38584 Federal Register / Vol. 65, No. 120 / Wednesday, June 21, 2000 / Notices

3Bechtel, 648 F.2d at 666 (internal citations

omitted) (emphasis added); see BNS, 858 F.2d at

463; United States v. National Broad. Co., 449 F.

Supp. 1127, 1143 (C.D.Cal. 1978); Gillette, 406 F.

Supp. at 716. See also Microsoft, 56 F.3d at 1461

(whether ‘‘the remedies [obtained in the decree are]

so inconsonant with the allegations charged as to

fall outside of the ‘reaches of the public interest’’’)

(citations omitted). 4United States v. American Tel. & Tel. Co., 552

F. Supp. 131, 151 (citations omitted) (D.D.C. 1982),

aff’d sub nom. Maryland v. United States, 460 U.S.

1001 (1983), quoting Gillette, 406 F. Supp. at 716;

United States v. Alcan Aluminum, Ltd., 605 F.

Supp. 619, 622 (W.D. Ky. 1985).

whether the settlement is ‘‘within the reaches

of the public interest.’’ More elaborate

requirements might undermine the

effectiveness of antitrust enforcement by

consent decree.3

The proposed Final Judgment,

therefore, should not be reviewed under

a standard of whether it is certain to

eliminate every anticompetitive effect of

a particular practice or whether it

mandates certainty of free competition

in the future. Court approval of a final

judgment requires a standard more

flexible and less strict than the standard

required for a finding of liability. ‘‘[A]

proposed decree must be approved even

if it falls short of the remedy the court

would impose on its own, as long as it

falls within the range of acceptability or

is ‘within the reaches of public

interest’’’ 4

VIII. Determinative Documents

There are no determinative materials

or documents within the meaning of the

APPA that were considered by the

United States in formulating the

proposed Final Judgment.

For Plaintiff United States of America:

Dated: June 6, 2000.

Respectfully submitted,

Allee A. Ramadhan,

D.C. Bar # 162131.

Bruce Pearson,

Connecticut Bar # 372598.

Janet R. Urban,

Maryland Bar # 222–32–2468.

Mark S. Hegedus,

D.C. Bar # 435525.

Andrew K. Rosa,

Hawaii Bar # 6366.

Michelle J. Livingston,

D.C. Bar # 461268, Trial Attorneys, U.S.

Department of Justice, Antitrust Division, 325

Seventh Street, N.W., Suite 500, Washington,

DC 20530, (202) 307–6470, (202) 307–2441

(facsimile).

Certificate of Service

I hereby certify that I have caused a

copy of the foregoing Competitive

Impact Statement to be served on

counsel for Defendants in this matter in

the manner set forth below:

By first class mail, postage, and by

facsimile:

Mark Leddy, Cleary, Gottlieb, Steen &

Hamilton, 2000 Pennsylvania

Avenue, N.W., Washington, DC

20006–1801

Michael H. Byowitz, Wachtell, Lipton,

Rosen & Katz, 51 West 52nd Street,

New York, NY 10019–6150.

Dated: June 6, 2000.

Andrew K. Rossa,

Hawaii Bar # 6366, Trial Attorney, Antitrust

Division, U.S. Department of Justice, 325

Seventh Street, N.W., Suite 500, Washington,

(202) 307–0886, (202) 616–2441 (fax).

[FR Doc. 00–15594 Filed 6–20–00; 8:45 am]

BILLING CODE 4410–11–M

DEPARTMENT OF JUSTICE

Antitrust Division

Proposed Final Judgment and

Competitive Impact Statement; United

States v. AT&T Corp. and MediaOne

Group, Inc.

Notice is hereby given pursuant to the

Antitrust Procedures and Penalties Act,

15 U.S.C. 16(b)–(h), that a proposed

Final Judgment and Competitive Impact

Statement have been filed with the U.S.

District Court for the District of

Columbia in United States v. AT&T

Corp. and MediaOne Group, Inc., Civil

No. 00CV01176 (RCL). The United

States filed a civil antitrust Complaint

on May 25, 2000 alleging that the

proposed acquisition of MediaGroup,

Inc. (‘‘MediaOne’’) by AT&T Corp.

(‘‘AT&T’’) would violate Section 7 of the

Clayton Act, 15 U.S.C. 18. The proposed

Final Judgment requires AT&T to divest

the 34% equity interest and significant

management interest in ServiceCo., LLC

(‘‘ServiceCo’’), the nation’s secondlargest provider of residential

broadband services, which operates

under the trade name ‘‘Road Runner’’

that it would acquire through its merger

with MediaOne no later than December

31, 2001.

Public comment is invited within the

statutory sixty-day comment period.

Such comments, and responses thereto,

will be published in the Federal

Register and filed with the court.

Written comments should be directed to

Donald J. Russell, Chief,

Telecommunications Task Force, 1401

H Street, NW, Washington, DC 20530

(telephone: (202) 514–5621).

Copies of the Complaint, proposed

Final Judgment, Competitive Impact

Statement are available for inspection in

Room 215 of the U.S. Department of

Justice, Antitrust Division, 325 Seventh

Street, NW, Washington, DC 20530

(telephone: (202) 514–2481) and at the

office of the Clerk of the U.S. District

Court for the District of Columbia, 333

Constitution Avenue, NW, Washington,

DC 20001. Copies of any of these

materials may be obtained upon request

and payment of a copying fee.

Constance K. Robinson,

Director of Operations, Antitrust Division.

United States District Court for the

District of Columbia

United States of America, Plaintiff, v.

AT&T Corp. and MediaOne Group, Inc.,

Defendants; Civil No.: 00 1176.

Stipulated Order

The Court hereby enters this

Stipulated Order, ordering and

adjudging as follows:

(1) The Court has jurisdiction over the

subject matter of this action and over

each of the parties hereto, and venue of

this action is proper in this Court.

(2) A Final Judgment in the form

hereto attached may be filed and

entered by the Court, upon the motion

of any party or upon the Court’s own

motion, at any time after compliance

with the requirements of the Antitrust

Procedures and Penalties Act, 15 U.S.C.

16, and without further notice to any

party or other proceedings, provided

that plaintiff has not withdrawn its

consent, which it may do at any time

before entry of the proposed Final

Judgment by serving notice thereof on

defendants and by filing that notice

with the Court and provided that

Defendants have not abandoned their

proposed merger and withdrawn their

filing under the Hart-Scott-Rodino

Antitrust Improvements Act, 15 U.S.C.

18a.

(3) Defendants shall abide by and

comply with the provisions of the

proposed Final Judgment pending entry

of the Final Judgment by the Court, or

until expiration of time for all appeals

of any Court ruling declining entry of

the proposed Final Judgment, and shall,

from the date of the signing of this

Stipulation, comply with all the terms

and provisions of the proposed Final

Judgment as though the same were in

full force and effect as an order of the

Court.

(4) This Stipulated Order shall apply

with equal force and effect to any

amended proposed Final Judgment

agreed upon in writing by the parties

and submitted to the Court.

(5) In the event plaintiff withdraws its

consent or Defendants abandon their

proposed merger and withdraw their

filing under the Antitrust Procedures

and Penalties Act, as provided in

paragraph (2) above, or in the event that

the Court declines to enter the proposed

Final Judgment pursuant to this

Federal Register / Vol. 65, No. 120 / Wednesday, June 21, 2000 / Notices 38585

Stipulation, the time has expired for all

appeals of any Court ruling declining

entry of the proposed Final Judgment,

and the Court has not otherwise ordered

continued compliance with the terms

and provisions of the proposed Final

Judgment, then the parties are released

from all further obligations under this

Stipulation, and the making of this

Stipulation shall be without prejudice to

any party in this or any other

proceeding.

(6) Defendants, having represented

that the divestiture ordered in the

proposed Final Judgment can and will

be made, will not raise claims of

hardship or difficulty as grounds for

asking the Court to modify any of the

divestiture provisions contained

therein.

The undersigned parties hereby

stipulate to the entry of this Stipulated

Order.

For Plaintiff United States of America: Joel

I. Klein, Assistant Attorney General. A.

Douglas Melamed, Principal Deputy

Assistant Attorney General. Constance K.

