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Home My WebLink AboutMINUTES - 08062002 - SD7 I. SALIENT FEATURES OF THE AT&T COMCAST MERGER. The AT&T ComcastMerger (the "Merger") will create` the largest' cable television company in history and involves the following salient features: (1)' AT&T Comcast Corporation ("AT&T` Comcast") will serve approximately 22 million cable subscribers, which includes°about 5 million digital video customers, to 2,200,000' cable modem subscribers, and 1,000,000 cable telephone subscribers. (2) Control of AT&T Comcast will be vested effectively in the Roberts Family, which currently controls Comcast. The Roberts Family will possess, subsequent to closing, 33% of the voting shares of the merged company. Given the widely diversed ownership of remaining shares,the Roberts Family will possess effective control of AT&T Comcast,. (3) The Board of Directors of AT&T Comcast will be comprised of five (5)members nominated'by Comcast, five (5) members nominated by AT&T, and two (2) additional members unaffiliated with either:.company. Brian Roberts of Comcast will be Chief Executive Officer and C. Michael Armstrong of AT&T will be Chairman of the Board. (4) On the liability side, AT&T Comcast will assume almost $20 billion in debt and other liabilities from AT&T and its subsidiaries, as well as $5 billion of AT&T subsidiary trusts convertible preferred securities held by Microsoft Corporation making the aggregate value of the transaction to AT&T shareholders worth$72 billion,based on the closing price of Comcast class K stock on December 1911'. (Exhibit 1,p. 4.) (5) AT&T Comcast Corporation will assume 'significant debt' in that AT&T constitutes>a highly leveraged cable operator with significant going forward capital demands. (Exhibit 2) (6)' Accounting for non-strategic assets that have been, or will be sold, AT&T originally paid $4,100 per subscriber for TCI and Media One, largely in AT&T stock. The Merger essentially values AT&T cable systems at approximately$4,500 per subscriber. (Exhibit 1,p. 6.) (7) The Merger is touted as producing"significant'synergies"based upon predictions, or perhaps speculation, that AT&T Comcast would generate $1.25 billion in cost savings annually with the potential to increase those benefits to between $2.6 billion and $2.8 billion as the companies work together to improve broadband's cash'flow margins. Comcast predicts significant improvements in operating margins with overhead perhaps being slashed by a factor of 10x. ("Brian's Bear'Hug-Comcast Roberts Want AT&T's MSO", Multichannel News, July 16,2001,Exhibit 3,p. 5;Exhibit 4,pps. 8, 10.) 1241011397-0001 ' 290697.01 a06111/02 II. THE 1998-2001 CAB E 'MEGA- ERGERS" HAVE PROVED FINANCIALLY DISASTROUS- TO CABLE SHAREHOLDERS CQUNTERPRODVCTIVE TO THE BEST INTERESTS OF CABLE SUBSCRIBERS. Between 1998 and 2001, we saw numerous "Mega-Mergers" of various cable operators including, without limitation, the acquisition of Century Communications by Adelphia Communications ("Adelphia"), the acquisition of TCI, Inc. by AT&T to form AT&T Broadband ("AT&T'), the acquisition of numerous cable operators including Marcus Communications and Charter Communications by Paul Allen to form Charter Communications, Inc. ("Charter") and the merger of Time-Warner'Cable and AOL, Inc. to form AOL Time-Warner, Inc. ("AOLTW") In all of these mergers, the following claims were made to justify the merger or acquisition to both shareholders and regulatory bodies. (l) The merger would increase shareholder value through a combination of massive increases.in revenue growth and cost savings synergies; (2) The merger would accelerate the deployment of cable based telephony so as to provide a viable competitive alternative to incumbent local exchange carriers; (3) The merger would produce significant opportunities for capital expansion and accelerate the upgrade of cable systems and the deployment;of new services; (4) The merger would produce no negative impact on subscribers in terms of instability of management personnel, increased rates,or reductions in the quality of services, and (5) The merger would put`an end to the fragmentation of cable ownership and provide long-term stability to the ownership and management of cable systems throughout the Country. Without a doubt, almost all of the promiseslisted above have proved hallow with the reality being far worse than any analyst or government official could have reasonably predicted.' The following constitutes a discussion of the proven historic results of past mergers which are substantially similar to the one being proposed'by AT&T and.Comcast, A. Impact on Shareholder Value. One only need to review the historic performance of the affected cable stocks over the past three to five years to determine the market reaction to the above-described"Mega-Mergers". On June 6, 2002, AT&T Corp. traded at $11.67. Immediately prior to the consummation of the TCI-AT&T merger, AT&T stock traded in the range of$40.00 per share. (Exhibit 5.) Charter Communications, Inc., a company built almost totally through high priced acquisitions by Paul Allen, traded on June 6, 2002, at around $5.40. During much of 2001, Charter traded between $21-25 per share. (Exhibit 6.) AOLTW, which obviously includes significant cable and non- cable properties,traded on June 6,'2002, at$16.56 although that stock traded in the range of$50- $55 immediately subsequent to the closing of the AOL Time Warner merger on January 11, 2001. (Exhibit 7.) AOLTW has recently taken a $54 billion none-cash pre-tax charge for 1 The fact that we are here today demonstrates the invalidity of the fifth premise. 124/011597.0001 290697.01206/11/02 -2- impairment of goodwill, substantially all of which was generated in the merger of AOL and Time-Warner, which reflects declines in market value of the combined assets. (Exhibit 8 ) A material portion of this impairment'charge relates to the decline in value of Time-Warner's cable property ($22.98billion or 42.3% of the total impairment charge).' (Exhibit 8..) Recent reports have indicated that the early retirement of Gerald Levin, the prior former CEO of Time-Warner, Inc. was based upon the perceived debacle of the AOL Time-Warner merger. (Exhibit 9.) Although not treated as harshly as ether cable operators, the stock price of Comcast Corporation has also taken a significant hit, trading at around $25.99 on June 6, 2002, down from approximately$56 in November 2000. (Exhibit 10.) The financial implosion of Adelphia, which no longer trades on the NASDAQ due to its delisting, is breathtaking from a negative viewpoint and merits a separate discussion given its dire potential consequences upon Adelphia' creditors, shareholders, franchising authorities, and subscribers. Although numerous factors obviously account for the horrendous declines in market value of the major cable operators which went on a "spending spree" between 1998-2001 by purchasing cable systems and companies for prices in the range of$3,00046,000 per subscriber, the uniformly dismal financial performance of these'entities suggest that the financial burdens imposed by these acquisitions, and the debt and equity demands associated therewith, create a grounds for suspicion of any transaction°which goes off at extremely high per'-subscriber prices and boasts of significant synergies. Against this factual backdrop, it is incumbent upon any cable operator proposing a merger similar to that undertaken by AT&T, Charter, AOL Time- Warner, and Adelphia to fully explain haw and why that proposed will succeed whereas other mergers have failed and why the merger will produce positive as opposed to negative subscriber results. B. ___ act U on Deplg_vment'of Cable--Based Tel hon and 0 her New Services. The "Mega-Mergers" have produced little competition in the delivery of local exchange phone service. Although Cox Communications, Inc., has aggressively deployed cable-based telephony in a few of its franchise areas, the availability of competitive local'exchange service options continues to be non-existent for the vast majority of citizens in this Country. AT&T touted its merger with TCI as producing an entity that would pursue the deployment of competitive local exchange service in an aggressive manner on a national level. However, three' years later, AT&T's local exchange telephony deployment has proved relatively insignificant, as compared to the boasted promises and the commitment of other"Mega-Merger" cable operators to local telephony has proved even more evasive. For example, Adelphia boasted the deployment of local exchange telephony service through its affiliated entity, Adelphia Business Solutions, Inc. However, Adelphia Business Solutions, Inc. recently declared bankruptcy and has sold the bulk of its infrastructure to potentially"soon to be bankrupt Adelphia. Although AT&T and Comcast have, once again and without specificity, boasted the telephony deployment potential of the Merger, they have refused ;to provide any details, plans,' budgets, roll-out schedules, or otherwise to support their claim that this Merger will succeed in an area where every prior merger has failed. 124/011 s97-moo 290647,01 aO6/ 1/oa -3- It is questionable, at best,whether the"Mega-Mergers"have enhanced the availability of capital for the purpose of rebuilding systems and deploying new services. Certainly, the reverse has=<been true over the last twelvemonths as highly-leveraged cable companies have lost' the ability to access either debt or equity capital based upon the market's curtailment of their capital sources. The fact that billions in debt and equity capital were raised and expended to pay the prior owners of many of these cable systems has certainly contributed to this problem. It is well known that AT&T has terminated or materially delayed numerous capital improvement programs ,'throughout the Country' within the '12-18 'months based upon "capital securement concerns" Likewise, highly-leveraged cable companies, such as Charter and Adelphia, have found it increasingly difficult to borrow additional sutras based upon negative market perception of high leverage ratios. Adelphia has recently announced the termination of all of its rebuild projects,at least in Southern California,based upon its current financial condition. C. I pact Upon Subscriber Rates. Congress significantly deregulated the cable television and telecommunications industries in 1996 used upon the extensive deregulation of cable operators, especially in the area of rates, values of cable systems soared between 1998 and 2001 from' a national average of approximately $180042,000 in 1997 per;subscriber to the range of$4,000-5,000 per subscriber with some large transactions peaking in excess of$6,000 per subscriber in 2001. Cable systems were bought and sold, often more than once within the same twelve month period, at a frenzied pace between 1998 and 2001 with cable owners realizing profits in the billions of dollars based upon the sale of cable systems which had escalated in value two or three tunes within a six to eighteen month'period. Large and small fortunes were made literally overnight during this timeframe as local franchising authorities were inundated with FCC Forms 394 seeking franchise transfers. Little known cable operators, such as Charter and Marcus which did not even exist prior to the mid-I990's, all of a sudden jumped into the "top ten" stratus of M Us with some operators,,such as Marcus, going through a cycle where it was created, grew by acquisition and flipped in its entirety to another cable operator between 1993 and 2001. Cable executives and their investment bankers reaped billions in short term profits during this period of rampant speculation. Telecommunications operators, which consist of primarily competitive local exchange carriers ("CLECS") and competitive long-distance carriers also enjoyed a stock market halo during the same timeframe. Between 1998' and 'early 2000, °telecommunication operators, including the so-called "video overbuilders" such as RCN, Inc.,;Wide Open West,,WIN First, Inc'. and Siren"Communications enjoyed easy access to the capital market. Publicly-traded 2 It should be noted that it was only in 1992 that Congress significantly re-regulated the cable television industry, and the rates charged by those video providers, based upon a determination that the cable industry had unreasonably raised Basic Service Tier ("BST") and .Cable Programming Service Tier("CPST")rates between 1984 and 1992. The legislative history of the Cable Television Consumer Protection and Competition Act of 1992 (the "1992 Cable Act") is replete with anecdotal and statistically valid 'examples of rate gouging by monopolist cable operators. However,' for whatever reason, the political winds shifted' by 1996 and the cable industry was largely deregulated in terms of the rates which it could charge for video services' irrespective of the introduction of actual competition in any particular marketplace. 1 24/01 1 5 97.4001 11_ 290697.01406111/02 telecommunication operators likewise rode the "E-commerce 'optimism right into stockholders meetings due to rapidly escalating market capitalizations and easy access to debt and equity financing'. Much of the economic enthusiasm for competitive telecommunications providers was bunt upon the purported availability and desirability'of new fiber-based services which, in one way or another, were often hinged: upon lightening quick access to the Internet. In theory, the introduction of material competition into the traditionally monopolistic markets for voice, video, and data was supposed to produce the same type of consumer benefits which were predicted by the creators of electric deregulation within the same timeframe espoused by the electric deregulation proponents. Unfortunately,reality and vision often do not coincide. The deregulation of video providers was largely premised upon' the notion that meaningful competition would be quickly infused into monopolistic local video markets through a combination of satellite providers, competitive video providers, and local phone companies. The harsh reality is that the local phone business and the video business simply did not mesh for a number of reasons. Although policy makers possessed great expectations in 1996 regarding the entry of Regional Bell Operating Companies ("RBOCS") into the local' video market, it simply didn't happen. Although some RBOCS,such as Pacific Bell,commenced construction of video platforms in certain selected markets, it ultimately abandoned' those efforts upon its acquisition by SBC. Likewise, Ameritech applied for and received numerous franchises in the Chicago area and ultimately constructed cable plant to be operated in conjunction with its existing phone system. Competitive overbuilders have largely come and gone due to the non-availability of capital in competitive markets. Likewise; entrenched and monopolistic providers, such as AT&T Corp., are currently experiencing significant problems in raising capital for system rebuilds'even in largely monopolistic markets. At this point in time, all but a few of the 'competitive' overbuilers have scaled back significantly upon their overbuild'efforts with little competitive plant having been constructed as of this date. Even in those situations where competitive ovrbuilders possess the capital and wherewithal to construct plant, it is uncertain whether their long-term plans envision a continuing market presence or a "bulk''up and sale" exit strategy to a larger existing video or voice provider.' Finally, although'direct broadcast satellite',("DBS") is certain a real force in the marketplace today, its presence has only served to slightly slaw the rate of growth in traditional cable television penetration and has not caused, at least in most large markets,any decline in traditional'cable penetration. Although DBS can be expected to continue; as a market force in rural and even marginal cable markets, it is unlikely that DBS, or any other: form of over-the-air delivery, will constitute a competitive force sufficient to actually cut cable penetration in all but a few markets. As a result of the convergence of abrupt governmental deregulation market:speculation competitive failures,: video and