  590  We  note  that  AOL  holds  an  ownership  interest  in  TiVo,  and  Time  Warner  holds  an  interest  in  RePLAY,  another  PVR  service.  591
 2.  Discussion
 a.  Relevant  Markets
 237.  At  a  global  level,  the  developing  ITV  market  appears  to  have  two  broad  segments  that  may  constitute  separate  markets.  The  first  segment  is  ITV  programming.  The  second  is  ITV  distribution
 and  retail.  The  ITV  programming  segment  includes  interactive  content  provided  by  video  programming  networks  to  accompany  their  video  signals.  ITV  distribution  involves  the  aggregation  of  interactive  video
 content  and  other  inputs  in  the  provision  of  ITV  services.  592  As  discussed  in  greater  detail  above,  AOL  is  an  aggregator  and  distributor  of  ITV  inputs,  and  has  begun  a  nationwide  rollout  of  its  AOLTV  product.
 Time  Warner  owns  cable  facilities  that  can  be  used  to  deliver  advanced  ITV  services  to  consumers.  AOL
 (  continued  from  previous  page)  consumers  via  advanced  TV.  As  noted  above,  AT&  T  entered  into  an  agreement  in  June  2000  with  Microsoft  to
 provide  interactive  television  software  for  7.  5  million  of  AT&  Ts  planned  10  million  Motorola-  manufactured  ITV  set  top  boxes,  though  planned  technical  trials  have  since  been  delayed.  In  September  2000,  AT&  T  announced  it  will
 use  interactive  television  software  from  Liberate  (also  the  software  provider  for  AOLTV)  for  trials,  planned  for  late  2000,  of  Motorola-  manufactured  ITV  set-  top  boxes.  AT&  T  To  Use  Liberate  Interactive  TV  Software,  ZDNET
 NEWS,  Sept.  21,  2000,  at  http://  www.  zdnet.  com  (visited  Sept.  24,  2000).  Motorola  has  a  5.  4%  stake  in  OpenTV  Corp.,  another  interactive  television  software  manufacturer.  Motorola  Ups  OpenTV  Stake,  MULTICHANNEL  NEWS
 ONLINE,  Sept.  18,  2000,  at  http://  www.  multichannel.  com  (visited  Sept.  24,  2000).  OpenTV  announced  that  TeleCruz  Technology,  Inc.,  will  license  OpenTV  software  for  chips  that  can  be  integrated  directly  into  television
 sets  to  enable  browsing  similar  to  WebTV;  OpenTV  also  plans  to  make  its  software  available  for  PCs  and  cellular  phones.  David  Iler,  OpenTV  Deal  Bypasses  Box,  MULTICHANNEL  NEWS  ONLINE,  Sept.  11,  2000,  at
 http://  www.  multichannel.  com  (visited  Sept.  24,  2000).  588
 Jeff  Baumgartner,  Liberate,  OpenTV  Could  Make  Gains  on  Microsofts  Turf,  MULTICHANNEL  NEWS  ONLINE,  Sept.  4,  2000,  at  http://  www.  multichannel.  com  (visited  Sept.  6,  2000).
 589  A  PVR  can  pause,  rewind,  and  perform  slow  motion  and  instant  replay  of  a  live  program,  thereby  allowing  a
 viewer  to  watch  earlier  portions  of  a  program  while  later  portions  of  the  program  are  still  being  broadcast.  A  PVR  can  be  used  with  a  service  that  provides  an  onscreen  programming  guide  service  through  a  telephone  connection.
 This  technology  can  be  used  to  create  a  personal  menu  that  records  in  accordance  with  a  viewers  television  preferences.
 590  Ex  Parte  Comments  of  Applicants  (Sept.  29,  2000)  (  Applicants  Sept.  29  ITV  Letter)  at  3,  transmitted  by  letter
 from  Peter  D.  Ross  on  behalf  of  AOL  and  Time  Warner  to  Magalie  Roman  Salas,  Secretary,  FCC,  dated  Sept.  29,  2000.
 591  Applicants  Second  Response  at  29.  On  July  14,  2000,  AOL  and  TiVo  announced  a  three-  year  strategic
 agreement  and  equity  investment  whereby  AOL  acquired  slightly  over  1%  interest  in  TiVo.  Id.  Time  Warner  Inc.,  Form  10-  K  for  the  Year-  ended  1999  (filed  as  amended  Mar.  30,  2000),  at  I-  26.  As  of  March  1,  2000,  investments
 made  by  [Time  Warner]  in  digital  media  include    ReplayTV    Id.  592
 At  this  time,  we  do  not  find  it  necessary  to  further  distinguish  among  these  ITV  inputs,  aside  from  EPGs,  which  we  discuss  below  in  Section  IV-  C-  1.,  supra  (Electronic  Programming  Guides).  In  particular,  we  find  no  reason  to
 distinguish  between  markets  for  aggregation  of  narrowband  and  broadband  ITV  content  given  overlaps  in  the  range  of  services.
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 and  Time  Warner  will  become  a  vertically  integrated  provider  of  ITV  services  in  Time  Warners  cable  territories.  593
 b.  Harm  to  Competition
 238.  Commenters  allege  that  the  merged  firm  would  have  the  ability  to  discriminate  against  unaffiliated  programming  networks.  594  AOL  Time  Warner  could,  according  to  commenters,  discriminate
 against  unaffiliated  video  programming  networks  by  denying  them  access  (or  degrading  their  access  vis--  vis  affiliated  video  programming  networks)  to  one  or  all  three  delivery  components  of  ITV:  the  cable
 video  pipeline,  the  merged  entitys  ITV-  STB,  and  the  cable  Internet  connection.  595  We  recognize  the  possibility  of  the  alleged  harm.  However,  we  are  of  the  view  that  a  merger-  specific  condition  is
 unwarranted  given  the  terms  of  the  FTC  Consent  Agreement  and  that  any  industry-  wide  intervention  requires  (1)  a  greater  examination  of  the  potentially  conflicting  incentives  for  favoring  ones  own
 programming  to  the  detriment  of  competitors,  and  for  offering  as  much  interactive  programming  as  possible;  and  (2)  a  fuller  exploration  of  the  technical  ability  and  manner  of  potential  discrimination.
 239.  Disney  argues  that  conditions  must  be  placed  on  Commission  approval  of  the  merger  596  to  prevent  AOL  Time  Warner  from  using  its  control  over  the  cable  video  pipeline,  the  ITV-  STB,  and  the
 broadband  Internet  connection  to  discriminate  against  the  interactive  content  of  unaffiliated  video  programming  networks  in  the  following  ways:  597
 593  The  ITV  NOI  will  explore  further  the  geographic  scope  of  the  market  for  ITV  services.
 594  Disney  July  25  Ex  Parte  at  1-  6,  61-  71;  NBC  July  24  Ex  Parte  at  1-  10.
 595  Disney  Reply  at  12-  15;  Ex  Parte  Comments  of  Disney,  Attachment  (Sept.  25,  2000),  (  Disney  Sept.  25
 Memorandum)  transmitted  by  letter  from  Marsha  McBride,  Vice-  President,  Government  Relations,  Disney,  to  Magalie  Roman  Salas,  Secretary,  FCC,  dated  Sept.  26,  2000.
 596  Disney  argues  that  the  Commission  should  require  AOL  Time  Warner  to  separate  its  content  from  distribution  as
 a  condition  to  approval  of  the  merger.  Disney  July  25  Ex  Parte  at  6.  Disney  asserts  that  if  the  Commission  does  not  require  such  separation,  the  Commission  should,  at  a  minimum,  require  enforceable,  non-  discriminatory  treatment  of
 unaffiliated  content  and  interactive  service  providers.  Disney  Reply  Comments  at  15;  Disney  July  25  Ex  Parte  at  6.  See  also  NAB  May  19  Ex  Parte  at  2-  4;  NAB  Oct.  2  Ex  Parte  at  2;  Sinclair  Reply  Comments  at  1  (  Sinclair  urges  the
 Commission  to  condition  the  AOL/  Time  Warner  merger  on  the  companies  divestiture  of  all  content,  or  to  impose  nondiscrimination  requirements  that  prohibit  the  merged  company  from  degrading  or  blocking  customer  access  to
 any  part  of  the  digital  broadcast  signals  carried  on  its  infrastructure  that  could  be  received  by  its  customers  free  over  the  air.);  MSTV  Reply  Comments  at  1  (the  Commission  should  impose  conditions  that  strictly  prohibit  AOL  Time
 Warner  from  discriminating  against  the  programming,  navigation  devices  and  other  services  delivered  through  the  broadcast  signal  for  free.).  In  addition  to  a  catch-  all  prohibition  against  discrimination,  Disney  argues  that  the
 Commission  should  impose  a  series  of  specific,  but  not  exhaustive,  prohibitions  of  practices  that  would  otherwise  allow  AOLTV  to  discriminate  against  unaffiliated  content  providers.  Disney  states  that  these  would  include
 prohibitions  against:  refusals  to  deal;  discrimination  in  prices,  terms  or  conditions  of  carriage;  discriminatory  presentation  of  information  or  displays  on  navigational  devices  or  electronic  program  guides  for  purposes  of
 enabling  subscribers  to  select  program  or  content  offerings;  discrimination  with  respect  to  downstream  traffic;  discrimination  on  the  return  path  for  interactive  television  services;  discrimination  that  undermines  interactive
 advertising  opportunities;  discrimination  in  set-  top  box  design  and  architecture  that  fills  up  memory  with  affiliated  content  before  loading  unaffiliated  content;  and  discrimination  in  caching  practices.  Finally,  Disney  recommends
 that  the  Commission  use  arbitration  procedures  to  enforce  these  safeguards.  Disney  July  25  Ex  Parte  at  82-  85.  597
 We  note  that  prior  to  the  merger,  Time  Warner  already  had  the  ability  to  discriminate  against  unaffiliated  video  programming  networks  by  not  carrying  their  interactive  content  on  the  video  pipeline  or  the  broadband  Internet
 connection.  The  merger  does  not  alter  Time  Warners  ability  in  this  regard.  However,  the  merger  might  encourage  (continued)
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   excluding  unaffiliated  interactive  content  and  services,  598    transmitting  its  affiliated  content  at  faster  rates,  599
   manipulating  communications  between  competing  content  providers  and  customers,
   limiting  unaffiliated  ITV  services  providers  from  caching  data  locally,  600    favoring  its  own  content  on  navigation  systems  and  links  (with  more  convenient
 consumer  interfaces  for  its  own  content),  601    building  its  own  links  to  merchant  Internet  sites  that  conflict  with  an  unaffiliated
 video  programming  networks  advertisers,  602    making  unaffiliated  video  programming  less  attractive  and/  or  accessible  to
 consumers,  603    imposing  charges  for  each  interactive  commercial  transaction,  604
   restricting  an  unaffiliated  video  programming  networks  advertising  on  interactive  channels  so  that  it  would  not  interfere  with  exclusive  contracts  that
 AOL  Time  Warner  has  with  its  advertisers,  605  and    developing  AOLTV  controlled  interactive  advertising  that  undermines
 unaffiliated  content  providers  advertising.  606
 240.  The  record  in  this  proceeding  demonstrates  that  AOL  Time  Warner  intends  to  integrate  the  cable  set-  top  box  with  the  AOLTV  box  and  a  high  speed  Internet  connection  and  that  AOL  and  Time
 Warner  are  well  aware  that  control  over  the  set-  top  box  would  enable  the  merged  firm  to  favor  its  own  content.  607  In  addition,  we  agree  with  Dr.  Haseltines  findings  that  AOL  Time  Warner  could  use
 equipment  at  the  cable  headend  in  order  to  discriminate.  608  While  AOL  and  Time  Warner  do  not  dispute
 (  continued  from  previous  page)  Time  Warner  to  carry  unaffiliated  video  programming  content  to  its  new  affiliated  AOLTV  because,  as  discussed
 below,  it  is  arguable  that  AOLTV  will  need  as  much  interactive  content  as  possible  to  successfully  launch  its  ITV  product.
 598  Disney  July  25  Ex  Parte  at  44.
 599  Id.
 600  Id.  Caching  is  the  technique  of  storing  frequently  accessed  content  in  fast  memory  (e.  g.,  RAM)  in  order  to
 speed  access  to  those  files  by  eliminating  delays  and  costs  associated  with  reverting  to  the  original  source  for  the  information.  An  ISP  engages  in  caching  when  it  downloads  a  copy  of  Internet  content  onto  its  own  server,  from
 which  it  can  thereafter  supply  its  subscribers  repeated  demands  for  this  content.  601
 Id.  602
 Id.  603
 Disney  July  25  Ex  Parte  at  44;  Ex  Parte  Comments  of  Disney,  Attachment  (Sept.  5,  2000)  (  Disney  Sept.  5  Memorandum)  at  11,  transmitted  by  letter  from  Marsha  McBride,  Vice-  President,  Government  Relations,  Disney,
 to  Magalie  Roman  Salas,  Secretary,  FCC,  dated  Sept.  14,  2000;  NBC  July  24  Ex  Parte  at  5-  6.  604
 Disney  Sept.  5  Memorandum  at  11.  605
 Disney  July  25  Ex  Parte  at  44.  606
 Id.  607
 See  Applicants  Second  Response  at  5,  8;  Confidential  App.  IV-  D-  1,  Note  1.  608
 Ex  Parte  Comments  of  Disney,  Attachment  (Oct.  25,  2000)  (  Declaration  of  Eric  C.  Haseltine)  at  1-  2,  transmitted  by  letter  to  Lawrence  R.  Sidman,  Counsel  for  Disney,  to  Magalie  Roman  Salas,  Secretary,  FCC,  dated
 (continued)
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 Disneys  allegations  that  they  have  the  technical  ability  to  use  the  three  components    Time  Warners  video  pipeline  and  broadband  Internet  connection  and  AOLTVs  set-  top  box    in  the  manner  alleged,  they
 argue  that  they  have  no  incentive  to  do  so.  609  Based  on  this  record,  it  appears  that  the  merged  entity  would  have  conflicting  incentives.  Applicants  assert  that  the  merged  entity  has  the  incentive  to  carry  as
 much  interactive  programming  as  possible  so  that  AOLTV  will  be  attractive  to  consumers.  610  AOL  Time  Warner  states  that  its  AOL  ITV-  STB  will  activate  the  ATVEF  interactive  content  of  unaffiliated  video
 programming  networks,  without  any  agreement  with  or  payment  to  AOL,  so  that  AOLTV  subscribers  may  view  unaffiliated  interactive  content.  611
 241.  However,  the  record  also  contains  evidence  that  AOL  has  a  history  of  negotiating  exclusionary  deals  once  it  is  in  its  economic  interest  to  do  so.  612  AOL  may  cease  its  current  practice  of
 carrying  interactive  content  of  unaffiliated  programmers  without  AOLTV  carriage  agreements  once  it  has  achieved  some  level  of  success  in  the  marketplace.  We  note  that  if  AOLTV  becomes  successful,  it  may
 be  less  dependent  on  the  interactive  content  of  unaffiliated  video  programming  networks  and  therefore  may  be  in  a  position  to  discriminate  against  them  in  the  terms,  conditions  and  prices  for  carriage  on
 AOLTV.  613  At  the  same  time,  unaffiliated  video  programming  networks  will  likely  become  more  dependent  on  interactive  television  commerce  revenue.  Some  analysts  predict  that  while  video
 programmers  revenues  from  traditional  advertising  will  decline  over  the  next  few  years,  lost  revenue  will  be  replaced  by  new  revenue  from  interactive  television  commerce.  614  Moreover,  AOL  and  Time  Warner
 have  stated  that  their  MOU  does  not  obligate  them  to  provide  access  to  the  cable  broadband  platform  for  ITV  uses.  615
 242.  We  believe  that,  at  the  present  time,  the  terms  of  the  FTC  Consent  Agreement  will  substantially  mitigate  any  potential  public  interest  harm  that  may  arise  from  discrimination  by  AOL  Time
 Warner  with  regard  to  ITV  content  or  service.  The  FTC  has  ordered  that  AOL  Time  Warner  not  discriminate  in  the  transmission  and  carriage  of  content  616  that  it  has  agreed  to  carry,  and  has  forbidden
 (  continued  from  previous  page)  Oct.  25,  2000.
 609  See  Applicants  Sept.  29  ITV  Letter.
 610  Applicants  Sept.  29  ITV  Letter  at  5  ([  t]  here  is  no  advantage  in  denying  consumers  access  to  a  full  array  of
 content  sources.  AOL  and  Time  Warners  surest  route  to  failure  in  interactive  television  would  be  to  restrict  or  degrade  consumers  access  to  a  true  diversity  of  interactive  content  and  service  offerings.).
 611  Applicants  Sept.  29  ITV  Letter  at  5.
 612  See  Confidential  Appendix.  IV-  D-  1,  Notes  1  and  2.
 613  NAB  notes  that  in  Time  Warner  Entertainment  Co.,  L.  P.  v.  U.  S.,  211  F.  3d  1313  (D.  C.  Cir.  2000),  the  court,  when
 reviewing  the  channel  occupancy  limits  of  the  Cable  Television  Consumer  Protection  and  Competition  Act  of  1992,  Pub.  L.  No.  102-  385,  106  Stat.  1460  (47  U.  S.  C.    533(  f)(  1)(  B)),  stated  that  [  Time  Warner]  does  not  deny  that  a
 cable  operator  has  an  incentive  to  favor  its  affiliated  programmers;  where  the  two  forces  are  in  conflict,  the  operator  may,  as  a  rational  profit-  maximizer,  compromise  the  consumers  interests.  NAB  Oct.  2  Ex  Parte  at  2.
 614  Disney  Oct.  25  Ex  Parte  at  n.  37;  Myers  Group  Report  at  13  (predicting  that  advertising  revenues  from  interactive
 television,  including  e-  commerce  and  subscription  fees,  will  reach  $20  billion  by  2005).  615
 See  Ex  Parte  Comments  of  Applicants  (Sept.  6,  2000)  (  Applicants  Sept.  6  Letter)  at  12,  transmitted  by  letter  from  Craig  A.  Gilley,  Fleishman  &  Walsh,  to  Magalie  Roman  Salas,  Secretary,  FCC,  dated  Sept.  6,  2000.  See  also
 Confidential  Appendix  IV-  D-  1,  Note  3.  616
 The  FTC  Consent  Agreement  construes  the  term  content  to  include  interactive  signals  and  interactive  triggers.  See  FTC  Consent  Agreement  Section  I.  R.  (defining  content  as  data  packets  carrying  information  including,  but  not
 (continued)
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 AOL  Time  Warner  from  blocking  or  otherwise  interfering  with  interactive  content  transmitted  by  an  unaffiliated  ISP.  617  Thus,  it  would  appear  that  unaffiliated  video  programming  networks  could  utilize
 alternatives  to  AOLTV  for  distribution  of  their  interactive  content.  For  example,  even  if  AOL  Time  Warner  refused  to  carry  an  unaffiliated  video  programmers  interactive  content  with  its  video  signal,  618
 the  video  programmer  could  seek  to  deliver  its  interactive  content  via  an  unaffiliated  ISP  on  AOL  Time  Warners  cable  system.  Further,  the  FTC  Consent  Agreement  would  prohibit  AOL  Time  Warner  from
 blocking  subscribers  access  to  any  interactive  content  that  is  carried  on  the  AOL  Time  Warner  facilities  and  thus  would  enable  subscribers  to  access  such  content  as  part  of  an  ITV  service  provided  by  an
 unaffiliated  entity.  619  If  unaffiliated  video  networks  have  alternatives  to  the  video  pipeline  for  the  provision  of  competitive  interactive  services  to  consumers  (comparable  to  a  cable-  affiliated  ITV  provider
 that  has  access  to  a  video  pipeline),  then  AOL  Time  Warners  refusal  to  carry  interactive  content  with  the  video  signal  would  not  appear  to  harm  the  public  interest.  Therefore,  in  light  of  the  FTCs  actions,  we
 disagree  with  Disney  that  the  Commission  should  impose  a  merger  condition  with  respect  to  unaffiliated  video  programming  networks  and  interactive  content  providers  that  does  not  apply  industry-  wide.
 243.  We  note  that  Disney  has  provided  evidence  that  suggests  that  alternatives  to  the  cable  video  path  may  not  ultimately  provide  competitive  outlets  for  the  provision  of  ITV  services.  620  We  find
 that  it  is  necessary  to  develop  a  more  complete  record  in  this  regard  to  determine  whether  rules  of  general  applicability  are  needed  to  promote  competition  and  diversity  in  the  provision  of  ITV  services.  Our  ITV
 NOI  will  explore  further  what  types  of  services  should  be  defined  as  ITV,  what  types  of  ITV  business  models  will  prevail,  how  ITV  services  will  be  delivered,  and  whether  there  are  competitive  alternatives  to
 a  cable  operators  affiliated  ITV  provider  for  the  provision  of  ITV  services.  621
 E.  Multichannel  Video  Programming  Distribution
 244.  In  this  section  we  examine  the  mergers  potential  effects  on  the  video  services  provided  by  multichannel  video  programming  distributors  (  MVPDs).  622  MVPDs  include  cable  operators,  direct
 (  continued  from  previous  page)  limited  to,  links,  video,  audio,  text,  e-  mail,  message,  interactive  signals,  and  interactive  triggers.).
 617  See  FTC  Consent  Agreement  Section  III.  A.  (  Respondents  shall  not  interfere  .  .  .  with  Content  passed  in  either
 direction  along  the  Bandwidth  contracted  for  and  being  used  by  any  non-  affiliated  ISP  in  compliance  with  the  Non-affiliated  ISPs  agreement  with  Respondents.).
 618  See  Disney  Sept.  25  Memorandum  at  3-  4;  Ex  Parte  Comments  of  Disney  (Sept.  14,  2000)  (  Disney  Sept.  14  Ex
 Parte)  at  2-  3,  transmitted  by  letter  from  Marsha  McBride,  Vice-  President,  Government  Relations,  Disney,  to  Magalie  Roman  Salas,  Secretary,  FCC,  dated  Sept.  14,  2000.
 619  FTC  Consent  Agreement  Section  III.  C.  (  Respondents  shall  not  interfere  with  the  ability  of  a  Subscriber  to  use,  in
 conjunction  with  ITV  services  provided  by  a  Person  that  is  not  Affiliated  with  Respondent,  interactive  signals,  triggers,  or  other  Content  that  Respondents  have  agreed  to  carry.).
 620  See,  e.  g.,  Disney  July  25  Ex  Parte  at  34-  36;  Disney  Reply  Comments  at  8;  Myers  Group  Report  at  39.  We  note
 that  the  Applicants  argue  that  existing  broadband  alternatives,  such  as  DSL,  are  equivalent  to  a  cable  Internet  connection.  Applicants  Sept.  29  ITV  Letter  at  8.  However,  such  alternatives  may  not  currently  be  able  to  support
 ITV  services  comparable  to  those  that  can  be  provided  using  a  cable  Internet  connection.  621
 See  ITV  NOI,  FCC  01-  15.  622
 See  47  U.  S.  C.    522(  13)  (defining  MVPD  as  a  person,  such  as,  but  not  limited  to,  a  cable  operator,  a  multichannel  multipoint  distribution  service,  a  direct  broadcast  satellite  service,  or  a  television  receive-  only  satellite
 program  distributor,  who  makes  available  for  purchase,  by  subscribers  or  customers,  multiple  channels  of  video  programming).
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 broadcast  satellite  providers  (  DBS),  multichannel  multipoint  distribution  services  (  MMDS),  and  satellite  master  antenna  television  (  SMATV)  providers.  623  In  AT&  T-  TCI,  we  concluded  that  the
 relevant  geographic  market  for  MVPD  service  is  local.  624  One  or  more  MVPD  providers  furnish  MVPD  services  in  local  franchise  areas.  Only  one  cable  operator  serves  most  franchise  areas.  In  a  limited
 number  of  franchise  areas,  a  second  cable  operator  (an  overbuilder)  or  MMDS  operator  also  offers  service.  SMATV  providers  generally  offer  service  in  any  setting  in  which  a  public  right-  of-  way  is  not
 crossed,  but  do  not  provide  competition  throughout  a  local  franchise  area.  DBS  providers  also  distribute  MVPD  services  and  are  available  nationwide  to  consumers  with  an  unobstructed  southern  view.
 245.  Time  Warner  is  the  dominant  provider  of  multichannel  video  programming  services  in  those  local  markets  in  which  it  operates  franchised  cable  systems.  America  Online  does  not  directly
 operate  any  company  providing  MVPD  service,  but  does  have  an  ownership  interest  in  DBS  operator  DirecTVs  corporate  parent,  Hughes.
 246.  We  examine  below  specific  allegations  of  harm  to  MVPDs  arising  from  the  combination  of  Time  Warners  cable  systems  with  AOLs  ownership  interest  in  DirecTV,  as  well  as  concerns  about
 MVPDs  access  to  Time  Warner  video  programming  post-  merger.  625  We  conclude  that  the  merger  will  not  present  any  public  interest  harms  affecting  MVPD  services.
 1.  Common  Ownership  of  DBS  and  Cable  MVPDs
 247.  As  discussed  in  Section  IV.  C.  3  above,  AOL  paid  GM  $1.5  billion  for  2,669,663  shares  of  non-  voting  GM  Preference  Stock  that  tracks  the  performance  of  Hughes,  GMs  wholly  owned
 subsidiary.  626  If  AOL  converted  its  GM  Preference  stock  into  GM  voting  equity,  AOL  would  hold  approximately  1.  76%  of  GMs  voting  equity.  627  GMs  wholly  owned  subsidiary  DirecTV,  the  nations
 largest  DBS  provider,  served  8.3  million  MVPD  customers  nationwide  as  of  March,  2000.  628
 623  See  AT&  T-  TCI  Order,  14  FCC  Rcd  at  3172-  73    21.  DBS  operators  provide  programming  via  satellite  to
 subscribers  that  own  or  lease  small-  diameter  receiving  dishes.  MMDS  providers  offer  programming  via  microwave  facilities  (the  service  is  often  referred  to  as  wireless  cable  service).  SMATV  operators,  also  known  as  private
 cable  operators,  also  frequently  use  microwave  facilities  to  transmit  programming  to  subscribers.  SMATV  subscribers  usually  reside  in  multiple  dwelling  units.  Id.
 624  AT&  T-  TCI  Order,  14  FCC  Rcd  at  3172-  73    21.
 625  We  note  that  Everest  Connections  Corp.  (  Everest),  a  broadband  cable  overbuilder,  in  a  late  filed  comment  in
 this  proceeding,  states  that  leading  set-  top  box  and  cable  equipment  manufacturers  claim  that  they  cannot  provide  their  products  to  companies,  like  Everest,  that  intend  to  operate  MVPD  systems  in  competition  with  Time  Warner
 cable  systems.  These  manufacturers,  according  to  Everest,  will  provide  equipment  to  Everest  only  if  it  agrees  that  it  will  not  use  the  equipment  to  compete  with  Time  Warner.  Everest  Comments  at  1-  3.  Everest  asks  that  the
 Commission  condition  the  merger  on  a  requirement  that  Time  Warner  not  prohibit  equipment  vendors  from  supplying  equipment  to  Time  Warners  MVPD  competitors.  Everest  Comments  at  5-  7.  If  Everests  allegations  are
 accurate,  Time  Warners  actions  are  disturbing  because  they  apparently  are  impeding  consumers  ability  to  purchase  competing  MVPD  services.  Nevertheless,  Everest  has  not  sufficiently  established  how  the  merger  would  affect
 Time  Warners  behavior  in  this  regard.  Moreover,  Everest  does  not  allege  that  Time  Warner  is  violating  any  Commission  rule  or  provision  of  the  Communications  Act.  Hence,  we  cannot  conclude  that  Time  Warners  alleged
 behavior  constitutes  a  merger-  specific  public  interest  harm.  626
 See  Applicants  March  21  Supplemental  Information  at  11-  12  n.  15.  627
 Id.  at  14.  628
 Id.  at  12
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 Commenters  argue  that  the  merged  firms  ownership  interests  in  both  DirecTV  and  Time  Warner  will  enable  the  merged  firm  to  harm  competition  between  DBS  and  cable  MVPDs.  629  Consumers  Union
 asserts  that  the  merged  firm  will  harm  the  ability  of  DirecTV  to  compete  with  cable.  630  Although  the  Commission  does  not  have  a  rule  barring  cross-  ownership  of  both  a  DBS  and  cable  MVPD,  RCN  argues
 that  the  Commission  has  the  discretion  to  address  any  competitive  harms  caused  by  such  cross-  ownership  on  a  case  by  case  basis.  631  Consumers  Union  and  ACA  request  that  the  Commission  order  AOL  to  divest
 its  interest  in  GM,  DirecTVs  parent,  as  a  condition  of  the  merger.  632
 248.  With  respect  to  the  merged  firms  ownership  interest  in  GM,  we  find  that  the  proposed  merger  will  not  violate  the  Communications  Act  or  any  Commission  rules,  nor  will  it  frustrate  the
 implementation  of  the  Communications  Act  or  its  goals.  We  conclude  that  the  merger  will  not  result  in  public  interest  harms  regarding  competition  between  DBS  and  cable.
 249.  Although  legislation  introduced  in  the  Senate  proposed  a  cable/  DBS  cross-  ownership  ban  in  the  1992  Cable  Act,  the  House  and  Senate  Conference  decided  that  it  was  premature  to  adopt  such  a
 ban  at  that  time.  633  The  conferees  stated  that  they  expected  the  Commission  to  exercise  its  existing  authority  to  adopt  such  limitations  should  it  be  determined  that  such  limitations  would  serve  the  public
 interest.  634  The  Commission  subsequently  decided  that  its  authority  to  approve  transfers  of  control  of  licenses  would  enable  it  to  address  any  competitive  concerns  raised  by  subsequent  proposals  by  cable
 affiliated  entities  to  acquire  DBS  spectrum.  635  In  1998,  the  Commission  initiated  a  rulemaking  seeking  comment  whether  the  Commission  should  adopt  DBS  ownership  rules,  including  DBS  cross-  ownership
 rules  with  cable  operators.  636  This  rulemaking  is  still  pending.  In  the  meantime,  we  examine  specific  competition  and  public  interest  concerns  related  to  DBS  ownership  on  a  case-  by-  case  basis.  637
 250.  In  this  case,  we  find  that  the  merged  entitys  indirect  interest  in  DirecTV  does  not  rise  to  the  level  of  ownership  that  ordinarily  triggers  scrutiny  by  the  Commission.  Therefore,  we  need  not
 examine  whether  the  common  ownership  of  both  a  DBS  and  a  cable  MVPD  provider  raises  public  interest  concerns.  We  agree  with  the  Applicants  that  AOL  does  not  have  an  interest  in  DirecTVs  parent,  GM,
 that  confers  on  AOL  the  ability  to  influence  or  control  DirecTV  such  that  AOL  should  be  deemed  the  owner  of  DirecTV  for  the  purposes  of  a  DBS/  cable  competitive  analysis.  638  As  noted  above,  the
 Commission  does  not  have  ownership  or  attribution  rules  that  apply  to  satellite  spectrum  ownership.  Under  our  various  other  ownership  rules,  the  Commission  has  generally  found  that  a  voting  equity
 interest  of  5%  or  more  is  required  to  confer  influence  or  control  on  the  interest  holder  in  order  to  deem  the
 629  Consumers  Union  Comments  at  35;  ACA  Comments  at  12-  14.
 630  Consumers  Union  Comments  at  35.
 631  RCN  Comments  at  6  (citing  In  re  Policies  for  the  Direct  Broadcast  Satellite  Service,  IB  Docket  No.  98-  21,
 Notice  of  Proposed  Rulemaking  (  DBS  NPRM),  13  FCC  Rcd  6907,  6939    56,  58  (1998)).  632
 Consumers  Union  Comments  at  157;  ACA  Comments  at  13-  14.  633
 H.  R.  Conf.  Rep.  No.  102-  862,  102d  Cong.,  2d  Sess.  (1992).  634
 H.  R.  Conf.  Rep.  No.  102-  862,  102d  Cong.,  2d  Sess.  (1992).  635
 See  DBS  NPRM,  13  FCC  Rcd  at  6938    56.  636
 See  id.  at  6939    58  n.  132.  637
 See  id.  at  6939    58.  638
 See  Applicants  March  21  Supplemental  Information  at  12-  14.
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 interest  holder  an  owner  for  purposes  of  the  applicable  rule.  639  As  discussed  above,  AOL  holds  nonvoting  equity  in  DirecTVs  parent  that,  if  converted,  would  constitute  less  than  2%  of  the  voting
 equity  of  GM.  Thus,  we  would  not  treat  AOL  as  an  owner  for  purposes  of  our  other  ownership  rules,  and  the  commenters  have  made  no  credible  arguments  why  AOLs  less  than  2%  voting  equity  interest  should
 be  treated  differently  under  these  circumstances.  Because  the  record  does  not  demonstrate  that  AOL  has  the  ability  to  influence  or  control  DirecTV,  we  need  not  examine  further  whether  this  merger  poses
 potential  harms  to  competition  between  DBS  and  cable.
 251.  Nevertheless,  if  the  merged  firm  increases  its  ownership  interest  in  Hughes  and/  or  GM,  we  reserve  discretion  to  decide  whether  the  increased  ownership  interest  poses  a  threat  to  DBS/  cable
 competition.  Accordingly,  as  a  condition  of  this  merger,  we  will  require  the  Applicants  to  notify  the  Commission  in  writing  of  any  transactions  that  increase  the  Applicants  ownership  interest  in  Hughes
 and/  or  GM,  within  30  days  of  the  transaction.  640
 2.  Program  Access  Issues
 252.  Commenters  allege  that  the  merger  would  harm  unaffiliated  MVPDs,  and  assert  that  the  Commission  should  remedy  this  potential  harm  by  expanding  the  scope  and  application  of  its  program
 access  rules  to  cover  terrestrially  delivered  video  programming  and  contracts  between  cable  operators  and  unaffiliated  programmers.  641  These  rules  are  designed  to  prevent  vertically  integrated  programming
 suppliers  from  favoring  affiliated  cable  operators  over  unaffiliated  MVPDs  in  the  sale  of  satellite-delivered  programming.  The  record  does  not  support  a  finding  that  the  merger  would  enable  or  increase
 the  likelihood  of  harm  to  competing  MVPDs  with  respect  to  the  sale  of  video  programming.  Accordingly,  we  find  it  unnecessary  to  impose  remedial  conditions.
 253.  The  program  access  rules  apply  to  cable  operators  and  programming  vendors  affiliated  with  cable  operators  that  deliver  video  programming  via  satellite  to  a  cable  operator.  642  The  Commission
 adopted  these  rules  pursuant  to  Section  628  of  the  Communications  Act,  643  through  which  Congress  sought  to  minimize  the  incentive  and  ability  of  vertically  integrated  programming  suppliers  to  favor
 affiliated  cable  operators  over  nonaffiliated  cable  operators  or  other  MVPDs  in  the  sale  of  satellite  cable  and  satellite  broadcast  programming.  644  Among  other  restrictions,  the  rules  prohibit  any  cable  operator
 639  See,  e.  g.,  47  C.  F.  R.    76.  501  n.  2(  a)  (cable/  broadcast  station  cross-  ownership  rule);  47  C.  F.  R.  76.  503  n.  2  (cable
 horizontal  ownership  rule);  47  C.  F.  R.    73.  3555  n.  2(  a)  (broadcast  multiple  ownership  rules);  47  C.  F.  R.    21.  912  n.  1(  a)  (cable/  MMDS  cross-  ownership  rule).