Robinson, Director of Operations and

Merger Enforcement. Donald J. Russell,

Chief, Telecommunications Task Force.

Laury Bobbish, Assistant Chief,

Telecommunications Task Force. Claude

F. Scott, Jr., D.C. Bar No. 414960,

Lawrence M. Frankel, D.C. Bar No.

441532, Attorneys, Telecommunications

Task Force. U.S. Department of Justice,

Antitrust Division, 1401 H Street, N.W.,

Suite 8000, Washington, D.C. 20530,

(202) 514–5621.

For Defendant AT&T Corp.: Mark C.

Rosenblum, Larry J. Lafaro, AT&T Corp.,

295 North Maple Avenue, Basking Ridge,

NJ 07920, (908) 221–2000. David W.

Carpenter, D.C. Bar No. 306084, David L.

Lawson, Sidley & Austin, Bank One

Plaza, Chicago, IL 60603, (312) 853–

7237. Ilene K. Gotts, Wachtell, Lipton,

Rosen & Katz, 51 West 52nd Street, New

York, New York 10019.

For Defendant MediaOne Group, Inc.: Sean

C. Lindsay, MediaOne Group, Inc., 188

Inverness Drive West, Suite 600,

Englewood, CO 80112, (303) 858–3507.

Stipulated Order Approved for Filing.

Done this ___ day of May, 2000. llllll

United States District Judge

Final Judgment

Whereas, plaintiff, United States of

America, filed its Complaint on May 25,

2000;

And Whereas, plaintiff and

defendants, AT&T Corp. (‘‘AT&T’’) and

MediaOne Group, Inc. (‘‘MediaOne’’),

by their respective attorneys, have

consented to the entry of this Final

Judgment without trial or adjudication

of any issue of fact or law, and without

this Final Judgment constituting any

evidence against or admission by any

party regarding any issue of fact or law;

And Whereas, AT&T and MediaOne

agree to be bound by the provisions of

this Final Judgment pending its

approval by the Court;

And Whereas, the essence of this

Final Judgment is the reorganization of

certain business relationships of AT&T

and MediaOne to assure that

competition is not substantially

lessened;

And Whereas, plaintiff requires AT&T

and MediaOne to restructure certain of

their business relationships for the

purpose of remedying the loss of

competition alleged in the Complaint;

And Whereas, AT&T and MediaOne

have represented that the restructuring

required below can and will be made,

that AT&T and MediaOne can assure

compliance with the requirements of

this Final Judgment, and that AT&T and

MediaOne will later raise no claim of

hardship or difficulty as grounds for

asking the Court to modify any of the

provisions relating to the required

restructuring or the limitations on

subsequent agreements contained

below;

Now Therefore, before any testimony

is taken, without trial or adjudication of

any issue of fact or law, and upon

consent of the parties, it is Ordered,

Adjudged and Decreed:

I. Jurisdiction

This Court has jurisdiction over the

subject matter of and each of the parties

to this action. The Complaint states a

claim upon which relief may be granted

against defendants under Section 7 of

the Clayton Act, as amended, 15 U.S.C.

18.

II. Definitions

As used in this Final Judgment:

A. ‘‘Affiliate’’ means any person,

corporation, partnership, or joint

venture that (directly or indirectly)

owns or controls, is owned or controlled

by, or is under common ownership or

control with, another person,

corporation, partnership, or joint

venture. For purposes of this definition,

the term ‘‘own’’ means to own an equity

interest (or the equivalent thereof) of 50

percent or more.

B. ‘‘AT&T’’ means AT&T Corp., a New

York corporation with its headquarters

in New York, New York, its successors

and assigns, and its parents, majorityowned subsidiaries, divisions, groups,

and their officers, managers, agents, and

employees. For purposes of Section IV

of this Final Judgment, ‘‘AT&T’’ or its

Affiliates shall not include Liberty

Media or any entity which would be

included within the definitions of

‘‘AT&T’’’ or ‘‘AT&T’s’’ Affiliates solely

because of Liberty Media’s ownership

interests.

C. ‘‘Cable Modem Service’’ means any

Residential Broadband Service provided

over cable facilities.

D. ‘‘MediaOne’’ means MediaOne

Group, Inc., a Delaware corporation

with its headquarters in Englewood,

Colorado, its successors and assigns,

and its parents, majority-owned

subsidiaries, divisions, groups, and their

officers, managers, agents, and

employees.

E. ‘‘Operating Agreement’’ means the

agreement entitled Amended and

Restated Operating Agreement of

ServiceCo LLC, dated June 12, 1998,

among Cable HoldCo LLC, Microsoft

BOV, Inc., and CPQ Holdings, Inc.

F. ‘‘Residential Broadband Service’’

means any service offered to residential

customers in the United States of

America that permits users to transmit

and receive information using Internet

protocols at speeds which may exceed

128 kilobits per second.

G. ‘‘ServiceCo’’ means ServiceCo LLC,

a Delaware limited liability company.

H. ‘‘ServiceCo Interest’’ means any

direct or indirect financial ownership

interest in, and any direct or indirect

role in management or participation in

control of, ServiceCo LLC to be held by

AT&T pursuant to AT&T’s acquisition of

MediaOne. However, any ServiceCo

Interest held as of May 8, 2000 by AT&T

or MediaOne solely by virtue of

ownership of a limited partnership

interest in Time Warner Entertainment

Company, L.P. shall not be considered

a ServiceCo Interest for the purposes of

this Judgment.

H. ‘‘Time Warner’’ means Time

Warner, Inc., a Delaware corporation

with its headquarters in New York, New

York, Time Warner Entertainment Co.,

L.P., and ServiceCo, their successors

and assigns, and their parents,

divisions, groups, and majority-owned

subsidiaries; and any legal entity that is

subject to a merger or other agreement

with Time Warner, Inc. and that would

be included within this definition when

such agreement is consummated.

III. Applicability

This Final Judgment applies to AT&T

and MediaOne, as defined above, and

all other persons in active concert or

participation with any of them who

receive actual notice of this Final

Judgment by personal service or

otherwise.

IV. Restructuring

A. AT&T or MediaOne shall divest the

ServiceCo Interest on or before

December 31, 2000; provided, however,

that this divestiture obligation shall not

38586 Federal Register / Vol. 65, No. 120 / Wednesday, June 21, 2000 / Notices

prohibit AT&T’s or MediaOne’s

retention or acquisition of assets

dedicated solely to the provision of

service to MediaOne customers or any

regional data centers that are used

predominantly for the provision of

service to MediaOne customers as

defined in section 6.3(b) of the

Operating Agreement (‘‘Assets’’).

B. AT&T and MediaOne must satisfy

the requirements of Section IV(A) of this

Final Judgment through one of the

methods described in this Section

IV(B)(1)–(3):

(1) AT&T and MediaOne shall take all

necessary steps to implement (a) the

dissolution of ServiceCo pursuant to the

terms of sections 6.1 and 6.2 of the

Operating Agreement; and (b) the

distribution of the ServiceCo assets

pursuant to the terms of section 6.3 of

the Operating Agreement; provided,

however, that notwithstanding any

other contractual rights of AT&T or

MediaOne, AT&T and MediaOne shall

consent to the acquisition by Time

Warner of any or all of ServiceCo’s

remaining assets (i.e. those assets

remaining after AT&T or MediaOne

retain or acquire Assets) at the fair

market value of those assets (determined

by a third party appraisal if the parties

do not agree on valuation) so long as

AT&T or MediaOne are permitted to

lease capacity on those assets and

transitional support services at fair

market value until June 30, 2002 in

order to maintain the quality of Cable

Modem Services that AT&T and

MediaOne offer to their customers; or

(2) AT&T and MediaOne shall take all

necessary steps to divest the ServiceCo

Interest pursuant to section 9.3 of the

Operating Agreement; or

(3) AT&T and MediaOne shall

implement an alternative plan for

divestiture of the ServiceCo Interest that

has been agreed to by AT&T and

MediaOne and approved in writing by

Plaintiff in its sole discretion.

