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13 <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 />responsibilities ofoperating acable-telecommunication system. <br />The FCC-394 form must be completed by the operator and provided to the franchise <br />authority to disclose the business matters associated with the transfer. It requires the <br />cable operator to: 1) furnish a copy of the document providing for 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 partnership with 9.7 million subscribers that also include the Warner <br />Brothers Studio and the Home Box Office premium cable channel, is barred under <br />Federal cable-ownership limits. These limits prohibit any cable operator from <br />serving more than 30 % of cable television customers. AT&T's acquisition of <br />MediaOne would boost AT&T's market share to 42% of the homes served by <br />cable television As a result, the federal government (FCC) has ordered AT&T to <br />divest itself of cable systems or partial stakes in other operators or programming <br />interests, such as Liberty Media Group to comply with the federal ownership <br />limitsl. Without divestitures, the merged AT&T-MediaOne would serve 34.4 <br />million subscribers or 41.8% of Multichannel Video Programming Distributor <br />(MVPD) subscribers, which represents 51.32% of nationwide cable subscribers. <br />On June 5, 2000, the FCC has granted conditioned approval of the <br />AT&T-MediaQne Merger. As anon-severable condition to granting the <br />application, the FCC requires the applicants to complete one of the following <br />1FCC Document CC92-12, June 5, 2000. <br />Franchise Fee U-Tax Auditing & Cable Television Administration <br />101 Pocono Lane, Cary, North Carolina 27513-5316 Voice # 919.467.5392 Fax # 919.460.6868 <br />