telecommunications suppliers are experiencing significant financial;problems with a portion of those problems ultimately being strapped to the back of consumers. The Telecommunications Act of 1996 (the "TCA") has produced little if any meaningful competition in the areas of video and local phone services. On May 3, 2001, the Wall Street Journal published an article entitled' "The Big Telecom Disconnect" which essentially reported that the TCA. has failed to deliver upon its competitive promises to consumers with the result that the monthly bills for local telephone service and cable continue to 1241011597-0001 290697.01 405(11102 -5- rise reflecting an array of new fees and dearthof competitors. Among the points made by the Wall Street Journal are as follows:' (1) Basic cable rates on average have risen 33% since the TCA took effect in 1996— almost three times the rate of inflation. (2) Prices' for basic high-speed Internet access via: digital subscriber lines are increasing to approximately $49.95 a month from $39.95, thanks to increases by SBC Communications, Inc. and Earthlink, Inc. Verizon Communications, Inc. and BellSouth Corp. are expected to announce similar jumps. (3) AT&T Corp. in 2001 raised its prices on Internet access via cable modems by$6 per month to about $45.95'a month. Another rate ''increase relating to equipment rental was announced last week.; AOL Time'Warner, Inc. raised At3I!s basic service rate for online access to$21.95 Double digit rate increases are the norm as opposed to the exception.. (4) Local telephone bills are ballooning due to numerous fees that the RBOC'S and regulators have slapped on or ratcheted up, while most basic phone rates remain regulated. Significant rate'increases can be found in such deregulated or marginally regulated'services as voice mail, national directory assistance. In addition, basic monthly charges for twisted copper connections are likewise rising. Although the TCA has produced'little direct consumer benefit, the telecom providers are likewise struggling in this new deregulated environment. Although the TCA was"intended to spur competition, the law has actually left long-distance companies struggling with low profits, RBQC'S continue to angle to get into long distance>without success, cable TV rates rise far in excess of inflation, and many phone and high-speed Internet service start ups:have collapsed or are on the verge of collapse. (Wall Street Journal, "Everyone's Got a Solution for Indy Woes,"May 3,'2001), Many of the new startup teleom providers, which were often pointed to as the bearers of new competition in the post-TCA age, are bankrupt or will soon be in that sorry state of affairs. The years 2001 and 2002' witnessed a flurry of bankruptcy filings"'by telecommunications providers throughout the Country. Well known companies including Convergent' Communications, Winstar Communications, North Point Communications, Digital Broadband,' Flashcom, Inc., Fast Point-Communications, ICG Communications, Inc., Global Crossing, Net Tel Communications, Inc., 'MFN,'Inc., GST Telecommunications, Inc., and Op Tel, Inc.,'have already bitten the dust. Even major players such as Qwest are experiencing severe financial troubles. However,the numerous existing bankruptcy filings may only be the tip of the iceberg. The number of. filings by companies providing telecommunications and broadband'' services is expected to increase dramatically. These bankruptcies raise a number of questions and concerns for communities in which these telecommunications companies are constructing or operating networks, not to mention the subscribers who are looking forward to the provision of competitive telcom services from these companies. At least some of the more realistic members of Congress have acknowledged that the TCA has done little to change the fact that RBOCS control about 93% of residential telephone and existing cable operators continue to control the 124/01 2 597-tool 290697.01906/11/02 -6- vast majority of video connections into American households. (Multichannel News, "Sens. Bemoan Lack of Phone Competition,"May 2,2001). Although competitive conditions exist in the telecommunications business market, CLECs are nowhere close to unseating the four regional Bell operating companies:with Bells claiming about '95% of the small business and residential markets according to the Federal Communications Commission. (Multichannel News, "CLEC Surge Could be Last Hurrah,"May 28,'2001,p. 31) The impact of the TCA'upon erne-way cable television video!services has been equally unimpressive. Although AT&T Corp. ballyhooed the synergistic benefits of its combination with TCI'in 1999 in terms of the spurring of competition in local''residential phone service as well as the creation of a robust and healthy video provider,'the realities have been anything but kind to AT&T Corp. Its stock price has decreased dramatically since its acquisition of TCI, and it has now announced its intent to "take Humpty Dumpty'apart" in 2002 with the Merger. In the meantime,' both the trade and popular press have reported significant rate increases for AT&T as well as other cable operators (Multichannel News, "Cablevision Bikes Ex-MediaOne Rates," May 7, 2001) and customer complaints relating to service quality degradation have likewise increased. (Multichannel News "Complaints Skyrocket in L.A., April 20,'2001; Multichannel News "AT&T Media Services Eyes Layoffs,"'' April 27, 2001). One cannot go a week without reading an article in Multichannel News regarding layoffs or other economic constrictions at cable operators hit hard by a decline in their stock price or the availability of market capital. Cable operators are not only raising video programming rates, many of which were deregulated pursuant to the TCA in 1996,but have also announced significant'increases in cable modem service rates. (Multichannel News, "Powell. Data Pates Could'Curb Growth," May 28,' 2001, p. 31).3 At least certain members of Congress'have rejected the Commission's spin as to 3 The spin doctors at the Federal Communications Commission (the "Commission"):have recently created a new index for rate reasonableness evaluation, that being "price per channel". The Commission reported that cable rate increases are not unreasonable,at least in the opinion of the Cable Services Bureau, in that cable rates have stayed relatively flat as calculated on,a per channel basis. However, in the same report, the Commission acknowledged that cable 'rates, calculated in the aggregate, rose 5.8°x'0 during the twelve' month period ending July 1, '2000' compared with a 3.7% inflation rate during the same period. The same Commission survey' showed that rates on a per channel basis remained flat at 57¢ for cable operators facing. competition from overbuilders. (Multichannel News "FCC Official: Cable Rates Flat," May 3, 2001). Cable rate increases don't appear to be a concern of Michael Powell, the Republican' Commission Chairman, when he 'indicated that cable rates'don't appear to be a problem in that average cable rates don't even come close compared to what you pay for gas, for electric service. to. . . my electric bill is by an order of magnitude higher than my,phone bill ever is or ever will be [and] a magnitude higher than my cable bill. (Multichannel News, "Cable :Rates Reasonable, Powell Says," .April 24, 2001.) The methodology currently utilized by the Commission, as well as its Chairman, is inconsistent with the aggregate pricing analysis utilized by Congress as well as the Commission in relation to:;the adoption and implementation of the 1992 Cable Act. In addition,;rate calculations on a per channel basis possess little relevance to consumers who are forced to buy large packages of programming as opposed to selecting only programming which: they find to be valuable or desirable. 1247t111597-OWI 290697.01 806!11/02 -7- the reasonableness of cable rates as calculated'on a "per channel" basis. Claiming competition hasn't stopped runaway cable rate increases, Representative Barney Frank (D-Mass.),introduced a bill to°revive the Communications' authority to regulate retail cable prices by essentially repealing`the CPT deregulation which occurred in 1999.' (Multichannel News, "Rep. Frank Proposed Cable'-Regulation Bill," May 21, 2001). Likewise, at least one city council, faced with extreme customer dissatisfaction with monopolistic pricing'and cable service,',has attempted to take relatively dramatic and innovative steps by negotiating bulk deals with satellite providers hoping to instill some true competition in the local video market, notwithstanding the fact that such an 'approach would reduce franchise fees. Other 'cities have 'begun to study public ownership. Regardless of any "efficiencies of scale," or increase in programming purchasing power achieved by the merger, it is unlikely that subscriber rates will decrease in the future. The likelihood, rather, is for an increase in 'rates, although perhaps not in the short term. Some economies can result from cutting costs,but the need to service the huge new debt resulting from the merger, and simultaneously to expedite system upgrades and introduce new services, will exert great pressure to increase rates. The only counterweight to this pressure in ,most communities will be the availability of DBS services as a competitor'for video services, and Digital Subscriber Line (DSL) as a competitor for data services. Both DBS and 'DSL' competition, at'least up to now, have not slowed annual cable rate increases to any significant extent. Furthermore, the history of previous cable industry mergers has not evidenced any slowing impact upon rate increases, and there appears to be no reason to believe that the results of the Merger will be any different, D. Impact Upon Subscriber Service. Within the last two to three years, a substantial number of ATT-served communities have indicated growing concern with a perceived deterioration in the duality of customer service provided by AT&T. Exhibit 11 indicates a number of examples. The first page provides the quarterly telephone response over the last two years for AT&T's "Western Region" cable' systems,which includes many California systems. Section 7 6.3 09(c)(1)(ii) ("Customer Service Obligations"] of the FCC's regulations reads as follows: "Under normal operating conditions, telephone answer time by a customer representative, including wait time, shall not exceed thirty (30)seconds when the connection is'made. If the call needs to be transferred, transfer time shall not; exceed thirty (30)seconds. These standards shall be met no less than ninety (90) Percent of the time under normal operating conditions, measured on a quarterly basis.,, As can be seen on the chart in Exhibit 11,for 1939 the 90%threshold was met only in the first quarter,dropping as low as 50.15%in the third quarter.. In 2000,the 90%threshold was met for the first two quarters, but was not met during the last two quarters. For the first three quarter;, 1241011597.0001 290697.01$46/11102 -8- of 2001,the threshold was not met at all. From the third quarter of'2000 through the third quarter of 2001,the response worsened from 86.QO o to $0.84 0. In summary, over a period of nearly three years (I1 calendar quarters), the FCC Standards were met in only three quarters. Based on this;poor telephone response history, it reasonably can be presumed that there has been an adverse impact on the overall quality of service, since a basic requirement for good service is the ability of subscribers to reach customer' service representatives on the telephone. if 50' % of the callers are not to do so within 30 seconds, experience dictates that many of them will abandon the call, and consequently service problems will go unresolved(or subscribers will discontinue their service). Exhibit 11 contains other examples. The Forbes article of October 25, 2001, contains the following statements. "The cities are miffed about poor customer'''service. Several have levied fines against the company for failing) to meet minimum standards. Those fines are capped at only a few hundred dollars a day,but are a n indicating of frustration at the local level.": "Last week, Fort Lauderdale, Fla., city commissioners did something almost unheard-of -- they refused to renew the city's cable franchise agreement with AT&T broadband until they are convinced that customer service has improved. The service complaints do not appear to be isolated. It is the same story in the suburbs of Chicago; central Massachusetts; Miami-Dade County, Tustin, Calif., St. Paul,Minn.; and Fayette County, Ga. The city of Plantation, Fla., went so far as to sue A&T (sic) Broadband in September because it did not build what its attorney says was a promised institutional network." "Many systems are in the process of renewing franchise agreements and are looking for ironclad promises from AT&T Broadband -- promises; for better costumer service and upgraded networks that ultimately will have to be kept by a new provider. "We will put the new buyer on notice that they are obligated to comply with the contractual obligations made by AT&T," says Mario Goderich, director of Miami-Dade County's consumer protection division." A third and fourth article in Exhibit 11, from the February 11,2002 issue of Cable 'World describes the customer service problems of Jacksonville, Florida, which have escalated to the point where the state Attorney General has been requested to initiate a fraud investigation against AT&T Broadband. The aggregate weight of''these, and other examples, indicates that AT&T's quality of service appears to have deteriorated substantially in many'communities. How much of this is due to budgetary constraints imposed as a result of AT&T's financial problems is difficult to determine,but certainly that has been one contributing factor. 