C. If the remaining parties to the

Operating Agreement whose consent is

required offer to allow AT&T and

MediaOne to terminate their affiliation

agreement and divest the ServiceCo

Interest pursuant to either of the

methods specified in Section IV(B)(1) or

(2) above after the closing of the merger

between AT&T and MediaOne and prior

to December 31, 2001, AT&T and

MediaOne shall accept that offer and

divest the ServiceCo interest on the date

proposed by the other parties; provided

that AT&T or MediaOne are permitted

to lease capacity on those assets and

transitional support services at fair

market value until June 30, 2002, in

order to maintain the quality of Cable

Modem Services that AT&T and

MediaOne offer to their customers.

V. Limitations on Subsequent

Agreements

A. Prior to the earlier of December 31,

2003 or two years after AT&T’s and

MediaOne’s divestiture of the ServiceCo

Interest, unless they obtain the prior

consent of Plantiff, 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 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)

AT&T, MediaOne, their Affiliates or

Time Warner from including any

content, 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 or retail

Cable Modem Service offered by AT&T,

MediaOne or their Affilates to 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. Plaintiff shall consent to a

proposed contractual or other

arrangement if it determines in its sole

discretion that such arrangement will

not substantially lessen competition

between AT&T and its Affiliates, and

Time Warner in any market. Plaintiff

shall be deemed to have consented to

the proposed arrangement if Plaintiff

has not provided written objection

within 30 days of the submission of a

request for Plaintiff’s consent. If Plaintiff

provides a written objection to a request

within the 30 day period, Plaintiff’s

determination shall be final and binding

unless, on application by AT&T or

MediaOne, the Court concludes that

Plaintiff abused its discretion in

refusing to consent to an agreement.

C. AT&T’s and MediaOne’s

participation in the management and

governance of ServiceCo prior to

completion of the restructuring required

by Section IV in accordance with the

requirements of Section VI. and its

agreement to receive transitional

services in accord with Section IV shall

not violate the restrictions of Section V.

VI. AT&T’s and MediaOne’s Interim

Participation in the Management and

Governance of ServiceCo

Until the divestiture required by this

Final Judgment has been accomplished,

AT&T and MediaOne shall conduct

their relationship with ServiceCo in

accordance with all of the requirements

specified below, except as Plaintiff may

otherwise consent in writing.

A. Except as necessary to comply with

this Final Judgment, AT&T and

MediaOne shall take all necessary steps

to ensure that the management of the

ServiceCo Interest will be kept separate

and apart from, and not influenced by,

the operation of AT&T and its Affiliates,

and all books, records, and

competitively-sensitive sales, marketing,

and pricing information associated with

ServiceCo will be kept separate and

apart from the books, records, and

competitively-sensitive sales, marketing,

and pricing information associated with

AT&T’s and its Affiliates’ other

businesses.

B. AT&T and MediaOne are

prohibited (1) from participating in or

attempting to influence any decision by

ServiceCo regarding ServiceCo’s offering

of wholesale or retail residential

broadband services to any customer

other than AT&T’s, MediaOne’s and

Time Warner’s cable systems; (2) from

participating in or attempting to

influence any decision by ServiceCo

relating to the content or services

provided by any person other than Time

Warner to ServiceCo subscribers; and (3)

from impeding ServiceCo’s ability to

obtain additional capital from other

direct or indirect holders of equity in

ServiceCo.

C. Upon closing of the merger of

AT&T and MediaOne, AT&T shall

appoint a person or persons (the

‘‘Appointee’’) to oversee the ServiceCo

Interest, who will also be responsible for

AT&T’s and MediaOne’s compliance

with this section. The Appointee shall

have complete managerial responsibility

for the ServiceCo Interest, subject to the

provisions of this Final Judgment and

subject to review and direction by

AT&T’s Chairman of the Board, its Chief

Financial Officer, its Chief Operating

Officer, General Counsel, and its Board

of Directors. In the event that the

Appointee is unable to perform his or

her duties, AT&T shall appoint a

replacement within ten (10) working

days. The Appointee shall have the

authority to act on AT&T’s and

Federal Register / Vol. 65, No. 120 / Wednesday, June 21, 2000 / Notices 38587

MediaOne’s behalf in exercising the

rights under the Operating Agreement

and the Affiliation Agreement that

AT&T and MediaOne are permitted to

exercise under the terms of this Final

Judgment. 1. The Appointee shall be permitted

to consult with individuals whose

responsibilities pertain to the MediaOne

cable systems only when necessary to

exercise rights under the Operating

Agreement and the Affiliation

Agreement that AT&T and MediaOne

are permitted to exercise under the

terms of this Final Judgment. The

Appointee may disclose non-public

information regarding ServiceCo’s

operations to personnel whose

responsibilities pertain to the MediaOne

cable systems only when necessary to

exercise AT&T’s and MediaOne

management rights, and no such

information regarding ServiceCo’s

operations may be disclosed by the

Appointee or by personnel whose

responsibilities pertain to the MediaOne

cable systems to other personnel of

AT&T or its Affiliates.

2. The Appointee shall not

communicate with any individuals

employed by AT&T, MediaOne or their

Affiliates with responsibilities relating

to the operations of Excite@Home or

AT&T cable systems other than those

acquired from MediaOne. The

Appointee shall not be given access to

any nonpublic information regarding

the operations of Excite@Home or AT&T

cable systems other than those acquired

from MediaOne.

3. Except for those circumstances

provided for in this Section or as may

otherwise be required by law, in no

event shall any employee of AT&T,

MediaOne or their Affiliates, other than

the Appointee, have access to any

nonpublic information regarding the

operations and management of

ServiceCo.

VII. Compliance Inspection

For the purposes of determining or

securing compliance of defendants with

this Final Judgment, and subject to any

legally recognized privilege, from time

to time:

A. Duly authorized representatives of

the United States Department of Justice,

upon written request of a duly

authorized representative of the

Assistant Attorney General in charge of

the Antitrust Division, and on

reasonable notice to AT&T or MediaOne

made to its principal office, shall be

permitted without restraint or

interference from AT&T and MediaOne:

1. To have access during office hours

of AT&T or MediaOne to inspect and

copy or, at plaintiff’s option to, request

AT&T or MediaOne to provide copies of

all books, ledgers, accounts,

correspondence, memoranda, and other

records and documents in the

possession or under the control of AT&T

or MediaOne, who may have counsel

present, relating to any matters

contained in this Final Judgment; and 2. To interview, either informally or

on the record, and to take sworn

testimony from the officers, directors,

employees, or agents of AT&T and

MediaOne, who may have their

individual counsel present, relating to

any matters contained in this Final

Judgment. B. Upon the written request of a duly

authorized representative of the

Assistant Attorney General in charge of

the Antitrust Division, made to AT&T or

MediaOne, AT&T or MediaOne shall

submit written reports, under oath if

requested, relating to any of the matters

contained in this Final Judgment. C. No information or documents

obtained by the means provided in this

section shall be divulged by plaintiff to

any person other than a duly authorized

representative of the Executive Branch

of the United States, or to the FCC

(pursuant to a customary protective

order or a waiver of confidentiality by

AT&T or MediaOne), except in the

course of legal proceedings to which the

United States is a party (including grand

jury proceedings), or for the purpose of

securing compliance with this Final

Judgment, or as otherwise required by

law.

D. If, at the time information or

documents are furnished by AT&T or

MediaOne to plaintiff, AT&T or

MediaOne represent and identify in

writing the material in any such

information or documents as to which a

claim of protection may be asserted

under Rule 26(c)(7) of the Federal Rules

of Civil Procedure, and mark each

pertinent page of such material,

‘‘Subject to claim of protection under

Rule 26(c)(7) of the Federal Rules of

Civil Procedure,’’ then ten (10) calendar

days’ notice shall be given by Plaintiff

to AT&T or MediaOne prior to divulging

such material in any legal proceeding

(other than a grand jury proceeding) to

which AT&T or MediaOne is not a

party.