 640  Cf.  In  re  AMRC  Application  for  Authority  to  Construct,  Launch,  and  Operate,  File  Nos.  72-  SAT-  AMEND-  97,
 10/  11-  DSS-  P-  9312/  15/  92,  26/  27-  DSS-  LA-  931/  15/  93,  83/  84-  SAT-  AMEND-  953/  10/  95,  72-  SAT-  AMEND-  97,  Order  and  Authorization,  13  FCC  Rcd  8829,  8842    27  (1997)  (requiring  WorldSpace  to  seek  Commission  approval  prior
 to  exercising  options  to  purchase  additional  shares  of  ARMC);  In  re  KaStar,  File  Nos.  SAT-  T/  C-  19990629-  00071,  SAT-  T/  C-  19990629-  00072,  Memorandum  Opinion  and  Order,  15  FCC  Rcd  1615,  1620,  1622    13,  21  (1999)
 (requiring  licensee  to  notify  the  Commission  of  transactions  involving  the  sale  of  its  shares  by  certain  parties).
 641  47  C.  F.  R.    76.  1000-  76.  1004.  The  terms  terrestrially  delivered  and  satellite  delivered  refer  to  the  delivery
 of  programming  to  a  cable  system  headend.  642
 47  C.  F.  R.    76.  1000-  76.  1004;  see  also  AT&  T-  MediaOne  Order,  15  FCC  Rcd  at  9852-  55    77-  83.  643
 47  U.  S.  C.    548.  644
 1992  Cable  Act    2(  a)(  5).
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 that  has  an  attributable  interest  645  in  a  satellite  cable  programming  vendor  from  improperly  influencing  the  decisions  of  the  vendor  with  respect  to  the  sale  or  delivery,  including  prices,  terms,  and  conditions  of
 sale  or  delivery,  of  satellite  cable  programming  or  satellite  broadcast  programming  to  any  unaffiliated  MVPD.  646  The  rules  also  prohibit  vertically  integrated  satellite  programming  distributors  from
 discriminating  in  the  prices  or  terms  and  conditions  of  sale  of  satellite-  delivered  programming  to  cable  operators  and  other  MVPDs.  647  Additionally,  cable  operators  generally  are  prohibited  from  entering  into
 exclusive  distribution  arrangements  with  affiliated  programming  vendors.  648
 254.  RCN  contends  that  Time  Warner  has  migrated  affiliated  programming  from  satellite  to  terrestrial  delivery  so  that  it  will  not  be  required  to  give  competing  MVPDs  access  to  this  programming.
 RCN  argues  that  AOL  Time  Warners  ability  to  shield  terrestrially  delivered  affiliated  programming,  such  as  local  news  or  sports  programming,  from  the  program  access  rules  will  substantially  impair  its  ability,
 and  that  of  other  MVPDs,  to  compete.  649  SBC  echoes  these  sentiments  in  its  comments.  650  RCN  also  expresses  concern  about  the  Applicants  potential  power  as  a  purchaser  of  video  programming,  and
 further  suggests  that  the  combined  entitys  forays  into  interactive  TV,  and  its  ownership  stake  in  DirecTVs  parent  Hughes,  would  exacerbate  its  market  power,  allowing  it  to  exercise  substantial  power  in
 the  programming  marketplace.  651  RCN  contends  that  this  power,  in  turn,  might  lead  unaffiliated  programmers  to  discriminate  against  RCN  and  other  overbuilders  by  offering  the  Applicants  exclusive
 contracts  or  preferential  treatment.
 255.  To  remedy  these  alleged  problems,  RCN  first  proposes  a  merger  condition  that  would  require  the  Applicants  to  provide  programming  to  other  MVPD  competitors  without  reference  to  its
 mode  of  delivery.  652  Similarly,  SBC  asks  that  the  Commission  condition  the  merger  on  AOL  Time  Warners  agreement  to  comply  with  the  program  access  rules,  regardless  of  the  technology  used  to
 distribute  its  content  at  the  wholesale  level.  653  Second,  RCN  requests  that  we  require  AOL  Time  Warner  to  comply  with  the  program  access  rules  without  the  requirement  of  vertical  integration.  654  Such  a
 condition  would  prevent  the  Applicants  from  entering  into  exclusive  arrangements  with  unaffiliated  programmers.  Digital  Access,  another  cable  overbuilder,  seeks  the  same  condition,  based  on  its  inability
 to  obtain  sports  programming  from  the  Midwest  Sports  Channel,  which  has  an  exclusive  contract  with  Time  Warner  Cable  in  the  Milwaukee,  Wisconsin  market.  655  AOL  and  Time  Warner  oppose  these
 645  The  attribution  of  corporate  interests  for  purposes  of  the  program  access  rules  is  determined  under  sections
 76.  501  and  76.  1000(  b)  of  the  Commission's  rules.  See  47  C.  F.  R.    76.  501  n.  2.,  76.  1000(  b).  646
 47  C.  F.  R.    76.1002(  a).  647
 47  C.  F.  R.    76.1002(  b).  This  restriction  is  subject  to  certain  limited  exceptions.  Id.  648
 47  C.  F.  R.    76.  1002(  c).  Relief  may  be  granted  pursuant  to  a  Commission  determination  that  specific  exclusive  arrangements  are  in  the  public  interest.  47  C.  F.  R.    76.  1002(  c)(  4).  In  addition,  exclusive  arrangements  entered  into
 prior  to  June  1,  1990,  are  "grandfathered,"  or  exempt  from  the  exclusivity  prohibition,  provided  they  were  not  extended  or  renewed  after  October  5,  1992.  47  C.  F.  R.    76.  1002(  e).
 649  RCN  Comments  at  13.
 650  SBC  Comments  at  38.
 651  RCN  Comments  at  12.
 652  Id.  at  13.
 653  SBC  Comments  at  38.
 654  RCN  Comments  at  13.
 655  Letter  from  Samuel  W.  Morris,  Jr.,  Senior  Vice  President    General  Counsel,  Digital  Access,  Inc.  to  Magalie
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 conditions,  arguing  both  that  the  proposed  conditions  are  inconsistent  with  existing  statutory  language,  and  that  they  are  unrelated  to  the  merger.  656
 256.  There  is  no  record  evidence  suggesting  that  the  merger  would  either  create  or  enhance  the  ability  or  incentive  of  AOL  Time  Warner  to  prevent  competing  MVPDs  from  gaining  access  to  Time
 Warners  video  programming  through  the  migration  of  such  programming  from  satellite  to  terrestrial  delivery.  657  Thus  we  cannot  conclude  that  competing  MVPDs  will  suffer  any  harm  in  this  context.
 Accordingly,  we  decline  these  commenters  invitation  to  apply  the  program  access  rules  or  equivalent  restrictions  to  terrestrially  delivered  programming  distributed  by  the  merged  company.  658  We  also  reject
 RCNs  proposal  that  we  apply  our  program  access  rules  to  AOL  Time  Warners  dealings  with  unaffiliated  programmers.  Again,  there  is  no  evidence  suggesting  that  the  merged  firms  incentive  or  ability  to  enter
 into  exclusive  contracts  with  unaffiliated  video  programmers  would  be  greater  than  Time  Warners  current  ability  to  do  so.  While  we  are  cognizant  of  the  harm  that  exclusive  contracts  can  cause
 overbuilders  in  local  markets,  we  cannot  conclude  that  the  merger  will  harm  competing  MVPDs  seeking  to  purchase  non-  Time  Warner  video  programming.
 F.  COORDINATION  WITH  AT&  T
 257.  In  this  section  we  consider  whether  the  merger  would  increase  the  likelihood  of  coordinated  action  by  AOL  Time  Warner  and  AT&  T  that  would  harm  the  public  interest.  We  conclude
 that  it  would.  We  have  already  found  that  the  merger  would  enable  AOL  Time  Warner  to  obtain  preferential  access  on  both  Time  Warner  and  non-  AOL  Time  Warner  cable  systems  to  provide  AOLs
 residential  high-  speed  Internet  access  services.  659  We  find  that  among  all  non-  AOL  Time  Warner  cable  operators,  AT&  T,  the  nations  largest  cable  operator,  would  be  particularly  likely  to  afford  preferential
 access  rights  to  AOL  as  a  result  of  the  merger.  Because  AT&  T  is  the  nations  largest  cable  operator,  such  preferential  treatment  for  AOL  would  exacerbate  the  harms  to  competition  for  residential  Internet  access
 service  that  would  result  from  the  merger.
 258.  Although  commenters  request  that  in  this  proceeding  we  order  AT&  Ts  structural  separation  from  Time  Warner,  we  need  not  address  this  issue  because  AT&  T  has  already  elected  to  divest
 (  continued  from  previous  page)  Roman  Salas,  Secretary,  FCC,  dated  October  17,  2000  at  1-  2,  transmitted  by  letter  from  William  Fishman,  Swidler
 Berlin  Shereff  Friedman,  to  Magalie  Roman  Salas,  Secretary,  FCC,  dated  Oct.  17,  2000.  656
 Applicants  Reply  Comments  at  49.  657
 In  Section  IV.  A.,  supra,  (High-  Speed  Internet  Access  Services)  we  address  AOL  Time  Warners  potential  ability  and  incentive  to  use  its  control  of  popular  video  programming  networks  to  obtain  favorable  rights  of  access  by  AOL
 on  the  facilities  of  non-  AOL  Time  Warner  cable  systems.  658
 See  Implementation  of  the  Cable  Television  Consumer  Protection  and  Competition  Act  of  1992,  Petition  for  Rulemaking  of  Ameritech  New  Media,  Inc.  Regarding  the  Development  of  Competition  and  Diversity  in  Video
 Programming  Distribution  and  Carriage,  CS  Docket  No.  97-  248,  Memorandum  Opinion  and  Order  and  Notice  of  Proposed  Rulemaking  (  Program  Access  Order),  12  FCC  Rcd  22840,  22861  (1997).  As  we  stated  in  the  Program
 Access  Order,  there  are  no  indications  at  this  time  that  terrestrial  delivery  of  programming  formerly  delivered  by  satellite  is  a  significant  competitive  problem.  See  also  DirecTV,  Inc.  v.  Comcast  Corp.,  Application  for  Review  of
 Orders  of  the  Cable  Services  Bureau  Denying  Program  Access  Complaints,  Memorandum  Opinion  and  Order,  CSR  5244-  P  (rel.  Nov.  20,  2000)    12.
 659  See  Section  IV.  A.,  supra.  (High-  Speed  Internet  Access  Services)
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 its  interest  in  TWE.  660  Notwithstanding  AT&  Ts  withdrawal  from  TWE,  there  still  exists  the  possibility  of  anticompetitive  coordination  between  AT&  T  and  AOL  Time  Warner.  We  conclude  that  the  adverse
 effects  of  potential  coordination  between  AT&  T  and  AOL  Time  Warner  as  a  result  of  the  merger  would  be  sufficiently  mitigated  by  a  condition  that  prohibits  AOL  Time  Warner  from  entering  into  exclusive
 contracts  with  AT&  T  for  access  by  AOL  Time  Warners  affiliated  ISPs  and  that  further  prohibits  AOL  Time  Warner  from  interfering  with  AT&  Ts  ability  to  offer  other  ISPs  any  rates,  terms,  or  conditions  of
 service  that  AT&  T  and  an  ISP  find  mutually  agreeable.
 1.  Background
 259.  AT&  T  holds  attributable  ownership  interests  in  cable  systems,  including  its  interest  in  TWE,  that  serve  approximately  51.  3%  of  the  nations  cable  subscribers.  661  Through  Liberty  Media  Group
 (  Liberty  Media)  and  other  holdings,  AT&  T  also  is  a  major  supplier  of  video  programming.  662  In  addition,  AT&  T  controls  Excite@  Home,  the  nations  largest  broadband  ISP.  663  Excite@  Home  serves
 approximately  1.15  million  subscribers  over  both  AT&  T  cable  systems  and  over  cable  systems  owned  by  other  cable  companies.  664  AT&  T  has  an  exclusive  contract  with  Excite@  Home  that  expires  June  30,
 2002.  Once  the  contract  expires,  AT&  T  can  choose  whether  to  afford  other  ISPs  access  to  its  cable  plant  in  competition  with  Excite@  Home,  as  well  as  the  terms  and  conditions  of  such  access.  665  On  October  25,
 660  See  SBC  Comments  at  30-  32;  BellSouth  Reply  Comments  at  18-  19;  Consumers  Union  Comments  at  2-  7;  157.
 661  These  numbers  are  calculated  according  to  our  attribution  rules.  See  47  C.  F.  R.    76.  503  notes.  AT&  T-  MediaOne
 Order,  15  FCC  Rcd  at  9819    3.  Absent  TWE,  AT&  T  serves  34.  6%  of  the  nations  cable  subscribers  and  26.  5%  of  the  nations  MVPD  subscribers.  15  FCC  Rcd  at  9836-  37    42.  TWE  serves  18.  9%  of  the  nations  cables
 subscribers.  To  avoid  double  counting,  this  TWE  subscriber  figure  does  not  include  1,  416,000  subscribers  that  AT&  T  and  TWE  jointly  serve  through  a  joint  partnership  agreement.  See  also  AT&  T-  MediaOne  Order  15  FCC  Rcd
 at  9823    14  (stating  that  AT&  T  has  18,  959,  000  subscribers  prior  to  its  merger  with  MediaOne);  id.  at  15  FCC  Rcd  at  9824    17  (stating  that  total  U.  S.  subscribers  equal  67.  1  million;  id.  at  9829-  30    26  note  95  (stating  that
 MediaOne  had  5,  000,000  subscribers  prior  to  its  merger  with  AT&  T,  and  that  Time  Warner  subscribers  attributable  to  MediaOne  include  both  TWE  and  Time  Warner  Inc.  subscribers);  id.  at  9833    32  (stating  that  AT&  T  will  sell  a
 certain  number  of  subscribers,  later  determined  to  be  750,000,  to  Comcast  upon  consummation  of  its  merger  with  MediaOne).  The  cable  horizontal  ownership  rule  limits  a  cable  operator  to  30%  of  the  nations  MVPD  subscribers.
 See  47  C.  F.  R.    76.  503.  662
 Liberty  Media  also  holds  an  ownership  interest  in  Time  Warner  Inc.  that  amounts  to  approximately  9%  of  the  non-  voting  equity  and  less  than  one  percent  of  the  voting  equity  in  Time  Warner  Inc.  See  AT&  T-  MediaOne  Order,
 15  FCC  Rcd  at  9825    19.  663
 AT&  T  holds  a  74%  voting  interest  in  Excite@  Home.  Other  entities  holding  an  ownership  interest  in  Excite@  Home  include  Comcast  Corp.,  Cox  Communications,  Inc.,  Cablevision  Systems  Corp.,  and  Shaw
 Cablesystems  Ltd.  AT&  T-  MediaOne  Order,  15  FCC  Rcd  at  9826    21  n.  64.  664
 See  Patricia  Fusco,  Top  12  ISPs  by  Subscriber,  INTERNETNEWS.  COM,  at  http://  www.  isp-planet.  com/  research/  isp_  071000.  html  (no  date).  Both  Road  Runner  and  Excite@  Home  are,  by  contract,  the
 exclusive  ISPs  of  the  cable  operators  they  serve,  until  December,  2001,  and  June,  2002,  respectively.  See  AT&  T-MediaOne,  15  FCC  Rcd  at  9869    120.  Time  Warner  has  announced,  however,  that  its  exclusivity  with  Road
 Runner  will  end  in  April  2001.  See  Time  Warner  Inc.,  Time  Warner  to  Increase  Road  Runner  Ownership  and  Manage  its  Operations  (press  release),  Dec.  18,  2000.
 665  For  example,  currently  AT&  T  and  its  cable  affiliates  have  an  arrangement  to  feature  the  Excite@  Home  ISP  on
 their  cable  Internet  service  exclusively  until  June  30,  2002,  and  on  a  preferred  basis  until  2008.  See  SBC  Comments  at  9;  AT&  T-  MediaOne  Order,  15  FCC  Rcd  at  9869    120;  see  also  AT&  T  Corp.,  Eight  ISPs  Join  AT&  T  Broadband
 Choice  Trial  (press  release),  Nov.  1,  2000  (stating  that  AT&  T  has  begun  offering  on  a  trial  basis  to  a  limited  number  of  customers  ISP  choice  for  high-  speed,  always-  on  cable  Internet  service  over  a  hybrid  fiber-  coaxial  network);
 (continued)
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 2000,  AT&  T  announced  that  it  would  restructure  each  of  its  major  units  into  four  separate,  publicly-  held  companies  traded  as  a  common  stock  or  tracking  stock.  666  AT&  T  Broadband,  the  unit  responsible  for
 broadband  services,  including  MVPD,  pay  TV  and  high-  speed  Internet  access  services,  will  assume  ownership  of  Excite@  Home.  667  AT&  T  also  offers  local  telephone  service  over  its  cable  systems,  and  has
 sought  to  provide  local  telephone  service  over  other  cable  systems.  As  a  result  of  its  merger  with  MediaOne,  AT&  T  acquired  a  34.67%  direct  interest  in  Road  Runner,  the  nations  second  largest
 broadband  ISP,  and  a  25.5%  interest  in  TWE.  668  Time  Warner  owns  the  remaining  74.49%  of  TWE.
 260.  TWE  owns  or  operates  Time  Warners  cable  systems,  which  serve  approximately  12.7  million,  or  18.9%  of  the  nations  cable  subscribers.  669  TWE  is  also  a  major  producer  of  video
 programming  and  controls  Road  Runner.  670  Time  Warner  controls  the  day-  to-  day  management  of  the  TWE  cable  systems  and  the  other  TWE  assets.  671  AT&  T  currently  has  no  right  to  participate  in  day-  to-day
 management  of  TWE.  672  According  to  AT&  T,  however,  its  ownership  interest  in  TWE  does  confer  rights  to  vote  on  specified  Participant  Matters,  and  gives  it  veto  power  over,  among  other  things,  any
 (  continued  from  previous  page)  Applications  for  Consent  to  the  Transfer  of  Control  of  Licenses  and  Section  214  Authorizations  from  MediaOne
 Group,  Inc.,  to  AT&  T  Corp.,  CS  Docket  No.  99-  251,  Letter  from  James  W.  Cicconi,  General  Counsel,  AT&  T,  to  William  Kennard,  Chairman,  FCC,  dated  Dec.  6,  1999  (in  which  AT&  T  committed  to  provide  unaffiliated  ISPs
 access  to  its  cable  systems  following  the  expiration  of  its  exclusive  arrangement  with  Excite@  Home  in  2002,  and  affirmed  its  commitment  to  openness),  transmitted  by  letter  from  Joan  Marsh,  Director,  Federal  Government
 Affairs,  AT&  T,  to  Magalie  Roman  Salas,  Secretary,  FCC,  dated  Dec.  7,  1999.  666
 The  four  units  will  include  AT&  T  Broadband,  which  operates  AT&  Ts  cable  systems;  AT&  T  Business,  which  provides  business  communications  and  networking  services;  AT&  T  Consumer,  which  provides  pre-  paid  calling
 cards,  stand  alone  residential  long  distance,  and  residential  dial-  up  Internet  access  service;  and  AT&  T  Wireless.  Each  of  the  four  new  companies  will  continue  to  bundle  each  others  services  through  inter-  company  agreements.
 AT&  T  Corp.,  AT&  T  To  Create  Family  of  Four  New  Companies  (press  release),  Oct.  25,  2000.  667
 AT&  T  plans  to  conduct  an  initial  public  offering  for  stock  that  will  track  the  performance  of  the  Broadband  unit  during  the  summer  of  2001.  AT&  T  Corp.,  AT&  T  To  Create  Family  of  Four  New  Companies  (press  release),  Oct.
 25,  2000.  668
 See  AT&  T-  MediaOne  Order,  15  FCC  Rcd  at  9831    28.  669
 See  AT&  T-  MediaOne  Order,  15  FCC  Rcd  at  9836-  37    42  n.  145.  670
 AT&  T  therefore  has  both  a  direct  and,  through  TWE,  an  indirect  interest  in  Road  Runner  and  in  the  production  of  video  content.
 671  See  Applications  for  Consent  to  the  Transfer  of  Control  of  Licenses  from  MediaOne  Group,  Inc.  to  AT&  T  Corp.,
 CS  Docket  No.  99-  251,  Letter  from  Betsy  J.  Brady,  Esq.,  Vice  President  Federal  Government  Affairs,  AT&  T  to  To-Quyen  Truong,  Associate  Chief,  Cable  Services  Bureau,  dated  Nov.  24,  1999,  at  2,  9-  15,  see  also  Letter  from  Peter
 D.  Ross,  Counsel  for  America  Online,  Inc.,  and  Arthur  H.  Harding,  Counsel  for  Time  Warner  Inc.,  to  Deborah  Lathen,  Chief  Cable  Services  Bureau,  FCC,  dated  Oct.  5,  2000  (  Ross-  Harding  Oct.  5  Letter)  at  3.
 672  MediaOnes  right  to  participate  in  the  day-  to-  day  management  of  TWE  terminated  in  1999  as  a  result  of  a  non-compete
 provision  in  the  TWE  limited  partnership  agreement  that  prohibited  MediaOne  from  competing  in  any  lines  of  business  with  TWE.  MediaOne  had  the  right  to  unilaterally  terminate  the  non-  compete  clause.  Upon  termination
 by  MediaOne,  Time  Warner  had  the  right  to  terminate  entirely  MediaOnes  right  to  participate  on  the  TWE  cable  management  committee.  See  Applications  for  Consent  to  the  Transfer  of  Control  of  Licenses  from  MediaOne
 Group,  Inc.  to  AT&  T  Corp.,  CS  Docket  No.  99-  251,  Letter  from  Betsy  J.  Brady,  Esq.,  Vice  President  Federal  Government  Affairs,  AT&  T  to  To-  Quyen  Truong,  Associate  Chief,  Cable  Services  Bureau,  dated  Nov.  24,  1999  at
 2-  3  n.  7;  see  also  Letter  from  Betsy  J.  Brady,  Vice  President,  Federal  Government  Affairs,  AT&  T,  to  Magalie  Roman  Salas,  Secretary,  dated  FCC,  Nov.  28,  2000  (AT&  T  Nov.  28  Ex  Parte)  at  1.
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 merger  involving  TWE,  the  sale  or  transfer  of  more  than  ten  percent  of  TWEs  assets,  the  expansion  of  TWE  into  new  lines  of  business  and  the  transfer  or  sale  of  TWE  assets.  673  Time  Warner  enjoys  the  same
 voting  rights.
 261.  As  a  result  of  its  acquisition  of  MediaOne  and  MediaOnes  interest  in  Road  Runner,  AT&  T  presently  is  subject  to  a  DOJ  consent  decree.  In  the  complaint  accompanying  the  Consent  Decree,
 DOJ  alleged  that  the  substantial  ownership  interest  AT&  T  was  acquiring  in  Road  Runner  would  facilitate  collusion  and  coordination  between  Excite@  Home  and  Road  Runner.  674  The  DOJ  Consent  Decree
 therefore  requires  AT&  T  to  divest  its  interest  in  Road  Runner  on  or  before  December  31,  2001,  restricts  AT&  Ts  role  in  the  management  and  governance  of  Road  Runner  prior  to  divestiture,  and  prevents  AT&  T
 from  entering  into  certain  agreements  with  Time  Warner  (and  AOL  Time  Warner  after  the  merger)  with  regard  to  Residential  Broadband  Service  without  the  approval  of  DOJ.  675
 673  According  to  AT&  T,  these  rights  include:  veto  rights  over  any  merger  involving  Time  Warner  Entertainment;
 the  sale  or  transfer  of  assets  constituting  more  than  10%  of  Time  Warner  Entertainment  Assets;  the  expansion  of  Time  Warner  Entertainment  into  new  lines  of  business;  the  specified  issuance  of  additional  partnership  interest;  the
 indemnification  of  any  partner  or  affiliate  for  liability  in  excess  of  $500,  000;  incurrance  of  debt  for  money  borrowed  above  a  defined  ratio;  the  admission  of  a  new  general  partner;  certain  acquisitions  above  the  greater  of  $750,000  or
 10%  of  Time  Warner  Entertainments  consolidated  revenues  for  its  most  recent  fiscal  year;  the  dissolution  of  Time  Warner  Entertainment;  the  voluntary  bankruptcy  of  Time  Warner  Entertainment;  the  amendment  or  modification  of
 the  Time  Warner  partnership  agreement;  and  the  transfer  or  sale  of  certain  major  interests  in  Time  Warner  or  any  sub-  partnership  thereof.  See  Applications  for  Consent  to  the  Transfer  of  Control  of  Licenses  from  MediaOne  Group,
 Inc.  to  AT&  T  Corp.,  CS  Docket  No.  99-  251,  Letter  from  Betsy  J.  Brady,  Esq.,  VP  Federal  Government  Affairs,  AT&  T  to  To-  Quyen  Truong,  Associate  Chief,  Cable  Services  Bureau,  dated  Nov.  24,  1999,  at  10;  see  also  AT&  T-MediaOne
 Order,  15  FCC  Rcd  at  9830    26  n.  93.  Time  Warner  does  not  agree  with  AT&  Ts  characterization  of  AT&  Ts  rights  in  TWE.  See  Letter  from  Catherine  R.  Nolan,  VP,  Law  and  Public  Policy,  to  Kathryn  C.  Brown,
 Chief  of  Staff,  Office  of  Chairman,  FCC,  dated  Oct.  13,  2000  (Time  Warner  Oct.  13  Ex  Parte)  at  1  transmitted  by  Letter  from  Peter  D.  Ross,  Counsel  for  Applicants,  to  Magalie  Roman  Salas,  Secretary,  FCC,  dated  Nov.  9,  2000.
 674  DOJ  Consent  Decree  Section  IV    30-  34.
 675  U.  S.  v.  AT&  T  Corp.  and  MediaOne  Group,  Inc.,  Final  Judgment,  2000  WL  782849.  The  DOJ  Consent  Decree
 reads,  in  part:
 Prior  to  the  earlier  of  December  31,  2003  or  two  years  after  AT&  Ts  and  MediaOnes  divestiture  of  [Road  Runner],  unless  they  obtain  prior  consent  of  [DOJ],  AT&  T,  MediaOne,  and  their  Affiliates  shall  not  (1)
 enter  into  any  contractual  or  other  arrangement  with  Time  Warner  to  jointly  offer  or  provide  any  wholesale  or  retail  Residential  Broadband  Service;  (2)  enter  into  any  contractual  or  other  arrangement  with  Time
 Warner  that  has  the  purpose  or  effect  of  preventing  AT&  T,  MediaOne,  their  Affiliates  or  Time  Warner  from  offering  or  of  providing  a  wholesale  or  retail  Residential  Broadband  Service  in  any  geographic  region
 or  to  any  group  of  customers;  or  (3)  enter  into  any  contractual  or  other  arrangement  with  Time  Warner  that  has  the  purpose  or  effect  of  preventing  (a)  services,  capabilities,  or  features  in  any  wholesale  or  retail  Cable
 Modem  Service  offered  by  AT&  T,  MediaOne,  their  Affiliates,  or  Time  Warner;  or  (b)  AT&  T,  MediaOne  or  their  Affiliates  from  granting  preferential  treatment  in  any  wholesale  content,  services,  capabilities,  or
 features  offered  by  any  person  other  than  Time  Warner,  or  Time  Warner  from  granting  preferential  treatment  in  any  wholesale  or  retail  Cable  Modem  Service  offered  by  Time  Warner  to  content,  services,
 capabilities,  or  features  offered  by  any  person  other  than  AT&  T,  MediaOne  or  their  Affiliates  .  .  .  (B)  [DOJ]  shall  consent  to  a  proposed  contractual  or  other  arrangement  if  it  determines  in  its  sole  discretion
 that  such  arrangement  will  not  substantially  lessen  competition  in  any  market.
 DOJ  Consent  Decree  Section  V(  A),  (B).
 The  Consent  Decree  further  defines  Residential  Broadband  Service  to  mean    any  service  offered  to  residential  customers  in  the  United  States  of  America  that  permits  users  to  transmit  and  receive  information  using
 (continued)
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 262.  On  December  18,  2000,  AT&  T  and  Time  Warner  announced  that  they  would  dissolve  the  Road  Runner  joint  venture  as  required  by  the  DOJ  Consent  Decree,  turning  over  operations  of  Road
 Runner  to  Time  Warner  (and  America  Online  after  the  merger).  676  The  restructuring  of  Road  Runner  also  would  end  Road  Runner  exclusivity  on  Time  Warners  cable  platform,  permitting  further  opportunity  for
 consumer  choice  of  ISPs  on  Time  Warners  cable  platform.  677
 263.  AT&  T  is  also  subject  to  a  video  condition,  imposed  as  a  condition  of  the  Commissions  approval  of  AT&  Ts  merger  with  MediaOne,  that  AT&  T  either:  (i)  divest  its  ownership  interest  in  TWE;
 (ii)  divest  or  reduce  its  interest  in  Liberty  Media  and  other  video  programming  companies  such  that  AT&  T  terminates  its  involvement  in  TWEs  video  programming  activities  pursuant  to  the  limited
 partnership  exemption  678  and  the  officers/  directors  attribution  waiver  provisions  of  the  cable  ownership
 (  continued  from  previous  page)  Internet  protocols  at  speeds  which  may  exceed  128  kilobits  per  second.  The  Consent  Decree  also  defines  Time
 Warner  to  include  Time  Warner,  TWE,  Road  Runner,  their  successors  and  assigns,  and  their  parents,  divisions,  groups,  majority-  owned  subsidiaries,  and  any  entity  that  has  a  merger  agreement  with  Time  Warner  and  that  would
 be  included  in  this  definition  when  the  merger  is  consummated.  DOJ  Consent  Decree  Section  II(  F),  (H).  676
 AT&  T  Corp.,  Road  Runner  Joint  Venture  to  be  Dissolved  (press  release),  Dec.  18,  2000;  Time  Warner  Inc.,  Time  Warner  to  Increase  Road  Runner  Ownership  and  Manage  its  Operations  (press  release),  Dec.  18,  2000.  At  the  time
 of  the  announced  restructuring  of  Road  Runner,  Microsoft  Corporation  and  Compaq  Computer  Corporation  owned  a  combined  20  percent  interest  in  Road  Runner,  while  Time  Warner,  AT&  T  Broadband,  and  Advance/  Newhouse
 together  owned  an  80  percent  fully  diluted  interest.  Under  the  restructuring  plan,  the  interests  of  Microsoft  and  Compaq  would  be  redeemed  and  Road  Runner  would  distribute  substantially  all  of  its  assets  to  Time  Warner  and  its
 affiliates,  and  to  AT&  T  Broadband.  677
 Id.  678
 The  Commissions  cable  ownership  attribution  rules  provide  that  all  partnership  interests  are  attributable  because,  unlike  a  corporate  shareholder,  a  limited  partner  may  influence  or  control  the  operations  of  the  partnership  even  if
 the  percentage  equity  interest  is  small.  See  AT&  T-  MediaOne  Order,  15  FCC  Rcd  at  9837    43;  see  also  In  re  Cable  Reform  Act  Provisions  of  the  Telecommunications  Act  of  1996:  Review  of  the  Commissions  Cable  Attribution
 Rules  CS  Docket  Nos.  98-  82,  96-  85,  Report  and  Order  (  Attribution  Order),  14  FCC  Rcd  19014,  19039    61  (1999).  However,  partnership  interests  may  be  rendered  nonattributable,  under  the  insulated  limited  partnership
 exemption  (  ILP),  when  a  partner  that  "is  not  materially  involved,  directly  or  indirectly,  in  the  management  or  operation  of  the  video-  programming  related  activities  of  the  partnership  and  the  relevant  entity  so  certifies."  See
 Attribution  Order,  14  FCC  Rcd  at  19040    64;  47  C.  F.  R.    76.  503  n.  2(  b)(  1).  In  order  to  satisfy  this  standard,  the  limited  partner  may  not  engage  in  the  following  seven  activities  (the  "ILP  test"):
 (1)  The  limited  partner  cannot  act  as  an  employee  of  the  partnership  if  his  or  her  functions,  directly  or  indirectly,  relate  to  the  video  programming  enterprises  of  the  company;
 (2)  the  limited  partner  may  not  serve,  in  any  material  capacity,  as  an  independent  contractor  or  agent  with  respect  to  the  partnership's  video  programming  enterprises;
 (3)  the  limited  partner  may  not  communicate  with  the  licensee  or  general  partners  on  matters  pertaining  to  the  day-  to-  day  operations  of  its  video  programming  business;
 (4)  the  rights  of  the  limited  partner  to  vote  on  the  admission  of  additional  general  partners  must  be  subject  to  the  power  of  the  general  partner  to  veto  any  such  admissions;
 (5)  the  limited  partner  may  not  vote  to  remove  a  general  partner  except  where  the  general  partner  is  subject  to  bankruptcy  proceedings,  is  adjudicated  incompetent  by  a  court  of  competent  jurisdiction,  or  is  removed  for  cause  as
 determined  by  a  neutral  arbiter;
 (6)  the  limited  partner  may  not  perform  any  services  for  the  partnership  materially  relating  to  its  video  programming  activities,  except  that  a  limited  partner  may  make  loans  to  or  act  as  a  surety  for  the  business;  and
 (continued)
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 attribution  rules;  or  (iii)  divest  its  ownership  interest  in  certain  non-  TWE  cable  systems.  AT&  T  was  required  to  make  an  unambiguous  election  of  one  of  the  three  options  by  December  15,  2000,  six  months
 after  the  consummation  of  the  AT&  T-  MediaOne  merger,  and  must  comply  with  this  election  by  May  19,  2001.  We  also  stated  that  until  AT&  T  complies  with  the  divestiture  condition,  its  participation  in  TWE  is
 further  limited  by  certain  other  Commission-  imposed  restrictions.  679
 (  continued  from  previous  page)  (7)  the  limited  partner  may  not  become  actively  involved  in  the  management  or  operation  of  the  video
 programming  businesses  of  the  partnership.  Attribution  Order,  14  FCC  Rcd  at  19040-  41    64.
 See  also  47  C.  F.  R.    76.  503  n.  2(  b)(  2).  To  utilize  the  ILP  exemption,  the  limited  partner  must  file  with  the  Commission  a  certification,  with  supporting  facts,  stating  that  it  is  not  involved  in  these  seven  activities.  ([  T]  he
 certification  must  be  accompanied  by  facts,  e.  g.,  in  the  form  of  documents,  affidavits  or  declarations,  that  demonstrate  that  these  insulation  criteria  are  met.)  Attribution  Order,  14  FCC  Rcd  at  19040-  41,    64.
 679  We  further  required  that  AT&  T  abide  by  several  interim  conditions  and  their  enforcement  mechanisms  until  such
 time  as  AT&  T  has  taken  the  required  compliance  action.  The  interim  conditions  provide  that:
 (1)  No  officer  or  director  of  AT&  T  shall  also  be  an  officer  or  director  of  TWE.  AT&  T  may  appoint  an  employee  (who  is  not  an  officer  or  director  of  AT&  T)  to  the  TWE  Board  of  Directors,  provided  that  such  employee
 is  not  involved  in  the  Video  Programming  activities  of  AT&  T.
 (2)  No  officer,  director,  or  employee  of  AT&  T  shall,  directly  or  indirectly,  influence  or  attempt  to  influence,  or  otherwise  participate  in,  the  management  or  operation  of  the  Video  Programming  activities  of  TWE.  In
 particular,  no  member  of  the  TWE  Board  of  Directors  appointed  by  AT&  T  shall  be  involved  in  the  following  matters:
 a)  the  decisions  of  TWE  regarding  which  Video  Programming  services  are  purchased  for  or  carried  on  TWE's  cable  systems;
 b)  negotiation  of  the  prices  paid  by  TWE  for  Video  Programming  carried  on  TWE's  cable  systems;
 c)  setting  the  schedule  for  rollout  of  Video  Programming  by  TWE's  cable  systems;
 d)  marketing  by  TWE  of  Video  Programming  carried  on  TWE's  cable  systems;
 e)  setting  the  budget  for  the  Video  Programming  operations  of  TWE's  cable  systems  (except  that  AT&  T  may  be  involved  in  setting  the  overall  TWE  budget  for  Video  Programming  operations  provided  that  AT&  T's  access
 to  TWE  budget  information  does  not  include  information  concerning  individual  budget  components  of  TWE's  Video  Programming  operations,  e.  g.,  personnel,  overhead,  marketing,  and  program  purchasing);
 f)  selecting  the  electronic  programming  guide  used  by  TWE's  cable  systems;
 g)  the  hiring,  firing,  or  supervising  of  TWE  employees  directly  involved  in  the  Video  Programming  activities  of  TWE's  cable  systems;  or
 h)  assessing  the  performance  of  any  Video  Programming  service  carried  by  TWE's  cable  systems.