124011597--0001 290697.01"/11/02 _ The perceived, as well as quantified, declines in customer service performance should come as no surprise since marry of the "Mega-Mergers" involved the assimilation of a large number of cable subscribers into organizations which were extremely young and relatively thin in terms of management personnel. It is not difficult to link the 'declines in service quality, at least in part, to the consolidation and elimination of local positions, elimination of management positions, the introduction of managers from remote locations into unfamiliar markets, and the general personnel"noise level"that often'comes in the merger of two culturally different entities such as AT&T and TCL Other cable companies suffered wholesale defections of management, such as the case of MarcusCommunications where their entire top management echelon was replaced or left shortly after its acquisition by Paul .Allen. In fact, all of the founders and top managers of Charter were gone within two years of Mr. Allen's acquisition of that entity. Once again, declining customer service in an atmosphere of management and employee instability and transition can be expected as the norm as opposed to the exception. It'should be noted that several prominent consumer protection;;groups, fronted by the Consumer Federation of America which is made up of 280 consumer groups including the American Association of Retired persons and represents about 50 million members,have taken the formal position that the Merger "will'lead to higher rates and poor service." The Consumer Federation has concluded that Comcast's plan to achieve synergies by reducing AT&T's operating'costs thus improving margins will cause quality to "deteriorate as call centers move farther away." (Exhibit 12.)' E. Impact Upon lylana eg, rnent stability. It should be noted that one of the promises typically made in a merger is stability of management in terms of retention of key personnel of the acquired company at the local and national level so that subscribers and franchising', authorities will not burdened with the introduction of new personnel unfamiliar with the market place and its regulatory requirements. Once again, most of these promises have proved hollow and many of the "Mega-Mergers" have resulted in wholesale' eliminations of existing management at the national, regional and local level. For example, notwithstanding specific claims to the contrary, practically the entire tier of top management of Marcus was replaced upon its acquisition by Paul Allen. Likewise, many of the prior Century managers failed to make the transition to Adelphia. In the case of AT&T's acquisition of TCI, management changes were made wholesale. Shortly after the ''AT&T-TCI merger closed,many of the top and middle level TCI personnel were replaced either with AT&T personnel, which had little or any familiarity with cable, or with individuals from other cable operators. Upon AT&T's acquisition of Media One, many of the few remaining TCI personnel were likewise :replaced with Media One employees. In some cases, local managers were eliminated with cable systems now being managed by individuals stationed many'miles away from the situs of the cable operation. Likewise, local call centers,containing individuals familiar with the cable market, were replaced with regional and national call centers staffed by individuals who had little if any knowledge of individual cable systems, their programming; lineups, or the community. In some cases, AT&T customer service calls have allegedly been routed to Canada and ether'remote areas where lower employee costs could be obtained. All of these changes have eliminated, in many''cases,'the "institutional memory" of the cable operator, disrupted ongoing relationships, essentially terminated and restarted any type of negotiations regarding renewals, breaches, or otherwise, and have done little to improve the quality of cable 1241011547-0002 290697.01 406n 1/02 '10 service while apparently not achieving the kind of cost saving advantages which were predicted prior to the close of the AT&T-TCI merger. F. Irnfiact LTnon Capital h2provements. As many AT&T-served communities are aware, AT&T in the last two to three years has been slow in upgrading its:cable''plant, particularly thosesystems acquired'from TCI. In a number of cases, franchise contractual schedules for completing the upgrade have not been met. AT&T representatives have indicated that restrictions on'capital budgets were a major reason for upgrade delinquency. These restrictions, in turn,were driven by precipitous decreases in AT&T's stock valuation(which eventually led to the merger proposal from Comcast). In any event, Exhibit 13 notes that "Capital additions decreased 26.3%to $2.6 billion for the nine months ended September 30, 2001 from $3.6 billion for the comparable prior' year period." This indicates the substantial reduction in capital expenditures, most of which are allocated to system upgrades. The key question is whether AT&T Comcast will have the capital resources needed to speed up'cable system upgrades and also to introduce new services, and if so, can it allocate these resources quickly and effectively. The Comcast balance sheet, as of September 30, 2001 (Exhibit 14), indicates about $15.9 billion in total stockholders' equity, and about $20 billion in liabilities. Furthermore, current liabilities exceed current assets, so that new capital will have to come,in the short-term, from additional borrowings or increased subscriber rates. This is substantiated by the announcement (Exhibit 14) that indicates that Comcast has secured additional taros of about $10 billion dollars. This amount is estimated to be "about 80°f0" of the$11-14 billion"needed to service AT&T Broadband's'debt and handle capital issues." As has been noted, AT&T will carry into the Merger, $20-25 billion in debt, depending on whether the Microsoft investment is converted into stack. This debt alone may require $2 billion or more a year in interest costs, withoutany reduction in principal. After debt service, any leftover capital presumably could be utilized for system upgrades. Given the fact that AT&T an its own; has not been ableto raise capital to meet all its upgrade commitments, the merger appears to promise benefits through the use of Comcast's borrowing capacity. Whether that capacity will be sufficient'is still an open question:- It is noted that many of the same'claims that were made about the AT&T purchase of TO (e.g., that the merged'entity would be more efficient)'are being made with respect to the Merger. With the benefit of hindsight, it can be seen that the promise of the: earlier merger was not achieved, and therefore some skepticism'may be warranted in this case. Consequently, it is prudent to assume that the Merger, in the'main, probably will not speed up cable system upgrades in a noticeable fashion. Over a number of years,;however, if Comcast'is able to integrate its acquisition effectively, some improvement May occur. i 2 4101 1 S97-0001 290697.01 W&I 1/02 -11- III. lu FII AN IAL IlVIPLOSION AND IMPENDING B UPTCY OF ELPH CCATI 1NS RPOJRATION I1EMONST'RATES THAT HIGH S SCRl E ' UE " E A:M- ERS" IASL ,T Il fi SE FINANCIAL PE L TO S SCRIBER.& FRANCHISING AUTHORITIES C EDITORS,AND SHAREHOLDERS. Adelphia, as it exists today, was largely created through the merger of a much smaller Adelphia Communications Corporation and Century Communications, Inc. with subsequent acquisitions of cable systems at extremely high ($4,000 +) subscriber values. Adelphia today constitutes the most highly leveraged cable operator with Charter running a close second. As has been widely publicized in both the trade press and the papular press, Adelphia is about to financially implode, with bankruptcy existing as a meaningful, if not inevitable, potential based upon tidal waves of debt and allegations of self-dealing between°Adelphia's controlling family and that entity. Once again, the acquisition of Century'by Adelphia was 'hailed' as a transaction which would produce significant shareholder and subscriber benefits based upon greater access to capital, economies of scale, combined operational synergies, and the structural incentive for the deployment of advanced communications services such as high speed cable modern service and telephony. Nothing,reheat"no"nothing", could have been farther:from the truth. On June 3, 2002, Adelphia's stock was dropped from the Nasdaq Composite Index based upon recent'disclosures of billions in off-the-books debt and financial self-dealing between' the Rigas family and Adelphia'. Adelphia's stock had plunged 95% from $20.39 before Adelphia began divulging information on March 27 about dealings with the family of founder John J. Rigas, including off- the-boobs debt now estimated at more than $3 billion, and other aspects of potential financial peril. Grange County Register, June 4, 2002, Exhibit 15.) Not only is Adelphia's debt apparently much higher than original represented, based upon off-balance sheet "borrowings" similar to that employed by Enron Corporation but numerous examples of self-dealing between the Rigas'family and Adelphia awppear to have occurred. (Multichannel News"Adelphia Outlines Rigas Family Deals",'Multichannel News, May 28, 2002, (Exhibit 16)). Although Adelphia is attempting to negotiate a sale of some of its most valuable properties which include''1.2 million subscribers in Southern California, the prospect of bankruptcy is becoming more and more of an inevitability, as apposed to simply a possibility. ("Hope For Adelphia Beal Fades Linder Investors' Opposition", New York Times, June 1, 2002; "Adelphia Board Puts Off Decision Can Bankruptcy"',New York Times,June 3, 2002 (Exhibit 18); " Delisted' Adelphia Is In FullFree- Fall", Multi-Channel News, June 30, 2002 (Exhibit 19); `NASDAQ To Delist Adelphia", Multichannel News,May 30,2002 (Exhibit 20).) As Adelphia spirals downhill toward oblivion, local franchising authorities are scrambling to create contingency'plans to deal with a pending bankruptcy so as to "keep the lights on" for cable subscribers. Adelphia's capital improvements projects, such as system' rebuilds,''have been halted on a national basis and Adelphia is routinely breaching franchises by failing to pay franchise fees. ("Cities Could Be Among Creditors", Cable World, June 3, 2002 (Exhibit 21).) Even other cable operators, such as 'Charter, have been negatively affected by Adelphies demise given the market's' concern that Charter might increase its leverage by attempting to purchase some of the soon to be available Adelphia franchise assets. ("Adelphia Is Seen As Hurting Charter", The Beal, June 4, 2002 (Exhibit 22).) It now appears that Adelphia 1241011397-0001 -12- 290697.01206111/02 may have attempted to mask or hide financial problems relating to its merger" with false subscriber reporting and."cooked"books. (Exhibit 22A) The lesson of Adelphia is clear and evident: "Mega-Mergers" and high priced acquisitions do present significant risks to subscribers and local franchising authorities, especially when combined with non-diversified control of the merged entity. It should be noted that the parties to the Merger have been asked questions regarding the history, or lack' thereof, of Comcast in terms of off-balance-sheet borrowing as well as'what structural' protections exist, if any; to prevent the type of leverage increases and self-dealings which apparently have devastated the financial viability of Adelphia. (Exhibit 23.) Although no definitive conclusions can be drawn based upon the facts to date, the structural similarities''(i.e., high leverage, significant or total control by single shareholder or small group of shareholders, limited independent board and, shareholder oversight) exist between Adelphia and AT&T Comcast. After the Merger is consummated, AT&T Comcast will have an office of the Chairman comprised of the Chairman of the Board(C. Michael Armstrong) and the CEO (Brian L. Roberts) from the completion of the Merger until the earlier to occur of(i)''the 2005 Annual Meeting of AT&T Comcast Shareholders (at< which Mr.'Armstrong will presumptively step down) and (ii) the elate upon which C. Michael Armstrong ceases to be Chairman of the Board. The office of the Chairman will be AT&T Corricast's principal executive deliberative body with responsibility for corporate strategy, policy and direction, governmental a#`fairs, and ,other' significant matters. (Amendment No. 2 to Form S-4 at Ch.VIII,pp 1-2 (April 29, 2002)). Brian L. Roberts, through his control of Sural LLC or a successor entity, will held. a 33-113% non dilutable voting interest in AT&T Comcast stock notwithstanding the fact that Mr.Roberts owns, directly or indirectly, a far lesser percentage of the outstanding shares of AT&T Comcast. (Amendment No.2 to Form'S-4, Ch. I at 31-32). The Chairman of the Board and CE0 of AT&T Comcast can only be removed,with limited exceptions,with:the approval of at least seventy-five' percent (75%) of the entire AT&T Comcast Board'thus making it "unlikely that C' Michael Armstrong or Brian L. Roberts will be removed from their management positions."' (Id. at 31- 32). Thus, urider .AT&T Comcast's initial 'management structure, the Beard of Directors, Chairman of the Board, and Chief Executive Officer will have little'or no accountability to shareholders for the decisions they make. In its Amendment No. 2 to Form 2-4,AT&T Comcast itself concludes that ". . . [i]n addition to the governance arrangements relating to the AT&T Comcast Board, Comcast and AT&T have agreed to a number of governance arrangements which will make it difficult to replace the senior management of AT&T Comcast." (Id. at 31- 32). Notwithstanding the clear concern caused by the complete financial implosion of Adelphia, a company strikingly similar to AT&T Comcast in several ways, AT&T Comcast has failed to. respond to the Supplemental Information Requests within the ten(10)day response period.' The Adelphia saga appears close to conclusion in that Century Communications Corp., a unit of Adelphia Communications'which holds certain.Adelphia cable systems, filed`for Chapter': 11''bankruptcy protection on June 10, 2002. (Exhibit'24). Local fi`anchising authorities continue: to feel the pain of Adelphia's financial ruin by way of missed franchise fee payments, halted construction, and ;general franchise non-compliance. Precipitous halts in construction associated with financial instability can not only create breaches of contract but cause or lead to violation of public safety cedes and standards. (Exhibit 24A.), 12410t 1597-0001 w 13_ 290647.01 a06111102 IV. TIJE QUEST FOR JUSTIFYING 1NFFCLR ATlgN Based upon the information presented above, it seemsclear' that numerous issues, concerns, and questions exist as to why the Merger should be approved.. In order to obtain such information, Staff has tendered several information requests to AT&T, Comcast, and AT&T Comcast.' As will be described more specifically herein, those entities have been substantially unresponsive in providing any clarifying and justifying information but rather have attempted to hide behind a cloak of objections, obfuscation, and "Madison Avenue" slogans as opposed to substantially justifying a transaction which appears to be facially problematic. By letter dated March 18, 2002, William M Marticorena, Special Counsel, requested certain information relating to, among other things, the legal documents relating to the Merger, the impact of the Merger upon management stability, the potential impact of the consolidation of the operations of AT&T and Comcast into AT&T Comcast upon subscriber services; questions relating to potential labor problems created by the Merger, and questions relating to the impact of the Merger upon rates and services. (Exhibit 25.) By letter dated March 29, 2002, F. Kent Leacock, Vice President Government Affairs and Franchising, Bay Area Markets, responded to said questionnaire. (Exhibit 26.) In terms of providing exhibits and schedules to the essential Merger documents, none of this information is provided 'based upon AT&T's `self-serving" allegation that "none of the exhibits or schedules' that have been omitted is necessary to understand the terms of the agreements." (Exhibit 26,p. 4.) Questions relating to management stability were totally ignored (Exhibit 26, p. 7)'. Likewise, questions relating to how AT&T and Comcast' intend to achieve operating synergies by increasing AT&T's margins without negatively affecting subscriber rates or services are answered with only the most conclusory and self-serving rhetoric with the concluding allegation that "AT&T Comcast intends to consolidate redundant services within a single corporate management structure. Such reductions in corporate overhead' should have no impact on the quality of video service, customer' service, or:other aspects of the cable system operation that affects subscribers or the franchisees." (Exhibit 26,p. 8.) When asked about potential subscriber disruption and what plans exist to avoid the same, AT&T responds only that "AT&T and Comcast believe that they will be able to merge the respective cable operations without a significant degree of operational disruption, subscriber inconveniences; and other associated problems. No public documents exist with respect to operating plans;budgets,timetable or other projections." (Exhibit 26,p. 9.) With all due respect to AT&T and Comcast, the March 29 2002,response did nothing to relieve any of, concerns which exist relating a new `Mega-Merger" which possesses characteristics substantially similar to numerous other transactions which have miserably failed. On April 8, 2002, Mr. Marticorena responded to the March 29, 2002, and April 4,2042, letters indicating their non-responsive nature. (Exhibit 27.) In addition,;by letter dated.April 18, 2042, pursuant to AT&T's request, Mr. Marticorena identified with specificity the Exhibits and Schedules to the Merger Agreements which were being sought by hire for review. (Exhibit 28.)' AT&T responded by letter dated April 22, 2002, which provided absolutely no father'' substantive information but simply tendered a host of objections designed to prevent disclosure as opposed to enhance it. (Exhibit 29,) 124/111597-0001 14_ 290697.01 a06111102 By letterdated; April' 30, 2002, from Jeremy'H. Stem of Cale, Rayw d & Braverman, LLP, outside counsel to AT&T, to William M. Marticorena, AT&T agreed' to mare certain Exhibits and Schedules to the Merger Agreements available for Mr. Marticorena.'s review upon the following conditions: (1) The review would take place in the offices of AT&T without the ability