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14 <br />options to reduce its attributable ownership interests to 30% of MVPD <br />subscribers nationwide: 1) divest their interests in Time Warner Entertainment; 2) <br />insulate their interests in Time Warner Entertainment (TWE) by ending <br />involvement in TWE's video programming activities, which entails selling <br />AT&T's programming interests, including Liberty Media Group; or 3) divest their <br />interests in other cable systems, which involves divesting cable systems serving <br />approximately 11.8% of subscribers nationwide (i.e., more than 9.7 million <br />subscribers or more than half of AT&T's current subscribers) <br />If AT&T chooses to sell its TWE interest (option #1), it is likely that the City will <br />have to review and approve that transaction as well. The new owner could be <br />another cable company, a telephone company, another Internet service provider or <br />some other company seeking to position itself the new e-commerce economy. <br />B. AOL-TWI Merger <br />AOL is acquiring Time Warner. To effect the merger, the companies propose to <br />eliminate their existing stock and issuing shares in a new company, AOL-Time <br />Warner. This is the largest corporate merger in the history of the USA, Time <br />Warner, the world's lazgest 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 in traditional media with the world's largest Internet company. The <br />merger will transform the Internet from a communication medium, originally <br />coveted by academic and scientific professionals, to a highly evolved ubiquitous <br />media entertainment and communication economic engine. <br />Time Warner was created in 1990 merger of Warner Communications and Tirne, <br />Inc. while. AOL was founded in 1985. AOL has four times the net profit of Time <br />Warner. For the fiscal year ending June 30t", 1999, AOL earned $762 million on <br />$4.8 billion in sales against TWI's $26.8 billion gross revenues. <br />While AOL has become a cable and telecommunication company, the merger <br />completes the transformation of Time Warner's cable systems into comprehensive <br />digital networks. The merger grants AOL access to Time Warner's 20 million <br />homes, making AOL the lazgest provider of information distributed via a wired <br />broadband platform. It offers AOL's 13 million customers, many of which are <br />Time Warner cable subscribers, direct high speed access to AOL's content <br />engines via the cable modem platform. Likewise, Time Warner cable subscribers <br />will have access to the same platform and content database delivery engines. <br />Soon, Time Warner's vast intellectual property libraries, as well as AOL's, will <br />be delivered at light speed via fiber optic cable and cable modems upon the click <br />of a mouse and fora "small fee" to the public. <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 />