 (3)  AT&  T  may  not  receive  information  from  TWE  regarding  the  price,  terms,  and  conditions  which  TWE  negotiates  for  the  carriage  of  Video  Programming  on  the  TWE  cable  systems,  nor  provide  information  to
 TWE  regarding  the  price,  terms,  and  conditions  which  AT&  T  negotiates  for  the  carriage  of  Video  Programming  on  the  AT&  T  cable  systems.  AT&  T  may  not  obtain  from  any  Video  Programming  vendor  a  volume  discount  or  other
 favorable  terms  and  conditions  as  a  result  of  TWE's  purchase  of  Video  Programming  for,  or  carriage  on,  TWE's  cable  systems.
 AT&  T-  MediaOne  Order,  15  FCC  Rcd  at  9899,  Appendix  B    3-  5.
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 264.  Pursuant  to  the  AT&  T-  MediaOne  Order,  on  December  15,  2000,  AT&  T  notified  the  Commission  that  it  would  divest  its  interest  in  Liberty  Media  if  it  obtains  a  favorable  tax  ruling,  680  and
 that  otherwise  it  would  divest  its  interest  in  TWE.  681  On  December  18,  2000,  the  Cable  Services  Bureau  requested  clarification  of  AT&  Ts  December  15  letter  which,  by  making  the  Liberty  Media  divestiture
 contingent  upon  a  favorable  tax  ruling,  did  not  appear  to  make  a  single  election  as  required  by  the  AT&  T-  MediaOne  Order.  682  On  December  21,  2000,  after  considering  AT&  Ts  response  to  the  Bureaus
 request  for  clarification,  the  Commission  issued  an  order  ruling  that  AT&  T  had  not  complied  with  the  provisions  of  the  AT&  T-  MediaOne  Order  that  required  AT&  T  to  unambiguously  elect  a  single
 compliance  option.  683  In  the  December  21  Order,  we  ruled  that  it  was  AT&  Ts  intent  to  elect  .  .  .  the  divestiture  of  TWE  .  .  .  and  we  determined  to  treat  AT&  Ts  election  as  choosing  that  option  only.  684
 2.  Discussion
 265.  Several  commenters  argue  that  the  merger  will  create  what  one  describes  as  a  sprawling  conglomerate  of  interests  685  between  AT&  T  and  AOL  Time  Warner  that  would  confer  upon  the
 companies  the  ability  and  incentive  to  use  their  combined  dominance  in  the  Internet  access  market,  and  other  unspecified  product  markets,  to  discriminate  against  unaffiliated  companies.  686  Commenters  also
 680  See  In  the  Matter  of  Applications  for  Consent  to  the  Transfer  of  Control  of  Licenses  and  Section  214
 Authorizations  from  MediaOne  Group,  Inc.,  Transferor  To  AT&  T  Corp.,  Transferee,  CS  Docket  No.  99-  251,  Letter  from  James  W.  Cicconi,  General  Counsel,  AT&  T,  to  Deborah  Lathen,  Chief,  Cable  Services  Bureau,  dated  Dec.  15,
 2000.  See  also  id.  Letter  from  Deborah  A.  Lathen,  Chief,  Cable  Services  Bureau,  FCC,  to  James  W.  Cicconi,  General  Counsel,  AT&  T,  dated  Dec.  18,  2000.
 681  See  In  the  Matter  of  Applications  for  Consent  to  the  Transfer  of  Control  of  Licenses  and  Section  214
 Authorizations  from  MediaOne  Group,  Inc.,  Transferor  To  AT&  T  Corp.,  Transferee,  CS  Docket  No.  99-  251,  Letter  from  James  W.  Cicconi,  General  Counsel,  AT&  T,  to  Deborah  Lathen,  Chief,  Cable  Services  Bureau,  dated  Dec.  15,
 2000  ([  i]  f,  however,  AT&  T  is  unable  for  any  reason  to  achieve  insulation  of  its  TWE  interests  by  May,  19,  2001  .  .  .  AT&  T  hereby  certifies  that  it  will,  by  such  date,  either  divest  its  ownership  interest  in  TWE  or  place  this  interest  in
 an  irrevocable  trust  for  purposes  of  sale.).  If  AT&  T  divests  Liberty  Media  pursuant  to  its  December  15  letter,  it  will  also  divest  other  programming  interests.  Id.
 682  See  In  the  Matter  of  Applications  for  Consent  to  the  Transfer  of  Control  of  Licenses  and  Section  214
 Authorizations  from  MediaOne  Group,  Inc.,  Transferor  To  AT&  T  Corp.,  Transferee,  CS  Docket  No.  99-  251,  Letter  from  Deborah  A.  Lathen,  Chief,  Cable  Services  Bureau,  FCC,  to  James  W.  Cicconi,  General  Counsel,  AT&  T,  dated
 Dec.  18,  2000.  683
 In  the  Matter  of  Applications  for  Consent  to  the  Transfer  of  Control  of  Licenses  and  Section  214  Authorizations  from  MediaOne  Group,  Inc.,  Transferor  To  AT&  T  Corp.,  Transferee,  CS  Docket  No.  99-  251,  Order,  FCC  No.  00-
 447  (rel.  Dec.  21,  2000)  (  December  21  Order).  684
 December  21  Order  at    4-  5.  We  further  stated  that  AT&  T  would  be  permitted  until  January  15,  2001  to  seek  a  modification  of  the  December  21  Order.  The  December  21  Order  states:
 IT  IS  FURTHER  ORDERED  .  .  .  should  AT&  T  seek  to  have  the  Commission  consider  a  modification  of  this  Order  to  allow  it  to  elect  Option  (b)  [the  divestiture  of  Liberty  Media  Group
 and  AT&  Ts  other  video  programming  interests],  it  must  submit  a  written  request  by  January  15,  2001  with  an  appropriate  showing  as  to  why  such  a  modification  would  serve  the  public  interest.
 December  21  Order  at    7.  685
 SBC  Comments  at  1;  see  also  Consumers  Union  Comments  at  4.  686
 Consumers  Union  broadly  defines  the  competitive  problem  with  respect  to  AT&  T  as  involving  barriers  to  entry,  foreclosure  of  inputs  and  monopsony  power.  Consumers  Union  Comments  at  37-  49.  SBC  asserts  that
 [  c]  ollectively,  AOL,  Time  Warner,  and  AT&  T  will  be  able  to  leverage  their  dominant  position  in  the  Internet  (continued)
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 allege  that  AOL  Time  Warner  would  be  able  to  leverage  its  power  in  video  programming,  broadband  content  and  portal  services  to  solidify  this  dominance.  687  They  argue  that  AT&  Ts  and  AOL  Time
 Warners  ownership  interest  in  TWE  will  give  AT&  T  and  AOL  Time  Warner  the  incentive  to  refrain  from  competing  with  each  other  in  areas  of  MVPD,  Internet  and  IM  services.  688  Consumers  Union,  for
 example,  argues  that  AOL  Time  Warner  would  clearly  have  the  incentive  to  use  its  leverage  to  induce  AT&  T  to  drop  its  efforts  to  push  for  compatibility/  interoperability/  access  to  AOLs  IM  customers.  689
 Similarly,  Consumers  Union  believes  AOL  could  use  TWE  leverage  to  foreclose  rival  portals  like  Yahoo,  encouraging  AT&  T  to  favor  AOL  as  a  portal  over  rivals,  and  adds  that  AOL  would  encourage
 AT&  T  to  give  preferential  treatment  to  AOL  Time  Warner  music  distribution  services.  690  Next,  Consumers  Union  contends  that  AOL  could  use  the  TWE  leverage  to  impede  head-  to-  head  competition
 between  AT&  T  and  AOL  in,  for  example,  the  provision  of  interactive  television  offerings  by  agreeing  to  common  platforms  that  further  their  collective  interests.  691  To  remedy  the  alleged  harms,  these
 commenters  ask  that  we  require  AOL  Time  Warner  to  not  discriminate  against  unaffiliated  Internet  access  providers,  to  provide  open  access  to  its  cable  systems  for  unaffiliated  ISPs,  to  sever  its  cross-  ownership
 ties  with  AT&  T  through  TWE  and  Time  Warner  Inc.,  and  to  sever  all  contractual  ties  and  joint  ventures  with  AT&  T.  692
 266.  We  find  that  the  merger  increases  the  likelihood  of  coordinated  action  by  AOL  Time  Warner  and  AT&  T  to  discriminate  in  favor  of  AOLs  ISP  service.  The  proposed  merger  will  increase
 AOL  Time  Warners  incentive  and  ability  to  obtain  agreements  with  AT&  T  to  favor  AOL  Time  Warners
 (  continued  from  previous  page)  access  market  to  increase  their  power  in  the  market  for  broadband  portal  and  content  services  while  simultaneously
 leveraging  their  combined  dominance  in  the  broadband  portal  and  content  markets  to  increase  their  market  share  for  high-  speed  Internet  access.  SBC  Comments  at  7,  18-  24;  see  also  Disney  Reply  Comments  at  5  (  Assuming
 approval  of  the  [AT&  T-  MediaOne  merger],  Time  Warner  and  AT&  T/  TCI/  MediaOne  would  operate  as  an  interconnected  consortium  passing  83  million  U.  S.  homes  80%  of  all  U.  S.  households  .  .  .Taken  together,  the  cross
 interests  of  AT&  T  and  Time  Warner  are  enormous  in  the  broadband  services  market,  including  control  of  69%  of  the  high-  speed  residential  Internet  access  market.).
 687  Commenters  also  believe  AOL  Time  Warner  could  use  its  power  as  owner  of  Road  Runner  to  discriminate
 against  unaffiliated  content  providers,  and  could  use  its  power  as  a  large  content  provider  to  discriminate  against  competing  broadband  ISPs.  See  SBC  Comments  at  27;  Letter  from  Andrew  Jay  Schwartzman,  Counsel  for
 Consumers  Union,  et.  al.,  to  Deborah  Lathen,  Chief,  Cable  Services  Bureau,  FCC,  dated  Nov.  14,  2000  (  Schwartzman  Nov.  14  Letter)  at  2-  4.  Even  AT&  T  acknowledges  that  Time  Warner  could  use  its  dominance  over
 TWE  to  impede  competition  between  AOL  and  AT&  T.  See  AT&  T  Nov.  28  Ex  Parte  at  2-  4  (summarizing  Consumers  Union  arguments).
 688  See  SBC  Comments  at  27-  30;  Schwartzman  Nov.  14  Letter  at  3.
 689  Schwartzman  Nov.  14  Letter  at  3.
 690  Id.  at  2-  3.
 691  Id.  at  3.
 692  See  SBC  Comments  at  32;  BellSouth  Reply  Comments  at  19-  20.  BellSouth  argues  that  AT&  T  cannot,  for
 example,  be  permitted  to  provide  AOL  access  to  AT&  T  customers  on  a  preferential  basis  for  ISP  services  in  exchange  for  AT&  T  access,  for  telephony  purposes,  to  the  cable  customers  of  Time  Warner.  BellSouth  Reply
 Comments.  at  20.  See  also  Consumers  Union  Comments  at  157;  Schwartzman  Nov.  14  Letter  at  2-  3.  We  note  that  in  AT&  T-  MediaOne,  we  rejected  Consumers  Unions  motion  to  consolidate  that  proceeding  with  this  proceeding.
 Consumers  Union  filed  its  motion  in  the  dockets  of  both  proceedings.  We  once  again  reject  the  request  for  the  reasons  enumerated  in  AT&  T-  MediaOne.  See  ATT-  MediaOne  Order,  15  FCC  Rcd  at  9892-  93    179.
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 ISPs  to  the  detriment  of  AOL  Time  Warners  competitors.  693  AT&  T  could  give  preferential  treatment  to  AOLs  ISP  by  refusing  carriage  to  competing  ISPs,  by  providing  AOL  better  price  or  non-  price  terms  of
 service  if  AT&  T  does  carry  competing  ISPs,  or  by  limiting  the  functionalities  or  features  available  to  competing  ISPs.  694  For  example,  AT&  T  could,  as  Consumers  Union  contends,  circumscribe  the
 availability  of  capacity  or  connection  points  for  non-  favored  ISPs.  695
 267.  Accordingly,  because  we  conclude  below  that  the  benefits  of  the  merger  do  not  outweigh  its  harms,  696  we  find  it  necessary  to  impose  remedial  conditions  that  will  prevent  the  potential  harm
 arising  from  possible  post-  merger  coordination  between  AT&  T  and  AOL  Time  Warner.  This  conduct  remedy,  in  combination  with  our  conditions  prohibiting  AOL  Time  Warner  from  discriminating  against
 unaffiliated  ISPs  on  its  own  cable  systems,  as  well  as  the  conditions  we  imposed  in  our  AT&  T-  MediaOne  Order,  conditions  imposed  by  DOJ  in  its  AT&  T-  MediaOne  Consent  Decree,  and  existing  antitrust  laws,
 will  prevent  any  public  interest  harms  that  might  arise  from  coordination  between  AOL  Time  Warner  and  AT&  T  as  a  result  of  the  merger.
 268.  We  find  that  other  alleged  harms  that  might  arise  from  the  possibility  of  coordinated  action  between  AT&  T  and  AOL  Time  Warner,  such  as  coordination  in  MVPD  and  video  programming
 services  and  coordination  between  Excite@  Home  and  Road  Runner,  697  existed  before  the  proposed  merger,  and  there  is  insufficient  evidence  that  the  merger  would  increase  the  likelihood  or  magnitude  of
 those  harms.  Moreover,  those  harms  have  already  been  addressed  by  the  Commission  and  DOJ  in  their  respective  reviews  of  the  AT&  T-  MediaOne  merger.  698  Other  harms,  such  as  potential  agreements  not  to
 compete  in  IM  or  ITV  services,  would  be  addressed  by  existing  antitrust  laws.  699  Thus,  we  do  not  believe  any  additional  remedies  are  warranted.
 269.  We  find  that  in  three  respects  the  merger  will  increase  the  likelihood  of  discrimination  by  AT&  T  in  favor  of  AOL.  700  Although  we  agree  with  the  Applicants  that  the  merger  of  AOL  and  Time
 693  We  note  that  even  AOL  acknowledges  that  prior  to  the  proposed  merger,  AOL  was  unable  to  strike  an  agreement
 with  any  cable  operator.  See  Applicants  Second  Response  at  13.  694
 See  Disney  Reply  Comments  at  9;  see  also  Letter  from  the  Senator  Mike  DeWine,  Chairman,  Subcommittee  on  Antitrust,  Business  Rights,  and  Competition,  and  Senator  Herb  Kohl,  Ranking  Member,  Subcommittee  on  Antitrust
 Business  Rights  and  Competition  to  William  Kennard,  Chairman,  FCC,  and  Robert  Pitofsky,  Chairman,  Federal  Trade  Commission,  dated  May10,  1999  (citing  a  hypothetical  example  of  possible  discrimination  against
 unaffiliated  content  providers:  Using  this  technology,  it  appears  that  it  would  be  possible,  for  example,  for  the  combined  AOL  Time  Warner  to  slow  down  traffic  to  the  [unaffiliated]  ESPN  web  site  while  speeding  it  up  to  its
 own  competing  CNN/  Sports  Illustrated  site.);  see  also  SBC  Comments  at  31-  32  (contending  that  risks  of  anticompetitive  coordination  also  stem  from  contracts  and  sweetheart  deals).
 695  Consumers  Union  points  out  that  [  e]  fforts  to  impose  or  obtain  exclusive  arrangements  have  become  ever-  present
 controversies  in  the  [cable  industry],  including  efforts  to  prevent  competing  technologies  from  obtaining  programming,  as  well  as  to  prevent  competition  from  developing  within  the  cable  industry.  Consumers  Union
 Comments  at  40.  We  believe  that  Consumers  Union  intends  to  suggest  that  similar  preferential  or  exclusive  arrangements  may  be  implemented  with  respect  to  ISP  services  over  cable  platforms.  See  Schwartzman  Nov.  14
 Letter  at  2-  4.  696
 See  Section  V,  infra.  (Analysis  of  Potential  Public  Interest  Benefits)  697
 See  SBC  Comments  at  22-  29.  698
 See  Section  IV.  A.,  supra.  (High-  Speed  Internet  Access  Services)  699
 See  para.  276,  infra.  700
 We  are  not  persuaded  by  AOL  Time  Warners  argument  that  no  conditions  are  required  here  because  the  FCC  (continued)
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 Warner  creates  no  new  corporate  link  between  AT&  T  and  Time  Warner,  701  we  nevertheless  conclude  that  AT&  Ts  existing  ownership  interests  in  TWE,  and  its  rights  afforded  over  Participant  Matters,  such  as
 any  merger  involving  TWE,  could  be  used  as  leverage  to  gain  favorable  ISP  access.  702  For  example,  in  exchange  for  voting  with  AT&  T  on  a  particular  Participant  Matter,  AOL  Time  Warner  could  require
 AT&  T  to  afford  AOL  preferential  rights  of  access  to  AT&  Ts  cable  systems.  In  addition,  as  AT&  T  points  out,  because  AOL  Time  Warner  would  retain  veto  rights  over  important  TWE  partnership
 decisions,  AOL  Time  Warner  could  wield  strategic  influence  over  AT&  T  and  use  this  power  if  AT&  T  deviated  from  any  tacit  or  agreed  upon  preferential  treatment  for  affiliated  ISPs.  703  Thus,  although  we
 agree  with  the  Applicants  that  these  ownership  interests  existed  pre-  merger,  we  are  persuaded  that  these  corporate  provisions  could  be  used  to  enforce  post-  merger  cooperation.  704  AT&  Ts  election  to  divest
 TWE  in  compliance  with  the  AT&  T-  MediaOne  Order  will,  once  it  is  effectuated,  eliminate  this  possibility.  We  note,  however,  that  AT&  T  is  not  required  to  divest  TWE  until  May  19,  2001.  705  Our
 conduct  remedy,  which  prohibits  AOL  Time  Warner  from  seeking  or  accepting  exclusive  or  preferential  treatment  from  AT&  T,  will  eliminate  AOL  Time  Warners  incentive  and  ability  to  engage  in  any  such
 conduct  before  AT&  T  divests  TWE.  706
 (  continued  from  previous  page)  found  no  cause  for  concern  over  preferential  agreements  in  AT&  T-  MediaOne.  See  Letter  from  Peter  D.  Ross,
 Counsel  to  America  Online,  to  Magalie  Roman  Salas,  Secretary,  FCC,  dated  Sept.  19,  2000  (  Applicants  Sept.  19  Letter)  at  3;  Ross-  Harding  Oct.  5  Letter  at  4-  8,  12.  In  AT&  T-  MediaOne,  we  were  not  presented  with  facts  that
 would  lead  to  a  concern  about  preferential  treatment  of  AOL  by  AT&  T.  Nothing  in  the  AT&  T-  MediaOne  merger  increased  the  likelihood  of  such  a  result.  For  the  reasons  explained  above,  this  merger  does  increase  the  likelihood
 of  preferential  treatment  of  AOL  by  AT&  T.  Moreover,  we  expressly  declined  to  consider  in  AT&  T-  MediaOne  the  facts  of  the  instant  merger,  and  as  a  consequence  we  denied  a  motion  to  consolidate  the  two  proceedings.  See  AT&  T-MediaOne
 Order,  15  FCC  Rcd  at  9892-  93    179.  701
 See  Ross-  Harding  Oct.  5  Letter  (.  .  .this  combination  has  no  effect  on  the  nature  of  AT&  Ts  limited  ownership  relationships  with  Time  Warner  relationships  that  the  Commission  and  antitrust  regulators  alike  reviewed  and
 approved  only  a  few  months  ago  when  AT&  T  obtained  approval  to  acquire  MediaOne.).  702
 See,  e.  g.,  SBC  Comments  at  31-  32  (contending  that  risks  of  anticompetitive  coordination  also  stem  from  contracts  and  sweetheart  deals);  BellSouth  Comments  at  20.  However,  we  disagree  with  commenters  apparent
 assertions  that  it  is  the  mere  existence  of  AT&  Ts  cross  ownership  interest  in  TWE  that  results  in  merger-  specific  competitive  harms.  These  cross  ownership  interests  exist  absent  the  merger.  However,  we  do  conclude  that  these
 ownership  interests  would  serve  to  facilitate  any  anticompetitive  incentives  brought  on  as  a  result  of  the  merger.  See  Consumers  Union  Comments  at  4;  see  also  AT&  T  Nov.  28  Ex  Parte  at  1-  2.
 703  AT&  T  Nov.  28  Ex  Parte  at  2-  4  (citing  Consumers  Union  Comments).
 704  Applicants  Sept.  19  Letter.  AT&  Ts  acquisition  of  MediaOne  created  AT&  Ts  interest  in  TWE,  and  the
 Commission  affirmatively  ruled  this  ownership  interest  permissible  in  the  AT&  T-  MediaOne  merger,  subject  to  AT&  Ts  compliance  with  the  conditions  set  forth  in  its  order  in  that  proceeding.  AT&  T-  MediaOne  Order,  15  FCC
 Rcd  at  9866    116.  705
 We  also  note  that  AT&  T  may,  on  or  before  January  15,  2001,  seek  a  modification  of  the  Commissions  December  21  Order  that  determined  it  has  elected  to  divest  TWE.  December  21  Order  at    7.  Any  further  argument
 with  respect  to  the  mandatory  divestiture  of  AT&  Ts  interest  in  TWE  is  being  considered  in  the  pending  Petition  for  Reconsideration  of  AT&  T-  MediaOne.
 706  As  noted  in  Section  IV-  A.,  supra,  (High-  Speed  Internet  Access  Services)  the  FTC  Consent  Agreement  forbids
 AOL  Time  Warner  from  entering  agreements  with  other  cable  operators  that  would  interfere  with  the  ability  of  any  such  [cable  operator]  to  enter  into  agreements  with  any  other  ISP  or  provider  of  ITV  services.  FTC  Consent
 Agreement  Section  III.  E.  While  we  believe  the  FTC  provision  would  prohibit  both  exclusive  and  preferential  agreements  between  AOL  Time  Warner  and  other  cable  operators,  because  of  AT&  Ts  particular  incentive  and
 (continued)
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 270.  Second,  AOL  Time  Warner  could  delay  or  otherwise  seek  to  frustrate  AT&  Ts  plans  to  sell  its  interest  in  TWE  in  connection  with  AT&  Ts  election  to  divest  TWE.  707  AT&  T  states  that  Time
 Warner  is  already  effectively  blocking  AT&  Ts  attempts  to  sell  its  TWE  interest  by  refusing  to  provide  AT&  T  with  financial  information  AT&  T  deems  necessary.  708  AOL  Time  Warner  could  use  these  or  other
 tactics  as  leverage  to  gain  preferential  ISP  access  rights  on  AT&  Ts  cable  systems.  Our  conduct  remedy  will  prevent  this  result.
 271.  Third,  since  at  least  February,  1999,  709  AT&  T  has  sought  access  to  Time  Warners  cable  systems  to  offer  Time  Warners  cable  customers  local  telephone  service,  but  has  so  far  been  unsuccessful
 in  its  negotiations  with  Time  Warner.  710  As  a  result  of  the  merger,  however,  we  find  that  it  is  more  likely  that  AT&  T  will  obtain  a  telephony  deal  from  the  merged  firm  if  it  chooses  to  pursue  this  strategy.  The
 merger  will  increase  the  incentive  for  AOL  Time  Warner  to  negotiate  with  AT&  T  because  AT&  T  holds  the  key  to  AOLs  access  to  the  facilities  of  the  nations  largest  cable  operator.  711  AOL  clearly  desires
 access  to  AT&  Ts  cable  systems  in  order  to  provide  ISP  service.  712  In  exchange  for  giving  AT&  T  telephony  access  to  TWE  cable  systems,  an  outcome  that  may  in  fact  benefit  the  public  interest,  AOL
 Time  Warner  could  obtain  preferential  treatment  for  AOLs  ISP  service  on  AT&  Ts  cable  systems,  an  outcome  that  would  harm  the  public  interest.  AT&  Ts  divestiture  of  TWE  will  not  forestall  this  outcome.
 Our  conduct  remedy  is  therefore  necessary  to  prevent  it.
 272.  Under  the  condition  we  are  adopting  to  address  the  potential  harm  described  above,  AOL  Time  Warner  shall  be  prohibited  from  entering  into  any  agreement  with  AT&  T  that  gives  AOL  or  any
 other  AOL  Time  Warner  ISP  exclusive  carriage  rights  on  AT&  Ts  cable  systems.  Further,  AOL  Time  Warner  may  not  enter  into  any  agreement  with  AT&  T  the  purpose  of  which  is  to  limit  in  any  way
 AT&  Ts  ability  to  enter  agreements  with  a  non-  AOL  Time  Warner  ISP.  713  For  example,  AOL  Time
 (  continued  from  previous  page)  ability  to  enter  into  such  agreements  with  AOL  Time  Warner  we  find  it  necessary  to  impose  a  condition  that
 explicitly  addresses  this  potential  public  interest  harm.  707
 See  AT&  T  Nov.  28  Ex  Parte.  708
 AT&  T  Nov.  28  Ex  Parte  at  2;  Letter  from  James  W.  Cicconi,  General  Counsel  and  Executive  Vice  President,  Law  &  Govt.  Affairs,  AT&  T,  to  Kathryn  C.  Brown,  Chief  of  Staff,  Office  of  the  Chairman,  FCC,  dated  Nov.  8,
 2000  (  AT&  T  Nov.  8  Ex  Parte)  at  2,  transmitted  by  Letter  from  Joan  Marsh,  Director,  Federal  Govt  Affairs,  AT&  T,  to  Magalie  Roman  Salas,  Secretary,  FCC,  dated  Nov.  8,  2000.
 709  See  AT&  T-  MediaOne  Order,  15  FCC  Rcd  at  9890    173.
 710  See  Confidential  Appendix  IV-  F  Note  1.  As  AOL  Time  Warner  points  out,  although  Time  Warner  and  AT&  T
 have  previously  explored  the  possibility  of  AT&  T  providing  telephony  services  over  Time  Warner  cable  systems  (in  discussions  that  long  predated  the  announcement  of  this  merger),  no  binding  agreement  has  ever  been  reached  .  .  .
 Ross-  Harding  Oct.  5  Letter  at  6;  see  also  Confidential  Appendix  IV.  F  Note  2.  As  discussed  below,  we  believe  an  agreement  that  would  facilitate  the  provision  of  cable  telephony  and  competition  with  the  incumbent  local  exchange
 carriers  would  be  pro-  competitive.  711
 This  result  would  arise  from  AOLs  acquisition  of  the  Time  Warner  cable  systems,  not  from  any  TWE  cross-ownership  between  AOL  and  AT&  T.
 712  See  Confidential  Appendix  IV-  F  Note.  3.
 713  We  note  that  there  may  be  unique  assets  that  only  one  ISP  can  use.  We  do  not  intend  to  prohibit  AT&  T  from
 entering  into  contracts  with  AOL  that  utilize  these  unique  assets.  Moreover,  we  do  not  believe  that  all  agreements  between  AT&  T  and  a  merged  AOL  Time  Warner  would  be  contrary  to  the  public  interest.  Although  certain  cable
 broadband  arrangements,  such  as  those  described  above,  would  result  in  discrimination  against  unaffiliated  ISPs  and  therefore,  would  be  contrary  to  the  public  interest,  other  agreements  between  AT&  T  and  the  merged  entity  would
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 Warner  may  not  enter  into  an  agreement  with  AT&  T  that  would  give  AOL  preferential  rights  to  use  a  particular  system  resource,  such  that  AT&  T  would  not  be  free  to  offer  the  same  rights  to  another  ISP.
 AOL  Time  Warner,  through  its  General  Counsel,  must  certify  upon  the  mergers  closing  and  annually  thereafter  that  it  is  in  compliance  with  this  condition.
 273.  In  combination  with  the  other  conditions  we  adopt  in  this  Order,  the  conditions  we  adopted  in  AT&  T-  MediaOne,  the  conditions  adopted  by  the  DOJ  in  its  AT&  T-  MediaOne  Consent  Decree,
 and  existing  antitrust  laws,  the  conduct  remedy  we  adopt  here  will  remedy  any  potential  harm  that  might  arise  from  the  merger  in  the  form  of  coordination  between  AT&  T  and  AOL  Time  Warner.  This  conduct
 remedy  will  address  in  a  direct  manner  any  potential  harm  due  to  coordination  between  AT&  T  and  AOL  Time  Warner  that  would  affect  competition  for  high-  speed  residential  Internet  access  service.  We
 conclude  that  this  condition  will  prevent  AOL  Time  Warner  from  using  any  leverage  it  might  gain  against  AT&  T  as  a  result  of  the  merger  to  induce  AT&  T  to  favor  AOL  and  disfavor  other  ISPs  seeking  access  to
 AT&  Ts  cable  systems.  Thus,  AOL  Time  Warner  will  not  be  permitted  to  use  its  control  of  TWE  ,  or  any  other  merger  asset,  714  to  induce  AT&  T  to  give  AOL  preferential  carriage  rights  as  a  condition  of  AOL
 Time  Warners  agreement  to  vote  in  AT&  Ts  favor  on  any  TWE  Participant  Matter,  to  improve  any  offer  to  purchase  AT&  Ts  TWE  interest,  or  to  enter  a  telephony  deal  with  AT&  T.  Nor  may  AOL  Time  Warner
 for  any  other  reason  or  in  any  other  manner  enter  into  any  agreement  with  AT&  T  that  is  designed  to  afford  AOL  preferential  access  to  AT&  Ts  cable  systems  or  to  otherwise  disadvantage  AOLs
 competitors  with  respect  to  access  to  AT&  Ts  cable  systems.  Thus,  the  condition  will  also  prevent  any  agreements  between  AOL  Time  Warner  and  AT&  T  that  may  arise  as  a  result  of  the  merger  from  any
 unforeseen  motivation  by  AT&  T  to  disfavor  AOLs  competitors.
 274.  Several  commenters  requested  that  we  require  AT&  T  and  Time  Warner  to  sever  all  corporate  and  contractual  relationships,  including  AT&  Ts  interest  in  TWE.  715  Because  AT&  T  recently
 elected  to  divest  TWE,  effective  May  19,  2001,  in  compliance  with  the  Commissions  order  in  AT&  T-MediaOne,  we  need  not  address  this  issue.  AT&  T  requests  that  we  condition  this  merger  by  requiring
 AOL  and  Time  Warner  to  submit  to  binding  arbitration  if  AT&  T  and  AOL  Time  Warner  fail  to  reach  agreement  on  the  price  for  AT&  Ts  interest  in  TWE.  716  AT&  T  argues  that  the  Commission  could  provide
 the  appropriate  incentive  to  AOL  Time  Warner  to  complete  AT&  Ts  divestiture  of  the  TWE  partnership  by  requiring  as  a  condition  of  its  approval  of  the  AOL-  Time  Warner  merger  that,  in  the  event  AT&  T  and
 AOL  Time  Warner  fail  to  reach  agreement  on  the  price  Time  Warner  will  pay  for  AT&  Ts  interest  by  a  certain  date,  the  matter  will  be  submitted  to  binding  arbitration  pursuant  to  a  customary  appraisal
 (  continued  from  previous  page)  likely  further  important  public  interest  goals.  Efforts  by  AT&  T  to  expand  its  cable  telephony  service  over  the  Time
 Warner  cable  plant  may  in  fact  satisfy  important  Commission  policy  goals  and  fulfill  the  goals  of  the  1996  Act.  Accordingly,  we  reaffirm  the  public  interest  benefits  that  we  recognized  would  result  from  agreements  between
 AT&  T  and  Time  Warner  relating  to  local  telephony  services.  See  AT&  T-  MediaOne  Order,  15  FCC  Rcd  at  9890    173-  174;  see  also  Ross-  Harding  Oct.  5  Letter  at  6.  Similarly,  AOLs  expansion  of  its  service  over  AT&  Ts  cable
 systems  could  also  satisfy  important  Commission  policy  goals,  provided  the  terms  of  AOLs  access  do  not  unfairly  favor  AOL  over  its  competitors.  We  therefore  do  not  wish  to  prohibit  AT&  T  and  AOL  Time  Warner  from  reaching
 what  may  be  pro-  competitive  agreements.  714
 For  example,  as  a  result  of  this  condition,  AOL  Time  Warner  would  not  be  permitted  to  require  AT&  T  to  give  preferential  access  rights  to  AOL  as  a  condition  of  AT&  Ts  access  to  AOL  Time  Warner  video  programming.  See
 Section  IV-  A  supra,  (High-  Speed  Internet  Access  Services)..  715
 See  SBC  Comments  at  30-  32;  BellSouth  Reply  Comments  at  18-  19.  716
 AT&  T  Nov.  28  Ex  Parte  at  1-  3.
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 process.  717  AT&  T  also  requests  that  the  Commission  require  that  AOL  Time  Warner  enter  a  definitive  agreement  to  effect  disposition  of  AT&  Ts  TWE  interest  at  the  arbitrated  price,  before  the  compliance
 date  set  in  the  AT&  T-  MediaOne  Order.  718
 275.  AT&  T  contends  that  the  imposition  of  arbitration  requirements  also  would  prevent  the  potential  harms  to  competition  that  commenters  have  alleged.  AT&  T  claims  that  [  i]  f  AOL  and  AT&  T
 were  to  become  partners  in  TWE,  their  shared  ownership  and  incentives  could  .  .  .  lead  to  unilateral  conduct  that  would  produce  the  same  outcome  that  consumer  advocates  have  suggested  would  result  from
 joint  action.  719  For  example,  apparently  adopting  Consumers  Unions  arguments,  AT&  T  states  that  because  of  Time  Warners  control  over  TWE,  Time  Warner  could  use  the  TWE  leverage  to  impede
 competition  where  AOL  and  AT&  T  compete  head-  to-  head  or  plan  to  do  so.  720  For  example,  AT&  T  notes  that  [  p]  ost-  merger  AOL  could  let  AT&  T  know  that  a  condition  for  agreeing  to  restructure  TWE
 would  be  for  AT&  T  to  drop  its  rival  interactive  TV  platform.  721  AT&  T  also  argues  that  AOL  would  clearly  prefer  less  rather  than  more  broadband  competition  from  AT&  T  and,  as  a  consequence  of  the
 merger  with  Time  Warner,  could  gain  the  means  to  achieve  that  goal.  722
 276.  We  find  it  disturbing  that  AT&  T  would  recite  a  litany  of  anticompetitive  actions  it  might  pursue,  including  agreements  not  to  compete,  if  the  Commission  fails  to  adopt  a  merger  condition  that
 would  improve  AT&  Ts  prospects  of  obtaining  a  favorable  price  from  Time  Warner  for  the  sale  of  the  TWE  assets  AT&  T  has  elected  to  divest  to  comply  with  our  order  in  AT&  T-  MediaOne.  We  disagree  with
 AT&  T  that  the  Commission  should  use  this  merger  proceeding  to  facilitate  AT&  Ts  compliance  with  obligations  the  Commission  imposed  in  a  separate  merger  proceeding.  723  While  we  are  concerned  about
 the  possibility  that  AT&  T  and  AOL  Time  Warner  would  engage  in  collusive  behavior  as  a  result  of  this  merger,  we  believe  our  conduct  remedy  will  address  any  potential  public  interest  harms  that  might  arise
 from  conduct  that  is  not  otherwise  prohibited  by  law  or  that  is  not  remedied  by  AT&  Ts  divestiture  of  TWE  pursuant  to  its  December  15,  2000  election.  724
 717  AT&  T  specified  December  1,  2000,  as  the  date  after  which  the  matter  should  be  submitted  to  binding  arbitration
 if  by  that  date  it  had  failed  to  reach  agreement  with  Time  Warner.  See  AT&  T  Nov.  8  Ex  Parte  at  3;  see  also  AT&  T  Nov.  28  Ex  Parte  at  4.