of Mr. Marticorena to make copies of said documents; and (2) The contents of said documents could not be disclosed to the Staff or legislative body for any purpose or summarized in any written report prepared by Mr. Marticorena to the Staff or legislative body. (Exhibit 30.) By letter'dated May 1, 2002, from William M. Marticorena to Jeremy H. Stern, outside counsel to AT&T, Mr. Marticorena objected to the process described above and indicated'that his review of the documents'without the ability to copy them or otherwise disclose them to the Staff or legislative body rendered the review of the "subject documents'meaningless and of no value to the franchising authorities." (Exhibit 31,p. 2.) AT&T continued to insist upon the conditions stated above relating to the inability of any representative of the Staff or legislative'body to receive copies of the documents as well as transmit those documents, or the substance thereof, to the Staff or legislative body.; By letter dated May 8, 2002, Mr. Marticorena agreed, without prejudice, to review the Exhibits and Schedules subject to the conditions unilaterally imposed by AT&T. (Exhibit 32.) However, the confidentiality agreement made it clear that an inspection pursuant to the mandated confidentiality agreement did not waive or relinquish our right to argue that said documents had never been produced since they have, in fact,not been produced since Mr. Marticorena is barred by the confidentiality agreement mandated by AT&T from disclosing the contents thereof. The inspection took dace on May 15, 2002, but is essentially non existent for the purposes of this report, since none of the contents of those documents can, in ;any way, be revealed to the legislative body. Thus, as a'matter of fact and law, AT&T, Comcast, and AT&T Comcast have failed to provide the Exhibits and Schedules to the various Merger Documents sought on several occasions. Given the fact that one of the paramount justifications for the Merger is the synergies obtained by way of combined entity cost reductions and margin improvement, it is particularly important'for us to understand how this will occur and whether or not it can be done in such a way as to avoid'negative subscriber impact. Obviously, costs can'be reduced in both a positive as well as service neutral manner.' Reducing CSRs, field technicians, and even local managers can be a savings, but subscribers often suffer in terms of expanded telephone wait times, billing difficulties, service quality degradations,,and the simple inability to access a person who can fix a problem. Comcast operating cash flow, as a percentage of revenue, is more than twice that of AT&T. This was one of the factors sighted heavily by Conxcast in its campaign to acquire AT&T. Comcast has indicated that it anticipates raising cash flow for the former AT&T cable systems. This effort most likely will involve cutting costs,to the extent possible, since AT&T's rate structure is generally high. (Exhibit 33.) At this point in time, cost reduction equating to service degradations is certainly as likely, and based upon the history, perhaps more likely, than is cost reduction which is subscriber neutral or even positive. 124/011597-(MI 29059701$06111102 -15- V. TIDE CREIGHTON BRADLEY & CUZZETTALLC/ASHPAUGH &'SCULC(� CPA PLC REPORTS. Staff has received a copy of two reports prepared by franchising consultants to a large number of mid-west communities. The law firm of Creighton, Bradley & Guzzetta, LLChas prepared a report entitled "Report of Creighton, Bradley & Guzzetta, LLC Relating to the.FCC Form 394 and Related Materials Filed by AT&T Corp. and Comcast Corporation", dated May. 30, 2002 (the"CBG Report") and a report of Ashp,augh &Sculco, CPA's, LPC>>entitled "Review of the Proposed'Merger of AT&T Broadband, Inc. and Comcast Corporation to Form AT&T Comcast Corporation" dated May 24, 2002 (the "A&S Report"). These reports were provided pursuant to the NATOA listserve and the CBG Report is further provided upon its own web site. The CBG Report constitutes a careful and thoughtful analysis of the legal, technical,;and financial qualifications of AT&T Comcast as well as the Merger's potential impact upon rates and services. CBG was retained by a large number' of franchising authorities in Minnesota, Tennessee, and Wisconsin. CBG apparently retained A&S to prepare a financial due diligence study of the Merger. (Exhibit 35).' Staff'has carefully reviewed the CBG Report and the A&S Report and finds them to be persuasive and consistent with the facts and conclusions previously articulated in this report.4 After a careful review of the CBCT Report and the A&S Report, we hereby adapt the following sections as a portion of this report: (1)> CBG Report, Section IV; (2)' CBG Report, Section'VIII; (3) CBG Report, Section X; 4 It is commonplace and good public policy for governmental entities to share ..and exchange relevant information regarding transactions of common interest. For example, Staff has met on a number of occasions with representatives of other franchising authorities from the Bay Area faced with the same Merger. Given the costs of preparing extensive consultant reports, especially in the area of financial clue diligence, government must avail' itself of all resources including the work performed by other governmental. ''entities, their consultants, and attorneys. Sharing of information among governmental entities is the noun as opposed to the exception. In this particular case, CBCT and A&S were evaluating the exact same transaction as the one herein presented based upon the same set'of facts, data, and supplied information. The bulk of the information relied upon by CBG and A&S'was taken from public documents filed with either the PCC or other franchising authorities. The A&S Report'evaluated the transaction at the parent as opposed to local subsidiary basis. (A&S Report, p. 2). Thus, the"trickle down" impact of the Merger would, at least in theory, be the same here as it would be to the communities which actually retained A&S. The CBG Report makes it clear that the chosen standard of review was not a comparison of either AT&T or Comcast to AT&T Comcast, but rather an independent determination as to the legal,;financial, and technical qualifications of AT&T Comcast. (CBG Report, pps. 9-10). Thus, the CBCs Report and the A&S Report are relevant and probative to both AT&T communities as well as Comcast communities being asked' to approve the exact same'transaction. 124/011597-0001 290697.01 a06/11/02 —16- (4) CBG Report, Section XUI, (5) A&S Report, all provisions thereof. The wards of CBG are particularly important and well represent the concerns determined by Staff to exist in relation to the Merger: "Never in the over thirty-five years of combinedexperience of representing municipalities in cable communications issues have the principals of CBG been presented with such a negative financial report related to a proposed transfer of ownership of control At virtually every tarn, the LFA's are confronted with legitimate, significant concerns regarding the financial viability or reasonableness of the transaction as it related to local cable systems. It is the conclusion of CBCT, based upon the financial analysis of A&S, that the transaction is neither viable nor reasonable. In addition, as indicated above, AT&T Comcast is not financial qualified to own or operate the cable systems of the LTA's communities, or to control ATTB and Comcast, and their subsidiaries, and the franchises. It is also evident that the transaction will detrimentally affect services, system maintenance and repair, customer service, the integration of technical improvements, and the ability' of Comcast Cable and AT&T Broadband- to meet franchise commitments. Moreover, the transaction would likely cause a moderate increase in rates.. However, the financial analysis conducted by A&S illustrates that as to virtually every issue that is a legitimate concern of the LFA's, the results of the transaction would not only be detrimental to the LFA's and subscribers,but `possibly significantly' detrimental. It is therefore CBE's conclusion that individual LFA's have numerous and significant bases on which to withhold approval'of this transaction:. Accordingly, CBG recommends that the LFA's adopt a resolution or ordinance, as appropriate, withholding 'their consent to the transaction." (CBG Report,pps 19-20), VI.; CGNCLUSIC)N. Transactions similar to the Merger impose significant transactional casts upon the parties. In many of these multi-billion dollar transactions, tens of millions to hundreds of millions of dollars are in fees are generated by the;numerous investment bankers,underwriters, lawyers, and consultants. In the case of the AT&T-MediaOne merger, AT&T paid a breakup fee in excess of $1 billion to Comcast in order to trump Con cast's'prior accepted bid for the acquisition of Media One. To the extent that you believe that subscriber rates are driven by costs incurred by 134/©11347-0001 290697.01 206/11/02 -17- cable operators, which is certainly the story utilized by the cable industry to justifyconstantly increasing'rates based'upon''purported increase in programmingcosts,' there' is no reason to believe that these types of transactional costs will not likewise be imposed upon subscribers on a going-forward basis. Thus, one should not assume that a failed merger constitutes "no harm,no fowl" since, at a minimum the bulk of the transactional costs may well ultimately..be felt by subscribers. The cable sector, and especially those companies associated with high leverage or which require future leverage to implement their business plans, is clearly out of favor with the investment community. ("C"able Stacks Sink ''Thursday'; Multichannel News, June 6, 2002 (Exhibit 34)). Likewise, the Adelphia situation is teaching us all the lesson that subscribers'and local franchising'authorities posses a clear and undeniable risk in the event of a'cratered merger. Although one cannot predict with any degree of certainty whether the Merger will result in the fate now being suffered by Adelphia, there is little in the record which would rule out such a conclusion. Ultimately,transactions affecting the interests of monopoly-bound cable subscribers and local 'franchising 'authorities must be viewed within the context of a carefully crafted analytical framework which considers both the history of similar' transactions and the information provided by the applicants as to why the results of the transactions in question will be different than the results obtained from similar historic transactions.' Although often over quoted,there is truth in the notion that one who fails to'consider history is'doomed to relive it. 124!011547.0001 290697.01 aO6/11102 —18 Ilk a�. RL AW ccomca$ L. News Release For more information,contact: Eileen M. Connolly—AT&T 908-221-6731 Adam Miller,Brian Paw—Comcast The Abernathy MacGregor Group 212-371-5999 FOR RELEASE WEDNESDAY DECEMBER 19 2001 AT&T BROADBAND TO MERGE WITH COMCAST CORPORATION IN $72 BILLION TRANSACTION Strategic Combination Creates One of the Most Powerful,Communications, Media and Entertainment Companies in the World .Nation's PremiereBroadband Services Network Will Serve More Than 22 Million Subscribers NEW YORK AND PHILADELPHIA--AT&T(NYSE: T) and Comcast Corporation, (NASDAQ: CMCSA CMCSK) today announced that their Boards"of Directors`approved a definitive agreement to combine AT&T'Broadband with Comcast in a transaction that values AT&T Broadband at an aggregate value of$72 billion. The transaction will create the world's pre-eminent broadband services company and is expected to be tax-free to shareowners. The new company,to be called AT&T Comcast Corporation,will be one of the leading and most powerful communications,media and entertainment companies in the world. It will have approximately 22 million subscribers and a major presence in 17 of the Ui ited States'20 largest metropolitan areas,including Atlanta,Boston,Chicago,Dallas-Forth Worth,Denver,Detroit,Miami,Philadelphia, and San Francisco-Oakland. It will be the world's leading provider of broadband video,voice and data services with annual pro forma revenue of approximately$19 billion. The combined company will have a presence in 41 states with approximately 5 million digital video customers, 2.2 million high-speed datacustomersand one million cable telephony customers. AT&T Comcast Corporation'will begin life with.a clear mandate to aggressively expand the availability of those services throughout its service areas,including plans to bring a choice in local telephone service to more than 38 million homes passed by its cable systems. The new company's telephony footprint will have national reach and its scale will allow it to develop and deploy new broadband applications such as video on demand and interactive television. AT&T's decision,which received unanimous approval and full support by its Board of Directors,culminates a rigorous process that began last July when the AT&T Board directed management to assess strategic and financial alternatives for its Broadband unit to create long-term shareowner value. "AT&T Comcast will create value for its customers, shareowners and employees by bringing more services to more people more quickly," said C.Michael Armstrong, Chairman and CEO of AT&T. "This is a leap forward in realizing a vision that 3 thousands of AT&T people have worked toward bringing greater choice in affordable broadband video, voice and data services to even more American homes. AT&T Broadband and Comcast can accomplish more together'than we could alone. Our shareowners and our employees will both benefit from the industry-leading growth we will achieve." Brian L.Roberts,president of Comcast Corporation, said,"Bringing together AT&T Broadband and Comcast,creates a company with a national footprint and'a powerful growth platform uniquely positioned to efficiently deliver content and entertainment to its customers. I look forward to working with Mike and.the AT&T Broadband team to achieve the full potential of this tremendous new company. "We are particularly excited about the telephony prospects,"Brian Roberts continued. "The size of our telephony footprint, combined with AT&T's expertise and leadership in the telephony space,will enable us to accelerate the deployment of telephone services to many new markets." "This transaction is the most rewarding and important step Comcast has taken.since I started the company nearly four decades ago," said Ralph J. Roberts, chairman of Comeast''Corporation "Combining Comcast with AT&T Broadband is a once in a lifetime opportunity that creates immediate value and positions the company for additional growth in the future. Shareholders, employees and customers alike are poised to reap considerable benefits from this remarkable union." 