VIII. Retention of Jurisdiction

Jurisdiction is retained by this Court

for the purposes of enabling any of the

parties to this Final Judgment to apply

to this Court at any time for such further

orders or directions as may be necessary

or appropriate for the construction or

carrying out of this Final Judgment, for

the modification of any of the

provisions hereof, for the enforcement

of compliance herewith, and for the

punishment of any violations hereof.

IX. Further Provisions and Termination

A. The entry of this judgment is in the

public interest.

B. Unless this Court grants an

extension, this Final Judgement shall

expire on the tenth anniversary of the

date of its entry.

Date: llllllllllllllllll

lllllllllllllllllllll

Judge, United States District Court

Certificate of Service

I hereby certify that copies of the

foregoing Plaintiff United States’

Stipulated Order and proposed Final

Judgment, were served via U.S. Mail,

first class postage prepaid, on this 25th

day of May 2000 upon each of the

parties listed below:

Attorneys for AT&T Corp: Mark Rosenblum,

AT&T Corp., Basking Ridge, New Jersey

07920. David Carpenter, Sidley & Austin,

Bank One Plaza, Chicago, IL 60603.

Attorney for Media One Group, Inc.: Sean

Lindsay, MediaOne Group, Inc., 188

Inverness Drive, West, Suite 600,

Englewood, CO 80112.

Claude F. Scott, Jr.,

Counsel for the United States.

Competitive Impact Statement

The United States, pursuant to

Section 2(b) of the Antitrust Procedures

and Penalties Act, 15 U.S.C § 16(b)–(h)

(‘‘APPA’’), files this Competitive Impact

Statement relating to the proposed Final

Judgment submitted for entry in this

civil antitrust proceeding.

I. Nature and Purpose of the Proceeding

The United States filed a civil

antitrust Complaint on May 25, 2000

alleging that the proposed acquisition of

MediaOne Group, Inc. (‘‘MediaOne’’) by

a AT&T Corp. (‘‘AT&T’’) would violate

Section 7 of the Clayton Act, 15 U.S.C.

18, by lessening competition in the

nationwide market for the aggregation,

promotion, and distribution of

residential broadband content.

AT&T, through its ownership of TCI

related companies, hold a majority of

the voting securities in Excite@Home

Corp. (‘‘Excite@Home’’), the nation’s

largest residential broadband services

provider. Through its proposed

acquisition of MediaOne, AT&T will

acquire roughly a 34% equity interest

and a significant management interest in

ServiceCo, LLC (‘‘ServiceCo’’), the

nation’s second-largest provider of

residential broadband services, which

operates under the trade name ‘‘Road

Runner.’’

By combining AT&T’s controlling

interest in Excite@Home with

MediaOne’s equity and management

interest in Road Runner, the proposed

38588 Federal Register / Vol. 65, No. 120 / Wednesday, June 21, 2000 / Notices

transaction threatens to substantially

lessen competition by increasing

concentration in the market for

aggregation, promotion, and distribution

of residential broadband content.

Competition between Excite@Home and

Road Runner in the provision of these

services may be substantially lessened

or even eliminated. Through its control

of Excite@Home and its substantial

influence or control of Road Runner,

AT&T would substantially increase its

leverage in dealing with broadband

content providers, enabling it to extract

more favorable terms for such services.

AT&T’s ability to affect the success of

individual content providers could be

used to confer market power on

individual content providers favored by

AT&T. By exploiting its ‘‘gatekeeper’’

position in the residential broadband

content market AT&T could make it less

profitable for disfavored content

providers to invest in the creation of

attraction broadband content, and

reduce competition and restrict output

in that market.

Shortly before the Complaint was

filed, the United States and defendants

reached agreement on the terms of a

proposed Final Judgment. The proposed

Final Judgment requires AT&T to divest

the interest in ServiceCo that it would

acquire through its merger with

MediaOne no later than December 31,

2001. The proposed Final Judgment also

contains provisions limiting AT&T’s

participation in the management and

governance of ServiceCo, designed to

minimize any risk of competitive harm

that otherwise might arise pending

completion of divestiture. It also

contains provisions requiring AT&T to

obtain the prior consent of the Justice

Department before entering into certain

types of agreements with the other

principal partner in ServiceCo, Time

Warner, that could have many of the

same anticompetitive effects as the

proposed merger would have. The

proposed Final Judgment and a

proposed Stipulated Order by which

defendants consent to the entry of the

proposed Final Judgment were filed

simultaneously with the Complaint.

The United States and defendants

have stipulated that the proposed Final

Judgment may be entered after

compliance with the Antitrust

Procedures and Penalties Act, 15 U.S.C.

§ 16 (‘‘APPA’’). Entry of the proposed

Final Judgment would terminate this

action, except that the Court would

retain jurisdiction to construe, modify,

or enforce the provision of the proposed

Final Judgment and to punish violations

thereof. The United States and

defendants have also stipulated that

defendants will comply with the terms

of the proposed Final Judgment from the

date of signing of the Stipulation,

pending entry of the Final Judgment by

the Court. Should the Court decline to

enter the Final Judgment, defendants

have also committed to continue to

abide by its requirements until the

expiration of time for any appeals of

such ruling.

II. Description of the Events Giving Rise

to the Alleged Violation

A. The Defendants and the Proposed

Transaction

AT&T, headquartered in New York,

New York, is the nation’s largest longdistance telephone company, one of the

nation’s largest wireless telephony

providers, a growing local telephony

provider with nationwide ambitions,

one of the top ten narrowband Internet

service provider via AT&T WorldNet,

and the nation’s second-largest cable

multiple system operator (‘‘MSO’’).

AT&T’s 1999 revenues totaled

approximately $62.4 billion.

AT&T also controls Excite@Home

Corp. (‘‘Excite@Home’’), the largest

provider of residential broadband

service. Excite@Home provides

residential broadband service over cable

systems to over 1.5 million end user

subscribers and is growing rapidly.

AT&T currently holds approximately a

26% equity interest in Excite@Home

and a majority of its voting stock. AT&T

recently entered into an agreement

which, if implemented, will

significantly increase its control over

Excite@Home. Excite@Home has

exclusive contract rights to provide

residential broadband service over the

cable facilities of its three principal

equity holders, AT&T, Comcast

Corporation, and Cox Communications,

Inc., which collectively account for over

35% of the nation’s cable subscribers.

Excite@Home also provides residential

broadband service over the cable

facilities of a significant number of other

cable system operators nationwide.

MediaOne Group, formerly US WEST/

MediaOne, is the nation’s seventh

largest cable MSO and is headquartered

in Englewood, Colorado. MediaOne

owns cable systems in major

metropolitan areas in several states

including California, Georgia, and

Florida. MediaOne also holds a 25.51%

equity interest in Time Warner

Entertainment (‘‘TWE’’). TWE owns and

operates numerous cable systems, and

holds interests in a number of cable

programming networks. MediaOne’s

1999 revenues totaled approximately

$2.7 billion.

ServiceCo, LLC, a limited liability

company owned by several Time

Warner related entities, MediaOne, and

subsidiaries of Microsoft Corporation

and Compaq Computer Corporation, is

the second largest provider of

residential broadband in the United

States, using the trade name ‘‘Road

Runner.’’ Road Runner provides

residential broadband service over cable

systems to more than 730,000 end user

subscribers, and its subscriber base is

growing rapidly. MediaOne owns

approximately 34% of Road Runner.

MediaOne owns approximately 25% of

Road Runner through a direct

ownership interest in the holding

company that owns Road Runner and

has additional indirect ownership

through MediaOne’s interest in TWE.

Many important Road Runner decisions

require only the concurrence of

MediaOne and Time Warner. Road

Runner has exclusive contract rights

through December, 2001 to provide

residential broadband service over the

cable facilities of its two principal cable

parents, MediaOne and Time Warner,

which collectively account for more

than 25% of the nation’s cable

subscribers. Road Runner also provides

residential broadband service over the

cable facilities of several other cable

system operators.

On May 6, 1999, AT&T and MediaOne

agreed to merge in a transaction valued

at roughly $56 billion. As a result of this

transaction, AT&T will have substantial

equity and management rights in both

Excite@Home and Road Runner—two

firms that, combined, serve a significant

majority of the nation’s residential

broadband users.