 718  AT&  T  Nov.  8  Ex  Parte  at  3.
 719  AT&  T  Nov.  28  Ex  Parte.
 720  AT&  T  Nov.  28  Ex  Parte  at  3.
 721  AT&  T  Nov.  28  Ex  Parte  at  3.
 722  AT&  T  Nov.  28  Ex  Parte  at  2  (citing  Schwartzman  Nov.  14  Letter  at  1-  4).
 723  See  Media  Access  Project  Ex  Parte  at  2.  See  also  AT&  T  Nov.  28  Ex  Parte  at  9819    4.
 724  We  are  not  sympathetic  to  AT&  Ts  argument  that  it  may  be  induced  by  AOL  Time  Warner  to  refrain  from
 competing  with  AOL  Time  Warner.  We  do  not  believe  that  it  is  likely  that  AT&  T  would  unilaterally  abandon  its  planned  interactive  TV  offering,  for  example,  on  the  mere  supposition  that  AOL  Time  Warner  would  react  favorably
 to  such  actions.  Rather  such  conduct  would  more  likely  reflect  an  explicit  agreement  not  to  compete,  which  would  be  addressed  by  antitrust  laws  and  the  state  and  federal  authorities  charged  with  enforcing  them.  Loraine  Journal  v.
 United  States,  342  U.  S.  143  (1951);  Klors  Inc.  v.  Broadway-  Hale  Stores,  359  U.  S.  207  (1959)  (firms  induced  others  to  boycott  ones  competitors);  United  States  v.  Associated  Patents,  134  F.  Supp.  74  (E.  D.  Mich  1955),  affd  mem.,
 350  U.  S.  960  (1956);  United  States  v.  Topco  Associates,  Inc.,  405  U.  S.  596  (1972).  The  fact  that  the  parties  to  an  [unlawful]  agreement  did  not  have  identical  motives,  or  that  one  party  to  the  agreement  was  coerced  to  participate,
 does  not  negate  the  finding  of  an  agreement  for  purposes  of  [Sherman  Act]  Section  1  so  long  as  the  parties  share  a  commitment  to  a  common  scheme  that  has  an  anticompetitive  objective  or  effect.  ABA,  Antitrust  Law
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 G.  Other  Potential  Public  Interest  Harms
 277.  Protection  of  Subscriber  Privacy.  Congressman  Markey  notes  that  privacy  of  personal  information  is  increasingly  becoming  a  concern  of  consumers  using  the  Internet.  725  He  states  that  cable
 operators,  such  as  Time  Warner,  have  a  statutory  obligation  under  Section  631  of  the  Communications  Act  to  protect  personal  information  gathered  from  subscribers.  726  He  further  states  that  the  obligation
 applies  not  just  to  information  obtained  through  a  customers  use  of  a  cable  service,  but  to  a  customers  use  of  any  wire  or  radio  communications  service  provided  using  any  of  the  cable  systems  facilities.  727
 Congressman  Markey  asks  that  we  assure  ourselves  that  AOL  Time  Warner  will  comply  with  the  requirements  of  Section  631  after  the  merger.  728
 278.  Section  631  of  the  Communications  Act  provides  that  at  the  time  a  cable  operator  enters  into  an  agreement  to  provide  any  cable  service  or  other  service  to  a  subscriber,  and  annually  thereafter,
 the  cable  operator  shall  inform  the  subscriber  of,  among  other  items,  the  nature  of  personally  identifiable  information  the  cable  operator  will  be  collecting,  the  nature  of  the  use  of  the  information,  and  the  nature
 and  purpose  of  any  disclosures  of  that  information.  729  The  statute  further  provides  that,  with  limited  exceptions,  a  cable  operator  may  not  use  the  cable  system  to  collect  personally  identifiable  information
 nor  may  the  cable  operator  disclose  personally  identifiable  information  without  the  prior  written  or  electronic  consent  of  the  subscriber.  730  As  Congressman  Markey  notes,  the  statute  defines  other  service
 to  include  any  wire  or  radio  communication  service  provided  using  any  of  the  facilities  of  a  cable  operator  that  are  used  in  the  provision  of  cable  service.
 279.  We  agree  with  Congressman  Markey  that  consumers  have  become  increasingly  concerned  about  the  unauthorized  use  and  disclosure  of  personal  information  gathered  about  them,
 especially  with  regard  to  information  collected  while  they  are  using  the  Internet.  By  enacting  Section  631,  Congress  directed  cable  operators,  including  affiliates,  731  to  protect  the  privacy  of  their  subscribers.
 Although  Section  631s  terms  are  enforced  by  the  courts,  and  not  by  the  Commission,  732  AOL  Time  Warners  future  compliance  with  Section  631  is  part  of  our  examination  of  AOL  Time  Warners
 qualifications  to  control  the  licenses  at  issue.  733  Accordingly,  as  a  condition  of  our  approval,  we  require
 (  continued  from  previous  page)  Developments  (Fourth)  4  (1997);  Rochez  Brothers  v.  North  American  Salt  Co.,  1994-  2  Trade  Cas.  (CCH)    70,  804,
 at  73,  441  (W.  D.  Pa.  1994).  725
 Letter  from  Cong.  Edward  J.  Markey  to  Chairman  William  E.  Kennard  at  1-  2  (Dec.  13,  2000).  726
 Id.  at  1.  727
 Id.  728
 Id.  at  2.  729
 47  U.  S.  C.    551(  a).  730
 47  U.  S.  C.    551(  b),  (c).  The  cable  operator  must  also  take  actions  necessary  to  prevent  unauthorized  disclosure.  47  U.  S.  C.    551(  b).
 731  The  statute  defines  cable  operator  to  include  any  company  that  is  under  common  ownership  or  control  with  a
 cable  operator  and  that  provides  any  wire  or  radio  communication  service.  732
 See  47  U.  S.  C.    551(  f)  (providing  that  any  person  aggrieved  by  the  section  may  bring  a  civil  action  in  a  United  States  district  court).
 733  Pursuant  to  Sections  308(  b)  and  310(  d)  of  the  Communications  Act,  47  U.  S.  C.    308(  b),  310(  d),  as  part  of  our
 public  interest  determination,  we  determine  whether  the  person  that  will  control  the  licenses  being  transferred  is  (continued)
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 AOL  Time  Warner,  by  its  General  Counsel,  to  certify  to  the  Commission,  by  filing  a  copy  of  the  certification  with  the  Secretarys  Office,  on  the  mergers  closing  and  annually  thereafter,  that  AOL  Time
 Warner  is  and  will  remain  in  compliance  with  Section  631  of  the  Communications  Act.
 280.  Premature  Control  by  AOL.  RCN  Telecom  Services,  Inc.  (  RCN)  requests  that  we  delay  approval  of  the  merger  to  investigate  whether  AOL  had  assumed  premature  control  of  Time
 Warner.  734  RCN's  request  is  based  on  a  Washington  Post  article  that  reported  that  a  senior  AOL  official  had  begun  the  process  of  "knitting  together"  AOL  and  Time  Warner.  AOL  responds  that  RCN  offers  no
 evidence  that  an  AOL  official  has  assumed  control  over  Time  Warner's  daily  operations  or  policy  determinations,  or  that  an  AOL  official  or  any  other  AOL  employee  in  any  way  dominates  the
 management  of  Time  Warner's  corporate  affairs  and  licensed  facilities.  735  Rather,  according  to  AOL,  an  AOL  senior  official  "simply  has  participated,  along  with  other  AOL  and  Time  Warner  officials,  in  the
 parties'  collective  efforts  --  wholly  consistent  with  applicable  law  --  to  achieve  a  smooth  integration  of  the  two  companies  after  closing."  736  We  find  that  the  record  is  devoid  of  specific  allegations  of  fact  that
 establish  a  prima  facie  case  of  de  facto  transfer  of  control  that  would  warrant  delaying  our  approval  of  the  merger  with  conditions  or  initiating  an  investigation.  We  therefore  deny  RCNs  request.
 V.  ANALYSIS  OF  POTENTIAL  PUBLIC  INTEREST  BENEFITS
 281.  In  addition  to  assessing  the  potential  public  interest  harms  of  this  merger,  we  must  consider  whether  the  merger  will  produce  public  interest  benefits.  737  The  proposed  transaction  is  deemed
 in  the  public  interest  if  the  identifiable  potential  public  interest  benefits  outweigh  any  potential  public  interest  harms.  738
 282.  Our  analysis  of  public  interest  benefits  focuses  on  demonstrable  and  verifiable  benefits  to  consumers  that  could  not  be  achieved  but  for  the  merger.  739  Merger-  specific  benefits  may  include
 beneficial  conditions  either  proffered  by  the  Applicants  or  imposed  by  the  Commission.  740  At  a  minimum,  our  public  interest  test  requires  that  the  merger  not  interfere  with  the  objectives  of  the
 Communications  Act.  741
 (  continued  from  previous  page)  qualified  to  do  so.  See  Voicestream  Wireless  Corp.,  Memorandum  Opinion  and  Order,  15  FCC  Rcd  3341,  3345-  46
   10-  11  (2000).  734
 Letter  from  William  F.  Fishman,  counsel  for  RCS,  to  Deborah  Lathen,  Chief,  FCC  Cable  Services  Bureau  (Dec.  15,  2000).
 735  Letter  from  Peter  Ross,  Counsel  for  AOL,  and  Arthur  Harding,  Counsel  for  Time  Warner,  to  Deborah  Lathen,
 Chief,  FCC  Cable  Services  Bureau  (Dec.  29,  2000)  at  2.  736
 Id.  737
 Bell  Atlantic-  NYNEX  Order,  12  FCC  Rcd  at  20063    157;  WorldCom-  MCI  Order,  13  FCC  Rcd  at  18134-  35    194;  AT&  T-  TCI  Order,  14  FCC  Rcd  at  3168    13;  AT&  T-  MediaOne  Order,  15  FCC  Rcd  at  9883    154.
 738  AT&  T-  MediaOne  Order,  15  FCC  Rcd  at  9816    154.
 739  Id.
 740  Bell  Atlantic-  NYNEX  Order,  12  FCC  Rcd  at  20063    157;  AT&  T-  MediaOne  Order,  15  FCC  Rcd  at  9883    154.
 741  Applications  of  Southern  New  England  Telecommunications  Corp.  and  SBC  Communications,  Inc.  for  Consent  to
 Transfer  of  Control  of  Licenses  and  Section  214  Authorizations,  CC  Docket  98-  25,  Memorandum  Opinion  and  Order,  (  SBC-  SNET  Order)  13  FCC  Rcd  21292,  21298-  99    13  (1998);  WorldCom-  MCI  Order,  13  FCC  Rcd  at
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 283.  We  find  that  the  Applicants  have  demonstrated  that  the  merger  will  result  in  benefits,  but  the  nature  and  degree  of  these  benefits  are  not  sufficient  to  outweigh  the  potential  harms  that  would  result
 from  the  merger  absent  conditions.  The  conditions  we  impose,  in  conjunction  with  those  imposed  by  the  FTC  Consent  Agreement,  will  mitigate  the  potential  harms,  and  allow  us  to  conclude  that,  on  balance,  the
 benefits  will  outweigh  any  remaining  potential  harms.
 284.  The  Applicants  claim  the  merger  will  produce  affirmative  public  interest  benefits  in  the  following  four  areas:
   access  by  unaffiliated  ISPs  to  cable  broadband  networks  (  cable  access);  742
   accelerated  deployment  of  broadband  content  and  broadband  technologies;  743
   accelerated  transformation  of  traditional  media  products  to  digital  platforms;  744  and
   expedited  development  and  deployment  of  new  service  offerings,  some  of  which,  the  parties  maintain,  are  yet  to  be  developed.  745
 285.  The  Applicants  have  produced  limited  third-  party  documentation  supporting  these  claims  of  affirmative  public  interest  benefits.  746  For  the  most  part,  the  Applicants  have  provided  narrative
 (  continued  from  previous  page)  18134-  35    194;  Bell  Atlantic-  NYNEX  Order,  12  FCC  Rcd  at  20063    157.
 742  Application  at  15  and  17;  Applicants  March  21  Supplemental  Information  at  21-  26;  Applicants  Reply
 Comments  at  4-  5,  9-  11,  17,  27-  29,  39,  45;  MOU  generally;  Letter  from  Peter  D.  Ross,  Attorney,  Wiley,  Rein  &  Fielding,  to  Magalie  Roman  Salas,  Secretary,  FCC,  dated  Aug.  14,  2000  (  Applicants  Aug.  14  Benefits  Ex  Parte)
 at  2;  Ex  Parte  Comments  of  Applicants  (Aug.  22,  2000)  (  Applicants  Aug.  22  Benefits  Ex  Parte)  at  2,  13-  15,  transmitted  by  letter  from  Arthur  H.  Harding,  Counsel,  Fleischman  and  Walsh,  to  Magalie  Roman  Salas,  Secretary,
 FCC,  dated  Aug.  25,  2000;  Case  En  Banc  Testimony,  Tr.  at  28  and  41;  Testimony  of  Gerald  Levin,  Chairman  and  CEO,  Time  Warner  Inc.,  FCC  En  Banc  Hearing,  CS  Docket  No.  00-  30  (July  27,  2000),  Tr.  at  34-  37,  44  (  Levin  En
 Banc  Testimony);  see  also  Applicants  Second  Response  at  33.  743
 Application  at  8,  10,  13,  15;  Applicants  March  21  Supplemental  Information  at  10-  11,  15-  19,  22,  26-  28,  30;  Applicants  Reply  Comments  at  9,  23-  27,  31,  36,  40,  43;  Applicants  Aug.  14  Benefits  Ex  Parte  at  2;  Applicants
 Aug.  22  Benefits  Ex  Parte  at  3,  15-  18;  Case  En  Banc  Testimony,  Tr.  at  26-  27,  41;  Levin  En  Banc  Testimony,  Tr.  at  34-  35,  42;  see  also  Applicants  Second  Response  at  13-  14,  18.
 744  Application  at  11;  Applicants  March  21  Supplemental  Information  at  30;  Applicants  Reply  Comments  at  1;
 Applicants  Aug.  22  Benefits  Ex  Parte  at  3  (citing  Mary  Meeker,  Richard  Bilotti,  Mark  Mahaney,  and  Celeste  Mellet,  America  Online/  Time  Warner:  How  Big  is  Big?  Big!,  Morgan  Stanley  Dean  Witter,  May  4,  2000,  at  10
 (  MSDW  May  4  Report);  Lanny  Baker,  Jill  Krutick,  and  Spencer  Wang,  AOL  and  Time  Warner  Link  The  Dynamic  Duo:  Form  a  Free  Cash  Flow  Dynamo,  Salomon  Smith  Barney,  Mar.  22,  2000  at  1  (  Salomon  Smith  Barney  Mar.
 22  Report);  Bressler  Decl.  at  2-  4  (  Applicants  Aug.  22  Benefits  Ex  Parte,  Bressler  Decl.));  Levin  En  Banc  Testimony,  Tr.  at  33-  34.
 745  Application  at  9-  10;  Applicants  March  21  Supplemental  Information  at  21,  29-  35;  Applicants  Reply  Comments
 at  9-  10,  43-  44;  Applicants  Aug.  22  Benefits  Ex  Parte  at  1,  6,  7  (citing  Salomon  Smith  Barney  Mar.  22  Report  at  31),  8  (citing  Myers  Group  Report)  9,  (citing  Applicants  Aug.  22  Benefits  Ex  Parte,  Bressler  Decl.  at    10-  12);
 see  also  Applicants  Second  Response  at  16-  23.  746
 See  MOU;  Henry  Blodget,  Jessica  Reif  Cohen,  Virgina  Syer,  and  Andrew  Slabin,  AOL  Time  Warner    Youve  Got  Upside!,  Merrill  Lynch,  Feb.  23,  2000  (  Merrill  Lynch:  Upside);  Christopher  Dixon,  Catherine  Kim,  AOL
 Time  Warner  -  A  Merger  that  Defines  the  New  Digital  Age,  Paine  Webber,  Mar.  1,  2000  (  Paine  Webber:  Merger  for  a  Digital  Age);  Michael  Parekh,  Richard  Simon,  Richard  Greenfield,  Katherine  Hays,  and  Christopher  Cox,
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 descriptions  and  affidavits  from  business  persons  explaining  the  synergies  likely  to  result  from  joining  these  two  companies  and  the  merged  companys  potential  to  provide  affirmative  public  interest
 benefits.  747  The  evidence  offered  by  the  Applicants  is  described  below.  Our  findings  follow.
 A.  The  Evidence
 286.  Cable  Access.  As  evidence  of  their  commitment  to  a  marketplace  solution  to  cable  access,  the  Applicants  have  submitted  a  Memorandum  of  Understanding  (  MOU)  between  AOL  and
 Time  Warner.  748  As  described  in  more  detail  in  Section  IV.  A.,  above,  the  MOU  provides  that  multiple  ISPs  would  be  permitted  to  serve  consumers  over  Time  Warner  cable  systems  without  consumers  having
 to  also  purchase  AOL  Time  Warner  ISP  services.  749  In  addition,  the  MOU  provides  that  there  will  be  no  fixed  limit  on  the  number  of  unaffiliated  ISPs  selected  by  Time  Warner  cable  systems  (except  as
 mandated  by  technical  limitations),  750  and  that  AOL  and  Time  Warner  will  consider  ISPs  of  national,  regional,  and  local  scope.  751
 287.  The  Applicants  assert  that  their  MOU  represents  a  shift  within  the  industry  towards  a  marketplace  solution  to  cable  access.  752  The  Applicants  believe  the  MOU  is  significant  not  only  because
 compliance  with  its  terms  will  bring  choice  to  consumers  where  none  existed  before,  but  also  because  it  creates  momentum  for  similar  action  throughout  the  cable  industry.  753  The  Applicants  cite  Wall  Street
 financial  analysts  that  agree  the  MOU  will  encourage  other  major  cable  operators  to  open  their  networks  to  unaffiliated  ISPs.  754
 (  continued  from  previous  page)  America  Online/  Time  Warner    Perfect  Time-  ing,  Goldman  Sachs,  Mar.  10,  2000  (  Goldman  Sachs:  Perfect  Time-ing);
 MSDW  May  4  Report;  Salomon  Smith  Barney  Mar.  22  Report;  First  Union  June  20  Report;  America  Online  Inc./  Time  Warner  Inc.,  Credit  Lyonnais  Securities,  Feb.  28,  2000,  at  12  (  Credit  Lyonnais  Report).
 747  See  generally  Application;  Applicants  March  21  Supplemental  Information;  Applicants  Reply  Comments;
 Applicants  Aug.  22  Benefits  Ex  Parte,  Britt  Decl.;  Applicants  Aug.  22  Benefits  Ex  Parte,  Bressler  Decl.;  Applicants  Aug.  22  Benefits  Ex  Parte,  Schuler  Decl.;  Applicants  Aug  14  Benefits  Ex  Parte;  Case  En  Banc
 Testimony;  Levin  En  Banc  Testimony;  Applicants  Second  Response.  748
 See  MOU.  749
 Id.  at    2.  750
 Id.  at    4.  751
 Id.  at    8.  752
 Applicants  March  21  Supplemental  Information  at  21-  24  and  25  (citing  Merrill  Lynch:  Upside  at  9,  15);  Applicants  Reply  Comments  at  11,  27;  Applicants  Aug.  14  Benefits  Ex  Parte  at  2;  see  also  Applicants  Aug.  22
 Benefits  Ex  Parte  at  2,  13-  15;  Applicants  Second  Response  at  33.  753
 Applicants  March  21  Supplemental  Information  at  24;  see  also  Applicants  Reply  Comments  at  5,  11;  Applicants  Aug.  22  Benefits  at  15  (citing  Applicants  Aug.  22  Benefits  Ex  Parte,  Britt  Decl.  at  13)  ([  Our  MOU]
 has  already  acted  as  a  catalyst  to  encourage  other  cable  operators  to  provide  ISP  choice  to  consumers.  At  least  7  of  the  11  largest  cable  operators  are  looking  at  offering  access  to  multiple  ISPs  on  their  high-  speed  broadband  lines.)
 See  also  Applicants  Second  Response  at  33.  754
 Applicants  March  21  Supplemental  Information  at  25.  Merrill  Lynch  notes  that:  AOLs  ownership  of  Time  Warner  will  help  pave  the  way  for  commercial  resolution  of  the  so-  called  open  access  issue.  We  would  expect  the
 merger  to,  in  turn,  push  other  cable  operators  to  consider  establishing  deals  with  AOL  or  other  Internet  service  providers  .  .  .    Applicants  March  21  Supplemental  Information  at  25  (citing  Merrill  Lynch:  Upside  at  9,  15).
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 288.  Accelerated  Deployment  of  Broadband  Technologies  and  Content.  The  Applicants  claim  that  the  merger  will  accelerate  the  deployment  of  cable  and  alternative  broadband  technologies,  as  well  as
 the  development  of  broadband  content.  The  Applicants  assert  that  the  development  of  broadband  content  and  conduit  are  mutually  reinforcing  occurrences.  They  state  that  many  potential  content  providers  have
 hesitated  to  roll  out  broadband  applications  in  the  absence  of  assurance  that  a  platform  for  their  services  would  be  available,  while  facilities  providers  have  been  similarly  skeptical  about  the  advantages  of
 investing  in  broadband  technology  prior  to  the  development  of  broadband  content.  755
 289.  The  Applicants  assert  that  the  merger  will  accelerate  the  deployment  of  broadband  technologies  by  several  years.  756  First,  the  Applicants  contend  that  the  merger  is  likely  to  accelerate  the
 pace  of  deployment  of  Time  Warners  cable  broadband  Internet  access  services.  757  Time  Warner  submits  that  rolling  out  high-  speed  Internet  services  is  more  complex  and  requires  a  greater  undertaking  than  the
 roll-  out  of  other  new  services.  758  They  believe  that  the  merger  will  result  in  the  deployment  of  more  resources  for  marketing  and  consumer  connection  functions,  thus  hastening  the  ability  of  consumers  to
 obtain  high-  speed  Internet  service.  759  As  evidence,  the  Applicants  have  provided  the  Commission  with  confidential  pre-  and  post-  merger  facilities  deployment  plans  for  Time  Warner  and  information  regarding
 potential  operating  synergies  for  both  parties.  760  As  further  evidence,  the  Applicants  note  that  the  financial  community  believes  the  merger  will  accelerate  cable  broadband  Internet  access  deployment.  761
 290.  Second,  the  Applicants  assert  that  the  merger  will  serve  to  accelerate  deployment  of  alternative  broadband  technologies.  The  Applicants  note  that  AOL,  in  keeping  with  its  AOL  Anywhere
 business  strategy,  has  sought,  and  will  continue  to  seek,  a  nationwide  footprint  for  its  ISP  services,  utilizing  multiple  broadband  technologies.  762  AOL  asserts  that  to  maximize  revenues,  it  must  continue  to
 pursue  as  many  broadband  delivery  options  as  possible  to  reach  every  potential  customer,  both  within  and  outside  Time  Warners  local  cable  franchise  areas.  763  As  evidence  of  its  commitment  to  further  the
 development  of  a  wide  range  of  broadband  technologies,  AOL  points  to  its  $1.5  billion  investment  in  Hughes  parent  GM,  and  its  numerous  deals  with  DSL  and  wireless  equipment  manufacturers.  764  AOL
 does  not  claim  that  the  merger  is  the  only  way  to  accomplish  the  goals  of  AOL  Anywhere.  However,
 755  Applicants  Aug.  22  Benefits  Ex  Parte  at  2-  3;  See  also  Applicants  Second  Response  at  18.
 756  Applicants  March  21  Supplemental  Information  at  30  (citing  AOL  Time  Warner  Inc.,  SEC  Form  S-  4,  filed  Feb.
 11,  2000  at  37).  757
 Applicants  Second  Response  at  13.  758
 Applicants  Aug.  22  Benefits  Ex  Parte,  Britt  Decl.  at  4.  759
 Letter  from  Art  Harding,  Attorney,  Fleischman  and  Walsh,  LLP,  to  Magalie  Roman  Salas,  Secretary,  FCC,  dated  July  12,  2000  (  Applicants  July  12  Benefits  Ex  Parte)  at  2;  see  also  Applicants  Aug.  22  Benefits  Ex  Parte,  Britt
 Decl.  at  4.  760
 See  Applicants  First  Response  (Confidential  Version)  at  30,  35-  36;  see  generally  Applicants  Second  Response  (Confidential  Supplemental  Volumes:  Benefits  1-  7).
 761  Applicants  March  21  Supplemental  Information  at  28  (citing  Merrill  Lynch:  Upside  at  9)  the  merger  will  only
 help  to  accelerate  cables  rollout  of  high-  speed  data  and  new  services.  Id;  see  also  Applicants  Second  Response  at  13-  14.
 762  Applicants  March  21  Supplemental  Information  at  10,  16-  19;  Applicants  Reply  Comments  at  23-  26;  see  also
 Levin  En  Banc  Testimony,  Tr.  at  26-  27.  763
 Applicants  March  21  Supplemental  Information  at  19.  764
 Id.  at  11  and  16-  18.
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 AOL  does  indicate  that  after  the  merger,  AOL  will  continue  to  pursue  its  AOL  Anywhere  strategy  and  that  Time  Warner  will  enable  AOL  to  further  these  goals.  Neither  AOL  nor  Time  Warner  provide
 concrete  examples  of  how  the  merger  will  serve  to  assist  AOL  in  its  AOL  Anywhere  strategy  other  than  to  say  that  a  merger  between  Time  Warner  and  AOL  will  enable  AOL  to  provide  its  ISP  service  over
 cable.  765  AOL  claims  that  this  is  particularly  significant  because  prior  to  the  proposed  merger,  AOL  had  been  unable  to  strike  an  agreement  with  any  cable  operator.  766
 291.  AOL  also  asserts  that  its  commitment  to  the  cable  broadband  platform  in  and  of  itself  will  spur  development  of  competing  platforms.  767  AOL  asserts  that  the  Commission  itself  has  recognized  this
 pattern,  understanding  that  competition  among  rival  technologies  is  one  of  the  primary  focuses  that  drives  deployment  of  broadband  services.  768
 292.  Finally,  the  Applicants  argue  that  their  commitment  to  maximizing  diversity  of  content  and  consumer  choice  on  the  Internet  will  further  promote  deployment  of  broadband  conduit  and  vice
 versa.  769  The  Applicants  state  that  it  is  well  understood  that  consumer  interest  in  innovative  and  enticing  online  offerings  will  inevitably  have  a  direct  positive  impact  on  broadband  penetration  and  deployment
 across  platforms.  770  They  state  that  they  intend  to  provide  their  customers  the  broadest  possible  array  of  appealing  content,  regardless  of  the  source.  771  Furthermore,  the  Applicants  argue  that  the  merged  entitys
 introduction  of  widely  appealing  broadband  offerings  will  motivate  providers  of  other  broadband  technologies  and  services  to  deploy  and  market  their  own  content  and  services  more  widely  in  order  to
 compete  with  the  merged  entity.  772
 293.  Accelerated  Transition  of  Traditional  Media  Products  to  Digital  Platforms.  The  Applicants  contend  that  the  merged  entity  will  accelerate  the  transition  of  established  media  offerings  to
 digital  platforms.  773  In  their  filings  with  the  SEC,  the  Applicants  note  that  one  factor  motivating  the  merger  is  the  existence  of  cost  efficiencies  in  launching  and  operating  interactive  extensions  of  Time
 Warner  brands.  774  They  claim  that  the  merged  company  will  bring  together  experience,  incentives,  and  resources  that  can  help  lead  the  integration  of  traditional  media  with  online  interactive  media.  775  As
 765  See  Applicants  Second  Response  at  9  and  13.
 766  Id,  at  13.
 767  Applicants  Aug.  22  Benefits  Ex  Parte  at  16-  17;  see  also  Applicants  Second  Response  at  11.  Applicants  note
 that  Merrill  Lynch  also  believes  the  availability  of  AOL  Time  Warners  service  on  broadband  cable  should  also  put  pressure  on  local  exchange  carriers  to  become  more  aggressive  in  rolling  out  DSL.  See  Applicants  March  21
 Supplemental  Information  at  26  (citing  Merrill  Lynch:  Upside  at  9).  768
 Applicants  March  21  Supplemental  Information  at  26-  27.  769
 Application  at  10,  13;  Applicants  Aug.  14  Benefits  Ex  Parte  at  2;  Applicants  Aug.  22  Benefits  Ex  Parte  at  15-  19.
 770  Id.
 771  Application  at  8.
 772  Applicants  March  21  Supplemental  Information  at  28-  29.
 773  Application  at  11;  Applicants  March  21  Supplemental  Information  at  30;  Applicants  Reply  Comments  at  1;
 Applicants  Aug.  22  Benefits  Ex  Parte  at  3  (citing  MSDW  May  4  Report  and  Salomon  Smith  Barney  Mar.  22  Report);  Levin  En  Banc  Testimony,  Tr.  at  33-  34.
 774  Applicants  March  21  Supplemental  Information  at  31.
 775  Applicants  Reply  Comments  at  1.  Applicants  use  the  term  traditional  media  to  refer  to  print  periodicals,
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 evidence,  the  Applicants  cite  financial  analyst  reports  asserting  that  the  merged  entity  can  quickly  respond  to  and  inspire  rapidly  morphing  user  habits  as  users  reexamine  their  daily  activities  through  Internet-enabled
 glasses.  776
 294.  Accelerated  Deployment  of  New  Services:  The  Applicants  claim  that  a  major  benefit  of  the  merger  will  be  the  merged  entitys  ability  to  develop  and  promote  new  interactive  services.  They
 maintain  that  this  combination  of  complementary  assets  will  create  the  first  company  prepared  to  compete  on  the  Internet,  due  to  the  lowered  risk  to  the  combined  companies  in  deploying  new  products
 and  services  as  well  as  increased  operating  efficiencies  and  complementary  expertise.  777  New  services  to  be  offered  include  developing  services  such  as  video-  on-  demand,  interactive  television,  video  streaming,
 online  music  distribution  and  purchasing,  IP  telephony,  and  numerous  yet-  to-  be  developed  services.  778  The  Applicants  state  that  while  detailed  business  plans  have  not  been  finalized,  plans  are  being  developed
 in  light  of  the  merged  entitys  coordinated  strengths  and  potential  to  offer  such  services.  779
 295.  As  evidence,  the  Applicants  cite  to  financial  community  reports,  stating  that  the  merged  company  will  be  well  positioned  to  pursue  and  expedite  personalized  jukeboxes,  news  clipping  services,
 voice  activated  web  surfing,  Internet  enabled  voice  communications,  downloadable  music,  personalized  video  services,  and  virtual  communities  centered  around  off-  line  magazines.  780  In  addition,  the  same
 analyst  notes  that  the  new  company  will  be  well-  positioned  to  define  and  create  yet-  to-  be  imagined  new  businesses  which  [will]  evolve  as  technologies  are  introduced  and  as  the  Internet  continues  to  develop.  781
 296.  As  evidence  of  the  mergers  ability  to  hasten  the  online  music  revolution,  Applicants  cite  to  financial  analyst  and  trade  press  recognition  of  the  merged  entitys  ability  and  expertise.  782  While  the
 Recording  Industry  Association  of  America  (  RIAA)  did  not  file  comments  in  this  proceeding,  Applicants  cite  to  a  public  statement  made  by  RIAA  President  Hilary  Rosen  that  the  merger  brings
 together  a  tremendous  wealth  of  music  assets  and  a  group  of  people  who  have  mastered  the  art  of  making  things  simple  on  the  Internet.  783  One  financial  analyst  states,  AOL  Time  Warner  is  poised  to  have  a
 substantial,  positive  effect  on  overcoming  the  technical  and  financial  complexity  that  has  hindered  the  development  of  downloadable  music.  784
 (  continued  from  previous  page)  books,  video,  and  other  popular  Time  Warner  brands.  See  Applicants  March  21  Supplemental  Information  at  30.
 776  Applicants  March  21  Supplemental  Information  at  31  (citing  Goldman  Sachs:  Perfect  Time-  ing  at  1).
 777  See  Id.  at  29  and  31,  and  Testimony  of  Gerald  M.  Levin,  Chairman  and  CEO,  Time  Warner  Inc.,  Before  the
 Senate  Committee  on  the  Judiciary,  106  th  Congress,  Feb.  29,  2000  at  4;  Applicants  Aug.  14  Benefits  Ex  Parte  at  2;  Applicants  Aug.  22  Benefits  Ex  Parte  at  1,  12;  see  also  Applicants  Second  Response  at  16-  17.
 778  Applicants  March  21  Supplemental  Information  at  35  (citing  Paine  Webber:  Merger  for  a  Digital  Age  at  8);
 Applicants  Reply  Comments  at  44;  Applicants  Aug.  22  Benefits  Ex  Parte  at  7-  12.  779
 See  Applicants  March  21  Supplemental  Information  at  30.  780
 Id.  at  35.  781
 Id.  at  34  (citing  Paine  Webber:  Merger  for  a  Digital  Age  at  6).  782
 Id.  at  32-  34.  783
 Id.  at  32  (citing  David  Segal,  Deal  May  Make  Online  Music  Pay,  THE  WASHINGTON  POST,  Jan.  12,  2000,  at  E1).  784
 Id.  at  32  (citing  Merrill  Lynch:  Upside  at  11  and  Paine  Webber:  Merger  for  a  Digital  Age  at  9).
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 297.  In  addition,  the  Applicants  state  that  the  unique  combination  of  AOL  and  Time  Warner  assets  could  permit  the  merged  firm  to  create  a  successful,  robust  ITV  product  where  others  have  failed.
 According  to  the  Applicants,  with  the  mergers  promotion  of  competitive  broadband  development,  the  prospects  for  an  enhanced,  next-  generation  AOLTV  that  could  even  more  seamlessly  and  robustly
 integrate  Internet  and  video  services  become  more  foreseeable.  785  The  Applicants  state  that  a  merged  AOL  Time  Warner  will  be  able  to  significantly  enhance  the  just-  launched  AOLTV  service  and  thereby
 turbo-  charge  an  entire  industry  and  that  [  t]  he  new  company  can  work  to  develop  all  facets  of  interactive  television  including  both  the  platform  and  new  interactive  content  applications  with  a  breadth  of
 common  purpose  unlikely  to  be  matched  even  in  the  best  joint  venture.  786
 298.  As  evidence,  the  Applicants  quote  several  industry  analysts  addressing  AOLs  expertise  in  the  provisioning  of  Internet  access  services,  and  Time  Warners  expertise  in  developing  and
 distributing  content,  including  a  report  stating  that  one  of  the  strengths  of  the  combined  entity  will  be  its  ability  to  develop  and  promote  new  interactive  services.  787  Another  analyst  asserts  that  [  a]  s  the
 interrelationship  between  and  the  evolution  of  new  media  and  old  media  is  established  in  the  form  of  AOLTV,  we  believe  the  wisdom  of  merging  AOL  and  Time  Warner  will  become  increasingly  evident  and
 obvious.  788  The  Applicants  further  note  that  at  least  one  analyst  agrees  that  the  merged  entity  is  in  a  better  position  than  either  entity  separately  to  drive  the  revolution  of  interactive  services  to  the  next  level
   breaking  the  convergence  logjams  that,  in  many  sectors  of  the  media  and  communications  industries,  are  inhibiting  growth  of  the  medium.  789
 299.  Merger  vs.  Joint  Ventures.  The  Applicants  contend  that  joint  venture  agreements  and  other  contractual  arrangements  would  not  produce  the  same  efficiencies  as  will  the  merger.  The
 Applicants  claim  that  a  joint  venture  would  be  much  less  efficient  than  full  integration  and  maintain  that  it  is  impractical  and  unprecedented  for  the  parties  to  try  to  negotiate  a  series  of  joint  ventures  to  cover  the
 far-  reaching  scope  of  this  merger.  790
 300.  Commenters  Position  on  Merger  Benefits.  According  to  the  Applicants,  commenters  do  not  dispute  that  the  merger  will  hasten  the  development  of  new  broadband  services,  791  and  furthermore,
 some  commenters  concede  that  the  merger  provides  social  benefits.  792
 301.  A  review  of  the  record  reveals  that  while  several  commenters  find  certain  public  interest  benefits  possible,  most  believe  these  benefits  would  result  only  if  the  Commission  conditions  its  approval
 of  the  license  transfers  on  specific  requirements.  For  example,  Memphis  Networx  does  not  request  a  denial  of  the  merger,  but  believes  the  Commission  should  require  that  the  Applicants  commit  to  taking  a
 neutral  stance  with  respect  to  the  entry  of  facilities-  based  network  providers  in  Time  Warner  service
 785  Applicants  Aug.  22  Benefits  Ex  Parte  at  7-  8.
 786  Id.
 787  Applicants  March  21  Supplemental  Information  at  31-  32  (citing  Merrill  Lynch:  Upside  at  11).
 788  Applicants  Aug.  22  Benefits  Ex  Parte  at  7-  8  (quoting  Salomon  Smith  Barney  Mar.  22  Report,  at  95).
 789  Applicants  March  21  Supplemental  Information  at  32  (citing  Merrill  Lynch:  Upside  at  11).
 790  Id.  at  38;  Applicants  Aug.  22  Benefits  Ex  Parte  at  11  (citing  Applicants  Aug  22  Benefits  Ex  Parte,  Schuler
 Decl.  at    21-  22)  and  12;  see  also  Applicants  Second  Response  at  21.  791
 Applicants  Reply  Comments  at  1  and  12.  792
 Id.  at  12.