4 Terms of the ageement + Under the terms of the definitive agreement,AT&T will spin off AT&T Broadband and simultaneously merge it with Comcast,forming a new company to be called AT&T Comcast Corporation. • AT&T shareholders will receive approximately 0.34 shares of AT&T Comcast Corporation for each share of AT&T they own(subject to adjustment based on the number of AT&T shares at closing). Comcast shareholders will receive one share of AT&T Comcast Corporation for each Comcast share they own. • AT&T shareowners will own=a 56 percent:economic stake and about a fib percent voting interest in the new company. The Roberts family,which owns Comcast Class B shares,will control one third of the new company's outstanding voting interest. • AT&T Comcast Corporation's assets will consist of both companies' cable TV systems,as well as AT&T's interests in cable television joint ventures and its 25.5 percent interest in Time Warner Entertainment, and Comcast''s interests in QVC; E1 Entertainment, The Golf Channel,and other entertainment properties. • The new company will assume nearly$20 billion in debt and other liabilities from AT&T and its subsidiaries, as well as$5 billion of AT&T subsidiary trust convertible preferred'securities held by Microsoft Corporation,making the aggregate value of the transaction to AT&T shareholders worth$72 billion,based on the closing price of Comcast Class K stock on December 19. AT&T shareowners would receive value equivalent to$13.07 per AT&T share used on Comcast's closing share price on Wednesday,December 19,while retaining complete ownership of AT&T's traditional communications businesses. In conjunction with the transaction,Microsoft Corporation has agreed to convert the$5 billion of AT&T subsidiary trust convertible preferred securities into 115 million shares of AT&T Comcast Corporation. AT&T and Comcast will each contribute five Board members to the new company and they will jointly select two additional members who have no current affiliation with either company. Brian Roberts,42,will be Chief Executive Officer of the new company. As part of the agreement,Armstrong will serve as Chairman of the new company when the merger closes instead of retiring from AT&T in May 2003 as he had planned. The AT&T Comcast Corporation transaction is expected to close at the end of 2002. Until then,Armstrong, 63, will remain Chairman and CEO of AT&T. AT&T Comcast Corporation will be headquartered in Philadelphia and maintain executive offices in the New York City°area. Armstrong and Roberts have also established a transition team to address issues arising from the merger of AT&T Broadband and Comcast from today's announcement through the closing. The members of the transition team are Steven Burke,president of Comcast Cable, Charles H.N'oski,chief financial officer of AT&T,William Schleyer,president 5 and CEO of AT&T Broadband, and Lawrence Smith, executive vice president of Comcast Corporation. Accounting for non-strategic assets that have been, or will be, sold,AT&T originally paid about$4,100 per subscriber for TCI and MediaOne, largely in AT&T stock. Today's announcement values AT&T's cable systems at approximately$4,500 per subscriber based on today's closing price of Comcast stock and gives AT&T shareowners majority ownership of the nation's leading broadband services company with an initial total aggregate value of approximately$120 billion. The merger of AT&T Broadband and Comcast is subject to regulatory review,approval' by both companies' shareholders and certain other conditions.' AT&T also intends to proceed with other aspects of its previously announced restructuring,including the creation of a tracking stock for its consumer services unit,which is expected to be fully distributed to AT&T shareholders following shareholder approval in mid-2002. Following the separation of AT&T Broadband and the establishment of the AT&T Consumer tracking stock,the'familiar"T"stock symbol will reflect the financial results of AT&T Business,which will retain ownership of the"AT&T"brand. AT&T Business is one of the world's leading providers of enterprise voice and data communications, serving more than 4.2 million customers. For the 12 months ended September 30,2'001, AT&T Business had revenue of more than$28 billion and earnings beforeinterest and taxes (EBIT), excluding other income, asset impairments and pre-tax equity earnings, of 7 approximately$5 billion. In the same period,AT&T Consumer had revenue of nearly $16 billion and EBIT,on the same basis, of about$5.4 billion,with margins that are three times those of its largest competitor.' Credit Suisse First Boston and Goldman.Sachs acted as financial advisors to AT&T. Morgan Stanley, JP Morgan,Merrill Lynch and Quadrangle Group acted as financial advisors to Comcast. Wachtell,Lipton,Rosen&Katz is legal advisor to AT&T. Davis' Polk&Wardwell is legal advisor to Comcast. About AT&T AT&T(http:tlwww.att.com) is among the world's premier voice, video and data communications companies, serving consumers,businesses and government. Backed by the research and development capabilities of AT&T Labs,the company runs the world's largest,most sophisticated communications network and is the largest cable operator in the U.S.The company is a leading supplier of data,Internet and managed services for businesses and offers outsourcing, consulting and networking-integration to large businesses.' About Comcast Comcast Corporation( ww.comcast.com),is principally engaged in the development, management and operation of broadband cable networks and in the provision of content: through principal'Ownership of QVC Comcast-Spectacor and Comcast SportsNet, a controlling'interest in E! Entertainment Television and through programming investments. Conicast's Class A Special Common Stock and Class A'Common Stack are traded on The Nasdaq Stock.Market under the symbols CMCSK.and CMCSA 'respectively. The foregoing are 'forward-looking statements"which are biased on management's beliefs as well as on a number of assumptions concerning future events made by and infonnation currently available to management.Readers are cautioned not to put undue reliance on such forward-looking statements, which are not a guarantee of performance and are subject to a number of uncertainties and other faciors, many of which are outside AT&T's control, that could cause actual results to differ materially from such statements. Fora more detailed description of`the factors that could cause such a difference,please see,AT&T'sf flings with the,Securities and Exchange Commission.AT&T disclaims any intention or obligation to update or revise any forward-looking statements,whether as a result of new information,future events or otherwise. This information is presented solely:,to provide additional information to fitrther understand the results of AT&T This communication shall not constitute an offer to sell or the solicitation of an offer to buy, nor shaft there be any sale of securities in any jurisdiction in which the offer,solicitation or sale would be unlawful prior to registration or qualification under the securities laws of any such jurisdiction.No offering of securities 8 shalt be made eccept by means of a prospectus meeting the requirements o,f Section 10 of the Securities Act of 1933, as amended. Additional Information and Where to Find it In connection with the proposed merger, AT&T and Comesst will file a joint proxy statement/prospectus with the Securities and Exchange Commission. INVESTORS AND SECURITY HOLDERS ARE ADVISED TO READ THE JOINT PROXY STATEMENT/PROSPECTUS WHEN IT BECOMES AVAILABLE,13ECAUSE IT WILL CONTAIN IMPORTANT INFORMATION. Investors and security holders may obtain a free copy of the joint proxy statement/prospectus(when available) and other documents filed by AT&T and Comcast with the Commission at the Commission's web site at http://www.sec.gov. Free copies of the joint proxy statement/prospectus, once available; and each company's other filings with the Commission may also be obtained' from the respective companies. Free copies of AT&T's filings may be obtained by directing'a request to AT&T Corp.,295 North Maple Avenue,Basking Ridge NJ 07920. Free copies of Comcast's filings may be obtained by directing a request to Comcast, 1500 Market Street,Philadelphia PA 19102. Participants in the Solicitation' AT&T, Comcast and their respective directors, executive officers and other members of their management and employees may be soliciting proxies from their respective stockholders in favor of the merger. Information concerning persons who may be considered participants in the solicitation'of AT&T's and Comcast's stockholders under the rules,of the Commission is set forth in public filings filed.by AT&T and Comcast with.the Commission and will be set forth in the Joint Proxy Statement/Prospectus when it is filed with the Commission. r Welco Multichannel hews All of TVinsite Reals for ext LIN ARCHIVES `r. EVENTS 1.. CL.ASSIFIE Sections ♦e.ern. •Top Stories >Broadband Week >Through the Wife >Programming You are here:>IMins >Multichanriel News>Brtftng News >Pay Per View. , BREAKING NEWS`STOkY— >People >MarkedngrAdvertising C >Policy •Finance Comcast: AT&T Funding 80% Corte IM Printer-Friendly Yeti >op-Ed By Mike Farrell >Supplement Multichannel mews ■ E-mall this to a 3/8/2002 4:35:00 PM cctllt?aou c� CS. ComcastCorp. company's Cor . executives said the cont ant pending's endin purchase of AT&T Broadband Registration was on track, with about 80 percent of the required funding assembled. i today ft: S t .�features, I III IINComcast has already Secured from five different banks about$10 billion of the$11 �* ill YI billion to $14 billion needed to service ATU Broadband's debt and handle capital r{ Y Issues,executive vice president and treasurer John Alchin said, speaking at the Bear Stearns&;Co. Media, Entertainment&Telecommunications conference March 4 In Palm Beach, Fla, The merger is expected to close this year. j He said that although Comcast may seek more loans from other lenders, it could Publications also tap a $4.5 billion 'liquidity cushion' In existing bank facilities. Tyinsitit BroadcagtIa Cattle 'We feel very good about the fact that we've been able to put this in place In a , blev'aion marketplace that has been relatively tight for new issuers,'Alchin said. Mule l TVlnsiite International -moi Printer-Friendly versionE-mail this to a colleague MURLA;h nnnel News a InlCrnatlonal Television Burooe z . Telttvision Latin America �u h!tn:/hvww:tvinsite.comJrnulticbannelnewslindec.ast7?layout==story&doc id=73113&display-break ngNews 03/08/27002 Cahners jVinsite Page 1 of 5 +may 9 Multichannel News C All of TVinsite Wel'co N Industry Sites The Web-powered by Google ■!�iAt rt�1M�iii#iE 111■>M�•;M�'� for ext ARCHIVES 1 EVENTS % CLASSIFIE Sections h e T A M 4 u ,'l rn 1 100% r ly roti ?' •Top Stories t: ' � '. Du >inside Broadband Register now at ctamjurnrnit,corn a y Through the Wire APF •Programming >Pay Per View You are here:>TVinslte >Multichannel News Cl >People TOP STORIES B ' >Marketing/Advertising Brian's Bear Hug Printer-Friendly V' >Policy version >Finance comcast's Robertses{Kant AT&T's MSO � E_.rrjai1 this to_a >Op-Edcoiieaaue Stock We By MIKE FARRELL Ticker Multichannel News ?C&MC 5. 7/15/01 CMCS A A QVC Spurred on by Comcast Corp.'s surprise$53.1 billion bid to buy AT&T Broadband, Registration institutional shareholders are pressing parent AT&T Corp.to sell off the cable unit, T 'Siqn up todaybut at a higher price than what Comcast has offered so:far. Cox ::Y Y: A On Sunday, July 8, Comcast Corp. chairman Ralph Roberts and president Brian CHTR access to-`and n-tuch More. Roberts publicly wrapped their arms around AT&T Broadband.They faxed AT&T chairman C. Michael Armstrong- and the rest of the world — a proposal to merge N dA AT&T's 13.5-million-subscriber MSO with Comcast's 8.4'-minion-subscriber DJIA mi Operation.The news taught the cable industry some mergers-and-acquisition S&P 500 " dY�s jargon: a "subsidiary bear hug." 1' w. . = The Philadelphia-based MSO offered 1.05 billion shares of stock, valued at$39.6 Get Quotet Publications billion at last Thursday's close, and would assume$13.5 billion in cable-system TVlnsite debt:_ Ticker Broadcasting&Cable Data dalaye Cablevision The deal would make the combined company— of which AT&T shareholders would Multichannel News own 51 percent, but Comcast's super-voting-stock owning Roberts family would rw control 49 percent-- the top U.S. MSO by far, with 22 million cable subscribers. TVinsite International The current No. 2 MSO is Time Warner Cable, with about 13 million subscribers. Muitighannel News International Investors, who figured the buyout offers were likely to get better before they got Television Eurol2 worse, bid up AT&T shares by a`significant 14.7 percent between July;b and last Television Latin America Thursday. Underscoring that logic, sources said AT&T's institutional shareholders _... +uhirk rr.Y+++rsl ni.i�rolcr rnni-rn 1. .1—o-Ali n eoM-rf thn rn+atinanvrY- nutct mnr{irn http:Hwww.tvinsite.com/multichar>nelnews/index.asp?layout=story_stocks&articleid=C.../200 7/16/01 Cahners ( Winsite Page 2 of S YYIISLt/WVj..%j1 UVW1Y LNltit Vl UVVVt.'T'T jd=f,%;1M V1 IwtlG t.V11�4�tGftY T. VUta UU.. VttfvArc .. Toolbox x stock —are pressing for a better deal; E-VlSlt�Res rch „Tla hey[the Institutions],are pressing for a deal, not the current dean," said one ; investment banker familiar with the situation. "The institutions would like more. CK ln�inks Take y Associations While It is unclear how much more those shareholders would like, sources within at The the investment community said it appears that they're leaning toward a price to n Classlfleds between$70 billion and$75 billion. ALCLaktifigda Jobs That would value AT&T Broadband at between $5,200 and$5,500 per subscriber, t i=n within the $4,500 to $5,500 per-subscriber range of cable system valuations over Sir the past year. In its current state, the Comcast deal values AT&T Broadband at about$3,900 per subscriber, down from the$4,300 per customer figure offered when the deal was first announced July 8. The overall price has declined because Comcast's stock pewored By: price lost nearly 11 percent of its value between July 6 ($42.28) and last Thursday eLogic ($37,70). t� According to sources, one of the funds pressing hardest is Fidelity Management& Research fund, an arm of Boston-based financial powerhouse Fidelity Investments Inc. FM&R Is one of AT&T's largest institutional shareholders, with 142 million shares as of March 31. A Fidelity spokeswoman declined comment, citing company policy not to discuss specific stocks. Robb Parlanti, senior portfolio manager at Turner Investment Partners, a Berwyn, Pa:-based fund,;said that he believes a Comcast deal would be best for AT&T. According to Security and Exchange Commission documents,Turner owns about 47,000 shares of Comcast stock. "The general consensus Is that Comcast Is the better bet," Parlant said. „But the last thing you want to do is sell out too cheap." Talk in the institutional investment community is that Fidelity is pushing for a deal, Parlanti added "I did hear that Fidelity was moving toward recommending AT&T to accept this, Parlanti said. "They own 4.2 percent[of AT&T stock], but it is Fidelity and they can sway people. Personally, If I was an AT&T shareholder,I'd take it." But others in the investment community — who see the current deal on the table as too lbw — don't necessarily share Parlantl's-view. One such investor is Liberty Media Group Inc, chairman Jahn Malone, who, in resigning from AT&T's board of directors last week,found the Comcast offer wanting, "As an AT&T shareholder I find the Comcast offer insufficient," Malone wrote In his resignation letter, according to a source who has seen the document. "The tax- efficient monetization of TWE [Time Warner Entertainment] and Cablevision [Systems Corp.]should be part of any Comcast transaction.' In published reports, Malone refuted speculation that either he or Liberty would make a competing bid for AT&T. He also expressed some support for a Comcast ....s..s«a.,.. ..e wvo.-ro.......,1 i.......i a..tsc......at.........s,.,:.......�I......,wt,..