B. Market To Be Harmed By the

Proposed Merger

The explosive growth of the Internet

over the past several years has

transformed the American economy as

well as the lifestyles of millions of

Americans. From a basic network that

served primarily the military and

academic institutions, the Internet has

expanded into a network of networks

which millions of individuals access

daily for both personal and professional

purposes. Increasing numbers of

individuals have begun to access the

Internet via ‘‘broadband’’ means—

technology which allows the

transmission of data at dramatically

higher speeds and thereby enables new

types of content and services to be

delivered to consumers.

The vast majority of residential users

of the Internet today access it via ‘‘dialup’’ modems: their computer uses a

standard telephone line to connect to an

Internet Service Provider (‘‘ISP’’) which

in turn connects the user to the Internet

and any proprietary or exclusive content

Federal Register / Vol. 65, No. 120 / Wednesday, June 21, 2000 / Notices 38589

offered by the ISP as a part of its service.

This service generally allows users to

send and receive data at rates of up to

56 kilobits per second or less and is

referred to as ‘‘narrowband’’ access. A

rapidly growing number of residential

users are accessing the Internet through

‘‘broadband’’ networks and

technologies. Broadband users may

receive data at rates up to 25 times

greater than the data transmission rate

currently provided by narrowband

access using standard dial-up modems.

In order to provide residential

broadband service, an ISP must have

access to transmission facilities capable

of carrying data at a high rate between

the facilities of the ISP and individual

homes. The two principal types of

transmission facilities used today to

provide this access to residential

customers are the networks owned by

cable companies and local telephone

companies.

Cable companies originally designed

their networks to provide video

programming to customers’ homes, but

in recent years many cable companies

have upgraded their networks to

provide the capability of two-way data

transmission needed for residential

broadband Internet service. Subscribers

access the Internet over computers

connected to a cable modem or, in some

cases, over their televisions connected

to a cable set-top box containing a cable

modem. The cable modem sends and

receives data over the cable company’s

transmission facilities to the facilities of

the residential broadband service

provider. Cable modem service

generally permits the transmission of

data from the ISP to the residence at

rates of up to 1.5 Mbps-2 Mpbs, 25 times

faster than the fastest dial-up

connections now available.

Digital subscriber line (‘‘DSL’’)

technology is used to enhance the

transmission capabilities of existing

copper telephone wires. DSL, which

requires users to have a DSL modem

attached to their personal computer,

typically delivers downstream data

transmission at rates between 256 Kbps

and 1.5 Mbps. DSL service may be

provided by local telephone companies

or by other firms which contract with

the local telephone company for the use

of its copper wires. Because of technical

limitations, and because upgrades of

telephone networks which are needed to

provide DSL service have not been

completed in many areas, DSL service is

available only to a portion of residences

which have local telephone service.

Broadband transmission to residences

is also provided through satellite

technology, which uses a radio relay

station in orbit above the earth to

receive, amplify, and redirect signals.

Satellite broadband services are

provided by direct broadcast satellite

(‘‘DBS’’) providers such as DIRECTV

and may be provided within the next

several years by low earth orbit (‘‘LEO’’)

satellites deployed by firms such as

Teledesic. At present, this technology

provides only one-way broadband

transmission; the satellite provider

transmits data downstream to the

consumer’s home, but the consumer

must use telephone lines for the

upstream transmission of data from the

home. Although satellite providers are

working to address this deficiency, twoway satellite broadband service to the

home may not be available for several

years.

Broadband transmission may also be

provided through ‘‘fixed wireless’’

technologies, including local multipoint

distribution systems (‘‘LMDS’’) and

multichannel multipoint distribution

systems (‘‘MMDS’’). Fixed wireless

technology uses microwave

transmission facilities to transmit data

to and from residential consumers.

Although firms are investing significant

sums of money to develop fixed

wireless technology, residential

broadband service using such

technology is not yet available on a large

scale to consumers, and likely will not

be commercially deployed on a large

scale in the immediate future.

As of early 2000, approximately 70%

of the subscribers to residential

broadband service use a cable modem

service in which data is transmitted

over the facilities of a cable company.

DSL services are the second most

frequently used, but though the number

of DSL users is growing rapidly, DSL

still lags substantially behind cable

modem service in market penetration

and acceptance. Satellite and fixed

wireless service have only a very small

portion of residential broadband

subscribers.

Of the seven largest cable MSOs, five

have contracted with Excite@Home or

Road Runner to provide residential

broadband service over their cable

facilities. Excite@Home and Road

Runner together serve the vast majority

of subscribers who receive residential

broadband Internet service over cable

facilities, and a significant majority of

all residential broadband subscribers.

Because of the rapid growth in the

number of residential broadband

subscribers, and the expectation that

there will soon be very large numbers of

such subscribers, many firms are

developing content that will be

particularly attractive to residential

broadband consumers. The transmission

capacity of residential broadband

service allows customers to access

content that contains much larger

quantities of data, such as high quality

‘‘streaming’’ video and various forms of

interactive entertainment. Much 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.

Content providers may earn revenue

in a variety of ways—from the sale of

advertising, from charging end users for

access to the content, from the sale of

products or services marketed through

the Internet—and most of the revenue

opportunities are substantially

enhanced in proportion to increased

numbers of consumers who access the

content or services. Content providers

produce most broadband content with

national distribution in mind, largely in

order to maximize the potential number

of consumers they will reach, thereby

maximizing advertising and other

revenues. AT&T and Time Warner (a coowner of Road Runner) are substantial

providers of content and services which

are or could be delivered to end users

through residential broadband Internet

facilities.

A relevant product market affected by

this transaction is the market for

aggregation, promotion, and distribution

of broadband content and services. The

success or failure of content providers

depends greatly on their ability to

attract large numbers of consumers.

Excite@Home, Road Runner, and other

residential broadband service providers

and ‘‘portals’’ can substantially enhance

or detract from a content provider’s

ability to reach large numbers of

customers. A portal generally is an

Internet site containing a ‘‘first page’’ as

well as several subsequent pages, that

users see with a high degree of

frequency. These pages aggregate links

to a variety of types of content and

services, and facilitate users’ efforts to

find content and services by providing

search engines, ‘‘tree and branch’’

indexes, and prominent links to Internet

content and services, as well as

proprietary content and services. Most

ISPs, including Excite@Home and Road

Runner, include the first page of their

portal as the default ‘‘start page’’ (i.e.,

the first screen a user seek upon access).

There are also portals, such as Yahoo

and Lycos, that are not affiliated with

major ISPs. Many customers access

content and service providers through

portals and therefore content providers

seek prominent links by which to

promote their content and draw users to

their sites. The more favorable the

placement of a link (e.g., ‘‘first page’’

rather than subsequent pages, a link that

38590 Federal Register / Vol. 65, No. 120 / Wednesday, June 21, 2000 / Notices

includes a larger share of the screen,

etc.), the greater the content provider’s

likely audience, advertising revenues,

and profitability.

For providers of broadband content,

i.e., content that either requires

broadband speeds or is much superior

when viewed at broadband speeds, links

that will attract more broadband

customers, and only broadband

customers, are more valuable than links

that will be seen predominantly by

narrowband users who will not access

broadband content. Therefore, links that

will be viewed by the general mass of

Internet users—a substantial majority of

which are narrowband users—are not a

good substitute for links that will be

widely and exclusively viewed by

broadband users.

In addition, content providers seek

network services such as caching that

will facilitate the distribution of their

data so as to enhance to quality and

accessibility of their content. Caching

stores a content provider’s content at

various locations throughout the

country, closer to end users, thereby

improving speed and performance. This

is a particularly important service for

broadband content providers who must

rely on the rapid delivery of large

quantities of data in order to provide the

most attractive content. Broadband

content providers therefore seek

favorable data distribution

arrangements, as well as favorable terms

for aggregation and promotion of their

content, in order to attract more

customers.

The aggregation and promotion of

content, and the efficient physical

distribution of content, are valuable

services to content providers that

heavily influence their success or failure

in the content market. Content providers

typically contract on a nationwide basis

with forms that provide such services.