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 areas.  793  Such  commitments,  they  say,  would  provide  concrete  support  for  a  Commission  finding  that  the  proposed  merger  is  consistent  with  the  public  interest.  794  In  its  initial  comments,  ACA  expressed  concern
 that  the  merged  entity  would  require  small  cable  operators  to  carry  AOL  service  in  order  to  receive  Time  Warner  programming.  795  In  its  reply  comments,  ACA  sought  a  commitment  from  the  Applicants  that
 they  would  not  engage  in  such  tactics,  while  at  the  same  time  recognizing  the  potential  of  the  merger  to  create  boundless  opportunities  for  new  consumer  services.  796  After  Time  Warner  representatives  stated,
 at  the  Commissions  en  banc  hearing  in  this  proceeding,  that  the  merged  entity  would  not  tie  or  condition  access  to  its  programming  on  carriage  of  AOL  service,  ACA  released  a  statement  voicing  its  support  for
 the  merger.  797  BellSouth  asserts  that  notwithstanding  the  anticompetitive  potential,  the  merger  could  advance  the  public  interest,  provided  the  Commission  implements  certain  safeguards.  798  Finally,  Sinclair
 Broadcasting  argues  that  the  merger  has  the  potential  to  promote  the  development  and  delivery  of  new  products  and  services,  but  not  without  the  appropriate  safeguards.  799
 B.  Discussion
 302.  Cable  Access.  The  Applicants'  MOU  represents  a  commendable  commitment  to  the  principle  of  multiple  access  and  offers  a  starting  point  from  which  a  marketplace  solution  can  proceed.  800
 The  Applicants  have  offered  evidence  that  in  the  wake  of  their  MOU,  other  cable  operators  are  considering  allowing  multiple  ISPs  to  provide  service  over  their  systems.  801  Nevertheless,  as  discussed  in
 Section  IV.  A.,  supra,  the  MOU  is  not  sufficient  to  avert  the  mergers  potential  deleterious  effects.  Moreover,  we  are  not  convinced  that  the  MOU  alone  will  induce  other  cable  operators  to  open  their
 networks  in  a  manner  that  would  meaningfully  benefit  the  market  for  high-  speed  Internet  services.  The  Applicants  admit  that  there  are  significant  details  surrounding  the  implementation  of  a  multiple  ISP
 approach  that  are  unresolved.  802  Although  the  FTCs  Consent  Agreement  substantially  mitigates  these  harms,  we  remain  concerned  that  the  merged  firm  could  indirectly  disadvantage  unaffiliated  ISPs,
 especially,  local  and  regional  ISPs,  through  means  that  are  not  squarely  addressed  by  the  Consent  Agreement.  Thus,  while  the  terms  of  the  Consent  Agreement  would  clearly  enhance  the  mergers
 potential  public  interest  benefits,  we  cannot  conclude  that  the  merger  will  result  in  unqualified  public  interest  benefits  with  respect  to  the  provision  of  Internet  access  by  multiple  ISPs  over  cable  facilities
 without  imposing  the  conditions  set  forth  in  Section  IV.  A.,  supra..
 793  Memphis  Networx  Comments  at  3.
 794  Id.  at  7.
 795  See  generally  ACA  Comments.
 796  ACA  Reply  Comments  at  5  and  8.
 797  ACA,  American  Cable  Association  Backs  Time  Warner/  AOL  Merger  (press  release),  July  27,  2000.
 798  BellSouth  Reply  Comments  at  1.
 799  Sinclair  Reply  Comments  at  1.
 800  Applicants  March  21  Supplemental  Information  at  23;  see  also  Applicants  Aug.  22  Benefits  Ex  Parte  at  13.
 801  Time  Warner  Inc.,  America  Online  and  Time  Warner  Announce  Framework  for  Agreements  to  Offer  AOL  Service
 and  Other  ISPs  on  Time  Warner  Broadband  Cable  Systems  (press  release),  Feb.  29,  2000;  Applicants  Reply  Comments  at  11  (citing  Leading  Cable  MSOs  Quietly  Shift  Toward  Open  Access,  COMM.  DAILY,  Apr.  6,  2000  (  a)  t
 least  7  of  (the)  11  largest  cable  operators  are  looking  at  offering  access  to  multiple  ISPs  on  their  high-  speed  broadband  lines).
 802  Application  at  15.
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 303.  Accelerated  Deployment  of  Broadband  Technologies  and  Content.  We  recognize  that  AOL  currently  has  many  agreements  with  non-  cable  broadband  service  providers.  For  example,  AOL
 currently  has  non-  exclusive  strategic  alliances  with  DSL  providers  SBC  (including  SBC-  owned  Ameritech),  and  with  both  components  of  the  newly  formed  Verizon  Communications,  Bell  Atlantic  and
 GTE.  803  While  AOL  could,  on  its  own,  pursue  a  strategy  of  AOL  Anywhere,  by  independently  advancing  subscription  to  all  broadband  technologies,  AOLs  acquisition  of  Time  Warner  may  aid  Time
 Warner  in  the  rollout  of  its  high-  speed  Internet  service  offering  by  enabling  Time  Warner  to  more  rapidly  assemble  the  inputs  it  needs  to  increase  the  rate  of  deployment.  804  However,  because  Time  Warner
 already  offers  high-  speed  Internet  access  in  a  significant  number  of  its  franchise  areas,  this  presents  only  a  modest  potential  public  interest  benefit.
 304.  To  the  extent  that  AOLs  investment  in  cable  broadband  stimulates  outside  investment  in  alternative  technologies,  we  acknowledge  the  potential  for  the  merger  to  provide  consumers  the  added
 benefit  of  expedited  broadband  rollout  generally.  Financial  analysts  agree  that  investment  in  one  broadband  technology  tends  to  stimulate  investment  in  competing  technologies.  805  The  Cable  Services
 Bureau  has  also  recognized  this  fact.  At  the  request  of  the  Commission  Chairman,  the  Cable  Services  Bureau  convened  a  series  of  meetings  in  1999  to  study  the  state  of  the  broadband  industry  and  identify
 any  potential  market  failures.  In  its  Report  to  the  Chairman,  the  Bureau  found  that  there  was  little  disagreement  among  the  panelists  that  cable  investment  inherently  spurs  investment  in  DSL  and  vice
 versa.  806  However,  it  is  impossible  for  us  to  predict  the  magnitude  of  the  potential  impact.
 305.  Finally,  to  the  extent  that  the  merger  advances  alternative  broadband  technologies  and  thus  broadband  deployment  generally,  we  would  expect  such  a  result  to  stimulate  the  development  of
 broadband  content.  However,  we  cannot  conclude  that  the  merger  will  advance  the  quantity  and  quality  of  broadband  content  because,  as  we  indicate  in  section  IV.  A.  above,  the  merger  itself  threatens  to  reduce
 competition  among  high-  speed  ISPs.  807
 306.  Accelerated  Transformation  of  Traditional  Media  Products  to  Digital  Platforms.  We  find  that  the  merged  entity  will  have  the  resources  to  implement  its  proposed  plan  for  accelerating  the
 transformation  of  traditional  media  products  to  digital  platforms.  AOL  has  proven  successful  at  making  online  content  appealing  to  consumers,  especially  those  who  are  not  computer  experts.  Time  Warner,  on
 the  other  hand,  has  been  relatively  unsuccessful  at  migrating  its  traditional  media  products  to  digital
 803  Applicants  March  21  Supplemental  Information  at  17-  18.
 804  Applicants  July  12  Benefits  Ex  Parte  at  2.  Deployment  of  high-  speed  Internet  services  by  cable  operators  is
 more  complex  than  the  deployment  of  video  services.  High-  speed  Internet  service  deployment  requires  the  expenditure  of  additional  capital  for  equipment  such  as  high-  speed  routers,  file  servers,  and  cable  modem
 termination  systems.  Additional  personnel  are  needed  for  installation  and  customer  care.  New  procedures  must  be  established  for  billing,  provisioning,  customer  maintenance,  and  marketing.  A  merger  between  AOL  and  Time
 Warner  gives  Time  Warner  access  to  AOLs  capital,  trained  personnel,  and  Internet  expertise  in  the  areas  of  technical  implementation,  sales,  marketing  and  customer  care.  Id.
 805  Applicants  March  21  Supplemental  Information  at  28  (citing  Merrill  Lynch:  Upside  at  28).
 806  Broadband  Today,  at  33.  See  also  Deborah  A.  Lathen,  Chief,  Cable  Services  Bureau,  Federal  Communications
 Commission,  Remarks  Before  the  National  Governors  Association,  Feb.  27,  2000  (  This  deployment  of  cable  modems  has  spurred  the  deployment  of  DSL,  and  this  competition  has  resulted  in  lower  prices  and  greater  choices
 for  consumers.).  807
 See  also  Section  IV.  F.  supra  (Coordination  with  AT&  T),  where  we  discuss  the  merged  firms  incentive  and  ability  to  obtain  preferential  ISP  access  rights  on  AT&  Ts  cable  systems.
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 platforms.  For  example,  Pathfinder  was  Time  Warners  attempt  to  aggregate  its  name  brand  content  into  one,  convenient  Web  portal.  However,  Time  Warner  later  abandoned  Pathfinder  in  hopes  of  finding  a
 better  strategy  to  market  its  traditional  media  products.  808  Similarly,  Time  Warner  attempted  in  1994  to  launch  an  interactive  television  service  called  Full  Service  Network  in  Orlando,  Florida.  Because  Full
 Service  Network  was  too  costly  to  maintain,  Time  Warner  abandoned  the  project.  809  Given  the  histories  of  each  of  these  companies  independently,  we  find  that  the  addition  of  AOLs  expertise  in  making  content
 commercially  acceptable  to  consumers  over  the  Internet  could  very  well  advance  the  migration  of  Time  Warners  name  brand  content  to  digital  interactive  platforms.
 307.  Accelerated  Deployment  of  New  Services.  While  we  have  no  reason  to  doubt  that  the  Applicants  have  every  economic  incentive  to  provide  consumers  with  a  wide  array  of  new  services,  we
 also  have  no  way  of  determining  the  level  to  which  consumers  will  benefit  in  this  regard  because  consumers  have  not  yet  had  the  opportunity  to  express  demand  for  as-  yet-  unavailable  products.  In
 particular,  we  recognize  the  potential  for  the  merged  firm  to  expedite  Time  Warners  deployment  of  IP  telephony  and  to  allow  Internet  video  streaming.  With  respect  to  IP  telephony,  we  believe  that  Time
 Warners  technologically  advanced  cable  systems  and  AOLs  expertise  in  Internet-  based  applications,  as  well  as  AOLs  investment  in  IP  telephony  provider  Net2Phone,  together  provide  promise  for  this
 developing  technology.  810  With  respect  to  Internet  video  streaming,  we  recognize  that  the  Applicants  have  pledged  to  allow  unaffiliated  ISPs  to  provide  video  streaming  to  consumers  over  Time  Warner
 cable  systems.  811  Our  assessment  of  these  benefits  is  tempered,  however,  by  the  prospect  that  AOLs  network  effects  advantage  in  the  IM  market  will  position  the  merged  firm  to  foreclose  competition,  and
 thereby  diminish  innovation  and  consumer  choice,  with  respect  to  real-  time,  interactive  broadband  services  that  rely  on  NPDs.  812  Thus,  while  we  believe  the  merger  would  stimulate  the  development  of
 such  services  and  thereby  produce  some  public  interest  benefit,  we  cannot  conclude  that  it  would  stimulate  competition  or  innovation  with  respect  to  such  services.
 308.  We  also  recognize  the  potential  for  the  merger  to  advance  the  deployment  of  new  services  such  as  online  music  distribution,  ITV,  and  video-  on-  demand.  For  example,  as  we  noted  earlier,
 AOL  and  Time  Warner  bring  together  significant  assets  that  the  merged  firm  could  use  to  launch  a  successful  interactive  television  product.  813  The  Applicants  unique  combination  of  assets  presents  the
 possibility  that  the  merged  firm  will  successfully  deploy  a  more  comprehensive  and  highly-  advanced  ITV
 808  See  Communications  Media  Center  at  New  York  Law  School,  Time  Warner  Will  Shut  Down  Pathfinder  Web-  Site
 (Bulletin),  Apr.  26,  1999  at  http://  www.  cmcnyls.  edu/  bulletins/  twsdpfws.  html-  ssi  (visited  on  Oct.  24,  2000);  See  also  ZDNET  UK,  Time  Warner  to  Close  Pathfinder,  ZDNN  US,  Apr.  27,  1999,  at
 http://  www.  zdnet.  co.  uk/  news/  1999/  16/  ns-  7919.  html  (visited  Oct.  24,  2000);  See  also  Jack  Egan,  Pathfinder,  Rest  in  Peace:  Time  Warner  Pulls  the  Plug  on  the  Site,  US  NEWS  ONLINE,  May  10,  1999,  at
 http://  www.  usnews.  com/  usnews/  issue/  990510/  10path.  htm  (visited  Oct.  24,  2000).  809
 Dan  Trigoboff,  Full  Service  Network  out  of  Service,  Broadcasting  &  Cable,  May  5,  1997,  at  http://  www.  ee.  surrey.  ac.  uk/  Contrib/  Edupage/  1997/  05/  15-  05-  1997.  html  (visited  Oct.  24,  2000).  Industry  observers
 also  note  that  FSNs  failure  may  have  been  due  to  a  lack  of  content  and  consumer  interest.  The  technology  was  not  there  yet.  And  without  the  technology  the  content  was  not  there.  And  its  clear  that  people  dont  want  a  lot  of
 whats  being  offered.  Id.  810
 See  Confidential  Appendix  V,  Note  1.  811
 MOU  at    6.  812
 As  discussed  in  more  detail  in  Section  IV.  B.,  supra  (Instant  Messaging  and  Advanced  IM-  Based  High-  Speed  Services),  we  believe  this  represents  a  potential  public  interest  harm  that  is  likely  to  arise  from  the  merger.
 813  See  Section  IV.  A.  D,  supra.  (Interactive  Television  Services)
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 product  to  consumers  than  was  offered  in  the  past.  The  cable  broadband  platform  in  particular  may  offer  ITV  providers  and  consumers  advantages  over  its  DSL  and  satellite  distribution  networks.  814  AOLTV
 delivered  over  Time  Warners  cable  broadband  pipeline  could  serve  to  ensure  the  success  of  a  new  generation  of  ITV  services.  Against  a  backdrop  of  limited  ITV  success,  the  deployment  of  this  new
 product,  if  successful,  could  further  the  statutory  goal  of  promoting  the  deployment  of  advanced  services.  815  Moreover,  provided  the  merged  firm  does  not  limit  its  distribution  of  unaffiliated  interactive
 content  for  the  purpose  of  favoring  its  own  content,  AOLTV  could  also  benefit  the  public  by  giving  viewers  access  to  a  greater  diversity  of  information  services.  816  While  the  parties  could  most  certainly
 develop  ITV  and  other  new  products  on  their  own,  the  combination  of  differing  areas  of  expertise  and  the  diminished  risks  associated  with  a  more  broad-  based  merged  entity  will  potentially  allow  these  products
 to  be  more  fully  developed,  and  may  allow  ITV  to  reach  the  market  sooner  than  would  otherwise  occur.
 309.  Merger  vs.  Joint  Ventures.  Having  found  that  the  combination  of  AOLs  and  Time  Warners  assets  will  offer  some  public  interest  benefits,  we  next  consider  whether  those  benefits  could  be
 achieved  through  a  series  of  joint  ventures  or  other  contractual  arrangements.  The  Applicants  enumerate,  and  we  recognize,  the  difficulties  involved  in  establishing  a  series  of  joint  ventures  to  accomplish  a
 diverse  set  of  goals.  Because  the  intent  underlying  the  merger  is  not  to  develop  or  deploy  a  single  product  or  service,  we  agree  that  it  would  be  difficult  for  the  parties  to  successfully  negotiate  a  series  of  contracts
 or  joint  venture  arrangements  that  would  account  for  the  series  of  multimedia  ventures  contemplated  by  the  transaction.  We  agree  with  the  Applicants  that  negotiating  individual  joint  venture  agreements  for
 each  separate  endeavor  would  involve  delays  and  inefficiencies  inherent  in  establishing  the  formal  relationship  necessitated  by  agreements  among  independent,  publicly  traded  companies.  As  we  noted  in
 AT&  T-  MediaOne:  the  services  to  be  covered  by  [a  series  of]  joint  venture[  s],  in  light  of  dynamic  and  rapidly  evolving  technology  and  market  developments,  would  make  arms-  length  negotiations
 arduous.    817  We  also  note  here  that  AOLs  merger  with  Time  Warner  will  create  an  alignment  of  the  parties  economic  interests  that  will  reduce  the  areas  of  friction  between  the  two  companies  and  facilitate
 the  development  of  new  services.  818
 814  This  issue  will  be  explored  in  our  ITV  NOI..  See  ITV  NOI,  FCC  01-  15.
 815  See  AT&  T-  MediaOne  Order,  15  FCC  Rcd  at  9821    11;  WorldCom-  MCI  Order,  13  FCC  Rcd  at  18030-  31    9;
 see  also  47  U.  S.  C    254;  Telecommunications  Act  of  1996  ("  1996  Act"),  Pub.  L.  104-  104,  Title  VII,    706,  Feb.  8,  1996,  110  Stat.  153,  reproduced  in  the  notes  under  47  U.  S.  C.    157;  1996  Act  Preamble.
 816  See  47  U.  S.  C.    521(  4)  (purpose  of  Title  VI,  "Cable  Communications,"  of  the  Act  is  to  "assure  that  cable
 communications  provide  and  are  encouraged  to  provide  the  widest  possible  diversity  of  information  sources  and  services  to  the  public");  47  U.  S.  C.    532(  a),  (g)  ("  diversity  of  information  sources");  see  also  Turner  Broadcasting
 System,  Inc.  v.  FCC,  512  U.  S.  622,  663  (1994)  (quoting  United  States  v.  Midwest  Video  Corp.,  406  U.  S.  649,  668  n.  27  (1972));  Review  of  the  Commission's  Regulations  Governing  Television  Broadcasting,  Television  Satellite
 Stations  Review  of  Policy  and  Rules,  MM  Docket  No.  91-  221,  MM  Docket  No.  87-  8,  Report  and  Order,  14  FCC  Rcd  12903,  12910-  12916  (1999);  Red  Lion  Broadcasting  Co.  v.  FCC,  395  U.  S.  367,  390  (1969)  ("  It  is  the  purpose
 of  the  First  Amendment  to  preserve  an  uninhibited  marketplace  of  ideas  in  which  truth  will  ultimately  prevail,  rather  than  to  countenance  monopolization  of  that  market,  whether  it  be  by  the  Government  itself  or  a  private  licensee.");
 Turner  Broadcasting,  512  U.  S.  at  657  (emphasizing  that  "[  t]  he  potential  for  abuse  of  this  private  power  over  a  central  avenue  of  communication  cannot  be  overlooked.  The  First  Amendment's  command  that  government  not
 impede  the  freedom  of  speech  does  not  disable  the  government  from  taking  steps  to  ensure  that  private  interests  not  restrict,  through  physical  control  of  a  critical  pathway  of  communication,  the  free  flow  of  information  and  ideas.").
 817  AT&  T-  MediaOne  Order,  15  FCC  Rcd  at  9891  175.
 818  Id.  at  15  FCC  Rcd  at  9891  175.
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 310.  We  agree  with  the  Applicants  that  because  there  is  no  way  to  predict  precisely  what  technologies  and  services  will  develop  and  be  demanded  by  consumers  in  the  future,  it  would  be  difficult,
 if  not  impossible  to  forecast  the  appropriate  parameters  of  a  limited  contractual  relationship.  819  Furthermore,  we  agree  that  AOL  and  Time  Warner  offer  complementary  strengths.  For  example,  we  note
 that  Time  Warners  Pathfinder  portal,  which  aggregated  the  companys  numerous  popular  content  brands,  failed  to  achieve  widespread  commercial  success.  Time  Warners  attempt  to  establish  interactive
 television  services  was  similarly  unsuccessful.  Conversely,  we  observe  that  AOL  has  unique  expertise  in  content  distribution,  as  evidenced  by  its  successful  distribution  of  its  AOL  ISP.
 311.  Finally,  we  agree  with  the  Applicants  that  a  merged  entity  with  the  resources  of  AOL  and  Time  Warner  would  be  able  to  take  on  substantial  additional  risk  in  the  development  and  rollout  of  new
 services.  AOL  states  that  a  merger  offer[  s]  the  only  way  for  AOL  and  Time  Warner  to  fully  integrate  their  operations  and  allow  the  merged  entity  to  set  aside  considerations  concerning  individual  lines  of
 business  to  concentrate  on  the  good  of  the  whole.  820
 312.  Conclusion.  We  recognize  that  were  they  not  to  merge,  AOL  and  Time  Warner  acting  independently  or  in  contractual  arrangements  with  each  other  or  other  service  providers  could  likely
 achieve  some  of  the  same  public  benefits  promised  by  the  merger.  We  are  not  persuaded  that  the  proposed  merger  is  the  only  means  to  assure  advancement  of  these  benefits.  Nevertheless,  we  recognize
 that  this  merger  has  the  potential  to  further  several  of  the  Commissions  goals  and  therefore  produce  some  public  interest  benefits.  Among  them  are  the  deployment  of  a  wide  range  of  broadband  technologies  to
 all  consumers.  As  described  above,  we  believe  this  merger  allows  for  the  direct  stimulation  of  the  cable  broadband  market  and  the  probable  indirect  stimulation  of  investment  in  alternative  broadband
 technologies.  While  it  is  impossible  for  us  to  predict  the  magnitude  of  the  potential  benefit  the  merger  may  bring  to  the  deployment  of  alternative  broadband  platforms,  we  acknowledge  that  the  merged  entity
 will  to  some  extent  allow  Time  Warner  to  more  rapidly  complete  its  rollout  of  high-  speed  services,  and  in  turn  encourage  competitors  to  do  the  same.  We  also  recognize  that  the  Applicants  MOU  and  the  FTC
 Consent  Agreement  have  given  the  industry  a  starting  point  by  which  to  discuss  the  meaningful  advancement  of  multiple  ISP  access.  Additionally,  we  believe  that  the  merger  will  accelerate  the
 transformation  of  traditional  media  products  to  digital  platforms,  aiding  the  development  of  advanced  services.
 313.  These  potential  public  interest  benefits,  however,  do  not  outweigh  the  serious  potential  public  interest  harms  we  have  identified  above.  For  example,  while  the  merger  may  well  stimulate  the
 development  and  deployment  of  new  services,  if  the  merger  in  fact  diminishes  competition  and  consumer  choice  with  respect  to  advanced  IM-  based  services  and  residential  high-  speed  Internet  access  service,  as
 we  predict,  then  the  mergers  potential  stimulation  of  the  development  of  new  services  will  not  guarantee  that  consumers  will  benefit  from  innovation,  price  competition,  or  diversity  of  choices  with  respect  to
 these  services.  Finally,  these  potential  harms  threaten  to  diminish  consumers  access  to  the  widest  possible  array  of  information  and  information  sources.
 314.  Accordingly,  we  find  it  necessary  to  impose  remedial  conditions  to  mitigate  the  mergers  potential  harms  and  in  order  to  ensure  that  consumers  enjoy  the  benefits  the  merger  promises  to  offer.  The
 conditions  we  are  imposing  to  mitigate  the  mergers  potential  harms  enable  us  to  conclude  that,  on
 819  Applicants  March  21  Supplemental  Information  at  38.
 820  Id.  at  38  (citing  Goldman  Sachs:  Perfect  Time-  ing  at  2).
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 balance,  the  potential  public  interest  benefits  offered  by  the  merger  will  outweigh  the  mergers  potential  public  interest  harms.
 VI.  CONCLUSION
 315.  Given  the  conditions  we  are  imposing  to  mitigate  the  mergers  potential  harms,  together  with  the  conditions  imposed  by  the  FTC  in  its  Consent  Agreement  and  Order  To  Hold  Separate,  we
 conclude  that,  on  balance,  the  potential  public  benefits  offered  by  the  merger  outweigh  any  harms  that  would  not  be  remedied  by  these  conditions.  Accordingly,  we  find  that  approval  of  the  license  transfer
 applications  subject  to  the  conditions  discussed  herein  will  serve  the  public  interest,  convenience,  and  necessity.
 VII.  ORDERING  CLAUSES
 316.  Accordingly,  having  reviewed  the  Application  and  the  record  in  this  matter,  IT  IS  ORDERED,  pursuant  to  Sections  4(  i)  and  (j),  214(  a),  214(  c),  309,  and  310(  d)  of  the  Communications  Act
 of  1934,  as  amended,  47  U.  S.  C.    154(  i),  154(  j),  214(  a),  214(  c),  309,  310(  d),  that  the  Application  filed  by  America  Online,  Inc.  and  Time  Warner  Inc.,  Inc.  IS  GRANTED  subject  to  the  conditions  stated
 below.  821
 317.  IT  IS  FURTHER  ORDERED,  pursuant  to  Sections  4(  i)  and  (j),  214(  a),  214(  c),  309,  and  310(  d)  of  the  Communications  Act  of  1934,  as  amended,  47  U.  S.  C.    154(  i),  154(  j),  214(  a),  214(  c),  309,
 310(  d),  that  the  above  grant  shall  include  authority  for  AOL  Time  Warner  Inc.  to  acquire  control  of:
 a)  any  authorization  issued  to  Time  Warner,  its  subsidiaries,  or  its  affiliates  during  the  Commission's  consideration  of  the  Application  and  the  period  required  for  consummation
 of  the  merger  transaction  following  approval;
 b)  construction  permits  held  by  licensees  involved  in  this  transfer  that  matured  into  licenses  during  the  Commissions  consideration  of  the  Application  or  that  mature  into  licenses
 after  closing  of  the  merger  transaction  and  that  may  have  been  omitted  from  the  transfer  of  control  Application;  and
 c)  applications  filed  by  such  licensees  and  that  are  pending  at  the  time  of  consummation  of  the  proposed  transfer  of  control.
 318.  IT  IS  FURTHER  ORDERED  that  AOL  Time  Warner  shall  not  restrict  the  ability  of  any  current  or  prospective  ISP  customers  to  select  and  initiate  service  from  any  unaffiliated  ISP  which,
 pursuant  to  a  contract  with  AOL  Time  Warner,  has  made  its  service  available  over  AOL  Time  Warners  cable  facilities  (  Participating  ISP).
 319.  IT  IS  FURTHER  ORDERED  that  AOL  Time  Warner  shall  allow  customers  to  select  a  Participating  ISP  by  a  method  that  does  not  discriminate  in  favor  of  AOL  Time  Warners  affiliates  on  the
 basis  of  affiliation.  At  a  minimum,  AOL  Time  Warner  shall  allow  customers  to  obtain  a  list  of  Participating  ISPs  by  calling  their  local  AOL  Time  Warner  cable  system  and  requesting  such  a  list.
 821  A  list  of  the  licenses  and  authorizations  that  have  been  approved  for  transfer  pursuant  to  the  terms  of  this  Order  is
 set  forth  in  Appendix  C  hereto.
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 Whenever  a  customer  requests  a  listing  of  Participating  ISPs,  AOL  Time  Warner  822  shall  provide  the  list  in  a  reasonable  and  timely  manner.  Such  list  shall  not  discriminate  in  favor  of  AOL  Time  Warners
 affiliates  on  the  basis  of  affiliation.  AOL  Time  Warner  shall  not  prohibit  ISPs  from  marketing  their  services  to  AOL  Time  Warner  cable  customers.  823
 320.  IT  IS  FURTHER  ORDERED  that  AOL  Time  Warner  shall  permit  each  Participating  ISP  to  determine  the  contents  of  its  subscribers  first  screen  824  and  shall  not  require  a  Participating  ISP  to
 include  any  content  as  a  condition  of  obtaining  access  to  AOL  Time  Warner  cable  systems;  provided  that  AOL  Time  Warner  and  any  Participating  ISP  may  agree  that  the  ISP  will  include  specified  content  or
 links  on  its  first  screen.  AOL  Time  Warner  shall  not  require  any  high-  speed  Internet  access  cable  customer  to  go  through  an  affiliated  ISP  to  reach  any  Participating  ISP  from  which  the  customer
 purchases  service.
 321.  IT  IS  FURTHER  ORDERED  that  AOL  Time  Warner  shall  permit  each  ISP  to  have  a  direct  billing  arrangement  with  those  high-  speed  Internet  access  subscribers  to  whom  the  ISP  sells
 service.  AOL  Time  Warner  may  offer  a  billing  service  to  any  Participating  ISP,  but  shall  not  require  any  ISP  to  purchase  this  service  as  a  condition  of  obtaining  access.
 322.  IT  IS  FURTHER  ORDERED  that  all  contracts  between  AOL  Time  Warner  and  unaffiliated  ISPs  for  access  to  Time  Warners  cable  systems  shall  contain  a  clause  warranting  that,  to  the
 extent  AOL  Time  Warner  provides  any  Quality  of  Service  mechanisms,  caching  services,  technical  support  customer  services,  multicasting  capabilities,  address  management  and  other  technical  functions  of
 the  cable  system  that  affect  customers  experience  with  their  ISP,  AOL  Time  Warner  shall  provide  them  in  a  manner  that  does  not  discriminate  in  favor  of  AOL  Time  Warners  affiliated  ISPs  on  the  basis  of
 affiliation.
 323.  IT  IS  FURTHER  ORDERED  that  AOL  Time  Warner  shall  not  enter  into  any  contract  with  any  ISP  for  connection  with  AOL  Time  Warners  cable  systems  that  prevents  that  ISP  from
 disclosing  the  terms  of  the  contract  to  the  Commission  under  the  Commissions  confidentiality  procedures.
 324.  IT  IS  FURTHER  ORDERED  that  complaints  or  petitions  regarding  conditions  regarding  high-  speed  Internet  services  shall  be  filed  and  adjudicated  pursuant  to  the  provisions  of  Section  IV.  A  of
 this  Order.
 325.  IT  IS  FURTHER  ORDERED  that  AOL  Time  Warner  825  shall  not  offer  an  AIHS  application  that  includes  the  transmission  and  reception,  utilizing  an  NPD  over  the  Internet  Protocol  path
 of  AOL  Time  Warner  broadband  facilities,  of  one-  or  two-  way  streaming  video  communication  using  IM  protocols    including  live  images,  tape  or  animation    that  are  new  features,  functions,  and  enhancements
 beyond  those  offered  in  AIM  4.3  or  ICQ  2000b,  826  until  AOL  Time  Warner  satisfies  one  of  three  options
 822  The  term  AOL  Time  Warner  as  used  in  this  sentence  refers  to  the  division  of  AOL  Time  Warner  that  operates  its
 cable  systems.  823
 This  provision  is  not  intended  to  restrict  AOL  Time  Warners  ability  to  market  its  own  products  to  prospective  or  current  ISP  customers.
 824  The  term  first  screen  shall  have  the  meaning  ascribed  to  it  in  Section  IV.  A,  supra.
 825  In  AOL  Time  Warner,  we  include  the  separate  pre-  merger  companies  and  the  post-  merger  company.
 826  We  explicitly  exclude  upgrades  to  AOLs  current  IM  products  that  are  not  otherwise  included  in  AIHS.
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 (the  IM  condition).  827  The  three  options  are:  (1)  AOL  Time  Warner  may  show  that  it  has  implemented  a  standard  for  server-  to-  server  interoperability  of  NPD-  based  services  that  has  been  promulgated  by  the
 IETF  or  a  widely  recognized  standard-  setting  body;  (2)  AOL  may  show  that  it  has  entered  into  a  written  contract  providing  for  server-  to-  server  interoperability  with  a  significant,  unaffiliated,  actual  or  potential
 competing  provider  of  NPD-  based  services  offered  to  the  public;  after  AOL  Time  Warner  has  entered  this  contract,  an  officer  of  AOL  Time  Warner  shall  certify  to  the  Commission  that  it  is  prepared  to  promptly
 enter  into  negotiations,  in  good  faith,  with  any  other  requesting  provider  of  NPD-  based  services;  within  180  days  after  entering  this  first  contract,  AOL  Time  Warner  must  enter  two  additional  contracts  with
 significant,  unaffiliated,  actual  or  potential  competing  providers  of  NPD-  based  services  offered  to  the  public;  (3)  AOL  Time  Warner  may  seek  relief  from  this  condition  by  showing  that  the  imposition  of  the
 condition  no  longer  serves  the  public  interest,  convenience  or  necessity  because  there  has  been  a  material  change  in  circumstance.
 326.  IT  IS  FURTHER  ORDERED  that  if  AOL  Time  Warner  seeks  relief  from  the  IM  condition  pursuant  to  one  of  the  three  options  listed  in  the  preceding  paragraph,  it  shall  submit  a  petition
 to  the  Commission  seeking  findings  and  conclusions  that  one  of  the  three  options  has  been  met.  828  The  findings  of  the  Commission  shall  be  made  upon  clear  and  convincing  evidence,  and  in  the  absence  of  such
 an  evidentiary  showing,  the  condition  shall  not  be  eliminated.  If  the  Commission  finds  that  one  of  the  three  options  has  been  met,  then  AOL  Time  Warner  may  offer  video  AIHS  services.
 327.  IT  IS  FURTHER  ORDERED  that  AOL  Time  Warner  shall  file  a  progress  report  with  the  Commission,  180  days  after  the  release  of  this  Order  and  every  180  days  thereafter,  describing  in
 technical  depth,  the  actions  it  has  taken  to  achieve  interoperability  of  its  IM  offerings  and  others  offerings.  Such  reports  will  be  placed  on  public  notice  for  comment.
 328.  IT  IS  FURTHER  ORDERED  that  complaints  or  petitions  regarding  the  IM  condition  shall  be  filed  and  adjudicated  pursuant  to  the  provisions  of  Section  IV.  B  of  this  Order.
 329.  IT  IS  FURTHER  ORDERED  that  five  (5)  years  after  the  date  of  release  of  this  Order,  the  condition  set  forth  in  the  preceding  paragraphs  325  through  328  shall  expire  and  shall  not  restrain  AOL
 Time  Warner  from  offering  video  AIHS.