«......t+. .. ..t.... ........t,.s http://www.tvinsite.com/multichannelnews/index.asp?layout=story_stocks articleid=C.../200 7/16/01 Cahners TVinsite Page 3 of 5 €st.4U1wcru€€ v€ n€ax€ c€vc€uu0€€u Le1€€19 o€vv€€iva€y €€€Cwb u€ac bUU1 C1 uca€ wvu€a make"a lot of sense," but at a higher price: THERE THEY STOOD On June 11, Armstrong:.and Brian Roberts stood side by side before reporters after a panel discussion at the National Show in Chicago,with Armstrong strongly insisting that AT&T was not for sale. Armstrong attempted to put to rest speculation that AT&T Broadband was an acquisition target. Such talk had been rampant since October, when the company announced it would split Into four separate units -- Broadband, Consumer Services,;Wireless and Business Services., By that point, the two men had restarted negotiations that had begun shortly after the AT&T restructuring announcement—talks about Comcast acquiring the cable unit. In a conference call with reporters, Roberts said that after the initial contact in October,AT&T"'wanted some time off"to work on its own restructuring plan, and it wasn't until six or eight weeks ago that the talks between the two companies resumed,But after It was shut down for a second time, Comcast decided to take matters into its own hands. "There were a number of issues that led to us not being able to reach an agreement, and we decided then to still want to pursue It," Roberts said. While Roberts declined to elaborate onwhat those Issues were, he said that AT&T's decision to Issue a proxy statement for the planned spin-off of the Broadband unit as a tracking stock prompted Comcast to take action. AT&T issued a preliminary proxy for the Broadband tracker on July 3 and stated that a more detailed statement would be Issued before the end of July. At that pace, Comcast feared shareholders could vote to issue a tracker In early September, putting any deal with Comcast in limbo for at least two years. According to SEC regulations, If a company sells the assets in a tracking stock prior to the two-year anniversary of the tracker, it could face a hefty tax liability. "We concluded that the train's leaving the statism,and it was nowor never," Roberts said in a conference call with analysts last week. AT&T spokeswoman Adele Ambrose denied that plans for the tracker were being accelerated, "We're on the same path we've been on for months,"Ambrose said. Roberts fired off a two-page proposal letter and sent it to Armstrong's home fax machine late in the afternoon on July 8,the same time It was sent to newspapers across the country. While Armstrong told an audience at the Greater Boston Chamber of Commerce last week that the board will "seriously consider" the Comcast offer, he also appeared miffed at Roberts' method. "I don't know if It'bothered me as much as It surprised me,"Armstrong told Reuters. "But how would you feel if you learned about something tike this about the same time as the newspapers?" http://www.tvinsite.com/multichannelnews/index.asp?layout=storystocks&articleid=C.../200 7/16/01 Cahners Winsite Page 4 of 5 In an electronic-mail message sent to AT&T Broadband employees last Thursday, Armstrong said the Comcast proposal "recognizes at least some of the value that we've created In AT&T Broadband.The question is whether it recognizes the right value. Only our board of directors can make that call and they will do what is in our shareowners' best long-term Interest" Armstrong added that analysis of the offer will take weeks, rather than quarters. The longer the AT&T board waits, the:greater the possibility that a third party could come in to trump Comcast's bid. While:Comcast had to deal with that in its 1999 bid for MediaOne Group Inc. with AT&T no less-- most analysts believe that it is unlikely another company would come in with a larger offer. Possible suitors include Charter Communications Inc., Cox Communications Inc., Vivendi Universal S.A., Viacom Inc. and The Wait Disney Co. But because of the structure of the deal, most analysts believe Comcast will be the sole bidder. In order to make an acquisition of AT&T Broadband tax-free, Comcast would' essentially give 51 percent of the ownership of the combined company to AT&T shareholders. While those shareholders will control the majority of the vote, the Roberts family - with a little more than i percent of the shares - would control more than 40 percent of the vote: According to several observers, It Is that structure that makes it difficult for another suitor to step In. Any potential bidder would have to be smaller than AT&T, but big enough to do the deal. Those criteria work against Charter, much of whose stock is owned by chairman Paul Allen, and Cox, whose major shareholders have been averse to having their holdingsdiluted,analysts said. Cable-broadcast cross-ownership restrictions would complicate matters for both CBS parent Viacom and ABC Inc. owner Disney. AT&T Is likely to look for a sweeter deal, which some observers said could Include cash, more stock or the assumption of more debt. "I don't think the deal as it stands today gets done," said one MSO executive, "There are some limitations as to what the pricing is." According:to one Wail Street analyst, debt reduction may be more attractive to AT&T than a cash component to the deal. "Cash doesn't mean anything to them," said an Investment banker who asked not to be named. "It's better for them to push the debt around. AT&T has worked hard to pare down its debt load this year,trimming its burden from $65 billion to$43.5 billion. According to the July 3 proxy, Broadband would be responsible for about$15.6 billion of that debt; Comcast,has said It could sweeten its offer by agreeing to purchase for additional stock AT&T's 25.5 percent interest in TWE and its 30 percent stake In Cablevision Those two stakes have been valued at between $10 billion and $20 billion. If it were to buy the TWE and Cablevision stakes,Comcast said it would likely sell them off. AT&T has been in protracted negotiations with AOL Time Warner Inc. - its other partner:in TWE'-but has been stalled over disagreements on the asset's http://www.tvinsite.com/multichannelnews/index.asp?layout=story_stocks&.articleid=G.../200 7/16/01 Cahners Winsite Page 5 of 5 worth. Comcast has stressed that Its proposalmerely accelerates the pian AT&T already had for Broadband. TOUTING SAVINGS Joining Comcast's existing 8.4-million-subscriber operations with AT&T Broadband's 13.5 million customers would create a combined entity with immediate synergies. In the analyst conference call, Roberts said the new Comcast would generate$1.25 billion In cost savings'annually, with the potential to increase those benefits to between $2.6 billion and $2.8 billion as the companies work together to ImproveBroadband's cash-flow margins. Those margins have been a topic of debate since the first quarter, when Broadband reported margins well below the industry average.At the end of the first quarter, Broadband's cash-flow margins were 16 percent, significantly short of Its cable peers, which range from 39 percent to 47 percent. Comcast's cash flow margins are at about 42 percent. To drive home Its point, Comcast pointed to systems it purchased from AT&T in January.In just the first six months of owning those systems, which have about 765,000 subscribers, the MSO has raised operating cash flow by 32 percent and its cash-flow margins have Increased by 6 percent. "It sounds like out of the box, there are some easy ones," said SG Cowen Securities Corp. analyst Gary Farber. "corporate overhead — they say they can run those systems for$50 [million] and they're being',run for$500 [million] -- telephony and programming costs. You've got two or three Items that look like, in the near-term, [they] could be addressed pretty quickly. Yankee Group president Brian Adamik said that one factor in Comcast's favor is its management team.' "When Comcast talks about improving margins, that's credible,"Adamik said. "What they will do is change [AT&T's) priorities. Their management team are all cable managers.The problem with AT&T Broadband Is that it's a cable company run by a telephone company that thinks Its a broadband company." AT&T has maintained that It will be able to raise margins on its own, blaming the poor performance on greater capital expenditures to upgrade plant. Printer-Friendly_ _v_ersLQ E-mail oris to 41e_aWe spirit- HOME 1'ABOUT US t ADVERTISE t CONTACT Us k REGISTERILOG IN 0 2001;Cahners Business Information Use of this Web site is subject to its Terms of Use Privacy Policy http://www.tvinsite.com/multichannelnews/index.asp?layout=story_stocks&articleid=C.../200 7/16/0'1 AT&T Broadband To Merge With Comcast Corporation Page 1 ofi_2 Home Quick Search" Mergeri Pw Download Press Releases: w December 19.2Q01°t AT&T Broadband to Merde s Septernber 28,2001'J Caieast Si± ns Confidentiality •July 18,.,22001 l Camcaq Views AT&T'selan e Jud S.24301 /Comcast Make Prapasal Recent Financial Releases D'eceMber 19,_2001 AT&T Broadband to Merge With Comcast Corporation in $72 Billion Transaction September 281 2001 Comcast Signs Confidentiality Agreement With AT&T 3uly 18, 2O01 Comcast Views AT&T's Delay in Tracking Stock as Positive Step July S. 2001 Comcast Makes Proposal to Merge with AT&T Broadband AT&T BROADBAND TO MERGE WITH COMCAST'CORPORATION IN $72 BILLION TRANSACTION Strategic Combination Creates One of the Most Powerful Communications, Media and Entertainment Companies in the World' Nation's Premiere Broadband Services Network Will Serve More Than 22 Million Subscribers' NEW YORK AND PHILADELPHIA -- AT&T (NYSE: T) and Comcast Corporation (NASDAQ: CMCSA CMCSK) today announced that their Boards of Directors approved a definitive agreement to combine AT&T Broadband with Comcast in a transaction that values AT&T Broadband at an aggregate value of $72 billion. The transaction will create the world's pre-eminent broadband services company and is expected to be tax-free to shareowners. The neve company, to be called AT&T Comcast Corporation, will be one of the leading and most powerful communications, media and entertainment companies in the world. It will have approximately:22 million subscribers and a major presence in 17 of the United States' 20 largest metropolitan areas, including Atlanta, Boston, Chicago, http://www.pressnews.net/cmcsk/pr.htm 6!4102 AT&T Broadband To Merge With Comcast Corporation Paue of 1 ' Dallas-Forth Worth, Denver, Detroit, Miami, Philadelphia, and San Francisco-Oakland. It will be the world's leading provider of broadband video, voice and data services with annual pro forma revenue of approximately $19 billion. The combined company will have a presence in 41 states with approximately 5 million digital video customers, 2.2 million high-speed data customers and one million cable telephonycustomers. AT&T Comcast Corporation will begin life with a clear mandate to aggressively expand the availability of those services throughout its service areas, including plans to bring a choice in local telephone service to more than 38'million homes passed by its cable systems. The new company's telephony footprint will have national reach and its scale will allow it to develop and deploy new broadband applications such as video on demand and interactive television. AT&T's decision, which received unanimous approval and full support by its Board of Directors, culminates a rigorous process that began last July when the AT&T Board directed management to assess strategic and financial alternatives for its Broadband unit to create long-term shareowner value. "AT&T Comcast will create value for its customers, shareowners and employees by bringing more services to more people more quickly," said C. Michael Armstrong, Chairman and CEO of AT&T.. "This is a leap forward in realizing a vision that thousands of AT&T people have worked toward - bringing greater choice in affordable broadband video, voice and data services to even more American homes. AT&T Broadband and Comcast can accomplish more together than we could alone. Our shareowners and our employees will both benefit from the industry-leading growth we will achieve.' Brian L. Roberts, president of Comcast Corporation, said, "Bringing together AT&T Broadband and Comcast, creates a company with a national footprint and a powerful growth platform uniquely positioned to efficiently deliver content and entertainment to its customers. I look forward to 'working with Mike`and the AT&T Broadband team to achieve the full potential of this tremendous'new company. "We are particularly excited about the telephony prospects," Brian Roberts continued. "The size of our telephony footprint, combined with AT&T's expertise and leadership in the telephony space, will enable us to accelerate the deployment of telephone services to many new markets." "This transaction is the most rewarding and important step Comcast'has taken since I started the company nearly four decades ago," said Ralph 7. Roberts, chairman of Comcast Corporation. "Combining Comcast with AT&T Broadband is a once in a Lifetime opportunity that creates immediate value and positions the company for additional growth in the future. Shareholders, employees and customers'alike are poised to reap considerable benefits from this remarkable union." Terms of the agreement • Under the terms of the definitive agreement, AT&T will spin off AT&T Broadband and simultaneously merge it with Comcast, forming a new company to be called AT&T Comcast Corporation. • AT&T shareholders will receive approximately 0.34 shares of AT&T Comcast Corporation for each share of AT&T they own (subject to adjustment based on the number of AT&T shares at closing). Comcast shareholders will receive one share of AT&T Comcast Corporation for each Comcast share they own. • AT&T shareowners will own a 56percent economic stake and about a 66 percent http://Nvvvw.pressnews.net/cmcsk/pr.htm 6/4/02 AT&T Broadband To Merge With Comcast Corporation Page z of i voting interest in the new company. The Roberts family, which owns Comcast Class Bshares, will'control one third of the new company's outstanding voting interest. . AT&T Comcast Corporation's assets will consist of both companies' cable TV systems, as well as AT&T's interests in cable television joint ventures and its 25.5 percent interest in Time Warner Entertainment, and Corncast's interests in QVC, El Entertainment, The Golf Channel, and other entertainment properties.. . The new company will assume nearly $20 billion in debt and other liabilities from AT&T and its subsidiaries, as well as 5 billion of AT&T subsidiary trust convertible preferred securities held by Microsoft Corporation, making the aggregate value of the transaction to AT&T shareholders worth $72 billion, based on the closing price of Comcast Class K stock on December 19. . AT&T shareowners would receive value equivalent to $13.02 per AT&T share based on Comcast's closing share price on Wednesday, december 19, while retaining complete ownership of AT&T's traditional communications businesses. In conjunction with the transaction, Microsoft Corporation has agreed to convert the $5 billion of AT&T subsidiary trust convertible preferred securities into 115 million shares of AT&T Comcast Corporation. AT&T and Comcast will each contribute five Board members to the new company and they will jointly select two additional members who have no current affiliation with either company. Brian Roberts, 42, will be Chief Executive Officer of the new company. As part of the agreement, Armstrong,will serve as Chairman of the new company when the merger closes instead of retiring from AT&T in May 20013 as he had planned. The AT&T Comcast Corporation transaction is expected to close at the end of 2002. Until then, Armstrong, 63, will 'remain Chairman and CEO of AT&T. AT&T Comcast Corporation will be headquartered in Philadelphia and maintain executive offices in the New York City area. Armstrong and Roberts have also established a transition team to address issues arising from the merger of AT&T Broadband.and Comcast from today's announcement through the closing. The members of the transition team are Steven Burke, president of Comcast Cable, Charles'H. Noski, chief financial officer of AT&T, William`Schleyer, president and CEO of AT&T Broadband, and Lawrence smith, executive vice president of Comcast Corporation. Accounting for non-strategic assets that have been, or will be, sold, AT&T originally paid about $4,100 per subscriber for TCI and MediaOne, largely in AT&T stock. Today's announcement values AT&T's cable systems at approximately $4,5001 per subscriber based on today's closing price of Comcast stock and gives AT&T shareowners majority ownership of the nation's leading broadband'services company with an initial total aggregate value of approximately $120 billion. The merger of AT&T Broadband and Comcast is subject to regulatory review, approval by both companies' shareholders, and certain other conditions. AT&T also intends to proceed with other aspects of its previously-announced restructuring, including the creation of a tracking stock for its consumer services unit, which is expected to be fully distributed to AT&T shareholders following shareholder approval in mid}2002.. Following the separation of AT&T Broadband:and the establishment of the AT&T Consumer tracking stock, the familiar "T" stock symbol will reflect the financial results of AT&T Business, which will retain ownership of the "AT&T°' brand. AT&T Business is one of the world's leading providers of enterprise voice and data communications, http://www.pressnews.net/emcsk/pr.htm 6/4/02 AT&T Broadband To Meme With Comcast Corporation Page 4 of 12 serving more than 4.2 million customers. For the 12 months ended September 30, 2001, AT&T Business had