Excite@Home and Road Runner are

positioned to become two of the most

important providers of aggregation,

promotion, and distribution of

residential broadband content. By virtue

of the large number of subscribers to

their residential broadband services,

both firms will be able to significantly

assist or retard the competitive efforts of

broadband content providers, by

granting or withholding aggregation,

promotion, and distribution services, or

through the prices, terms, and

conditions by which such services are

provided. Moreover, because of their

ownership affiliations and exclusive

contracts with many of the largest cable

MSOs, it is unlikely that other providers

of residential broadband services will be

able to enter and attract comparable

numbers of subscribers in the near term.

C. Anticompetitive Consequences of the

Merger

Upon consummation, the proposed

acquisition would give AT&T complete

ownership and control of the assets and

holdings of MediaOne, including

MediaOne’s ownership interest in Road

Runner and significant influence over

Road Runner’s operations and

management. AT&T’s post-merger

ownership interest in Road Runner will

entitle it to participate in the

governance of Road Runner, to have

effective veto power over Road Runner

management decisions, to be present at

meetings of Road Runner’s Members’

Committee, and to obtain all

information available to members of the

Board of Directors, including

competitively sensitive information.

AT&T’s control over Road Runner and

access to sensitive competitive Road

Runner information combined with its

control over Excite@Home and access to

confidential Excite@Home information

could facilitate collusion and

coordination between Excite@Home and

Road Runner in ways that would result

in a substantial lessening of competition

in the market for aggregation,

promotion, and distribution of

residential broadband content. Financial

benefits derived from collusion that

accrued to either Excite@Home or Road

Runner would accrue in part to AT&T.

If the proposed merger were

consummated, concentration in the

market for aggregation, promotion, and

distribution of residential broadband

content and services would be

substantially increased, and competition

between Excite@Home and Road

Runner in the provision of such services

may be substantially lessened or even

eliminated. Through its control of

Excite@Home and substantial influence

or control of Road Runner, AT&T would

have substantially increased leverage in

dealing with broadband content

providers, which it could use to extract

more favorable terms for such services.

The increased leverage that AT&T and

its affiliates would acquire in this

market could also be used to promote or

retard the success of individual content

providers. AT&T’s ability to promote or

retard the success of individual content

providers could be used to confer

market power on individual content

providers favored by AT&T. AT&T

could profit from the creation and

exercise of such market power either

through direct ownership of a favored

content provider, or by obtaining

payments from favored content

providers in exchange for favorable

treatment by Excite@Home and Road

Runner. By exploiting its ‘‘gatekeeper’’

position in the residential broadband

content market, AT&T could make it

less profitable for unaffiliated content

providers to invest in the creation of

attractive broadband content, and

reduce competition and restrict output

in that market.

For these reasons, the United States

concluded that the AT&T/MediaOne

merger as proposed may substantially

lessen competition, in violation of

Section 7 of the Clayton Act, in the

market for the aggregation, promotion,

and distribution of residential

broadband content.

Naturally, in emerging markets such

as these, predictions about the way the

market may develop in the future are far

from certain. Nevertheless, the

predictions and assumptions required to

conclude that the proposed merger

would present serious anticompetitive

problems in the future are very

reasonable ones. Moreover, the risks to

the development of broadband industry

posed by this merger are sufficiently

grace that appropriate relief is

warranted.

III. Explanation of the Proposed Final

Judgment

A. The Divestiture Requirement

The proposed Final Judgment will

preserve competition in the market for

the aggregation, promotion, and

distribution of broadband content by

requiring defendants to divest their

interest in ServiceCo no later than

December 31, 2001. This divestiture is

intended to ensure that Excite@Home

and Road Runner (or any successor

residential broadband service offered by

Time Warner) will continue to be

separate and independent of one

another, thereby preventing the

reduction or elimination of competition

between them that otherwise would

have resulted from AT&T’s acquisition

of MediaOne.

The divestiture requirements of the

proposed Final Judgment direct

defendants to divest their interest in

ServiceCo, including their direct

financial ownership interest and their

role in ServiceCo’s management,

through one of three methods specified

in Section IV.B. The first two methods

specified in Section IV.B contemplate

the defendants’ exiting the ServiceCo

partnership pursuant to the terms of the

ServiceCo Operating Agreement entered

into by the various ServiceCo partners.

Should the defendants opt for a

different means of divesting the

ServiceCo interest, the third option in

Section IV.B provides that the

defendants may utilize this method only

Federal Register / Vol. 65, No. 120 / Wednesday, June 21, 2000 / Notices 38591

1The Final Judgment defines Time Warner to

include any ‘‘legal entity that is subject to a merger

agreement with Time Warner, Inc., and that would

be included within this definition when such

agreement is consummated’’. Therefore, the

restrictions in Section V will apply to agreements

involving the defendants and AOL, as well as the

entity resulting from the merger of America Online

and Time Warner if that proposed merger closes.

if the United States provides its written

consent.

Consistent with other antitrust cases

involving mergers in which the United

States seeks a divestiture remedy, this

Final Judgment requires completion of

the divestiture within the shortest time

period reasonable under the

circumstances. The United States

normally requires the divestiture of

physical assets within six months or

less. The circumstances here are highly

unusual in that under the ServiceCo

Operating Agreement, other ServiceCo

owners have contractual rights that may

limit the drfendants’ ability to divest the

ServiceCo interest prior to December 31,

2001. Accordingly, the defendants are

permitted until that date to complete the

divestiture. However, if the other

relevant ServiceCo owner(s) request the

defendants to divest the ServiceCo

interest before December 31, 2001,

through one of the methods provided for

in the Operating Agreement (and

enumerated in Sections IV.B(1) and

IV.B(2) of the proposed Final Judgment),

the defendants are required to complete

the divestiture at such earlier date. The

proposed Final Judgment thereby

effectively requires the defendants to

divest their ServiceCo interest as soon

as reasonably practicable. During the

time that the defendants continue to

hold the interest in ServiceCo, their

ability to participate in the management

and governance of ServiceCo will be

restricted, pursuant to detailed

requirements contained in Section VI of

the Final Judgment which are discussed

further below, in order to minimize the

risk of interim harm to competition.

In requiring the divestiture specified

in Section IV, the Final Judgment strives

to prevent current Road Runner

customers from having any loss of, or

impairment of, cable modem service by

ensuring that both the principal

ServiceCo partners can continue to offer

cable modem service. Accordingly,

Section IV.A permits the defendants to

retain assets used solely or

predominantly to provide service to

MediaOne cable customers and Section

IV.B(1) requires the defendants to

consent to Time Warner purchasing the

remaining assets (e.g., assets that do not

automatically revert to the control of

either the defendants or Time Warner,

such as, potentially, ‘‘national’’ assets)

at fair market value. The defendants are

also permitted to lease capacity on those

assets and transitional support services

at fair market value until June 30, 2002.

The proposed Final Judgment thereby

should realize its competitive objectives

without any unnecessary adverse

interim effects on end users.

B. Limitations on Subsequent

Agreements

The divestiture requirements of the

proposed Final Judgment are intended

to ensure that Excite@Home and

ServiceCo continue to operate

separately and independently from one

another. The ServiceCo joint venture

affected actual or potential competition

between MediaOne and Time Warner in

a variety of ways. That joint venture is

a mechanism through which MediaOne

and Time Warner jointly provide

residential broadband service, rather

than providing such service separately

and potentially in competition with one

another. Similarly, the ServiceCo

venture is a mechanism through which

MediaOne and Time Warner jointly

control negotiations with content

providers over the terms under which

ServiceCo will provide aggregation,

promotion, and distribution of

broadband content. AT&T’s entry into

this type of partnership with Time

Warner (through its acquisition of

MediaOne’s ServiceCo interests) would

pose substantial risks to competition

because of AT&T’s significant position

(through Excite@Home) in the provision

of residential broadband service and the

aggregation, promotion, and distribution

of broadband content.