 330.  IT  IS  FURTHER  ORDERED  that  the  Applicants  shall  notify  the  Chiefs  of  the  Commission's  Cable  Services  Bureau  and  International  Bureau,  in  writing,  of  any  transactions  that
 increase  the  Applicants'  ownership  interest  in  General  Motors  Corporation  and/  or  Hughes  Electronics  Corporation,  no  later  than  30  days  after  the  transaction.
 331.  IT  IS  FURTHER  ORDERED  that  AOL  Time  Warner  shall  be  prohibited  from  entering  into  any  agreement  with  AT&  T  Corp.,  tacit  or  otherwise,  that  gives  any  AOL  Time  Warner  ISP  exclusive
 access  to  any  AT&  T  cable  system  for  the  purpose  of  offering  high-  speed  Internet  access  service.
 827  The  condition  and  the  three  options  are  set  forth  more  fully  in  Section  IV.  B.,  supra.  (Instant  Messaging  and
 Advanced  IM-  Based  High-  Speed  Services)  828
 The  procedures  for  submission  of  petitions  are  set  forth  more  fully  in  Section  IV.  B,  supra.  (Instant  Messaging  and  Advanced  IM-  Based  High-  Speed  Services)
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 332.  IT  IS  FURTHER  ORDERED  that  AOL  Time  Warner  shall  be  prohibited  from  entering  into  any  agreement  with  AT&  T,  tacit  or  otherwise,  that  affects  AT&  Ts  ability  to  offer  any  rates,  terms  or
 conditions  of  access  to  ISPs  that  are  not  affiliated  with  AOL  Time  Warner.
 333.  IT  IS  FURTHER  ORDERED  that  AOL  Time  Warner,  by  its  General  Counsel,  shall  certify  to  the  Commission  upon  the  mergers  closing  and  annually  thereafter  that  it  is  in  compliance  with
 the  foregoing  provisions  in  paragraphs  331  and  332  above.
 334.  IT  IS  FURTHER  ORDERED  that  compliance  with  all  conditions  imposed  herein  is  a  non-  severable  condition  of  the  grant  of  the  Application.
 335.  IT  IS  FURTHER  ORDERED  that  all  references  to  AOL,  Time  Warner,  and  AOL  Time  Warner  in  this  Order  shall  also  refer  to  their  respective  officers,  directors,  and  employees,  as  well  as  to
 any  affiliated  companies,  and  their  officers,  directors,  and  employees,  except  as  otherwise  noted.
 336.  IT  IS  FURTHER  ORDERED,  pursuant  to  Sections  4(  i)  and  (j),  214(  a),  214(  c),  309,  and  310(  d)  of  the  Communications  Act  of  1934,  as  amended,  47  U.  S.  C.    154(  i),  154(  j),  214(  a),  214(  c),  309,
 310(  d),  that  the  Petition  to  Deny  filed  by  the  Consumers  Union,  Consumer  Federation  of  America,  Media  Access  Project  and  Center  for  Media  Education,  the  Petition  to  Deny  of  Thomas  Lewis  Bonge,  the
 Petitions  to  Condition  filed  by  RCN  Telecom  Services  and  Gemstar,  and  all  similar  petitions  ARE  DENIED.
 337.  IT  IS  FURTHER  ORDERED  that  the  motion  to  consolidate  filed  by  the  Consumers  Union,  Consumer  Federation  of  America,  and  Center  for  Media  Education,  IS  DENIED.
 338.  IT  IS  FURTHER  ORDERED  that  this  Memorandum  Opinion  and  Order  SHALL  BE  EFFECTIVE  on  January  11,  2001,  829  in  accordance  with  Section  1.103  of  the  Commission's  rules,  47
 C.  F.  R.    1.103.
 FEDERAL  COMMUNICATIONS  COMMISSION
 Magalie  Roman  Salas  Secretary
 829  On  January  11,  2001,  the  Commission  released  a  public  notice  announcing  the  Commissions  adoption  of  this
 Order.  Public  Notice,  Subject  to  Conditions,  Commission  Approves  Merger  Between  America  Online,  Inc.  and  Time  Warner  Inc.,  CS  Docket  No.  00-  30,  FCC  01-  11  (rel.  Jan.  11,  2001).
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 APPENDIX  A
 List  of  Timely  Filed  Comments
 *  Denotes  that  the  commenter  filed  a  Petition  To  Deny
 INITIAL  COMMENTS
 American  Cable  Association  (  ACA)  *  Consumers  Union,  Consumer  Federation  of  America,  Media  Access  Project,  and  Center  for  Media
 Education  (  Consumers  Union)  Gemstar  International  Group,  Ltd.  and  Gemstar  Development  Corp.  (  Gemstar)
 City  of  Houston  City  Council  Members:  Bert  Keller,  John  E.  Castillo,  Annise  D.  Parker,  Carroll  G.  Robinson,  Rob  Todd  (  Houston  City  Council  Members)
 iCAST  Corporation  (  iCast)  Memphis  Light,  Gas  &  Water  Division  (  MLG&  W)
 Memphis  Networx,  LLC  (  Memphis  Networx)  SBC  Communications  (  SBC)
 RCN  Telecom  (  RCN)  Tribal  Voice  (  Tribal  Voice)
 REPLY  COMMENTS
 America  Online,  Inc.  and  Time  Warner  Inc.  (  Applicants)  American  Cable  Association  (  ACA)
 Association  for  Maximum  Service  Television,  Inc.  (  MSTV)  BellSouth  Corporation  (  BellSouth)
 Freedom  Broadcasting,  Inc.  (  Freedom)  iCAST  Corporation  and  Tribal  Voice  (  iCast  and  Tribal  Voice)
 Emy  Tseng,  Kamal  Latham,  Chen  Hao,  and  Armand  Ciccarelli  (  MIT/  Harvard  Students)  RCN  Telecom  (  RCN)
 Sinclair  Broadcast  Group,  Inc.  (  Sinclair)  State  of  Connecticut,  Office  of  the  Attorney  General  (  Connecticut  Attorney  General)
 Town  of  Cary,  North  Carolina  (  Town  of  Cary)  The  Walt  Disney  Company  (  Disney)
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 APPENDIX  B
 CONFIDENTIAL  APPENDIX
 CONFIDENTIAL  AND  UNDER  SEAL
 SUBJECT  TO  PROTECTIVE  ORDER
 IN  CS  DOCKET  NO.  00-  30
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 APPENDIX  C
 339.  List  of  Authorizations  and  Licenses
 The  approval  for  transfer  of  control  of  Time  Warners  and  AOLs  authorizations  and  licenses  to  AOL  Time  Warner  includes  the  Commission  authorizations  and  licenses  listed  below.  Additional  applications
 may  have  been  filed  during  the  pendency  of  the  applications  for  transfer  of  control  that  may  be  the  subject  of  future  public  notices.  Further,  AOL  and  Time  Warner  have  acquired  or  disposed  of  licenses  during  the
 pendency  of  this  proceeding.  Applications  for  transfer  of  these  licenses  will  also  be  addressed  in  future  public  notices.  The  call  signs  of  the  stations  involved  are  included  below  for  reference  only.
 Domestic  Fixed  Satellite  Service  (Part  25)
 Cable  News  Network  LP,  LLLP  SES-  T/  C-  20000211-  00219
 E2001  E890835
 E861053  E880870
 E890577  E890834
 E890836  E900975
 E930204  E940420
 E940421  E940422
 E950363  E970490
 E990281  E990282
 Turner  Teleport,  Inc.  SES-  T/  C-  20000211-  00225
 KA58
 Time  Warner  Entertainment-  Advance/  Newhouse  Partnership  SES-  T/  C-  20000211-  00226
 E990035  E990041
 Turner  Broadcasting  System,  Inc.  SES-  T/  C-  20000211-  00228
 E920013  E980173
 E980181
 Time  Warner  Entertainment  Company,  L.  P.  SES-  T/  C-  20000211-  00229
 E4063
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 E910207  E930421
 E930422
 International  Section  214  (Part  63)
 ITC-  T/  C-  2000211-  00069  Time  Warner  Telecom  Inc.  ITC-  T/  C-  20000211-  00230  Time  Warner  Connect  of  San  Antonio,  Inc.
 Television  Broadcast  Station  (Part  73)
 BTCCT-  200211AAD  WTBS(  TV)  SuperStation,  Inc.  CH.  17  Atlanta,  GA
 FAC  ID  64033
 Low  Power  Television  (Part  74)
 BTCTTL-  20000211AAE  W34AX  Time  Warner  Entertainment-  FAC  ID  64636  Advance/  Newhouse  Partnership
 Henderson,  NC
 Cable  Television  Relay  Services  (Part  78)
 Cablevision  Industries,  Inc.  CAR-  50596-  09  WHZ-  685  Fishkill,  NY
 CAR-  50597-  09  WHZ-  239  Lloyd,  NY  CAR-  50598-  09  WHZ-  502  West  Point,  NY
 CAR-  50599-  09  WAD-  241  Wurtsboro,  NY
 Century  Venture  Corporation  CAR-  50600-  09  WHZ-  810  Brunswick,  GA
 CAR-  50601-  09  WLY-  436  Jekyll  Island,  GA  CAR-  50602-  09  WHZ-  971  Owensboro,  KY
 CAR-  50603-  09  WAW-  505  Brookfield,  WI  CAR-  50604-  09  WGZ-  277  Wauwatosa,  WI
 CNN  America,  Inc.  CAR-  50605-  09  WHZ-  931  Oakland,  CA
 Florida  Cablevision  Management  Corp.  CAR-  50606-  09  WLY-  604  Golden  Gate,  FL
 Kansas  City  Cable  Partners  CAR-  50607-  09  WLY-  353  Ft.  Leavenworth,  KS
 CAR-  50608-  09  WHZ-  921  Leavenworth,  KS  CAR-  50609-  09  WGW-  207  Independence,  MO
 CAR-  50610-  09  WAE-  602  Kansas  City,  MO  CAR-  50611-  09  WGW-  219  Kansas  City,  MO
 CAR-  50612-  09  WGW-  220  Kansas  City,  MO
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 KBL  Cablesystems  of  Minneapolis,  Inc.  CAR-  50613-  09  WHZ-  238  Eden  Prairie,  MN
 KBL  Cablesystems  of  the  Southwest,  Inc.  CAR-  50614-  09  WHZ-  244  Minneapolis,  MN
 Massachusetts  Cablevision  Systems  Limited  Partnership  CAR-  50615-  09  WAL-  427  Bellevue,  OH
 CAR-  50616-  09  WAY-  894  Galion,  OH  CAR-  50617-  09  WBB-  813  Upper  Sandusky,  OH
 Paragon  Communications  CAR-  50618-  09  WHZ-  373  Carson,  CA
 CAR-  50619-  09  WGZ-  435  Mars  Hill,  ME  CAR-  50620-  09  WGV-  525  Fishkill,  NY
 CAR-  50621-  09  KN-  5098  Manhattan,  NY  CAR-  50622-  09  WHW-  60  Manhattan,  NY
 CAR-  50623-  09  WAF-  665  New  Windsor,  NY
 Staten  Island  Cable,  LLC  CAR-  50624-  09  WHZ-  455  Elizabeth,  NJ
 Texas  Cable  Partners,  L.  P.  CAR-  50625-  09  WHZ-  504  Alton,  TX
 CAR-  50626-  09  KYZ-  22  Bandera,  TX  CAR-  50627-  09  WMC-  696  Beaumont,  TX
 CAR-  50628-  09  WHZ-  677  Commerce,  TX  CAR-  50629-  09  WGI-  758  Eagle  Pass,  TX
 CAR-  50630-  09  WHZ-  780  El  Paso,  TX  CAR-  50631-  09  WJI-  36  El  Paso,  TX
 CAR-  50632-  09  WLY-  483  Ft.  Bliss,  TX  CAR-  50633-  09  WGI-  756  Farias  Ranch,  TX
 CAR-  50634-  09  KOD-  36  Harlingen,  TX  CAR-  50635-  09  KA-  80625  Houston,  TX
 CAR-  50636-  09  KYX-  62  Loma  Vista,  TX  CAR-  50637-  09  WGI-  757  Moore,  TX
 CAR-  50638-  09  WHZ-  869  One  North,  TX  CAR-  50639-  09  KYX-  61  Pearsall,  TX
 CAR-  50640-  09  KOD-  31  Pharr,  TX  CAR-  50641-  09  WAF-  861  Port  Isabel,  TX
 CAR-  50642-  09  WBH-  846  Port  Neches,  TX  CAR-  50643-  09  KOD-  35  Weslaco,  TX
 CAR-  50644-  09  WGI-  755  Winter  Haven,  TX
 Time  Warner  Cable  of  Southeastern  Wisconsin,  L.  P.  CAR-  50645-  09  WLY-  245  Brown  Deer,  WI
 CAR-  50646-  09  WHZ-  447  Milwaukee,  WI  CAR-  50647-  09  WGZ-  421  S.  Milwaukee,  WI
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 Time  Warner  Entertainment  Company  L.  P.  CAR-  50648-  09  WBM-  740  EMS-  Lanai,  HI
 CAR-  50649-  09  WAE-  470  Glenwood,  HI  CAR-  50650-  09  WAX-  743  Glenwood,  HI
 CAR-  50651-  09  WAB-  577  Haleakala  Mtn.,  HI  CAR-  50652-  09  WHZ-  819  Hana,  HI
 CAR-  50653-  09  WLY-  683  Hawaii  Kai,  HI  CAR-  50654-  09  WLY-  240  Hawaii  Kai,  HI
 CAR-  50655-  09  WAE-  478  Hilo,  HI  CAR-  50656-  09  WBM-  744  Hilo,  HI
 CAR-  50657-  09  KA-  80614  Honolulu,  HI  CAR-  50658-  09  WGV-  848  Kahului,  HI
 CAR-  50659-  09  WHZ-  876  Kahului,  HI  CAR-  50660-  09  WAV-  644  Kaupulehu,  HI
 CAR-  50661-  09  WAN-  954  Kaupulehu  Lava  Flow,  HI  CAR-  50662-  09  WLY-  248  Kihei,  HI
 CAR-  50663-  09  WLY-  713  Lahaina,  HI  CAR-  50664-  09  WLY-  684  Lanai  City,  HI
 CAR-  50665-  09  WAN-  953  Mahukona,  HI  CAR-  50666-  09  WBD-  613  Mauna  Kapu  Peak,  HI
 CAR-  50667-  09  KA-  80615  Mauna  Kapu  Peak,  HI  CAR-  50668-  09  WAB-  578  Maunaka  Mtn.,  HI
 CAR-  50669-  09  WLY-  402  Meyers  Ranch,  HI  CAR-  50670-  09  WLY-  415  Mililani,  HI
 CAR-  50671-  09  WLY-  409  Olinda,  HI  CAR-  50672-  09  WLY-  678  Puu  Kolii,  HI
 CAR-  50673-  09  WLY-  685  Puu  Nana,  HI  CAR-  50674-  09  WBM-  738  Puu  Nana,  HI
 CAR-  50675-  09  WBM-  742  Puu  Nianiau,  HI  CAR-  50676-  09  WHZ-  617  Waimalu,  HI
 CAR-  50677-  09  WBD-  612  Waipahu,  HI  CAR-  50678-  09  WHZ-  728  Brazil,  IN
 CAR-  50679-  09  WRC-  25  Chanute,  KS  CAR-  50680-  09  WRC-  23  Garnett,  KS
 CAR-  50681-  09  WLY-  703  Independence,  KS  CAR-  50682-  09  WRC-  24  Iola,  KS
 CAR-  50683-  09  KZW-  67  Neodesha,  KS  CAR-  50684-  09  WBL-  521  Thrall,  KS
 CAR-  50685-  09  WBK-  510  Saco,  ME  CAR-  50686-  09  WAS-  288  Sanford,  ME
 CAR-  50687-  09  WLY-  479  Columbus,  NE  CAR-  50688-  09  WAB-  572  Wynantskill,  NY
 CAR-  50689-  09  WHZ-  633  Bazetta,  OH  CAR-  50690-  09  WAY-  890  Columbus,  OH
 CAR-  50691-  09  WHZ-  408  Lima,  OH  CAR-  50692-  09  WHZ-  587  Marysville,  OH
 CAR-  50693-  09  WAY-  903  New  Albany,  OH  CAR-  50694-  09  WHZ-  437  Ottawa,  OH
 CAR-  50695-  09  WHZ-  406  Richwood,  OH  CAR-  50696-  09  WHZ-  545  Troy,  OH
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 CAR-  50697-  09  WLY-  471  Youngstown,  OH  CAR-  50698-  09  WGK-  594  Burlington,  WI
 Time  Warner  Entertainment-  Advance/  Newhouse  Partnership  CAR-  50699-  09  WHZ-  982  Clearwater,  FL
 CAR-  50700-  09  KA-  80616  Clearwater,  FL  CAR-  50701-  09  WLY-  462  Deland,  FL
 CAR-  50702-  09  WHZ-  784  Lakeland,  FL  CAR-  50703-  09  WHZ-  785  Lakeland,  FL
 CAR-  50704-  09  KD-  55011  Orlando,  FL  CAR-  50705-  09  WHZ-  396  Palm  Harbor,  FL
 CAR-  50706-  09  WGZ-  487  Pinellas  Park,  FL  CAR-  50707-  09  WHZ-  652  St.  Petersburg,  FL
 CAR-  50708-  09  KD-  55009  Tampa,  FL  CAR-  50709-  09  WLY-  330  Barada,  NE
 CAR-  50710-  09  WLY-  331  Octavia,  NE  CAR-  50711-  09  WHZ-  882  Camden,  NY
 CAR-  50712-  09  WLY-  554  Crown  Point,  NY  CAR-  50713-  09  WGK-  590  Glens  Falls,  NY
 CAR-  50714-  09  WAN-  337  Lake  George,  NY  CAR-  50715-  09  KB-  60127  Rochester,  NY
 CAR-  50716-  09  KD-  55003  Rochester,  NY  CAR-  50717-  09  WAF-  786  Sidney,  NY
 CAR-  50718-  09  WLY-  235  Atlantic,  NC  CAR-  50719-  09  WLY-  509  Beaufort,  NC
 CAR-  50720-  09  WBF-  574  Burgaw,  NC  CAR-  50721-  09  WGJ-  890  Butner,  NC
 CAR-  50722-  09  WAJ-  761  Fayetteville,  NC  CAR-  50723-  09  WLY-  333  Fayetteville,  NC
 CAR-  50724-  09  WLY-  246  Garner,  NC  CAR-  50725-  09  WHZ-  394  Havelock,  NC
 CAR-  50726-  09  WHZ-  430  Lizard  Lick,  NC  CAR-  50727-  09  WHZ-  395  Morehead  City,  NC
 CAR-  50728-  09  WLY-  646  Pembroke,  NC  CAR-  50729-  09  WLY-  429  Raleigh,  NC
 CAR-  50730-  09  WAX-  279  Red  Springs,  NC  CAR-  50731-  09  WAE-  564  Supply,  NC
 CAR-  50732-  09  WHZ-  774  Wilmington,  NC  CAR-  50733-  09  WDH-  701  Florence,  SC
 CAR-  50734-  09  WGV-  822  Sumter,  SC  CAR-  50735-  09  KA-  80624  Austin,  TX
 CAR-  50736-  09  KD-  55017  Austin,  TX  CAR-  50737-  09  WBY-  600  Austin,  TX
 CAR-  50738-  09  WAH-  212  Bluegrove,  TX  CAR-  50739-  09  WAH-  213  Crafton,  TX
 CAR-  50740-  09  WLY-  367  Elroy,  TX  CAR-  50741-  09  WSV-  58  Flat,  TX
 CAR-  50742-  09  WHZ-  585  Grenada  Hills,  TX  CAR-  50743-  09  WHZ-  339  Lukenbach,  TX
 CAR-  50744-  09  WSV-  56  McGregor,  TX
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 CAR-  50745-  09  WAH-  228  Vashti,  TX  CAR-  50746-  09  WCJ-  907  West  Lake  Hills,  TX
 TWI  Cable  Inc.  CAR-  50747-  09  WGV-  526  New  Riegel,  OH
 TWI  Summit  Cable,  Inc.  CAR-  50748-  09  WHZ-  548  Banning,  CA
 CAR-  50749-  09  WLY-  451  Beaumont,  CA  CAR-  50750-  09  WLY-  306  Cathedral  City,  CA
 CAR-  50751-  09  KD-  55002  Palm  Desert,  CA  CAR-  50752-  09  WLY-  449  Whitewater,  CA
 CAR-  50753-  09  WHZ-  547  Whitewater,  CA  CAR-  50754-  09  WGZ-  470  Palm  Desert,  CA
 CARS  Transfers  to  be  effected  in  the  future  (pending  application  and  public  notice)
 Time  Warner  Entertainment  Company,  LP  WLY-  720  Mauna  Lani,  HI
 WLY-  726  Wailuku,  HI  WAB-  572  Wynantskill,  NY
 Texas  Cable  Partners,  LP  WGZ-  450  Escobas,  TX
 WGZ-  451  Horseshoe  Ranch,  TX  WGZ-  452  Benavides,  TX
 WGZ-  264  Realitos,  TX  WJT-  43  Corpus  Christi,  TX
 The  Wireless  Telecommunications  Bureau  is  processing  41  applications  to  transfer  control  of  approximately  400  licenses:
 Private  Land  Mobile  Radio  Services  (Part  90)
 File  #  Lead  Call  Sign  Alert  Cable  TV  Inc  0000302063  KYK615
 Alert  Cable  TV  of  Oklahoma  Inc  0000302074  KWS691  Alert  Cable  TV  of  South  Carolina  Inc  0000302077  KFI554
 America  Online,  Inc.  0000302103  KNNW816  American  Television  and  Communications
 Corporation  0000302198  KXL770  Cablevision  Industries  Inc  0000302444  KNGX578
 Cablevision  Industries,  Limited  Partnership  0000302460  KNHJ962  Cablevision  Industries  of  Alabama  Inc  0000302488  KYD420
 CAT  Holdings  LLC  0000301862  KRU795  Century  Venture  Corporation  0000302539  KZE460
 Community  CATV  Corp  0000303479  WRJ952  Dorchester  Cablevision  Inc  0000303483  WSK244
 Erie  Telecommunications,  Inc  0000303486  KNCA620
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 Fairclark  Cable  TV  Inc  0000303492  KQI872  Florida  Cablevision  Management  Corp  0000303506  KNDR433
 Home  Box  Office  0000303522  KB51583  HBO  Studio  Productions  0000303600  WPLP425
 Kansas  City  Cable  Partners  0000304203  WRU681  KBL  Multnomah  Cablesystems  LP  0000304757  WNLJ857
 KBL  Portland  Cablesystems  LP  0000305899  WYJ623  Massachusetts  Cablevision  Industries  Inc  0000305900  WNZV590
 Massachusetts  Cablevision  Systems  LP  0000305901  KYC473  Paragon  Communications  0000305902  KBE579
 Texas  Cable  Partners,  LP  0000305904  KTF476  Time  Warner  Cable  of  Avalon  LP  0000305908  WPMF361
 Time  Warner  Entertainment  Company  LP  0000301876  KEA342  Time  Warner  Entertainment-
 Advance/  Newhouse  Partnership  0000301895  KFM714  Time  Warner  Entertainment-
 Advance/  Newhouse  Partnership  0000301830  WPFZ212  Time  Warner  Inc.  0000305897  KNAX816
 Turner  Broadcasting  System  Inc.  0000305909  WNXV224  TWFanch-  one  Co.  0000301815  WQP536
 TWI  Cable  Inc  0000305910  KNHA621  TWI  Summit  Cable  Inc  0000305911  WNDP983
 Warner  Bros  0000305912  WPLD733  West  Valley  Cablevision  Industries,  Inc  0000305913  WNSH254
 Fixed  Microwave  Services  (Part  101)
 Private  Operational  Fixed  Point-  to-  Point  Microwave
 File  #  Lead  Call  Sign  CNN  America  Inc  0000084755  WNES530
 Superstation  Inc  0000084751  WNEL539  Texas  Cable  Partners,  LP  0000084765  WNEW367
 Time  Warner  Entertainment-  Advance/  Newhouse  Partnership  0000084762  WNER856
 Common  Carrier  Fixed  Point  to  Point  Microwave
 File  #  Lead  Call  Sign  American  Television  and
 Communications  Corporation  0000084776  KPR32  Texas  Cable  Partners,  LP  0000084753  KLH77
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 STATEMENT  OF  FCC  CHAIRMAN  WILLIAM  E.  KENNARD  ON  CONDITIONED  APPROVAL  OF  AOL  TIME  WARNER  MERGER
 Our  conditioned  approval  of  the  AOL  Time  Warner  merger  is  significant  not  only  for  the  size  of  the  merger  we  approve  today,  but  also  for  its  scope.  AOL  Time  Warner  is  a  marriage  of  old  media  and
 new  media,  content  and  conduit,  20  th  century  know-  how  and  21  st  century  vision.  In  a  phrase,  its  Convergence  Illustrated.
 I  took  a  hard,  careful  look  at  this  merger  to  make  sure  that  this  historic  marriage  would  benefit  consumers.  I  balanced  the  need  to  protect  the  public  from  the  danger  that  any  one  company  will  be  able
 to  dominate  the  marketplace  against  the  need  to  guard  against  intrusive  regulation  that  could  stifle  investment  and  innovation.
 The  conditions  we  impose  today  are  forward-  looking  and  fair.  They  preserve  the  openness  of  the  Internet.  They  protect  consumers  and  avoid  heavy-  handed  regulation  by  using  a  narrowly-  tailored  market
 opening  approach.  And  they  ensure  that  neither  AOL  Time  Warner  nor  a  government  agency  will  pick  winners  and  losers  in  this  dynamic  marketplace.
 I  have  long  been  concerned  about  bottlenecksbottlenecks  that  could  stifle  competition  and  innovation.  So  in  reviewing  this  merger,  I  was  particularly  concerned  about  the  future  of  the  instant
 messaging  platform,  the  ability  of  competing  broadband  ISPs  to  access  Time  Warners  cable  systems,  and  the  potential  for  discrimination  in  the  interactive  television  space.
 We  dont  rely  on  good  intentions.  We  require  AOL  to  interoperate  with  competing  instant  messaging  (IM)  providers  before  it  can  offer  videoconferencing  and  other  streaming  video  over  IM.  This
 condition  guards  against  AOLs  ability  to  leverage  its  existing  dominance  in  current  IM  into  the  broadband  IM  marketplace.  In  order  to  ensure  fair  and  open  access  to  Time  Warners  cable  system,  we
 augment  the  FTC  conditions  by  imposing  specific  protections  against  discriminationprotections  that  will  be  particularly  critical  for  smaller  ISPs.  We  also  hold  AT&  T  to  its  commitment  to  divest  its  interest
 in  Time  Warner  Entertainment  and  impose  additional  conduct  restrictions  to  protect  consumers.  Finally,  the  potential  for  discrimination  in  the  interactive  television  marketplace  bears  watching  and  we  have
 begun  a  proceeding  to  explore  the  need  for  the  FCCs  involvement  in  promoting  competition  in  this  developing  service.
 When  I  look  at  this  merger,  the  potential  benefits  I  see  are  the  ability  to  roll  out  technologies  faster  and  farther,  the  potential  for  significant  innovation  in  new  services  and  technologies.  But,  those
 benefits  could  be  the  proverbial  silver  lining.  AOL  and  Time  Warner  each  possess  significant  market  power  in  their  respective  spheres.  AOL  is  the  leading  Internet  service  provider  with  over  26  million
 members  worldwide,  and  it  continues  to  grow.  In  fact,  AOL  has  gained  almost  six  million  members  in  just  the  last  year.  Time  Warner  is  the  nations  second  largest  cable  television  company  with  ties  to
 AT&  T,  the  nations  largest  cable  operator  and  owns  one  of  the  most  popular  video  content  libraries  in  the  world.
 The  power  of  these  players  is  immense  and  so  is  the  potential  for  anti-  competitive  behavior.  Therefore,  I  only  voted  to  approve  this  merger  because  of  the  conditions  we  impose.
 With  the  merger  of  AOL  and  Time  Warner,  we  are  seeing  the  creation  of  a  new  platform  for
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 communications  based  on  the  Internet.  Our  challenge  is  to  make  sure  that  consumers  get  the  full  benefits  of  this  new  world  technology  without  importing  the  dangers  of  monopoly  and  bottlenecks  from  the  old
 world.  We  have  met  this  challenge.
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 SEPARATE  STATEMENT  OF  COMMISSIONER  SUSAN  NESS
 Re:  Applications  for  Consent  to  the  Transfer  of  Control  of  Licenses  and  Section  214  Authorizations  by  Time  Warner  Inc.  and  America  Online,  Inc.,  Transferors,  to
 AOL  Time  Warner  Inc.,  Transferee
 The  marriage  of  America  Online  (AOL),  the  worlds  largest  Internet  service  provider  (ISP),  and  Time  Warner,  the  second  largest  American  cable  operator  and  a  global  content  provider,  creates  not  only  the
 largest  merger  in  U.  S.  history,  but  also  one  of  the  most  novel  and  complex  this  agency  has  ever  faced.  It  represents  the  convergence  of  old  and  new  media.  The  energy  and  synergy  derived  from  this  combination
 have  the  potential  to  provide  consumers  with  a  wealth  of  innovative  new  products  and  services.  If  unchecked,  however,  this  corporate  union  also  has  the  potential  to  exploit  its  considerable  market  power
 to  stymie  competition  by  restricting  the  flow  of  competing  goods  and  services  over  its  broadband  facilities.  For  this  reason,  I  voted  to  approve  the  transfer  of  Time  Warners  communications  licenses  with
 conditions.  I  would  not  have  supported  it  otherwise.
 The  merger  presents  several  novel  issues  for  FCC  consideration.  Four  such  issues  were  raised  in  challenges  to  the  grant  of  the  transfer  of  control  of  applications  filed  by  AOL  and  Time  Warner.
 Commenters  urged  us  to:
   Intervene  to  require  AOL,  the  dominant  provider  of  instant  messaging  (IM),  to  make  its  IM  service  interoperable  with  competing  IM  offerings;
   Examine  whether  the  vertical  combination  of  a  major  cable  operator  with  the  largest  ISP  necessitated  our  intervention  to  pry  open  the  Time  Warner  systems  to  other  ISPs,  even  though  we  had  rejected
 such  remedies;  830
   Intervene  to  protect  competing  content  providers  wishing  to  offer  interactive  television  services  over  Time  Warner  cable  facilities    novel  services  that  are  still  nascent  and  not  commercially  available;
 and,  finally,
   Reexamine  whether  the  joint  ownership  of  Time  Warner  Entertainment  by  AOL  Time  Warner  and  AT&  T  poses  an  unacceptable  risk  that  the  two  joint  venture  partners  would  conspire  to  discriminate
 against  other  programming  and  service  providers.
 While  we  believe  that  we  have  jurisdiction  to  explore  each  of  these  matters,  we  limited  our  actions  to  address  specific  harms  caused  or  exacerbated  by  the  merger  of  the  applicants.  Moreover,  we  crafted
 remedies  that  were  merger-  specific  --  designed  to  address  only  merger-  related  harms.
 830  See  Applications  for  Consent  to  the  Transfer  of  Control  of  Licenses  and  Section  214  Authorizations  from
 MediaOne  Group,  Inc.,  Transferor,  to  AT&  T  Corp.,  Transferee,  CS  Docket  No.  99-  251,  Memorandum  Opinion  and  Order,  15  FCC  Rcd  9816  (2000);  Applications  of  AT&  T  Corp.  and  Tele-  Communications,  Inc.  for  Transfer  of
 Control  of  Tele-  Communications,  Inc.  to  AT&  T  Corp.,  CC  Docket  No.  98-  178,  Memorandum  Opinion  and  Order,  14  FCC  Rcd  3160  (1999).
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 Instant  Messaging
 Instant  messaging  is  a  relatively  new,  Internet-  based  service  that  provides  presence  detection  and  real-time  communication  capabilities  to  subscribers.  I  believe  consumers  overwhelmingly  want  competing  IM
 services  to  be  interoperable.  I  do,  too.  The  Internet  has  thrived  upon  principles  of  openness  and  connectivity.  With  interoperability,  consumers  would  have  real-  time  access  to  more  individuals  and  to
 competitive  services.  Thus,  I  have  strongly  and  repeatedly  encouraged  AOL  and  the  other  industry  players  to  work  together  to  achieve  interoperability  as  expeditiously  as  possible.
 There  is  abundant  evidence  on  the  record  that  AOL,  which  developed  the  IM  product,  is  the  dominant  provider  of  that  service.  In  my  view,  however,  it  has  earned  that  position  for  dial-  up  service  through
 innovation  and  hard  work.  And  most  significantly  for  the  purposes  of  this  proceeding,  regardless  of  the  public  interest  in  interoperability,  it  earned  that  position  outside  of  the  context  of  this  merger.
 There  are  other  major  players  competing  aggressively  against  AOL  to  attract  IM  customers.  These  competitors  include  Microsoft,  which  has  bundled  its  IM  service  with  its  operating  system.  There  is  even
 disputed  evidence  in  the  record  that  Microsoft  and  others  recently  have  gained,  not  lost,  market  share  in  their  pursuit  of  IM  subscribers.  Moreover,  users  of  IM  represent  a  small  percentage  of  online  consumers,
 suggesting  that  the  market  is  far  from  saturated.  There  is  nothing  to  prevent  large  user  groups,  such  as  employment-  based  entities,  from  switching  en  masse  from  one  IM  provider  to  another  if  more  attractive
 terms  are  offered.  Thus,  while  our  decision  concludes  that  AOL  is  a  dominant  provider,  it  appropriately  stops  short  of  finding  that  the  market  has  tipped  in  AOLs  favor.  831  We  need  not  find  that  the  market
 has  tipped,  however,  in  order  to  address  potential  harm  to  consumers  that  could  result  from  the  merger  of  AOLs  dominant  IM  presence  with  Time  Warners  assets.
 AOL  claims  that  it  seeks  interoperability,  yet  it  appears  to  have  resisted  efforts  to  create  an  industry-  wide  standard.  Indeed,  its  contributions  to  an  industry-  wide  standards  body  were  disappointing  at  best.  At  our
 en  banc  hearing  on  the  merger,  however,  AOL  reaffirmed  its  commitment  to  interoperability,  and  testified  that  it  expected  to  have  a  workable  technical  standard  by  July  2001,  and  the  standard  then  would  have  to
 be  tested.  It  explained  that  any  standard  must  take  into  account  AOLs  need  to  protect  the  security  of  its  network  and  the  privacy  of  its  subscribers.
 I  take  AOL  at  its  word  that  it  will  have  a  standard  ready  by  July  --  presumably  one  that  addresses  its  privacy  and  security  concerns.  Thus,  I  supported  a  requirement  that  AOL  submit  a  detailed  report  to  the
 Commission  every  six  months  on  the  actions  it  has  taken  to  achieve  interoperability  in  IM.  By  AOLs  own  testimony,  the  first  interoperability  report  to  be  submitted  under  this  Order  should  include  a
 technologically  detailed  description  of  a  successful  IM  interoperability  protocol  or  standard.  The  Internet
 831  The  service  benefits  from  what  is  called  network  effects.  At  its  core  is  a  directory  of  names  and  presence
 detection  capability.  Each  new  person  who  joins  an  IM  directory  database  adds  value  to  the  service  for  every  other  subscriber  in  that  database.  If  interoperability  exists  among  competing  IM  services,  then  all  subscribers  benefit  from
 the  enlarged  database.  But  if  a  provider  does  not  permit  others  to  access  the  database,  then  prospective  subscribers  are  more  likely  to  choose  the  service  provider  that  has  access  to  the  greatest  number  of  people  they  wish  to  contact.