revenue of more than $28 billion and earnings before interest and taxes (EBIT), excluding other income, asset impairments ,and pre-tax equity earnings, of approximately $5 billion. In the same period, AT&T Consumer had revenue of nearly $16 billion and EBIT, on the same basis, of about $5.4 billion, with margins that are three times those of its largest competitor. Credit Suisse First Boston and Goldman Sachs acted as financial advisors to AT&T. Morgan Stanley, )P Morgan, Merrill Lynch and Quadrangle Group acted as financial advisors to Comcast. Wachtell, Lipton, Rosen & Katz is legal advisor to AT&T. Davis Polk & Wardwell' is legal advisor to Comcast. About AT&T AT&T (http://www.att.com) is among the world's premier voice, video and data communications companies, serving consumers, businesses and government. Backed by the research and development capabilities of AT&T Labs, the company runs the world's largest, most sophisticated communications network and is the largest cable operator in the U.S. The company is a leading'supplier of data, Internet and managed services for businesses and:offers outsourcing', consulting and networking-integration to large businesses. About Comcast Comcast Corporation (www.comcast.com) is principally engaged in the development, management and operation'of broadband cable networks and in the provision of content through principal ownership of'QVC, Comcast-Spectacor and Comcast SportsNet, a controlling interest in El Entertainment Television and through programming investments. Comcast's Class A Special Common Stock and Class A Common Stock are graded on The Nasdaq Stock Market under the symbols CMCSK and CMCSA, respectively. NOTE TO FINANCIAL MEDIA: AT&T executiveswill discuss today's'announcement on a two-way conference call for financial analysts at 8;30 a.m. ET Reporters are invited to'l sten to the call. U.S. callers should dial 800-230-1092;,to access the call. Callers outside the U.S. should dial 612-332-0342. A replay of the event will be available on the AT&T web site beginningshortly after the presentation. The Web site address is http://www.att.com/ir. AT&T executives will hold a press conference and conference call at 11:00 a.m. in the Nassau Suite of the New York Hilton. Reporters are invited to dial into the conference and ask questions. U.S. callers should dial 888-276-9996 to access the call. Callers outside the U.S. should dial 612-333-4911. The New York Hilton is located at 1335 Avenue of the Americas. The foregoing are forward-looking statements" which are based on management's beliefs as well asona number of assumptions concerning future events made by and information currently available to management. Readers are cautioned not to put undue reliance on such forward-looking statements, which are not a guarantee of performance and are subject to a number of uncertainties'and other factors, many of which are outside AT&T's control, that could cause actual results to differ materially from such statements.For a more detailed description of the factors that could cause such a difference, please see AT&T's filings with the Securities and Exchange Commission.AT&T disclaims any intention or obligation to update or revise any forward'-looking lstatements, whether as a result of new information,future events or otherwise.'This information Is presented solely to provide'additional information to further understand the results of AT&T. http://www.pressnews.net/cmcsk/pr.htm 6/4/02 AT&T Broadband To Merge With Comcast Corporation Page 5 o! i W This communication shall not constitute an offer to sell or the solicitation of an offer to buy, nor shall there be any sale of securities in any jurisdiction in which the offer,solicitation or sale,would be unlawful priortoregistration or qualification under the securities laws of any such jurisdiction. No offering of securities shall be made except by means of a prospectus meeting the requirements of section 10 of the Securities fact of 1933, as amended. Additional Information and Where to Find it In connectionwith the proposed merger, AT&T and Comcast will file a joint proxy statement/prospectus with the Securities and Exchange Commission. INVESTORS AND SECURITY HOLDERS ARE ADVISED TO READ THE JOINT PROXY STATEMENT/PROSPECTUS WHEN IT B'ECOM'ES AVAILABLE, BECAUSE IT WILL CONTAIN IMPORTANT INFORMATION. Investors and security holders may obtain a free copy of the joint proxy statement/prospectus (when available) and other documents filed by AT&T and Comcast with the Commission at the Commission's web site at httD://www.sec.gov. Free copies of the joint proxy statement/prospectus, once mailable, and each company's other filings with the Commission may also be obtained from the respective companies. Free copies of AT&T's filings may be obtained by directing a request to AT&T Corp., 295 North Maple Avenue, Basking Ridge NJ 07920. Free copies of Comcast's filings may be obtained by directing a request to Comcast, 1500 Market Street, Philadelphia PA 19102. Participantsin the Solicitation AT&T, Comcast and their respective directors, executive officers and other members of their management and employees may be soliciting proxies from their respective stockholders in favor of the merger. Information concerning persons who may be considered participants in the solicitation of AT&T's and Comcast's stockholders under the rules of the Commission is set forth in public filings filed by AT&T and,Comcast with the Commission and will be set forth in the Joint Proxy Statement/Prospectus when it is filed with the Commission. For more Information, contact: Eileen M. Connolly- AT&T 908-221-6731 Adam Miller, Brian Faw - Comcast The Abernathy MacGregor Group 212-371-5999 Return to toga COMCAST SIGNS 'COMFIDENTIALITY AGREEMENT' WITH AT&T PHILADELPHIA — September 28, 2001 — Comcast Corporation (Nasdaq: CMCSA, CMCSK),today'.announced that, in connection with discussions regarding AT&T Broadband, it has entered into a`reciprocal confidentiality agreement with AT&T that will permit the exchange of information between the two companies."The agreement http://www.pressnews.net/emcsk/pr.htm 6/4/02 AT&T Broadband To Merge With Comcast Corporation rage o of 1 also restricts certain discussions between Comcast and third parties which relate to AT&T Broadband without AT&T's approval. Comcast Corporation (www.comcast.com) is principally involved in the development, management and operation of broadband cable networks, and in the prevision of electronic commerce and programming content. Comcast Cable is the third largest cable company in the United States serving'more'than 8.4 million cable subscribers. Comcast's commerce and content businesses include majority ownership of QVC, Comcast-Spectacor, Comcast SportsNet and The Golf Channel, a controlling interest in El Networks, and other programming, investments. Comcast's«Class A Special and Class A Common Stock are traded on The Nasdaq Stock Market under the symbols CMCSK and CMCSA, respectively, This press release contains forward-looking statements.Readers are cautioned that such forward-looking statements involve risks and uncertainties that could significantly affect actual results from those expressed in any such forward-looking statements: Readers are directed to'Gomcast`s Quarterly Report on Form 10-Q fora description of such risks and uncertainties. Investor Contact: Marlene S. Dooner, Vice President, Investor Relations (215) 981-7392 William E. Dordelman, Vice President, Finance (215) 981-7550 Kelley L. Claypool, Manager, Investor Relations (215) 981-7729 Media Contact: The Abernathy MacGregor Group (212) 371-5999 Adam Miller, 'Steve Frankel, Brian Faw Return to top COMCAST VIEWS AT&.TAS DELAY IN TRACKING STOCK AS POSITIVE STEP Shareholders Respond To Comcastas Proposal By Adding $14 Billion In Market Valuation To A7`&T Philadelphia 6 July 18, 2001 6 Comcast Corporation (Nasdaq: CMCSA, CMCSK) today announced that it viewed positively the decision by AT&T&s (NYSE: T) Board of Directors. to maximize shareholder value by examining strategic alternatives in addition to its planned'initial"public offering of its broadband assets. on July 8, 2001, Comcast made a proposal to merge with AT&TAs broadband business in a tax-free transaction, which valued AT&TAs core broadband assets at $58 billion based on Comcast stockas closing http://www.pressnews.net/emesk/pr.htm 6/4/02 AT&T Broadband To Merge With Comcast Corporation Page, i of I price on July 6, 2001, the last trading day prior to Comcastis proposal: aWe are pleased that AT&TAs Board of Directors has responded to the rnarketas overwhelming endorsement of our proposal by delaying its broadband tracking stock plan,& said Mr. Brian L. Roberts; president of Comcast.E iHowever, we disagree with the AT&T Boardis characterization of our offer as inadequate.E^ Since our announcement, AT&T shareholders have responded to our proposal by adding $14 billion in market valuation to AT&T.E As evidenced by the reaction.of their shareholders, the Boardis concern about our corporate governance has no foundation.fWe think our stockas historical performance speaks for itself.& Mr. Roberts continued, aWe are surprised that AT&Tis Board has yet to ask us for any further information. To that end, we remain prepared to hold immediate discussions with AT&T regarding our proposal.69 Comcast reiterated that it is prepared to acquire AAT&Tis interests in Time Warner Entertainment, Cablevision, and Rainbow Media by assuming more debt and issuing more equity to reflect their agreed upon value. This press release contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1945.E to some cases, you can identify those so-called aforward-looking statementsa by wards such as 5may,a swill,&ashould,a sexpects,a&pians,&&anticipates,&&believes,&sestimates,a&predicts,6&potential,&or &continue,& or the negative of those words and other comparable words.E Comcast Corporation(aComcasta) wishes to take advantage of the&safe harbors provided for by the Private Securities litigation Reform Act of 1995 and you are cautioned that actual events or results may differ materially from the expectations expressed'in such forward-looking statements as a result of various factors,including risks and uncertainties, many of which are beyond the control of Comcast.E Factors that could cause actual results to differ materially include, but are not limited to: (1)the businesses of Comcast and AT&T Broadband may not be integrated successfully or such integration may be more difficult,time-consuming or costly than expected; (2) expected combination benefits from the transaction may not be fully realized or realized within the expected time frame; (3) revenues following the transaction may be lower than expected; (4) operating costs,customer loss and business disruption, including, without limitation,;difficulties in maintaining relationships with employees, customers, clients or suppliers,may be greater than expected following the transaction; (5)the regulatory approvals required for the transaction may not be obtained on the proposed terms or on the anticipated schedule (6) the,effects of legislative and regulatory changes; (7)the potential for increased competition; (S)technological changes; (9) the need to generate substantial growth in the subscriber base by successfully launching,marketing and providing services in identified markets; ( p)priding pressures which could affect demand for Comcast&s services'; (11) Comcast&s ability to expand its'distribution; (12)changes in labor, programming, equipment and capital costs; (13)Coimcastas continued ability to create or acquire programming and products that customers will find attractive; (14)future acquisitions, strategic partnerships and divestitures; (15)general business and economic conditions; and (16) other risks described from time to time in Comcastas periodic reports filed with the Securities and Exchange Commission. Return to top COiMCAST MAKES PROPOSAL TO MERGE WITH AT&T' BROADBAND Offers $58 Billion for Core Broadband Assets Plus Additional Value for Non-Core Znvestments http://www.pressnews.net/cmlcsk/pr.htrn 6!4/02 AT&T Broadband To Merge With Comcast Corporation Page S of i.2 Strategic Combination gots/d Create l/orfd's Preeminent Provider of Broadband Communications Services PHILADELPHIA - July 8, 2001- Comcast Corporation (Nasdaq:. CMCSA, CMCSK) today announced that it has made a proposal to AT&T (NYSE; T) to merge with AT&T's broadband business in a tax-free transaction. The combination would create the largest broadband communications provider in the world with approximately 22 million subscribers and leading positions in eight of the nation's 10 largest markets. Terms of the proposed transaction: • Comcast would issue 1.0525 billion shares of Comcast'stock with a value of $44.5 billion based on Friday's closing price and would assume $13.5 billion in debt for AT&T's core broadbandbusiness, which is composed of AT&T's 13.5 million cable subscribers and its joint venture interests. • Comcast is also prepared to acquire AT&T's interests in Time Warner Entertainment, Cablevision, and Rainbow Media by assuming more debt and issuing more equity to reflect their value. • AT&T shareholders would own a majority of the economic and voting interests of the combined company. • Comcast's offer delivers a multiple of 30x both 2000 EBITDA and annualized first quarter 2001'EBITDA, which in either case far exceeds the trading multiple of any publicly traded broadband company. • AT&T shareholders would receive a very substantial premium over published reports of the estimated value of AT&T's broadband business. Comcast's offer represents a value of over $4,000 per subscriber.' • AT&T shareholders would receive Comcast shares valued at $12.60 per AT&T share based on Friday's closing price ('75% of AT&T's current per share market value), while retaining complete'ownership of AT&T's historical communications business that according to published reports has a value'approaching $70 billion on a standalone basis. This combined value is dramatically higher than AT&T's current market value per share of $16.80 (after taking into account the AWE distribution). Comcast expects to generate combination benefits of at least $1.25' billion annually upon the full integration of Comcast and AT&T Broadband, with a potential to increase these benefits to between $2.6 billion and $2.8 billion annually as the companies work together to improve AT&T'Broadband`s margins. As a result of'these combination benefits, merging Comcast and AT&T Broadband would be value accretive to both groups of shareholders. "This is an extremely compelling combination for AT&T and Comcast shareholders, customers and employees," said Mr. Ralph J. Roberts, Chairman of Comcast. "AT&T's board of directors has the opportunity not only to deliver a considerable premium to its shareholders,;,but also to create both tremendous growth and significant value for the long-term. In ,my Judgment, the new company would be:ideally positioned to chart the course for the future of broadband." http://www.pressnews.net/cmcsk/pr.htm 6/4/02 AT&T Broadband To Merge With Comcast Corporation Page 9 ot' i "Over the last several months, we held discussions with AT&T Broadbandregarding this combination," said Mr. Brian L. Roberts, President of Comcast. "It's unfortunate that we were unable to continue our dialogue. At this paint, however, we believe that AT&T's;board' of directors should consider our proposal before a proxy statement relating to its broadband tracking stock proposal is sent to AT&T shareholders later this month: "Our proposal represents>a dramatic acceleration of AT&T's plan to separate its broadband business," said Mr. Roberts. "This combination would unlock the value of AT&T's broadband assets while avoiding the market risks, costs and uncertainties related to AT&T's planned broadband IPO. Significantly, under our proposal, AT&T shareholders will be majority owners in the>largest broadband company in the world. And given our track record, I'm confident that they will welcome our stock as currency." Since its IPC) in 1972, Comcast's stock has grown at a compound annual growth rate of 24% compared to 12% for the S&P 500. Since 1998, Comcast's stock price has appreciated nearly 168% compared to an approximately 23°lo''increase for the S&P 500. When measured in periods of one, three, five, seven and ten years, Comcast's Class A'Special shares have outperformed the cable composite index, the S&P 500 and the Nasdaq. _ Morgan Stanley, JP Morgan, Merrill Lynch and Quadrangle Group are financial advisors to Comcast. Davis Polk & Wardwell is legal advisor to Comcast. The full text of the letter submitted to the Board of Directors of AT&T is attached. July 8, 2001 Mr. C. Michael Armstrong Chairman and CEO AT&T Corp. 32 Avenue of the Americas New York, NY 10013 Dear Mike: Over many months of discussions we have shared a vision that AT&T Broadband and Comcast should be combined to create the world's`leader in broadband communications. We believed those discussions were progressing towards a tax-free transaction that would dramatically accelerate your own plan to separate the broadband company. It is;unfortunate'that we were not able to agree on a basis for continuing our dialogue. Accordingly, we submit this offer to you for consideration by your Board before a proxy statement relating to your broadband tracking'stock' proposal is sent to your shareholders later this month. Under our proposal Comcast would issue 1.01525 billion shares with a value of$44.5` billion based on Friday's closing 'price and assume $13.5 'billion in debt for your core broadband business, which is composed of your 13.5 million cable subscribers as well as your joint venture interests. In addition, we are prepared to acquire your interests in TWE, Cablevision:and Rainbow by assuming more debt and issuing more equity to http.