Even if AT&T divests its interest in

the ServiceCo joint venture, however,

those risks to competition could be recreated through contractual

arrangements between AT&T and Time

Warner that would have competitive

effects imilar to the effects of the

ServiceCo joint venture. In order to

prevent this, and to ensure that the

divestiture remedy achieves its purpose,

the proposed Final Judgment restricts

AT&T’s ability to enter into certain

types of contractual or other

arrangements with Time Warner for a

period of two years after the divestiture

of the ServiceCo interest.1 The

defendants are required to obtain the

prior written consent of the Department

of Justice before entering into three

categories of agreements defined in

Section V. First, prior approval is

required for agreements through which

defendants and Time Warner would

jointly offer or provide a residential

broadband service. Second, prior

approval is required for agreements that

would have the purpose or effect of

preventing either the defendants or

Time Warner from offering or providing

a residential broadband service. Third,

prior approval is required for

agreements that would have the purpose

or effect of (a) preventing defendants or

Time Warner from including any

content, services, capabilities, or

features in any cable modem services

offered by either the defendants or Time

Warner, or (b) preventing the defendants

from granting preferential treatment in

any of their cable modem services to

content, services, capabilities, or

features offered by others.

The Department will have thirty days

to review agreements submitted

pursuant to Section V and will consent

to proposed agreements if it determines,

in its sole discretion, that the

arrangement will not substantially

lessen competition between AT&T and

its Affiliates and Time Warner in any

market. The Department’s determination

regarding any agreement submitted for

review will be final unless the Court,

based on an application by the

defendants, concludes that the

Department abused its discretion in

refusing to consent to an agreement.

The requirements of Section V reflect

a conclusion that certain categories of

agreements could have anticompetitive

effects, but not a conclusion that such

agreements necessarily would have

competitive effects. By virtue of their

respective businesses in the operation of

cable systems, the provision of

residential broadband service, the

provision of broadband content, and the

provision of aggregation, promotion,

and distribution of broadband content,

AT&T and Time Warner may enter into

a variety of commercial arrangements

that pose no significant risk to

competition, even though such

arrangements are subject to the prior

approval requirements of Section V. It is

also possible that certain agreements

between AT&T and Time Warner that

are not subject to the prior approval

requirements might have

anticompetitive effects. The provisions

of Section V reflect a balancing of the

need to provide an effective means of

preventing anticompetitive agreements

while minimizing interference with

legitimate and procompetitive

commercial arrangements. The prior

approval requirements do not limit in

any way the ability of the United States

to initiate enforcement actions under

the antitrust laws to challenge

agreements, whether or not such

agreements are subject to the prior

approval requirements, and whether or

not the United States has granted its

approval under the terms of the Final

Judgment.

38592 Federal Register / Vol. 65, No. 120 / Wednesday, June 21, 2000 / Notices

C. Other Provisions of the Decree

Section VI contains important

requirements concerning the operation

of Road Runner prior to divestiture of

the interest in ServiceCo. The purpose

is to prevent any coordination or

collusion between Road Runner and

Excite@Home during the limited period

of time that AT&T has equity and

management interests in both. Section

VI.A lays out the basic rule that the

defendants shall take all necessary steps

to ensure that the management of the

ServiceCo interest will be kept separate

and apart from the operation of other

AT&T businesses, including

Excite@Home, and that all competitively

sensitive information of the ServiceCo

and AT&T’s other businesses are also

kept separate.

Although there are certain decisions

of ServiceCo which the defendants need

to be able to participate in during the

period prior to divestiture in order to

protect their legitimate interests, in

particular that of providing service to

their end user cable customers, there are

certain categories of decisions for which

there is no strong reason the defendants

need to be involved and, indeed, ones

in which their involvement could create

anticompetitive consequences.

Accordingly, Section VI.B delineates

three specific categories of ServiceCo

decisions which defendants are

prohibited from participating in or

influencing. The first of these involves

decisions regarding ServiceCo offering

service to customers other than

defendants’ or Time Warner’s cable

systems. It is possible that Road Runner

may want to expand service to other

cable systems or over other means of

broadband access such as DSL. Because

Excite@Home could protentially be a

competitor to Road Runner for these

customers, AT&T might have an

incentive to hinder Road Runner’s

efforts to serve these customers. The

Final Judgment bars AT&T from being

able to hinder any such efforts by Road

Runner. The second category of

decisions in which AT&T is barred from

participating are those regarding content

or services provided to ServiceCo

subscribers. A major competitive

concern outlined in the Complaint is

that AT&T would be able to coordinate

the actions of Excite@Home and Road

Runner in dealing with content

providers; by preventing AT&T from

participating in any Road Runner

content decisions, this risk is minmized.

Because Time Warner might have

incentives, and in the absence of AT&T

being able to exercise its management

rights the ability, to strike deals between

ServiceCo and Time Warner that would

be extremely favorable to Time Warner

and its content, there is an exception in

this provision that allows AT&T to

participate in content decisions

involving Time Warner content. The

final prohibition in this Section

prevents defendants from impeding

ServiceCo’s ability to obtain capital

from other ServiceCo equity holders.

This is to prevent AT&T from being able

to undermine ServiceCo as a

competitive force by blocking its access

to capital.

Section VI.C specifies the manner in

which AT&T must manage its ServiceCo

interest. It requires the appointment of

a person or persons (‘‘the Appointee’’)

who will manage AT&T’s interest in

ServiceCo and be responsible for

compliance with the separation

requirements of Section VI subject only

to review and direction by four senior

AT&T officers and its Board of

Directors. It also contains a number of

specific provisions regarding

communications and the sharing of nonpublic information that will help to

prevent sensitive ServiceCo competitive

information from being provided to the

rest of AT&T.

In order to ensure compliance with

the Final Judgment, Section VII gives

the United States various rights,

including the ability to inspect

defendants’ records, to conduct

interviews and take sworn testimony of

defendants’ officers, directors,

employees and agents, and to require

defendants to submit written reports.

These rights are subject to legally

recognized privileges, and any

information the United States obtains

using these powers is protected by

specified confidentiality obligations

which permit sharing of information

with the FCC under customary

protective order issued by that agency or

a waiver of confidentiality.

The Court retains jurisdiction under

Section VIII, and Section IX provides

that the proposed Final Judgment will

expire on the tenth anniversary of the

date of its entry, unless extended by the

Court.

IV. Remedies Available to Potential

Private Litigants

Section 4 of the Clayton Act, 15

U.S.C. 15, provides that any person who

has been injured as a result of conduct

prohibited by the antitrust laws may

bring suit in federal court to recover

three times the damages that the person

has suffered, as well as costs and

reasonable attorneys’ fees. Entry of the

proposed Final Judgment will neither

impair nor assist the bringing of any

private antitrust damage action. Under

the provisions of Section 5(a) of the

Clayton Act, 15 U.S.C. 16(a), the

proposed Final Judgment has no prima

facie effect in any subsequent private

lawsuit that may be brought against

defendants.

V. Procedures Available for

Modification of the Proposed Final

Judgment

Plaintiff and defendants have

stipulated that the proposed Final

Judgment may be entered by the Court

after compliance with the provisions of

the APPA, provided that the United

States has not withdrawn its consent.

The APPA conditions entry upon the

Court’s determination that the proposed

Final Judgment is in the public interest.

The APPA provides a period of at

least sixty (60) days preceding the

effective date of the proposed Final

Judgment within which any person may

submit to the United States written

comments regarding the proposed Final

Judgment. Any person who wishes to

comment should do so within sixty (60)

days of the date of publication of this

Competitive Impact Statement in the

Federal Register. The United States will

evaluate and respond to the comments.

All comments will be given due

consideration by the United States,

which remains free to withdraw its

consent to the proposed Final Judgment

at any time to entry. The comments and

the responses of the United States will

be filed with the Court and published in

the Federal Register.

Written comments should be

submitted to: Donald J. Russell, Chief,

Telecommunications Task Force,

Antitrust Division, United States

Department of Justice, 1401 H Street,

NW., Suite 8000, Washington, DC

20530.

The proposed Final Judgment

provides, in Section VIII, that the Court

retains jurisdiction over this action, and

the parties may apply to the Court for

any order necessary or appropriate to

carry out or construe the Final

Judgment, to modify any of its

provisions, to enforce compliance, and

to punish any violations of its

provisions.