 In  antitrust  terms,  a  market  characterized  by  network  effects  is  deemed  to  have  tipped  when  subscribers  to  a  competing  service  increasingly  switch  to  the  dominant  provider  to  gain  access  to  the  larger  number  of  users  on  the
 closed  system.  Generally,  in  a  tipping  scenario,  competing  providers  show  a  net  loss  of  customers  in  favor  of  the  dominant  provider.
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 and  technology  community  at  large  will  be  able  to  evaluate  the  accuracy  and  thoroughness  of  AOL  Time  Warners  assertions  when  the  report  is  placed  on  public  notice.  Should  we  conclude  that  AOL  is  not
 moving  expeditiously  toward  interoperability,  we  then  can  decide  whether  further  steps  in  a  proceeding  of  general  applicability  are  warranted.
 While  I  do  not  believe  that  AOL  has  moved  as  rapidly  as  it  could  to  resolve  its  privacy  and  security  concerns,  I  do  not  discredit  these  issues  entirely.  It  is  reasonable  for  a  company  that  features  itself  as  a
 protected  community  to  be  cautious  about  outside  contamination.  AOL  Chairman  Steve  Case  correctly  observes  that  the  e-  mail  system  is  riddled  with  security  and  privacy  problems.  Nevertheless,  it  has  been
 alleged  that  AOLs  IM  products  also  suffer  from  security  and  privacy  problems  today.
 We  wisely  decline  to  require  interoperability  on  AOLs  existing  dial-  up  IM  service  because  such  relief  would  not  be  merger  specific.  Without  interoperability,  however,  AOL  should  not  be  allowed  to  leverage
 its  market  power  in  the  dial-  up  IM  market  into  the  broadband  market  using  Time  Warners  content  and  facilities.  Our  restriction  is  based  upon  combining  AOLs  names  and  presence  database  (NPD)  with  Time
 Warners  broadband  facilities.  Thus,  if  AOL  wishes  to  offer  streaming  video  through  IM  using  its  NPD,  it  first  will  have  to  open  that  database  to  other  IM  providers.
 Many  argue  that  NPD  is  at  the  heart  of  future  real-  time  broadband  services,  such  as  streaming  video  and  video  conferencing.  Assertions  by  several  Internet  and  technology  companies  led  me  to  conclude  that  the
 development  of  communications  services  within  the  FCCs  jurisdiction  would  be  affected  by  the  combination  of  the  NPD  and  broadband  infrastructure.
 Given  the  potential  for  abuse  of  market  power  and  the  importance  of  the  services  at  issue,  I  supported  imposing  conditions  if  they  were  merger  specific  and  minimally  intrusive  to  achieve  the  public  interest
 goal  of  interoperability.  The  conditions  meet  those  requirements.  They  are  incentive  based.  We  do  not  reach  into  AOLs  current  IM  offerings  or  establish  through  the  heavy  hand  of  regulation  an
 interoperability  protocol.  Rather,  we  create  an  incentive  for  AOL  to  achieve  interoperability  on  its  own  terms.  By  allowing  AOL  to  meet  this  condition  by  entering  into  interoperability  agreements  with  three
 significant  providers,  we  have  enabled  AOL  contractually  to  address  its  privacy  and  security  concerns.
 In  addition,  our  condition  reflects  an  understanding  that  technology  is  constantly  evolving.  The  Commission  cannot  presume  to  know  what  will  come  next.  A  popular  service  or  technology  today,  such
 as  IM,  may  become  irrelevant  tomorrow,  if  another  technology  captures  the  hearts  and  minds  of  the  Internet  public.  Thus,  we  permit  AOL  to  avoid  mandatory  interoperability  if  it  can  demonstrate  that  the
 market  has  changed  dramatically  and  the  NPD  no  longer  is  at  the  core  of  new  services.
 I  am  realistic  about  the  scope  of  our  narrowly  tailored  conditions  on  AOL  Time  Warner,  and  recognize  that  the  restriction  may  be  of  limited  consequence.  The  triggering  factor  may  never  be  deployed.
 Nonetheless,  our  message  is  clear  and  I  fully  expect  the  merged  company  to  live  up  to  its  representations  to  allow  other  providers  to  interoperate  with  its  IM  product.
 Our  actions  to  address  the  IM  interoperability  concerns  raised  by  members  of  the  Internet  and  information  services  community  likely  will  be  cited  in  the  future  whenever  the  Commission  is  called  upon  to  consider
 Internet  service  offerings.  I  caution  advocates  against  using  this  decision  to  justify  invasive  regulation  of  the  Internet.  Far  from  opening  a  Pandoras  box  of  information  service  regulation,  our  action
 establishes  that  the  Commission  will  act  in  a  merger  only  when  essential  to  preserve  the  openness  and  connectivity  of  the  Internet  and  only  when  the  issue  is  merger  specific.  Moreover,  in  the  rare  instance
 where  intervention  is  necessary,  the  narrow  scope  of  our  conditions  demonstrates  that  such  action  must  be  minimally  intrusive,  technologically  neutral,  and  market-  based.
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 VIII.  CABLE  INTERNET  ACCESS
 The  combination  of  AOLs  dominant  narrowband  ISP  service  with  the  second  largest  cable  operator  in  the  nation  presented  the  clearest  threat  to  competitive  markets  posed  by  this  merger.  Our  sister  agency,
 the  Federal  Trade  Commission  (FTC),  took  sweeping  action  to  open  AOL  Time  Warners  cable  infrastructure  to  competing  Internet  service  providers.  832  I  am  pleased  that  the  actions  taken  by  the  FTC
 and  this  Commission  were  complementary  and  avoided  inconsistent  requirements.  I  have  long  supported  inter-  agency  coordination  as  a  way  to  expedite  merger  review.
 The  FTC  used  its  antitrust  and  enforcement  expertise  to  devise  restrictions  that  address  broad,  anti-competitive  behavior.  We  used  our  technological  expertise  to  address  specific  concerns  created  by  the
 merger  combination,  including  first  screen  access  and  quality  of  service  issues.  We  also  require  AOL  Time  Warner  to  negotiate  in  good  faith  with  local  and  regional  ISPs  so  that  a  diversity  of  ISPs  might  have
 an  opportunity  to  serve  cable  subscribers.  These  conditions  operate  in  concert  with  those  imposed  by  the  FTC.
 Our  conditions  are  appropriately  merger  specific.  I  agree  with  recent  industry  assessments  833  that  the  uniqueness  of  this  transaction  counsels  against  importing  our  analysis  and  conclusions  in  this  proceeding
 into  our  separate  Notice  of  Inquiry  on  cable  access.  834
 IX.  INTERACTIVE  TELEVISION
 Many  content  providers  urged  this  agency  to  impose  conditions  on  AOL  Time  Warner  to  prevent  it  from  exercising  its  control  over  the  cable  infrastructure  to  impair  competing  interactive  television  services.  The
 advent  of  these  services  is  still  hypothetical  and  we  were  called  upon  to  make  assumptions  about  where  the  market  is  heading.  We  wisely  declined  to  take  action  in  this  Order,  recognizing  that  the  issues  raised
 have  implications  for  the  industry  as  a  whole  and  are  more  appropriately  explored  in  a  Notice  of  Inquiry.  While  the  Commission  and  the  public  should  remain  watchful  as  these  issues  develop,  we  must  tread
 cautiously  and  not  leave  the  impression  that  we  are  on  the  verge  of  pouncing  on  a  nascent  industry  by  imposing  a  detailed  regulatory  regime.
 X.  TIME  WARNER  ENTERTAINMENT  AND  AT&  T
 832  In  the  Matter  of  America  Online,  Inc.  and  Time  Warner,  Inc.,  FTC  Docket  No.  C-  3989,  Agreement  Containing
 Consent  Orders;  Decision  and  Order,  2000  WL  1843019  (FTC)  (proposed  Dec.  14,  2000);  Federal  Trade  Commission,  Order  to  Hold  Separate  in  the  Matter  of  America  Online,  Inc.,  and  Time  Warner  Inc.,  Docket  No.  C-3989,
 rel.  Dec.  14,  2000.  833
 See,  e.  g.,  Response  of  NCTA  President  &  CEO  Robert  Sachs  to  FTC  Approval  of  AOL/  Time  Warner  Merger,  December  14,  2000  (on  file  with  the  National  Cable  Television  Association)  (  the  anti-  trust  safeguards  imposed  by
 the  FTC  are  unique  to  AOLs  substantial  Internet  position  and  are  not  a  precedent  for  broader  government  regulation).
 834  Inquiry  Concerning  High-  Speed  Access  to  the  Internet  Over  Cable  and  Other  Facilities,  GN  Docket  No.  00-185,
 Notice  of  Inquiry,  FCC  00-  355  (rel.  Sept.  28,  2000).
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 While  we  are  concerned  about  the  potential  for  abuse  by  the  partnership  of  the  first  and  second  largest  cable  MSOs  in  Time  Warner  Entertainment,  we  decline  to  take  action  in  this  merger  review  to  require
 AOL  Time  Warner  to  resolve  its  divestiture  discussions  with  AT&  T.  I  therefore  urge  Time  Warner  to  negotiate  in  good  faith  in  any  discussions  with  AT&  T  regarding  the  latters  disposition  of  its  25%
 minority  stake  in  TWE.
 XI.  PRIVACY
 While  occupying  only  a  few  short  paragraphs  of  our  150-  page  Order,  consumer  privacy  is  an  issue  that  increasingly  concerns  me.  I  wish  to  emphasize  the  importance  I  attach  to  this  aspect  of
 our  Order.  We  require  AOL  Time  Warner  to  regularly  certify  to  the  Commission  its  compliance  with  the  Communications  Acts  cable  subscriber  privacy  provision.  835  While  this  section  by  its
 own  terms  is  enforceable  in  federal  district  court,  rather  than  at  the  Commission,  we  should  regard  it  as  an  expression  of  Congressional  concern  for  cable  subscribers  privacy.  Under  this
 provision,  cable  operators  must  give  a  subscriber  adequate  notice  that  her  personally  identifiable  information  is  being  used,  836  and  secure  her  consent  for  such  use.  837
 AOL  itself  raised  privacy  concerns  with  respect  to  IM  interoperability.  AOL  Time  Warner  is  well  situated  to  be  at  the  forefront  of  protecting  consumer  privacy  as  we  enter  a  new  era  of
 communications.  I  hope  this  will  be  reflected  in  its  section  631  certifications.
 Conclusion
 Media  convergence    long  awaited    clearly  has  arrived  with  the  approval  of  the  AOL  Time  Warner  merger.  From  many  quarters  of  industry  and  the  public,  we  heard  concerns  regarding  the
 ability,  the  incentive,  and  the  propensity  of  this  powerful  combination  to  thwart  competition.  Our  response  in  this  merger  has  been  limited,  yet  purposeful.  The  ball  now  is  in  AOL  Time
 Warners  court  to  demonstrate  by  its  actions  its  willingness  to  allow  all  to  compete  fully  and  fairly  in  the  broadband  marketplace  for  the  benefit  of  the  American  consumer.
 835  47  U.  S.  C.  551.
 836  47  U.  S.  C.  551(  a)(  1).
 837  47  U.  S.  C.  551(  b)(  1).
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 FURCHTGOTT-  ROTH  SUPPORTS  MERGER,  BUT  DECRIES  REVIEW  PROCESS  AS  BROKEN
 Statement  of  Commissioner  Harold  W.  Furchtgott-  Roth,  Concurring  in  Part  and  Dissenting  in  Part
 In  re  Applications  for  Consent  to  the  Transfer  of  Control  of  Licenses  and  Section  214  Authorizations  by  Time  Warner  and  America  Online,  Inc.,  Transferors,  to  AOL
 Time  Warner,  Inc.,  Transferee,  Memorandum  Opinion  and  Order
 Because  the  proposed  transfer  of  radio  licenses  from  Time  Warner  to  the  new,  combined  entity  does  not  raise  any  compliance  issues  under  any  relevant  statutory  provisions  or  our  numerous  regulations,
 I  find  the  transfer  clearly  to  be  in  the  public  interest.  I  therefore  concur  in  the  grant  of  the  license  transfer  applications.
 I  cannot  subscribe  to  any  of  the  other  aspects  of  this  Order,  however.  My  general  views  on  the  proper  scope  of  the  Federal  Communications  Commissions  role  in  the  mergers  of  communications
 entities  are  well  documented.  838  To  summarize,  I  believe  that  our  job  under  the  plain  language  of  the  Communications  Act  is  to  approve  the  transfer  of  radio  licenses,  not  to  pass  on  mergers.  The  approval  of
 such  transfers  should  depend  upon  compliance  with  extant  regulations  and  applicable  statutory  provisions,  not  open-  ended  analysis  of  the  entities  businesses.
 Unfortunately,  the  Commission  in  this  Order  continues  to  engage  in  just  this  sort  of  merger  review.  The  overwhelming  bulk  of  this  document  has  little,  if  anything,  to  do  with  the  proposed
 transferees  use  of  the  CARS  licenses  that  are  the  jurisdictional  object  of  this  proceeding.  Instead,  the  Order  focuses  on  the  transferees  various  lines  of  internet  business,  including  instant  messaging  and
 interactive  television.  And  it  analyzes  those  business  activities  to  see  whether  the  entities  future  conduct  might  impair  or  frustrate  the  objectives  of  the  Act.  At  the  end  of  the  day,  the  Commission  has
 speculated  about  as  yet  undeveloped  facts  that  are  only  tangentially  related  to  license  usage,  and  then  applied  to  that  conjecture  a  standard  of  review  that  is  virtually  unknowable  ex  ante.  As  I  have  said
 before,  839  this  approach  is  fundamentally  flawed.
 I  am  also  troubled  by  a  particular  aspect  of  this  proceeding:  the  coordination  of  efforts  by  this  agency  and  the  Federal  Trade  Commission  (FTC).  To  be  sure,  federal  agencies  may  --  indeed,  sometimes
 should  --  communicate  with  each  other  about  official  government  business.  What  it  should  not  do,  however,  is  to  engage  in  such  communication  in  a  way  that  is  not  transparent  and  predictable.
 838  Applications  for  Consent  to  the  Transfer  of  Control  of  Licenses  and  214  Authorizations  From  MediaOne  Group,
 Inc.,  Transferor,  to  AT&  T  Corp.,  Transferee,  15  FCC  Rcd  9816  (2000);  Applications  of  Ameritech  Corp.,  Transferor,  and  SBC  Communications,  Inc.,  Transferee,  for  Consent  to  Transfer  Control  of  Corporations  Holding
 Commission  Licenses  and  Lines  Pursuant  to  Sections  214  and  310(  d)  of  the  Communications  Act  and  Parts  5,  22,  24,  25,  63,  90,  95,  and  101  of  the  Commissions  Rules,  14  FCC  Rcd.  14712  (1999);  Application  of  WorldCom,  Inc.,
 and  MCI  Communications  Corporation  to  WorldCom,  Inc.,  13  FCC  Rcd  18025  (1998);  Applications  of  NYNEX  Corp.  Transferor,  and  Bell  Atlantic  Corp.,  Transferee,  for  Consent  to  Transfer  Control  of  NYNEX  Corp.  and  its
 Subsidiaries,  12  FCC  Rcd  19985  (1997).
 839  See  supra  note  1.
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 Apparently,  the  FCC  and  the  FTC  shared  deliberative  documents  with  each  other  --  presumably  for  the  purpose  of  coordinating  their  efforts  --  throughout  the  course  of  each  agencies  proceedings.  This
 interaction  was  not  made  public,  which  makes  it  difficult  for  interested  commenters  and  even  the  parties  themselves  to  track  important  developments  in  the  decisionmaking  process.  Furthermore,  at  the  outset  of
 this  adjudication,  the  applicants  had  no  notice  of  the  extent  or  nature  of  the  intergovernmental  coordination  that  ultimately  ensued.  That  is  because  we  lack  consistent,  predictable  procedures  for
 working  with  other  agencies  on  mergers;  such  work  is  done  on  a  purely  ad  hoc  basis,  depending  on  the  personal  inclination  of  individual  officials.  The  approval  process  would  be  more  fair  to  the  applicants,
 and  also  more  efficient  for  the  FCC  staff,  if  the  scope  of  the  working  relationships  between  this  agency  and  other  relevant  entities  were  defined  in  advance.
 Of  course,  if  this  Commission  had  not  tied  its  review  to  that  of  the  FTCs  in  the  first  place,  no  such  coordination  would  ever  have  been  necessary.  That  is  to  say,  if  our  review  of  the  license  transfer
 applications  were  limited  to  compliance  with  extant  FCC  regulations  and  the  Communications  Act,  there  would  be  no  problem  of  duplication  with  the  FTC,  since  it  has  no  jurisdiction  over  those  provisions  of  the
 law.  We  would  be  free  to  process  applications  in  a  timely  fashion,  fully  independent  of  any  action  taken  by  the  FTC.
 For  the  foregoing  reasons,  I  concur  in  the  grant  of  the  applications,  but  dissent  from  the  remainder  of  the  Order,  including  the  conditions  imposed  upon  its  approval.
 #  #  #
 For  more  information  regarding  this  release  please  contact  Bryan  Tramont,  Press  Liaison,  Office  of  Commissioner  Furchtgott-  Roth  at  202-  418-  2000.
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 STATEMENT  OF  COMMISSIONER  MICHAEL  K.  POWELL,  CONCURRING  IN  PART  AND  DISSENTING  IN  PART
 Re:  Memorandum  Opinion  and  Order,  Applications  for  Consent  to  the  Transfer  of  Control  of  Licenses  by  Time  Warner  Inc.  and  America  Online,  Inc.,  Transferors,  to  AOL  Time
 Warner,  Inc.,  Transferee  (CS  Docket  No.  00-  30)
 The  merger  before  us  is  one  of  the  most  significant  in  history.  It  promises  to  open  a  new  chapter  in  communications,  combining  a  host  of  assets  and  expertise  that  will  likely  bring  new
 products  and  services  to  consumers.  As  one  would  expect,  the  very  same  things  that  engender  excitement  and  promise  with  this  combination  also  raise  anxiety  and  trepidation  among
 competitors  that  the  market  will  be  dominated  by  this  new  entity,  to  the  detriment  of  competition  and  consumers.
 The  merger  is  also  unique  because  it  is  difficult  to  review  using  traditional  metrics.  The  greatest  public  benefits  as  well  as  the  putative  harms  lie  principally  in  the  future,  thus  making
 any  analysis  somewhat  speculative  and  amorphous.  Our  challenge  is  to  base  a  decision  soundly  on  evidence  that  presently  exists,  on  an  understanding  of  the  business  dynamics  of  an  Internet-centered
 market,  on  a  grasp  of  past  experiences  and  on  reasonable  (and  carefully  limited)  assumptions  about  the  future.  This  is  no  easy  task,  but  the  key  is  not  to  let  our  imaginations  run
 away  with  us,  given  the  absence  of  strong  evidentiary  moorings.
 Unfortunately,  in  this  Order,  we  do  take  excessive  counsel  of  our  fears,  or,  more  accurately,  the  fears  of  AOL  Time  Warner's  competitors.  Therefore,  I  concur  in  approval  of  this
 merger  but  dissent  in  several  respects.  840  I  write  separately  to  underscore  the  following  points:  (1)  that  our  license  transfer  process  continues  to  pull  the  Commission  away  from  its  core
 responsibilities  and  competencies;  (2)  that  the  anticompetitive  analysis  used  to  support  the  Instant  Messaging  (IM)  condition  is  flawed;  and  (3)  that  the  sweeping  declaration  that  IM
 interoperability  is  somehow  intrinsic  to  the  public  interest  is  not  based  soundly  on  the  record,  but  is  simply  the  sentiment  of  the  Majority.  Such  a  far-  reaching  judgment,  if  merited  at  all,  should
 be  reached  only  through  a  more  comprehensive  regulatory  proceeding  with  the  notice  and  comment  procedures  set  out  in  the  Administrative  Procedures  Act.
 840  In  addition  to  dissenting  from  the  Majority's  Instant  Messaging  condition,  I  object  to  the  Majority's  decision
 to  impose  broadband  open  access  conditions  that  may  conflict  with  and  prejudge  issues  in  the  Notice  of  Inquiry  proceeding  regarding  broadband  Internet  access.  See  In  the  Matter  of  Inquiry  Concerning  High-  Speed  Access  to  the
 Internet  Over  Cable  and  Other  Facilities,  GEN  Docket  No.  00-  185,  FCC  00-  185,  Notice  of  Inquiry    25-  42  (rel.  Sept.  28,  2000)  (examining  potential  definitional,  policy  and  regulatory  cable  open  access  issues).  I  concur  in  the
 conditions  regarding  Time  Warner's  relationship  with  AT&  T,  though  I  believe  our  concerns  were  substantially  addressed  by  the  Department  of  Justice  consent  decrees  involving  AT&  T  and  MediaOne  and  the  Federal  Trade
 Commission  consent  decree  involving  AOL  and  Time  Warner.  See  United  States  v.  AT&  T  Corp.,  2000  WL  1752108,  *3  (D.  D.  C.  2000);  see  also  In  the  Matter  of  America  Online  and  Time  Warner,  2000  WL  1843019  (F.  T.  C.
 Dec.  14,  2000).
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 I.  THE  LICENSE  TRANSFER  PROCESS  IS  STRAYING  FROM  THE  COMMISSIONS  MISSION.
 I  have  had  many  previous  occasions  to  discuss  our  approach  to  license  transfers  (i.  e.,  mergers)  and  have  expressed  some  concerns  about  it,  focusing  primarily  on  our  tendency  to
 adopt  conditions  that  were  divorced  from  the  perceived  harms.  841  In  contrast,  I  would  like  to  compliment  the  drafters  of  this  Order  (primarily,  our  hardworking  Cable  Services  Bureau  staff)
 for  making  a  valiant  attempt  to  identify  specific  harms  and  crafting  conditions  in  response  to  them.  Regrettably,  in  places,  the  final  product  strays  considerably  from  this  limited  approach.
 Our  review  process  has  two  fundamental  problems.  First,  it  is  increasingly  morphing  the  FCC  into  an  antitrust  authority,  duplicating  the  analysis  of  other  more  competent  authorities.  Of
 course,  we  have  independent  authority  to  review  these  combinations,  but  we  have  wide  latitude  to  decide  how  searching  and  how  broad  such  a  review  need  be  and  I  believe  we  have  moved
 much  too  far  into  the  domain  of  other  government  institutions,  namely  the  Antitrust  Division  of  the  Department  of  Justice  and  the  Federal  Trade  Commission.
 Second,  we  increasingly  use  these  reviews  as  substitutes  for  regulatory  process.  I  believe  we  are  losing  focus  on  our  institutional  charge.  I  am  of  the  view  that  the  FCC's  focus  should  be
 on  compliance  with  the  current  regulatory  regime  and  a  forward-  looking  focus  on  the  appropriate  regulatory  treatment  of  the  industry  as  a  whole.  In  contrast,  the  antitrust  authorities  focus  is
 squarely  on  the  merger-  specific  anticompetitive  harms  of  a  given  combination  and  not  on  regulation.  Increasingly,  this  distinction  is  blurring.  I  find  that  the  Commission  is  willing  to
 pursue  broad-  reaching  industry-  wide  regulatory  questions  in  the  context  of  an  adjudicatory  proceeding,  the  record  of  which  is  limited  to  the  facts  solely  involving  the  applicants.  Our
 merger  conditions  more  often  look  like  rules,  reflecting  judgments  that,  if  true,  affect  the  entire  industry  and  not  just  the  parties.  As  such,  they  should  be  entertained,  if  at  all,  in  a  broader-  based
 proceeding.  The  IM  condition  imposed  in  this  order  is  an  ideal  example  of  this  drift.
 841  See,  e.  g.,  In  the  Matter  of  Applications  of  Ameritech  Corp.,  Transferor,  and  SBC
 Communications  Inc.,  Transferee,  For  Consent  to  Transfer  Control  of  Corporations  Holding  Commission  Licenses  and  Lines  Pursuant  to  Section  214  and  Section  310  (d)  of  the  Communications  Act  and  Parts  5,
 22,  24,  25,  63,  90,  95,  and  101  of  the  Commission  Rules,  CC  Docket  No.  98-  141,  FCC  99-  279,  Memorandum  Opinion  and  Order,  14  FCC  Rcd  14712,  15197  (1999)  (Separate  Statement  of  Michael  K.
 Powell,  Commissioner,  Federal  Communications  Commission)  [available  on  the  World  Wide  Web  at  <http://  www.  fcc.  gov/  commissioners/  powell>];  Statement  Of  Michael  K.  Powell,  Commissioner,  Federal
 Communications  Commission,  Before  The  Subcommittee  On  Telecommunications,  Trade  And  Consumer  Protection  Of  The  House  Committee  On  Commerce  On  "The  Telecommunications  Merger  Act  Of  2000"
 (Mar.  14,  2000)  (expressing  personal  discomfort  with  "a  standard  that  places  harms  on  one  side  of  a  scale  and  then  collects  and  places  any  hodgepodge  of  conditions  no  matter  how  ill-  suited  to  remedying  the
 identified  infirmities  on  the  other  side  of  the  scale).  .
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 II.  THE  MAJORITYS  ANTICOMPETITIVE  ANALYSIS  FOR  INSTANT  MESSAGING  IS  FLAWED.
 The  discussion  supporting  the  IM  condition,  which  would  require  interoperability  if  the  applicants  provide  video-  oriented  advanced,  IM-  based,  high-  speed  services  (  video  AIHS),
 reveals  what  a  melange  our  review  has  become.  On  the  one  hand,  it  is  a  classic  (though  flawed)  anticompetitive  analysis,  in  which  the  Commission  justifies  an  IM  condition  based  on  AOLs
 dominance  in  the  IM  market.  Yet  the  analysis  frequently  wobbles,  trying  to  cure  shortcomings  by  resorting  to  grand  declarations  that  IM  interoperability  is  somehow  intrinsic  to  the  public
 interest  a  breathtakingly  broad  pronouncement  that  crashes  through  the  confines  of  this  particular  merger,  with  broad  implications  for  all  communications  and  Internet  services.
 The  decision  to  impose  an  IM  condition  rests,  in  part,  on  the  conclusion  that  AOL  enjoys  virtually  insurmountable  market  power  in  the  existing  IM  market  and  will  leverage  that  power
 into  the  next  generation  of  IM-  based  products.  I  find  the  anticompetitive  analysis  on  which  this  conclusion  based  unpersuasive  and,  indeed,  flawed.
 A.  No  Traditional  Indicia  of  Market  Power
 1.  No  Clear  Market  Definition
 It  is  the  elemental  step  in  a  competitive  merger  review  to  define  the  market  both  in  terms  of  the  product  and  the  geographic  scope.  Defining  the  scope  of  the  market  is  essential  for
 measuring  market  power.  It  is  the  metric  used  for  determining  the  number  of  competitors  and  is  the  denominator  used  for  calculating  the  merging  parties  share  of  the  market  and  subsequently
 its  market  power.  It  is  the  foundation  of  a  well-  grounded  analysis.
 With  respect  to  IM,  however,  the  Order  does  not  cleanly  define  the  market,  presumably  because  the  analysis  vainly  tries  to  anticipate  harms  relating  to  a  loose  collection  of  largely
 hypothetical,  not-  yet-  existent  services.  Indeed,  it  eschews  the  need  to  define  the  market  with  any  precision.  842  A  sound  competitive  analysis  cannot  proceed  without  some  attempt  to  pin  down  the
 market,  even  where,  or  perhaps  especially  where,  services  are  new  and  novel  and  share  characteristics  with  many  other  products  and  services.  This  foundational  discussion  is  absent
 from  this  Order,  and  would  likely  prove  fatal  if  an  antitrust  authority  tried  to  bring  such  a  case  in  court.
 842  Order    151  ([  W]  e  find  that  the  area  of  our  concern  is  NPD  [Names  and  Presence  Directory]  services  
 interactive  communication  services  which  .  .  .  depend  on  an  NPD  for  real-  time  communication  between  and  among  users.  .  .  .  A  more  precise  definition  of  the  relevant  market  is  not  necessary  here,  where  the  Commission  can
 accurately  assess  the  competitive  impact  of  the  merger  without  such  a  detailed  analysis.).
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 2.  Inconclusive  Market  Share  Data
 Admittedly,  the  Order  tosses  around  some  impressive  market-  share  numbers  in  an  attempt  to  demonstrate,  or  at  least  to  give  a  feel  for  the  idea,  that  AOL  is  dominant.  The  Order
 concedes,  however,  that  there  is  no  solid  accepted  basis  for  measuring  IM  users.  It  is  difficult  to  compare  one  company's  market  share  to  another's  given  the  lack  of  uniform  criteria.  The
 numbers  cited  are  largely  those  proffered  by  the  proponents  of  a  condition  mandating  interoperability  for  text-  based  IM  a  condition  that  even  the  Majority  is  unwilling  to  impose.
 The  most  objective  data  on  the  record  is  a  study  by  Media  Metrix,  recognized  as  the  world  leader  in  the  measurement  of  Internet  and  digital  media  use.  843  Tellingly,  the  study  shows
 very  substantial  growth  by  the  two  largest  competitors  of  AOL  (i.  e.,  Microsoft  and  Yahoo!)  as  compared  to  slowing  growth  for  the  AOL  service.  Moreover,  the  study  reports  that,  combined,
 Microsoft  and  Yahoo!  have  nearly  the  same  market  share  as  AOL.  This  study,  though  arguably  the  best  objective  evidence  of  market  share,  market  trends  and  market  power  is  barely  mentioned
 in  the  Order.  844
 B.  Classic  Tipping  is  Unsubstantiated
 In  the  absence  of  sound  market  definitions  and  market  data,  the  Majority  turns  to  a  more  theoretical  construct  to  show  that  AOL  may  be  in  a  position  of  unassailable  dominance.  845  The
 Majority  essentially  employs  a  market  tipping  analysis  in  an  effort  to  make  this  case,  attempting  to  demonstrate  that  the  IM  market  has  nearly  tipped,  or  will  tip  when  AOL  combines
 with  Time  Warner.  The  Majority  avers,  however,  that  it  expresses  no  opinion  on  whether  its  conclusions  can  be  read  as  a  finding  the  market  has  tipped.  Tipping  analysis  is  emerging  as  a
 tool  to  examine  markets  that  exhibit  strong  network  effects  and  can  be  employed  to  consider  the  anticompetitive  dangers  with  respect  to  IM.  However,  theory  is  only  predictive  and  must  yield
 when  the  facts  stubbornly  belie  the  theory.  That  is  the  case  with  IM.
 843  Media  Metrix,  a  widely  regarded  Internet  traffic  measurement  consultancy,  reported  in  a  November  2000
 press  release  that  although  AOL  Instant  Messenger  is  still  the  dominant  IM  application  in  the  Internet  space,  "Yahoo!  Messenger  and  MSN  Messenger  Service  each  have  accumulated  approximately  half  the  number  of  users  as
 AOL  Instant  Messenger  and  have  become  the  fastest  growing  instant-  messaging  applications  in  terms  of  overall  users."  See  Press  Release,  Media  Metrix,  Yahoo!  Messenger  and  MSN  Messenger  Service  Are  Fastest  Growing
 Instant-  Messaging  Applications  In  The  U.  S.  (Nov.  16,  2000)  [available  on  the  World  Wide  Web  at  <http://  us.  mediametrix.  com/  press/  releases/  20001116.  jsp>].  AOL  Instant  Messenger  had  accummulated  21.5  million
 unique  users  by  August  2000;  for  their  part,  Yahoo!  and  MSN,  respectively,  had  grown  their  services  to  10.  6  million  unique  users  and  10.  3  million  unique  users.  Equally  interesting,  to  my  mind,  Media  Metrix  noted  that
 approximately  one-  third  of  AOL  Instant  Messenger  residential  users  also  used  at  least  one  other  competing  IM  application.  See  id.
 844  Microsoft,  one  of  the  two  significant  IM  competitors,  "dismissed"  the  Media  Metrix  IM  findings.  See  FTC
 Prepares  Vote  On  AOL-  TW  Deal,  Critics  Seek  More  Conditions,  Communications  Daily,  Dec.  12,  2000.  845
 Order    175.
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 A  market  is  said  to  tip  when  consumers  find  the  largest  provider  of  the  real  or  virtual  network  so  much  more  valuable  that  consumers  increasingly  select  that  provider  and  increasingly
 abandon  all  other  providers.  846  Thus,  in  theory,  tipped  markets  can  lead  to  one  provider  rapidly  surfing  these  network  effects  to  a  point  that  competitors  are  unable,  no  matter  how  efficient  or
 innovative,  to  compete  effectively  with  the  market  leader.  Under  these  circumstances,  the  benefits  to  consumers  of  joining  or  not  leaving  the  dominant  provider's  network  so  far  outweigh
 the  benefits  of  using  rival  networks  that  consumers  increasingly  choose  the  dominant  provider  and  increasingly  avoid  rival  providers.  Not  all  markets  exhibiting  strong  network  effects  will  tip,
 however.  847
 Had  the  Majority  persuasively  demonstrated  that  the  IM  market  had  tipped,  and  that  AOL  Time  Warner  would  assuredly  dominate  the  market  for  any  future  IM-  based  services,  an  IM
 condition  might  be  warranted.  Instead,  the  Majority  takes  a  middling  course  using  tipping  analysis  to  find  that  AOL  Time  Warner  may  well  be  in  a  position  of  unassailable  dominance,"  848
 while  trying  to  avoid  concluding  the  market  has  in  fact  tipped.  849  Whatever  the  semantics  of  its  conclusions,  the  Majoritys  market  tipping  analysis  is  a  critical  analytical  underpinning  for  the
 IM  condition.  850  Thus,  I  believe  it  worth  some  extended  discussion.
 Tipping  is  a  very  interesting  theoretical  phenomenon  regarding  network  markets  and  has  been  the  source  of  much  discussion  in  antitrust  literature.  Despite  its  appeal,  however,  there  is
 little  consensus  on  how  to  measure  when  a  market  has  tipped,  and  at  what  point  government  intervention  is  warranted.  Tipping  theory  is  at  once  seductive  and  elegant,  perhaps  too  much  so.
 My  concern  here  is  that  it  can  be  used  to  justify  premature,  unwarranted  government  intervention,  even  where  there  are  counter-  indications  that  the  market  will  remain  competitive  on
 its  own,  as  I  believe  is  the  case  here.  851
 Many  of  the  accepted  indicia  of  a  tipped  market  and,  indeed,  of  market  power  generally  are  just  not  present  in  the  IM  market,  despite  AOLs  large  market-  share.  I  detail
 some  of  these  factors  to  underscore  the  weakness  of  the  Majority's  market  assessment:
 846  See  Carl  Shapiro  &  Hal  R.  Varian,  Information  Rules:  A  Strategic  Guide  to  the  Network  Economy  174-  76
 (1999).  847
 Id.  at  187;  see  also  William  J.  Kolasky,  Network  Effects:  A  Contrarian  View,  7  Geo.  Mason  L.  Rev.  577,  577  (1999).
 848  Order    175.
 849  To  be  clear,  I  do  not  dispute  that  the  IM  market  could  tip  at  some  undetermined  point  in  the  future.  But  as  I
 describe  in  greater  detail,  the  underlying  facts  are  inconclusive  as  to  whether  tipping  has  occurred,  particularly  with  respect  to  the  future  hypothetical  services  contemplated  by  the  Majoritys  IM  condition.
 850  Presumably,  no  IM  condition  would  be  needed  if  it  is  demonstrated,  as  I  do  below,  that  it  is  still  quite
 possible  that  market  forces  will  enable  some  competing  firm  to  prevent  AOL  from  becoming  a  dominant  provider  of  the  advanced  IM  services  contemplated  by  the  majority's  condition.
