Agenda - 09-05-2000-5b - Laserfiche WebLink

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decision in the 1990s to enter the cable television business. They purchased the assets of multiple system providers (MSOs), such as Colony Cable as well as a 2S% interest in Time Warner Entertainment. USWest named its cable division MediaOne. Recently, USWest decided to concentrate on its core business, telephone service and decided to divest itself of its cable television assets. 18 Simultaneously, AT&T, a long distance telephone company, received authority from the federal government to provide local telephone service. AT&T reasoned that they could either lease `Bell' lines or deploy their own network. AT&T decided to pursue the third alternative, to purchase cable systems and use those wires to provide local and long distance telephone service to its customers and compete against the Bell telephone companies and GTE. AT&T's acquisition of MediaOne's 2S.S1% shaze of Time Warner Entertainment Advance Newhouse will give it a 32% interest in Time Warner's high speed Internet service, Road Runner. When this interest is combined with AT&T's S8% stake in Excite@home, MediaOne's high-speed Internet service, places AT&T squarely is in the position of dominating the two prominent broadband-cable modem services. The federal ownership statutes limit any one cable operator to no more than 30% of the mazketplace. AT&T's purchase of MediaOne boosted its national market share to 39%. Although, MediaOne surrendered its management rights to Time Warner, this did not deter the FCC from ruling that the transaction exceeded the federal limits. The FGC is not enforcing the rule because a federal district court judge in 1993 ruled that the statute authorizing the 30% cap was unconstitutional because it violated the First Amendment. The matter was appealed to the US Court of Appeals in December 1999 and a decision is expected later this year. The FCC believes that the lower court's ruling will be reversed and the 30% statute cap will be upheld. Consequently, the FCC has advised AT&T that they would have 180 days from the date of decision to come into compliance. Compliance could mean that i) AT&T could exchange its Time Warner stake for a sweet heart contract with AOL-Time Warner to provide phone service over their cable systems or ii) AT&T could divest itself of its Rainbow Media Holdings, Inc., and Liberty Cable properties to comply with the 30% cap rule. MediaOne initially invested $l.S billion in Road Runner's start-up. This investment's current value approaches $1 S billion4. Because of RR's exceptional appreciated value, a buyout of AT&T's interest by the new entity, AOL -Time "'T'alking Up the Deal, Multichannel News, January 24, 2000. Franchise Fee U-Tax Auditing & Cable Television Administration 101 Pocono Lane, Cary, North Carolina 27513-5316 Voice # 919.467.5392 Fax # 919.460.6868