VI. Alternatives to the Proposed Final

Judgment

The United States considered, as an

alternative to the proposed Final

Judgment, seeking an injunction to

block consummation of the AT&T/

MediaOne Merger and a full trial on the

merits. The United States is satisfied,

however, that the divestiture of the

interest in ServiceCo and other relief

contained in the proposed Final

Judgment will preserve competition in

the market for aggregation, promotion,

Federal Register / Vol. 65, No. 120 / Wednesday, June 21, 2000 / Notices 38593

2 119 Cong. Rec. 24598 (1973). See United States

v. Gillette Co., 406 F. Supp. 713, 715 (D. Mass.

1975). A ‘‘public interest’’ determination can be

made properly on the basis of the Competitive

Impact Statement and Response to Comments filed

pursuant to the APPA. Although the APPA

authorizes the use of additional procedures, 15

U.S.C. § 16(f), those procedures are discretionary. A

court need not invoke any of them unless it believes

that the comments have raised significant issues

and that further proceedings would aid the court in

resolving those issues. See H.R. Rep. 93–1463, 93d

Cong. 2d Sess. 8–9 (1974), reprinted in U.S.C.C.A.N.

6535, 6538.

3Bechtel, 648 F.2d at 666 (emphasis added); see

BNS, 858 F.2d at 463; United States v. National

Broadcasting Co., 449 F. Supp. 1127, 1143 (C.D.

Cal. 1978); Gillette, 406 F. Supp. at 716. See also

Microsoft, 56 F.3d at 1461 (whether ‘‘the remedies

[obtained in the decree are] so inconsonant with the

allegations charged as to fall outside of the ‘reaches

of the public interest’’’).

and distribution of residential

broadband content. This proposed Final

Judgment will also avoid the substantial

costs and uncertainty of a full trial on

the merits on the violations alleged in

the compliant. Therefore, the United

States believes that there is no reason

under the antitrust laws to proceed with

further litigation if divestiture of the

interest in ServiceCo is carried out in

the manner required by the proposed

Final Judgment.

VII. Standard of Review Under the

APPA for Proposed Final Judgment

The APPA requires that proposed

consent judgments in antitrust cases

brought by the United States by subject

to a sixty (60) day comment period, after

which the court shall determine

whether entry of the proposed Final

Judgment ‘‘is in the public interest.’’ In

making that determination, the court

may consider:

(1) The competitive impact of such

judgment, including termination of alleged

violations, provisions for enforcement and

modification, duration or relief sought,

anticipated effects of alternative remedies

actually considered, and any other

considerations bearing upon the adequacy of

such judgment;

(2) The impact of entry of such judgment

upon the public generally and individuals

alleging specific injury from the violations

set forth in the complaint including

consideration of the public benefit, if any, to

be derived from a determination of the issues

at trial.

15 U.S.C. § 16(e) (emphasis added). As

the United States Court of Appeals for

the D.C. Circuit held, this statute

permits a court to consider, among other

things, the relationship between the

remedy secured and the specific

allegations set forth in the government’s

complaint, whether the decree is

sufficiently clear, whether enforcement

mechanisms are sufficient, and whether

the decree may positively harm third

parties. See United States v. Microsoft,

56 F.3d 1448, 1461–62 (D.C. Cir. 1995).

In conducting this inquiry, ‘‘[t]he

Court is nowhere compelled to go to

trial or to engage in extended

proceedings which might have the effect

of vitiating the benefits of prompt and

less costly settlement through the

consent decree process.’’ 2 Rather,

[a]bsent a showing of corrupt failure of the

government to discharge its duty, the Court,

in making its public interest finding, should

* * * carefully consider the explanations of

the government in the competitive impact

statement and its responses to comments in

order to determine whether those

explanations are reasonable under the

circumstances.

United States v. Mid-America

Dairymen, Inc., 1977–1 Trade Cas.

(CCH) ¶ 61,508, at 71,980 (W.D. Mo.

1977).

Accordingly, with respect to the

adequacy of the relief secured by the

decree, a court may not ‘‘engage in an

unrestricted evaluation of what relief

would best serve the public.’’ United

States v. BNS, Inc., 858 F.2d 456, 462

(9th Cir. 1988) (citing United States v.

Bechtel Corp., 648 F.2d 660, 666 (9th

Cir. 1981); see also Microsoft, 56 F.3d at

1460–62. Precedent requires that

the balancing of competing social and

political interests affected by a proposed

antitrust consent decree must be left, in the

first instance, to the discretion of the

Attorney General. The court’s role in

protecting the public interest is one of

insuring that the government has not

breached its duty to the public in consenting

to the decree. The court is required to

determine not whether a particular decree is

the one that will best serve society, but

whether the settlement is ‘‘within the reaches

of the public interest.’’ More elaborate

requirements might undermine the

effectiveness of antitrust enforcement by

consent decree.3

The proposed Final Judgment,

therefore, should not be reviewed under

a standard of whether it is certain to

eliminate every anticompetitive effect of

a particular practice or whether it

mandates certainty of free competition

in the future. Court approval of a final

judgment requires a standard more

flexible and less strict than the standard

required for a finding of liability. ‘‘[A]

proposed decree must be approved even

if it falls short of the remedy the court

would impose on its own, as long as it

falls within the range of acceptability or

is ‘within the reaches of public

interest.’’’ United States v. American

Tel. & Tel Co., 552 F. Supp. 131, 151

(D.D.C. 1982), aff’d sub nom., Maryland

v. United States, 460 U.S. 1001 (1983)

(quoting Gillette Co., 406 F. Supp. at

716); United States v. Alcan Aluminum,

Ltd., 605 F. Supp. 619, 622 (W.D. Ky.

1985).

Moreover, the court’s role under the

Tunney Act is limited to reviewing the

remedy in relationship to the violations

that the United States has alleged in its

complaint, and does not authorize the

court to ‘‘construct [its] own

hypothetical case and then evaluate the

decree against that case.’’ Microsoft, 56

F.3d at 1459. Since ‘‘[t]he court’s

authority to review the decree depends

entirely on the government’s exercising

its prosecutorial discretion by bringing

a case in the first place,’’ it follows that

court ‘‘is only authorized to review the

decree itself,’’ and not to ‘‘effectively

redraft the complaint’’ to inquire into

other matters that the United States

might have but did not pursue. Id.

VIII. Determinative Documents

There are no determinative materials

or documents within the meaning of the

APPA that were considered by the

United States in formulating the

proposal Final Judgment. Consequently,

the United States has not attached any

such materials to the proposed Final

Judgment.

Respectfully submitted,

Joel I. Klein, Assistant Attorney General.

Donna E. Patterson, Deputy Assistant

Attorney General. Constance K. Robinson,

Director of Operations. Donald J. Russell,

Telecommunications Task Force.Claude F.

Scott, Jr. (DC Bar No. 414960). Lauren

Fishbein. Lawrence M. Frankel. Peter A.

Gray. Juanita Harris. Yvette F. Tarlov. Trial

Attorneys, U.S. Department of Justice,

Antitrust Division, Telecommunications Task

Force, 1401 H Street, N.W., Suite 8000,

Washington, D.C. 20530, (202) 514–5621.

Dated: May 25, 2000.

Certificate of Service

I hereby certify that copies of the

foregoing Plaintiff United States’

Competitive Impact Statement, were

served via U.S. Mail, first class postage

prepaid, on this 25th day of May 2000

upon each of the parties listed below:

Attorney for AT&T Corp: Mark

Rosenblum, AT&T Corp., 295 North

Maple Avenue, Basking Ridge, New

Jersey 07920; David Carpenter, Sidley &

Austin, Bank One Plaza, Chicago, IL

60603.

Attorney for MediaOne Group, Inc.:

Sean Lindsay, MediaOne Group, Inc.,

188 Inverness Drive, West, Suite 600,

Englewood, CO 80112.

Claude F. Scott, Jr.,

Counsel for the United States.

[FR Doc. 00–15591 Filed 6–20–00; 8:45 am]

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