 851  Kolasky  at  577.
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 No  sign  of  competitor  collapse.  Network  effects  can  be  both  positive  and  negative.  That  is,  while  a  company  might  grow  subscribers,  market  share,  and  market  leadership  quickly,
 network  effects  can  also  combine  to  destroy  other  companies  just  as  rapidly.  In  fact,  if  a  market  has  tipped  one  would  normally  expect  to  see  exponential  growth  by  the  leader  and  a  precipitous
 fall  off  by  its  competitors.  852  Here,  we  see  the  opposite;  although  AOL's  customer  base  has  continued  to  grow,  AOL's  competitors  have  been  growing  at  a  much  faster  rate.  853  Indeed,
 although  AOL  essentially  created  the  market  for  IM  only  a  few  years  ago,  competitors  have  garnered  a  sizeable  portion  of  the  market  in  considerably  less  time.  854  Many  of  AOL's
 competitors  have  surpassed  AOL  with  respect  to  IM  innovation  and  have  joined  the  battle  by  bringing  their  own  unique  assets  to  bear.  855  Microsoft  is  integrating  its  product  into  the  world's
 leading  browser  as  well  as  its  successful  Hotmail  e-  mail  service.  Yahoo!  has  created  an  applet  called  Yahoo!  Companion  that  attaches  to  the  browser  and  has  made  it  a  part  of  its  My  Yahoo!
 services,  the  leading  Internet  portal  with  a  very  substantial  subscriber  base.
 Very  low  barriers  to  entry.  The  Order  takes  the  view  that  AOL's  Names  and  Presence  Directory  (NPD)  technology  is  an  essential  input  and  that  AOL  has  an  insurmountable  lead  by
 virtue  of  its  large  NPD.  While  I  agree  an  NPD  is  an  essential  input  (indeed,  this  may  be  nothing  more  than  another  way  to  describe  what  IM  is),  I  am  at  a  loss  to  see  why  AOL  has  an
 insurmountable  advantage,  seeing  that  other  providers  can  easily  develop  or  acquire  the  key  assets.  Names  and  Presence  Directory  technology  is  not  particularly  sophisticated  to  develop  or
 acquire.  The  record  does  not  suggest  the  technology  is  difficult  to  reproduce  or  that  AOL  has  any  control  of  the  technology  through  intellectual  property  rights.  Many  competitors  seem  to  be
 able  to  develop  and  employ  products  using  the  technology  without  much  trouble.
 The  Order  essentially  argues  that  the  NPD  is  not  simply  a  database  of  users.  Yet  if  the  presence  detection  functionality  is  easily  acquired,  then  the  only  missing  ingredient  is  simply  a
 852  Shapiro  &  Varian  at  174-  77.
 853  See  Press  Release,  Media  Metrix,  Yahoo!  Messenger  and  MSN  Messenger  Service  Are  Fastest  Growing
 Instant-  Messaging  Applications  In  The  U.  S.  (Nov.  16,  2000)  (Launched  in  1999,  both  Yahoo!  's  and  MSN's  IM  product  offerings  have  become  the  "fastest  growing  instant-  messaging  applications  in  terms  of  overall  users"  over
 the  period  of  August  1999  to  August  2000)  [available  on  the  World  Wide  Web  at  <http://  us.  mediametrix.  com/  press/  releases/  20001116.  jsp>].
 854  Id
 855  See,  e.  g.,  Yahoo!  Companion  (on-  line  description  of  Yahoo!  content  and  feature  on  browser)
 (visited  Jan.  11,  2001)  [available  on  the  World  Wide  Web  at  <http://  edit.  yahoo.  com/  config/  download_  companion>];  Yahoo!  Messenger  (on-  line  description  of  Yahoo!
 IM  capability  and  integrated  functionality  like  free  Internet  phone  calls,  Yahoo!  Chat  client,  alerts  for  your  stocks  and  Yahoo!  Mail,  news,  weather,  stock  quotes,  etc.)  (visited  Jan.  11,  2001)  [available  on  the
 World  Wide  Web  at  <http://  messenger.  yahoo.  com/>];  MSN  Messenger  Service  (same)  (visited  Jan.  11,  2001)  [available  on  the  World  Wide  Web  at  <http://  messenger.  msn.  com/>];  Press  Release,  Microsoft
 Corporation,  MSN  Reviewers  Guide,  January  2000  (visited  Jan.  11,  2001)  [available  on  the  World  Wide  Web  at  <http://  www.  microsoft.  com/  presspass/  newsroom/  msn/  guide/  0100guide.  asp>].
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 large  user  base  to  take  advantage  of  the  network  effects.  Many  Internet  providers  have  access  to  large  databases.  Microsoft  and  Yahoo!  have  very  large  subscriber  bases,  as  does  Citibank  and
 Amazon.  com,  among  others.  I  see  no  reason,  for  example,  why  Citibank  could  not  offer  IM  services  to  all  its  customers  to  have  real-  time  customer  support  for  its  members.  Or,  why
 Amazon  could  not  offer  an  IM  product  to  its  base  of  users  to  facilitate  discussions  with  fans  of  Robert  Ludlum's  books.  Or,  why  an  IM  provider  could  not  market  its  products  to  distinct
 communities  of  users,  such  as  colleges  and  universities.  The  IM  product  has  any  number  of  creative  and  innovative  uses,  depending  on  what  network,  base  of  users,  or  communities  you
 attach  it  to.
 Underlying  the  Majority's  analysis  is  the  clear  view  that  IM  is  the  new  phone  system  that  it  will  be  a  mass  market,  public  network  (like  the  public  switched  telephone  network),
 allowing  anyone  to  talk  to  anyone.  I  am  not  convinced  that  this  is  the  proper  conception  of  the  service,  as  IM's  most  compelling  and  sustained  use  may  be  to  serve  as  a  tool  for  intimate
 communications  with  a  well-  defined,  limited  community  (rather  than  with  everyone  in  the  world),  or  as  an  adjunct  to  some  other  product  or  service.  Further,  unlike  the  Majority,  I  find  it
 cavalier  to  conclude  or  even  suggest  that  IM  is  the  essential  platform  for  real-  time  interactive  services.  There  are  many  technologies  vying  as  solutions  for  real-  time  interactive  service  and
 our  endorsement  of  one  is  nave.  Sure,  it  could  turn  out  that  the  Majority  has  guessed  correctly,  but  I  would  remind  them  that  even  the  surest  bets  for  the  "next  big  thing"  (i.  e.,  the  technology
 that  will  be  most  popular)  have  missed  the  mark.  856
 Nascent  Market.  AOL  created  this  market  and,  until  recently,  has  had  it  to  itself.  Other  providers  have  only  entered  in  the  last  year.  There  remains  huge  growth  potential  for  the  entire
 market.  AOL  does  not  have  a  high  percentage  of  a  mature  market,  it  just  has  the  most  customers  in  a  new  and  growing  market.  Depending  on  the  size  that  the  IM  market  ultimately  becomes,
 AOL  could  be  overtaken,  without  any  competitor  winning  a  substantial  portion  of  existing  AOL  customers.  Indeed,  the  fervor  with  which  AOL's  competitors  have  pursued  the  imposition  of  IM
 conditions  would  seem  to  suggest  a  very  large  and  lucrative  market  for  IM,  rather  than  one  whose  growth  stagnates  at  or  near  the  size  of  AOL's  current  customer  base.  Moreover,  there  is
 great  potential  for  competitors  to  add  features  and  functions  to  compete  with  AOL  and  win  these  customers.  The  network  effects,  which  are  not  isolated  to  AOL  Time  Warner,  provide  the
 possibility  for  strong  competitive  growth  as  well  if  a  competitor  can  put  together  a  base  of  users.
 856  I  am  fond  of  recording  bold  technology  predictions  about  the  various  industries  over  which  the
 Commission  has  jurisdiction  that,  over  time,  proved  generally  overstated  or  absolutely  incorrect  and  off  the  mark.  For  example,  the  New  York  Times,  on  the  occasion  of  the  1939  World's  Fair  and  the  introduction  of  the  black-  and-white
 television,  predicted  that  television  "will  never  be  a  serious  competitor  for  radio  because  people  must  sit  and  keep  their  eyes  glued  on  a  screen;  the  average  American  family  hasn't  time  for  it."  And,  in  1876,  a  Western  Union
 internal  memorandum  forecasted  that  "[  t]  his  'telephone'  has  too  many  shortcomings  to  be  seriously  considered  as  a  means  of  communication.  The  device  is  inherently  of  no  value  to  us."  Many  of  these  failed  technology  predictions
 are  now  compiled  in  The  Experts  Speak.  See  Christopher  Cerf  &  Victor  Navasky,  in  The  Experts  Speak:  The  Definitive  Compendium  of  Authoritative  Misinformation  225-  231  (Villard  1998).
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 Consumers  not  locked-  in.  Usually,  with  markets  that  are  believed  to  have  tipped,  you  find  a  lock-  in  of  subscribers.  That  is,  it  is  very  difficult  to  get  them  to  switch  to  competing
 services.  Here,  however,  one  finds  very  few  of  the  traditional  lock-  in  problems:
 No  cost  to  acquisition.  If  a  consumer  invests  a  substantial  amount  of  money  in  a  product  or  service,  he  may  be  unwilling  to  abandon  that  investment  lightly.  Similarly,  if  the  process  of
 acquiring  a  product  or  service  is  laborious  or  costly  in  terms  of  time,  a  consumer  may  be  less  willing  to  go  through  the  same  process  to  switch  products  or  providers.  IM  costs  nothing  and  is
 easily  downloaded  onto  any  computer  with  an  Internet  connection.  Virtually  no  investment  in  time  or  money  is  required  to  acquire  IM  from  any  provider.
 No  learning  curve.  Another  lock-  in  effect  is  present  when  a  user  must  invest  a  lot  of  time  in  learning  how  to  use  a  product.  A  consumer  is  not  easily  convinced  to  switch  to  another
 product  if  he  must  start  over  and  learn  a  new  system.  Economists  sometimes  call  this  "path  dependence."  857  The  classic  example  is  the  "QWERTY"  standard  typewriter  keyboard.  This
 keyboard  was  reportedly  designed  purposely  to  be  inefficient  in  order  to  prevent  users  from  typing  so  rapidly  that  they  jammed  the  typing  mechanism.  Having  learned  to  use  this
 "inefficient"  keyboard,  however,  few  people  want  to  learn  to  type  again,  in  an  entirely  new  way.  Thus,  they  are  "locked  in"  to  using  the  keyboard  they  have  already  learned  to  use.  Here,  despite
 the  Order's  suggestions  to  the  contrary,  there  is  no  real  dispute  that  any  of  the  IM  products  can  be  downloaded  and  used  within  a  matter  of  minutes,  without  any  significant  training.  Thus,  this
 ease  of  access  and  mastery  ensures  that  users  are  not  locked  in  to  any  given  IM  product  based  on  any  steep  learning  curve.
 No  incompatibility.  A  customer  might  not  wish  to  switch  to  a  competitor's  product  if  it  would  be  incompatible  with  her  system.  For  example,  one  who  owned  a  Microsoft  Windows-based
 PC,  could  not  switch  to  an  Apple  operating  system  without  purchasing  an  entirely  new  computer,  because  of  the  incompatibility.  Here,  all  IM  products  can  be  run  on  the  same
 machine,  and  at  the  same  time.  Users  can  run  both  products  and  talk  quite  easily  with  two  networks  of  people.  Perhaps  a  teenager  speaks  with  her  close  friends  on  one  service  and  her
 soccer  teammates  on  another,  and  her  parents  on  still  another.  Indeed,  there  is  evidence  that  people  use  multiple  IM  services  purposely  and  see  benefit  in  operating  in  this  fashion,  rather  than
 insisting  that  IM  work  like  a  telephone,  that  allows  anyone  to  call  into  you  using  one  platform.  858
 Losing  your  buddies.  The  theory  of  tipping  in  the  Order  makes  much  of  the  fact  that  a  user  would  have  to  re-  enter  his  buddy  lists  and  get  his  buddies  to  change  products  in  order  to
 857  Kolasky  at  579.
 858  According  to  Media  Metrix,  over  30%  of  both  AIM  and  ICQ  users  already  use  at  least  one  other  IM  or  chat
 application.  See  Press  Release,  Media  Metrix,  Yahoo!  Messenger  and  MSN  Messenger  Service  Are  Fastest  Growing  Instant-  Messaging  Applications  In  The  U.  S.  (Nov.  16,  2000).  See  also  id  (  Instant-  messaging  applications  are
 proving  to  be  very  popular  with  consumers  .  .  .  But  their  different  features  and  lack  of  interoperability  cause  users,  especially  heavy  users,  to  adopt  more  than  one  brand  in  order  to  keep  in  touch  with  all  their  friend  and  colleagues.).
 If  the  costs  or  difficulties  of  using  multiple  IM  services  were  truly  significant,  presumably  people  would  have  begun  to  focus  on  only  one  IM  provider,  rather  than  continuing  to  use  more  than  one.
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 switch  services.  Specifically,  the  Order  hypothesizes  that  the  burden  of  switching  IM  services  will  be  insurmountable  because  that  would  require  a  user  to  get  his  AOL  buddies  to  switch  to  the
 new  service,  even  though  those  buddies  may  have  their  own  unique  buddies  that  also  currently  use  AOL.  This  is  true,  but  I  find  the  onerousness  of  this  exaggerated.  Fundamentally,  I  do  not
 accept  that  IM  is  necessarily  the  equivalent  of  the  public  switched  telephone  network  and  that  a  user  is  compelled  to  stay  with  the  network  that  has  the  most  users.  I  think  IM  is  more  of  an
 intimate  communications  tool,  in  which  people  maintain  fairly  discrete  lists  of  buddies  to  whom  they  wish  to  speak.  The  record  contains  no  evidence  that  the  average  user  possesses  buddy  lists
 so  large  it  would  be  prohibitive  to  move  them  or  re-  enter  their  names.  A  simple  message  from  a  user  to  her  friends,  imploring  them  to  change,  may  be  relatively  easy  and  effective.
 C.  The  Majoritys  Novel  Behavioral  Theory
 The  Majority's  behavioral  theory  is  a  vain  and  circular  attempt  to  compensate  for  the  weak  evidence  to  support  their  IM  condition.  Undeterred  that  traditional  tipping  analysis  is
 undermined  by  the  factual  record,  the  Majority  conjures  up  a  new  behavioral  theory,  that  rests  entirely  on  the  supposition  that  because  AOL  has  not,  to  date,  been  willing  to  interoperate  with
 its  competitors,  that  itself  is  proof  that  AOL  has  nearly  insurmountable  market  power.  A  carrier  it  seems  should  always  prefer  to  interoperate  with  other  providers  in  order  to  extend  its  reach  and
 increase  the  value  of  its  network.  If  a  provider  refuses  to  interoperate,  the  theory  goes,  the  only  explanation  is  that  the  provider  believes  that  the  market  has  tipped  in  its  favor  and  that  it  need
 not  interoperate  with  other  providers.  Therefore,  since  AOL  has  yet  to  interoperate,  one  can  conclude  that  it  believes  the  market  has  tipped  (or  is  impermissibly  dominated  by  AOL).
 Besides  this  theory  having  the  leathery  taste  of  bootstrap,  it  is  undermined  by  the  record:
 First,  it  is  an  over-  statement  to  say  AOL  has  refused  to  interoperate.  It  has  maintained  both  publicly  and  in  this  proceeding  that  it  wishes  to  and  will  interoperate  once  it  can  tackle  a
 number  of  concerns  in  developing  a  standard.  859  I  recognize  that  such  a  statement  could  be  self-serving,  and  the  Commission  is  entitled  not  to  credit  AOL's  sincerity.  But  I  have  problems  with
 a  theory  that  rests  so  heavily  on  a  leading  provider's  refusal  to  interoperate  as  a  basis  for  concluding  the  market  has  nearly  tipped  or  is  dominated  by  that  provider,  where  the  provider  is
 not,  in  fact,  refusing  to  interoperate  under  any  circumstances.  I  am  not  prepared  to  read  so  much  into  AOLs  less  than  fulsome  participation  in  the  Internet  Engineering  Task  Force  (IETF)  for  the
 relatively  short  period  that  effort  has  been  underway,  nor  can  I  place  that  much  weight  on  AOL  blocking  companies  that  entered  their  servers  without  consent  or  negotiation.
 Second,  the  behavioral  theory  assumes  that  market  dominance  is  the  sole  reason  a  provider  would  not  interoperate  with  its  competitors.  A  provider  may  be  able,  however,  to
 enhance  the  value  of  its  network  in  other  ways  than  by  granting  non-  subscribers  access  to  its
 859  See,  e.  g.,  Ex  Parte  Letter  to  Deborah  Lathen,  Chief,  Cable  Services  Bureau,  Federal
 Communications  Commission,  from  George  Vradenburg  III,  Senior  Vice  President,  Global  and  Strategic  Policy,  America  Online,  Inc.  (Sept.  29,  2000)  at  1,  7-  8  ("  AOL  is  committed  to  pursuing  industry-  wide  IM
 interoperability  for  the  benefit  of  consumers,  not  competitors.")
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 network.  Moreover,  a  provider  may  not  be  able  to  afford  the  cost  of  expansion  or  maintenance  of  a  larger  network.  Its  business  plan  may  call  for  a  more  private  or  intimate  network,  with
 higher  quality,  reliability  and  privacy  and  not  a  mass  market  telephone-  like  model.  Who  knows?  But  it  is  hard  to  accept  the  notion  that  market  tipping  is  the  primary  reason  that  AOL  would
 decide  not  to  interoperate.
 Indeed,  AOL  itself  proffers  a  different  reason  for  why  it  has  yet  to  interoperate  with  other  providers  and  that  is  privacy  and  security  concerns.  860  AOL  has  a  business  model  according  to
 which  it  sells  community.  In  facilitating  that  community,  it  places  a  premium  on  protecting  the  consumer's  experience  and  privacy.  861  Surely,  increasing  unwanted  exposure  of  its
 subscribers  to  unwanted  IM  contact  from  others  is  not  necessarily  nefarious.  Additionally,  it  does  appear  that  some  security  issues  do  in  fact  presently  exist,  which  is  one  reason  the
 Commission  was  not  comfortable  with  mandating  immediate  interoperability  with  other  providers.  862  Lending  some  support  to  AOLs  argument  that  it  does  not  interoperate  with  other
 providers  for  reasons  other  than  its  desire  to  maintain  market  dominance  over  its  competitors  is  the  fact  that  AOL  has  not  integrated  its  own  IM  product  (AIM)  with  ICQ,  so  that  they  could
 interoperate.
 Third,  the  behavioral  theory  also  assumes  that  all  the  non-  dominant  providers  will  wish  to  interoperate.  We  have  gotten  ever-  changing  representations  of  the  degree  to  which  such
 providers  do  interoperate,  but  it  is  clear  that  for  a  substantial  part  of  the  relevant  period,  AOLs  competitors  have  not  interoperated  themselves  and,  to  this  day,  the  two  largest  competing  IM
 services,  Microsoft  and  Yahoo!,  do  not  interoperate,  nor  do  some  other  members  of  the  IM  Unified  coalition.  This  suggests  there  are  issues  to  be  worked  out  before  they  interconnect,
 and/  or  that  the  Majoritys  behavioral  theory  is  less  than  perfect  in  its  predictive  value.
 860  Id.  at  7-  8.
 861  See,  e.  g.,  Unsolicited  Bulk  E-  mail  (on-  line  statement  of  AOL's  anti-  spamming  policy)  (visited
 Jan.  11,  2001)  [available  on  the  World  Wide  Web  at  <http://  www.  aol.  com/  info/  bulkemail.  html>];  AOL's  Privacy  Policy  (on-  line  statement  of  AOL's  privacy  policy)  (visited  Jan.  11,  2001)  [available  on  the
 World  Wide  Web  at  <http://  www.  aol.  com/  info/  privacy.  html>].
 862  For  example,  my  discussion  with  my  colleagues  leads  me  to  conclude  that  even  the  Majority
 would  acknowledge  there  would  have  been  many  security  problems  associated  with  mandating  immediate  interoperability  for  text-  based  IM.  For  example,  if  AOL  had  to  publish  its  operating  protocols  and  accept
 and  deliver  all  outside  IM  messages,  hackers  and  users  of  unscrupulous  IM  providers  would  be  able  to  masquerade  as  other  users.  AOL  IM  users  would  receive  messages  from  people  that  they  think  are  their
 buddies,  but  in  fact  are  advertisements,  spam,  or  possibly  even  messages  from  predators.  Also,  AOL  users  could  find  that  hackers  have  been  sending  false  messages  in  their  names,  creating  its  own  set  of
 problems.  AOL  today  deals  with  these  issues  chiefly  by  using  live  monitors,  to  whom  its  users  can  report  problems.  It  is  not  clear  that  AOL  would  be  able  to  do  this  with  messages  that  come  from  outside  its
 system.
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 In  sum,  though  creative,  the  behavioral  theory  espoused  here  does  not  explain  away  the  tangible  evidence,  discussed  above,  that  contravenes  the  conclusions  reached  in  the  Order.
 E.  The  IM  Condition  Itself
 The  IM  condition  is  minor  and  not  fairly  derived  from  the  analysis.  The  Majority  has  chosen  to  require  interoperability  of  some  future  IM  video  product.  The  only  problem  is  that
 these  products,  in  large  measure,  do  not  yet  exist,  and  thus  there  is  not  a  market,  let  alone  a  market  monopolist.  Without  a  clear  product,  we  cannot  define  a  product  market,  nor  can  we
 assess  the  competitiveness  of  that  market.  Moreover,  this  product  may  or  may  not  develop  in  the  marketplace.  The  product  may  or  may  not  be  developed  by  AOL.  I  believe  in  innovation
 markets  and  sometimes  cautiously  accept  protecting  such  markets  through  government  intervention.  In  this  case,  however,  I  lack  any  confidence  that  we  know  how  IM  will  evolve,  or
 if  identifiable  harm  will  result.
 It  is  no  answer  to  say  that  our  action  does  no  harm  and  may  do  good.  Our  actions  may  very  well  affect  innovation,  by  restricting  AOL's  incentives  to  innovate,  and  by  favoring
 competitors,  who  can  innovate  without  interoperating  with  AOL,  thus  restricting  AOL  in  a  market  for  future  services.  Under  the  Majority's  hasty  establishment  of  interoperability  as  being
 in  the  public  interest  for  AOL  alone,  other  players  can  develop  new  products  without  any  regulatory  restraints,  while  an  effective  competitor  remains  shackled.  Rather  than  preserving  a
 competitive  market,  we  may  do  nothing  more  than  tip  the  market  to  another  player.  To  impose  a  condition  at  this  stage  without  incurring  these  risks  would  take  a  wizard  I  guess  a  Wizard  of
 AIHS!
 I  believe  video  AIHS  has  been  crafted  by  the  Majority  in  an  attempt  to  manufacture  merger  specificity  where  there  is  none.  The  anticompetitive  analysis  runs  to  the  existing  IM
 product.  AOL  alone  operates  IM  and  it  did  so  when  Time  Warner  was  just  a  glint  in  its  eye.  Normally,  what  this  should  mean  is  that  a  condition  on  the  merger  is  unwarranted.  Undeterred,
 the  Majority  proceeds  with  a  condition  by  inventing  a  product  that  requires  assets  from  both  the  merging  parties.  Video  AIHS,  a  product  baked  with  ingredients  from  Time  Warner    a  little
 content,  a  little  cable  broadband    and  presto  you  have  a  heretofore  unseen  IM  Video  product  and  your  merger  specificity  problem  is  solved.  Behold,  the  great  and  powerful  AIHS!  
 III.  IT  IS  INAPPROPRIATE  TO  ESTABLISH  INTEROPERABILITY  AS  A  REGULATORY  PARADIGM  IN  THIS  PROCEEDING.
 A.  A  Misguided  Regulatory  Leap  Into  the  Internet  Space
 This  Order  bends  over  backwards  to  give  the  impression  that  we  are  not  regulating  the  Internet  by  imposing  a  condition  on  IM.  Even  more  clever,  it  asserts  that  this  condition  will
 avert  the  need  to  regulate,  because  it  purportedly  will  kick  open  a  robust  competitive  landscape  and  thereby  avoid  intervention  later  to  tackle  the  effects  of  a  dominant  provider.
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 Perhaps.  But  all  the  qualifications  in  the  world  cannot  escape  the  fact  that  this  agency  is  asserting  and  exercising  jurisdiction  over  a  service  and  product  that  springs  directly  from  the
 Internet,  and  the  imposition  of  a  condition,  no  matter  how  modest,  is  a  regulatory  act.
 The  Order  asserts  that  the  Commission  has  jurisdiction  under  Title  I  of  the  Communications  Act.  That  Title  does  give  this  agency  very  broad  authority  over
 communications  services,  which  easily  encompasses  much  of  the  activity  that  takes  place  on  the  Internet.  Indeed,  without  more,  Title  I  could  be  interpreted  as  empowering  the  Commission  to
 regulate  chat  rooms,  e-  mail  services,  peer-  to-  peer  services  such  as  Napster,  and  even  the  Internet  browser  market.
 With  regard  to  Internet-  like  services,  the  fact  that  we  have  always  had  Title  I  authority  has  not  meant  it  was  prudent  to  exercise  it.  Indeed,  from  the  earliest  days,  the  Commission  has
 carefully  drawn  a  distinction  between  communications  services  that  it  defined  as  "basic"  or  "telecommunication  services"  and  "enhanced"  or  "information  services."  863  The  distinction  was
 made  as  a  matter  of  policy,  not  power,  to  limit  or  avoid  regulation  and  to  rely  on  competition  for  innovative  information  services,  while  regulating  as  common  carriers  the  providers  of  basic  or
 telecommunications  services.  This  distinction  took  on  greater  import  with  the  rise  of  the  Internet,  which  was  seen  as  the  mother  of  all  "information  services."  In  addition,  this  distinction
 is  the  basis  for  a  parade  of  pronouncements  by  members  of  this  very  Commission,  that  we  do  not,  will  not  and  shall  not  regulate  the  Internet.  864
 I  have  long  been  of  the  view  that  the  telecommunications/  information  services  distinction  is,  in  the  long  run,  untenable.  865  Digital,  packet-  based  technologies  will  increasingly  blur  and
 obliterate  the  ability  to  make  any  rational  distinction  between  the  transmission  of  information  and  the  information  itself.  Therefore,  I  am  not  critical  of  looking  for  ways  to  step  beyond  the
 distinction.  I  do,  however,  criticize  the  Majority  for  taking  that  step  and  thereby  walking  away  from  decades-  long  policies  of  declining  to  regulate  services  in  this  jurisdictional  category,
 863  See  In  the  Matter  of  Amendment  of  Section  64.  702  of  the  Commissions  Rules  and  Regulations,  77  FCC  2d
 384,  428-  40  (1980)  (Computer  II).  864
 See,  e.  g.,  Remarks  of  William  E.  Kennard,  Chairman,  Federal  Communications  Commission  Before  the  Summer  2000  Session  of  the  National  Association  of  Regulatory  Utility  Commissioners  (July  24,  2000)  ("[  p]  erhaps
 the  FCC's  most  important  decision  we  decided  to  leave  the  Internet  unregulated");  Remarks  of  Chairman  Kennard  Before  the  National  Press  Club,  Telecommunications  @  the  Millennium:  The  Telecom  Act  At  Four  (Feb.  8,  2000)
 ("  The  Commission  wisely  withheld  regulation  of  most  advanced  services.  Similarly,  we  refused  to  apply  legacy-style  regulations  to  the  new  service  of  cable  access  to  the  Internet,  relying  instead  on  market  incentives  to  keep
 multiple  paths  open  to  the  Internet.");  Remarks  of  Susan  Ness,  Commissioner,  Federal  Communications  Commission  Before  the  IRTS,  The  Net  Effects  on  Communications  Policy  (or  how  the  Internet  and  Convergence  are
 Revamping  Regulatory  Regimes)  (June  7,  2000)  (in  reference  to  technological  developments,  "[  t]  he  FCC's  policies  of  fostering  competition,  while  taking  a  hands-  off  approach  to  the  Internet  and  information  services,  have  facilitated
 many  of  these  changes").  865
 In  the  Matter  of  Federal-  State  Joint  Board  on  Universal  Service,  CC  Docket  No.  96-  45,  FCC  98-  67,  Report  to  Congress  (rel.  Apr.  10,  1998)  (Statement  of  Michael  K.  Powell,  Commissioner,  Federal  Communications,
 concurring)  [available  on  the  World  Wide  Web  at  <http://  www.  fcc.  gov/  commissioners/  powell/  statements].
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 without  any  meaningful  explanation,  or  even  consideration  of  this  significant  turnabout.  Rather,  the  Majority  asserts  that  IM  fits  within  a  category  under  our  jurisdiction,  and  lightly  dismisses
 the  need  to  discuss  the  nature  of  the  service  without  conceding  the  traditional  deregulatory  implication  of  this  categorization.  The  result  is  a  regulatory  foray  across  a  border  consistently
 held  to  be  inviolate.  This  step  is  a  very  big  one  and  should  not  be  made  in  such  a  breezy  manner  and  in  the  context  of  an  adjudication,  particularly  to  impose  such  a  minor  and  questionable
 condition  that  rests  on  such  a  questionable  evidentiary  basis.
 Taking  the  analysis  and  the  remedy  together,  it  is  evident  that  the  real  driving  force  behind  this  condition  is  a  preference  by  the  Majority  for  interoperability  as  the  market  paradigm
 for  IM  services,  indeed,  perhaps  for  all  Internet-  based  communications.  The  Majority  declares  that  the  public  interest  standard  somehow  compels  interoperability,  yet  have  no  basis  for  that
 finding  in  the  statute  or  the  record.  More  startling,  the  Commission,  with  no  particular  technical,  or  business  competence  declares  that  elements  of  IM  make  up  an  essential  input  for  the
 development  and  deployment  of  many,  if  not  most,  future  high-  speed  internet-  based  services  that  rely  on  real-  time  delivery  and  interaction.  866
 There  may  be  a  case  for  asserting  our  jurisdiction  over  IM  services,  and  then  finding  that  they  must  interoperate  as  a  matter  of  law,  though  I  doubt  it.  But  such  a  grand  conclusion  should
 only  be  reached  after  very  careful  and  thoughtful  deliberations  and  full  comment  by  a  wide  range  of  interested  parties,  which  can  only  be  achieved  in  a  rulemaking  proceeding.  The  record  here
 and  the  limited  comment  are  woefully  insufficient  for  considering  and  anticipating  the  reverberations  of  our  conclusions.  This  merger,  involving  only  two  members  of  the  industry  is
 not  an  appropriate  vehicle  for  taking  our  authority  where  the  Majority  does  today.
 B.  Achieving  Interoperability  Through  Market  Forces
 Even  assuming  the  merits  of  interoperability,  which  may  be  substantial,  there  is  still  a  very  central  question:  whether  interoperability  can  only  be  achieved  by  government-intervention,
 or  whether  market  forces  will  produce  the  desired  result.  I  am  concerned  that  in  new  and  innovative  markets,  the  government  will  be  too  easily  seduced  to  intervene  prematurely,
 given  the  initial  excitement  and  promise  (if  not  hype)  of  innovative  offerings,  the  rapid  pace  of  change  in  the  market,  and  competitors  natural  anxiety  (if  not  panic).
 Increasingly,  the  variables  of  digitalization,  broadband  and  the  Internet  are  combining  to  spurn  entirely  new  products  and  services  for  communications.  These  innovation  markets  are
 marked  by  the  fact  that  they  are  in  their  infancy  and  present  challenges  to  understanding  them.  For  example,  there  is  usually  scant  experience  with  the  new  markets  that  these  forces  are  just
 now  spawning.  The  products  in  these  markets  may  be  technically  novel,  making  it  difficult  to  comprehend,  and  easy  to  exaggerate,  or  underestimate,  their  significance  or  the  ability  to  offer
 competing  services.  And  business  models,  business  relationships  and  terms  and  conditions  for  the  market  have  yet  to  form  fully.  In  short,  there  is  typically  a  period  of  extensive
 866  Order    128.
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 experimentation  in  developing  markets.  During  this  period,  the  lucky  innovator  will  always  be  racing  to  take  advantage  of  having  created  the  market  and  to  gain  and  maintain  market
 leadership.  Competitors,  likewise,  often  will  be  struggling  to  respond  to  a  new  threat.  Increasingly,  one  of  their  responses,  even  in  the  largely  unregulated  Internet  realm,  is  to  seek  the
 assistance  of  the  government  either  to  intervene  directly  and  impede  the  market  leader,  or  to  use  the  threat  of  regulation  as  business  leverage  with  that  player.
 Given  the  infancy  and  necessarily  speculative  nature  of  these  markets,  it  is  easy  to  be  seduced  into  believing  that  an  ounce  of  early  government  intervention  will  prevent  these  markets
 from  catching  an  anticompetitive  cold.  This  view  emphasizes  how  quickly  a  provider  can  gain  market  share  and  market  dominance.  Yet  it  is  often  overlooked  that  in  the  network  effect,
 innovation  environment  players  often  fall  and  die  a  fiery  death  just  as  easily  as  they  ascend  (see  the  2000  NASDAQ  market),  and  the  government  should  be  careful  not  to  let  its  imagination  run
 away  with  it.
 That  said,  the  more  important  question,  even  when  there  is  some  general  agreement  about  an  operating  or  market  paradigm  such  as  interoperability  or  open  standards,  is  whether  the  terms
 and  conditions  for  those  regimes  are  better  developed  in  the  market  through  negotiation  and  market  responses,  or  by  a  regulator.  Given  the  experience  of  regulatorily-  derived  terms  and
 conditions  (its  plodding  process,  its  high  regulatory  costs,  its  risk  of  distorting  efficient  development,  its  political  compromises),  rarely  should  we  leap  to  regulatory  approaches  without
 compelling  circumstances  and  strong  confidence  that  the  conditions  are  clearly  absent  for  market  resolution  through  competition,  business  negotiation  and  innovation.  Moreover,  it  is  hubris  to
 believe  that  regulators  can  (better  than  businesses)  craft  the  optimal  terms  and  conditions  to  govern  the  fundamental  rules  for  market  operation,  particularly  where  innovation  is  at  a  premium
 and  new  and  novel  technologies  are  at  stake.  The  beauty  of  market  mechanisms  has  always  been  that  the  give  and  take  among  competitors  and  consumers  produces  an  optimal  set  of  terms  and
 conditions.  To  say  that  these  mechanisms  will  not  work  with  respect  to  video  AIHS  before  we  even  know  what  these  services  will  comprise  seems  to  indulge  regulators'  fears,  not  to  mention
 our  eagerness  to  "look  tough"  at  the  expense  of  sober  reflection  on  the  inconclusive  record  before  us.
 The  concern  with  premature  intervention  is  also  great  where  viable  business  models  are  still  being  explored.  The  Internet  is  a  wonderful  space,  but  producers  are  still  struggling  mightily
 to  find  services  and  approaches  that  will  allow  them  to  prosper.  I  am  concerned  about  the  government  labeling  aspects  of  market  activity  as  anticompetitive  before  we  even  have  a  fix  on
 the  elements  of  a  viable  business.  Notions  such  as  proprietary  assets  and  exclusivity  can  surely  rise  to  anticompetitive  levels,  but  they  also  are  often  the  keys  to  profitability  and  viable  business
 that  allow  producers  to  serve  consumers  effectively.  The  struggle  for  brand  protection  and  strong  copyright  protections  in  the  Internet  space  by  established  businesses  is  animated  by  that
 very  same  sort  of  concern.
 Regulatory  intervention  can  also  divert  companies  from  efforts  in  the  marketplace  to  battles  in  the  halls  of  government.  When  the  government  appoints  itself  referee,  it  provides  a
 venue  to  which  competitors  can  run  to  gain  market  leverage,  and  to  appeal  even  the  most  minor
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 market  disputes.  This  puts  the  government  in  the  game  on  an  ongoing  basis.  I  think  companies  and  regulators  delude  themselves  into  believing  a  regulator  can  act  surgically  a  sharp  quick
 cut  and  then  stay  out.  One  searches  past  experiences  in  vain  for  such  an  example,  and  I  am  skeptical  of  our  skill  with  the  knife.
 For  these  many  reasons,  I  cannot  support  the  Majority's  decision  to  impose  an  IM  condition  based  on  this  record.
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