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5 <br />REPORT <br />AOL - TWI - AT&T <br />TRANSFER OF OWNERSHIP &CONTROL <br />III. BACKGROUND: <br />Commensurate with the Cable Act of 1992, the Federal Communications Commission <br />promulgated a transfer of ownership procedure to allow franchise authorities to review <br />the legal, technical and financial qualifications of the new owner/transferee; and <br />determine whether or not the transferee is qualified to assume the duties and <br />responsibiliries of operating acable-telecommunication system. <br />The FCG-39~ form must be completed by the operator and provided to the franchise <br />authority to disclose the business matters associated with the transfer. Zt requires the <br />cable operator to: 1) furnish a copy of the document providing fox the transfer of control <br />from TWI to AOL 2) transfer of ownership from MediaOne to AT&T; 2) address <br />whether the transferees are legally qualified to transact business in North Carolina; 3) <br />address the character qualifications of the transferees; 4) discuss the transferee's financial <br />qualifications; and 5) present evidence that the transferee is technically qualified to <br />operate the cable system. <br />A. AT&T - MediaOne Acquisition <br />AT&T's acquisition of MediaOne's 25% stake in Time Warner Entertainment, a <br />limited partpership with 9.7 million subscribers that also include the Warner <br />Brothers Studio and tfie Home Box Office premium cable channel, may be barred <br />under Federal cable-ownership limits. These limits prohibit any cable operator <br />from serving more than 30 % of cable television customers. AT&T's acquisition <br />of MediaOne would boost AT&T's market share to 39% of the homes served by <br />cable television As a~result, the federal government (FCC) could force AT&T to <br />sell cable systems or partial stakes in other operators or programming interests, <br />such as Liberty Media Crroup to comply with the federal ownership limits. <br />B. AOL-TWI Merger <br />AOI, is acquiring Time Warner. To effect the merger, the companies propose to <br />eliminate their existing stock and issuing shares in a new company, AUE-Time <br />Warner, This is the largest corporate merger in the history of the USA, Time <br />Warner, the world's largest media and entertainment company, will be acquired in <br />a stock swap by America Online for about $168 billion. The merger unites the <br />biggest name i:n traditional media with, the world's largest Internet company. The <br />-I- <br />