//www.pressnews.net/cmcsk/pr.htm 614/02 AT&T Broadband To Meme With Comcast Corporation pa Ye I oI' i reflect their values. Under our proposal your shareholders would own a majority of the economic and voting interests of the combined company in a transaction that would„be tax-free to AT&T and all shareholders: Our proposal values yourcorebroadband business at $58 billion, which represents 30x both 2000 EBITDA and annualized first quarter 2001 EBITDA. AT&Tshareholders would receive'Comcast shares valued at $12.60 per AT&T share based on Friday's closing' price, while retaining complete ownership of AT&T's historical communications business that according to published reports has a value approaching $70 billion on a standalone basis.This combined value is dramatically higher than your current market value per share of $16.801 after giving effect to the spin-off of AT&T Wireless.' Your shareholders would receive significantly more value through a combination with Comcast than through your planned restructuring. Not only does our proposal avoid the market risks, costs and uncertainties inherent in the planned broadband IPO, it values your business at a'significant premium to your potential public market valuation. At 30x AT&T Broadband's annualized first quarter 2001 EBITDA, our offer far exceeds the trading multiple of any publicly:traded broadband company. Put another way, our proposal delivers a very substantial premium over published reports of the estimated value of your broadband business. After combining our broadband businesses, your shareholders will retain a majority of the future appreciation resulting from substantial combination benefits. Upon full integration of our broadband businesses, we expect the combination benefits will amount to at least $1.25 billion annually. This benefit could eventually increase to between $2.6 and $2.8 billion annually as we work together to raise the level of your margins. None of these figures take account of any new content, internet or other value creating' opportunities. As a result of these combination benefits, merging our broadband companies will clearly be value accretive to broth groups of shareholders. Given the strength of Comcast's balance sheet we are confident that the new company would have an investment grade debt rating, a view which is shared'by our financial' advisors, Morgan Stanley, JP Morgan and Merrill Lynch.: We understand that there were concerns within AT&T about Comcast's voting structure. As you know, multi-class structures are common in our industry and have not affected stock trading,,values. Our Class A Special shares have outperformed the cable composite index, the S&P 500 and the Nasdaq in each of the last one, three, five, seven and ten year periods. We are confident that your shareholders would welcome our currency. In fact, 38 of your 50 largest institutional shareholders also have significant investments in Comcast. Our proposal is subject to the negotiation of a definitive agreement. We are prepared to deliver a draft merger agreement as soon as you wish. We are confident that the combination does not present any significant regulatory issues. In light of the significance of this proposal to both your shareholders and ours, we are publicly releasing the text of this letter. We hope that you will work with us to make this vision a reality. Respectfully submitted, Ralph J. Roberts - Chairman of the Board http://www.pressnews.net/emesk/pr.htm 6/4/02 AT&T Broadband To Meme With Comcast Corporation Pa-c 1 i of l v Brian L. Roberts - President Financial Crammunity Meeting Comcast Corporation will host ameeting with the financial community on July 9, 2001 at 10:00 a.m. Eastern Daylight Time in New York.The meeting'is being held in the ballroom (20th floor) of the'St. Regis Hotel, which is on 55th Street between Madison and Fifth Avenues. The meeting will be broadcast live via the Internet at www.cmcsk.com. In addition, the meeting will be available via teleconference by dialing 888-754-3421 (international': 212-346-7476). A telephone'replay will be available beginning an hour following the meeting until duly 16, 2001 at midnight Eastern Daylight Time. To access the rebroadcast, please diad 800-633-8284 ('internationa'l callers: 858-812-64403) and enter code 19308891. An audio'recording of the meeting will also be available on Comcast's website (www.cmcsk.com) starting at 5:00 p.m. Eastern Daylight Time on July 9 and ending at midnight Eastern' Daylight Time on July 16, 2001. Press Conference Call Comcast Corporation will also host a press conference call on July 9, 2001; at 11:30 a.m. Eastern Daylight Time in New York. To participate in the teleconference dial 888- 732-8129 (international: 212-346-0261). A telephone replay will be available beginning an hour following the call until July 16, 2001 at midnight Eastern Daylight Time. To access the rebroadcast, please dial 800-633-8284 (international callers: 858- 812-6440) and enter code 19309191. In addition, the teleconference will also be broadcast live via the Internet at www.cmcsk.com. An audio recording of the call will be available on Comcast's website (www.cmcsk.com) starting at 5:00 p.m. Eastern Daylight Time on July 9 ending at midnight Eastern Daylight Time on July 16, 2001. This press release contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. In some cases, you can identify those so-called "forward-looking'statements" by words such as "may," "will," "should,` "expects," "plans," "anticipates," "believes," "estimates," "predicts," "potential," or "continue," or the negative of those words and other comparable words. Comcast Corporation ("Comcast") wishes to take advantage of the "safe harbor" provided for by the Private Securities Litigation Reform Act of 1995 and you are cautioned that actual events or results may differ materially'from the expectations expressed in such forward-looking statements as a result of various factors, including risks and uncertainties,°many of which are beyond the control of Comcast. Factors that could cause actual results to differ materially include, but are not limited to: (1) the businesses of Comcast and AT&T Broadband may not be integrated successfully or such integration may be more difficult, time-consuming or costly than expected, (2} expected combination benefits from the transaction may not be fully realized or realized within the expected time frame; (3) revenues fallowing the transaction may be lower than expected; (4) operating costs, customer loss and business disruption, including, without limitation, difficulties in maintaining relationships with employees, customers, clients or suppliers, may be greater than expected following the transaction; (5) the regulatory approvals required for the transaction may not be obtained on the proposed terms or on the anticipated schedule, (6) the effects of http://www.pressnews.net/cmcsk/pr.htrn 6/4/02 AT&T Broadband.To Merge With Comcast Corporation rage I? 01' l legislative and regulatory changes; (7) the potential for increased competition; (8) technological changes; (9) the need to generate substantial growth in the subscriber base by successfully launching, :marketing and providing,services in identified markets; (10) pricing pressures which could affect demand for Comcast's services; (11) Comcast's ability to expand its distribution; (12) changes in labor, programming, equipment and capital costs; (13) Comcast's continued ability to create or acquire programming''and products that customers will find attractive; (14) future'acquisitions, strategic partnerships and divestitures; (15)' general business and economic conditions; and (16) other risks described from time to time in Comcast's periodic reports filed with the Securities and Exchange Commission. Investor Contac Marlene S. Dooner, Vice President, Investor Relations (215) 981-7392 William E. Dordelman, Vice President, Finance (215)'981-7550 Kelley L. Claypool, Manager, Investor Relations (215)''981-7729 Media Contact: The Abernathy MacGregor Group (212) 371-5999 Adam Miller, Steve Frankel, Brian Faw Download Press Releases; fir;December 19 2001 j AT&T Broadband to Merge... s September 20, 2€01 Comcast Slgris Confidentiality... e Jyy 1$„•2001;/ Comcast Views A &*Cs elm •3141y 8 2001 1 Comcast Makes Pr ©sal..." 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Neither AT&T, CCBN.com nor their data or content providers guarantee the sequence, accuracy, or completeness of any stock price information or other data displayed, nor shall any such party be liable in any way to the reader or to any other person, firm or corporation whatsoever for any,delays, inaccuracies, errors in, or omission of any such:information or data or the transmission thereof,or for any actions taken in reliance thereon or for any damages arising there from or occasioned thereby or by reason of nonperformance or interruption, or termination of the stock price information for any cause whatsoever. Mote: Historical and current stock price performance data is not necessarily indicative of future performance. Terms and Conditions.Privacy Policy.write to AT&T. Copyright p 2002 AT&T.All rights reserved, http://www.edgar-online.com/brand/att/chart.asp?tf=524&opt=1&ct=1 6/4/02 AT&T Stock Chart Faye 1 of'! WIMP, •.f Enter Search Term or AT&T'Keyword: ATAJ Investor Relations Home > Stock Information 1 Site Map Stuck Chart Security: T (Com Time Frame Option Chart Type, 5 Years - I Choose from List IMountain Fill - Re-Draw aAT&T CORP COM as of 6t3 02 Daily 8o z 80 3 40 I ry 30 ri'• 20 10 Jul 'Oct 98 .Apr Jul Oct 99'Apr Jul Oct 00 App`Jul Oct 01 Ppr Jul Oct 02 Apr 71.46 M 53:58 35.72 tt rov«.'.w wr ""Vsrr Lblume Disclaimer: The CCBN.com data provided is for informational purposes only, is provided for use as a convenience and is not intended for trading purposes. Neither AT&T, CCBN.com nor their data or content providers guarantee the sequence, accuracy, or completeness of any stock price information or other data displayed, nor shall,any such party be liable in any way to the reader or to any other person,firm or corporation whatsoever for any delays, inaccuracies, errors in, or: omission of any such information or data or the transmission thereof,or for any actions taken in reliance thereon or for any damages arising there from or occasioned;,thereby or by reason of nonperformance or interruption, or termination of the stock price information for any cause whatsoever: Note: Historical and current stock price performance data is not necessarily indicative of future performance. Term5and Conditions.Privacy Policy.Write to AT&T. Copyright @ 2002 AT&T.All rights reserved. http://www.edgar-online.com/brand/att/chart.asp?tf=560&opt=l&ct=l 6/4/02 Charter Communications Stock Chart Pa-c I of ! Products and Services Customer Service About u,4gi ter Take me to: 211 Investor Center Click for historical_pr Ice lookup Security: CHTR (Class A Common St Overview Stock Info Price:.6.09Change: -0.121 • Stock Quote 6/4/2002 2:05 PM (minimum 20 minutes delayed) • Stcck Char Financial Reports CHTR Da i I y— Ear^n i ngs Up Doran Splits � 30 • Financial Outlook 25 • Annual Reports • SEC Filings 06 20 Communications + 15 10 • Press Releases 5 • Presentation VoIume • Webcas*s N C Calendar 100 sa r Analyst Infer L -I i FAQs 0001 02' • Email Alerts • Investor Kits Time Frame Compare To Indicators Time: Moving Average. Careers JAH Data None ' None' 7 Date Range: Business Networks � to Frequency: JDaily requent : Dally Re'-draw Copyright©1998-2002 MarketWatch.com Inc.User agreement applies. Historical and current end-of-day data provided by interactive Data Corp. Intraday data is at least 20-minutes delayed.All times are EDT. Intraday data provided by S&P Comstock and subject to terms of use. 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Press Release 5 • Presentation Vo l urne t., LA a' Calendar 50 " Analyst Info E . j I ,►: : u:_ J R S 0 N D 02 F "M fl _M FAQs • Email A€ertx- • Inve;tcr Kits; Time Frame Compare To Indicators _ Time: Moving Averagire: Careers 11 year JNone` 7 Date Range: Business Networks to Fre uene Da(y_ Re-draw Copyright 01998-2002 MarketWatch.com Inc.User agreement applies. Historical and current end-of-day data provided by interactive Data Corp. Intraday data is at least 20-minutes delayed.All times are EDT. Intraday data provided by S&P Comstock and subject to terms of use. 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Historical and current end-of-day data provided by Interactive Data Corp. Intraday data is at least 20-minutes delayed.All times are EDT. Intraday data provided by S&P Comstock and subject to terms of use. Copyright©2001 Charter Communications.All rights reserved. Rules and Policies http://www.corporate-ir.net/ireye/ir_site.zhtml?ticker=CHTR&script=350&layout=7 6/4/02 Charter Corrununications Stock Chart pa-C l 01 i Products and Services Customer Set-vice About c o wrlMt .�c�a CIG{ Take melrc�: �l_c�i't ......:........ .. _. . � ..._.. ...... � � ...___ Investor Center Click for historical-price lookup Security: CHTR (Glass A Common St Overview Stock Info Price: 6.09 Change: -0.121 • Stc--k Quote 6/4/2002 2:05 PM (minimum 20 minutes delayed) « 5tczK Char Financial Reports CHTR Da i I V — Earn i ngs Uta x Down "'' SP I i is 1;' . Financial Outlook NA A +157 • Annual Reports 157 . SEC ;=ilings � Oy Communications � -457 „ Press Releases _60% » Presentations -757 Vo l urtie Webcasts Calendar ° 50 Analyst Info ..r.. �,�. 1..:+.r' ..�..�•,, ,s E FAQs J AS 0 N D tit F t1 A ' M « Email Alert • Investcr Kits Time Frame Compare To indicators Time: Mn' Avera e: Careers I year NAS67A ;71 None Date Range: Business Networks ... ...�t ._.. W Frequency: Daily Re-draw Copyright 0 1998-2002'MarketWatch.com Inc.user agreement applies. Historical and current end-ofryday data provided by interactive Data Corp, Intraday data is at least 20-minutes delayed,All times are EDT. Intraday data provided by 5&P Comstock and subject to terms of use. Copyright d 2001 Charter Communications.All rights reserved.Rules and Policies http://www.corporate-ir.net/ireye/ir_Site-zhtml?ticker=CHTR&script=350&layout=7 6/4/02 Charter Communications Mack Chart Page I o1 Products arta Services Customer Service Abuut cfl�r�i.�i ��r, e Stack Chart- .. Take me to: Invest*r Center Click for_historical price;lookup Security: CHTR=(Class A Common Sl Overview Stock Info Price:6.11 Change: -0.101 * Stck Quote 6/4/2002 2:11PM (minimum 20 minutes delayed) • Stcz;+ ~hal Financial Reports GHTR Da i i y—Y Earn i ngs tip Down .. Sp I i is * Financial Outlook DJ + Annual Reports -157 * SEI pilings -307 Communications � -457 * Pres,rs Releases -75`s * Presentations Vo l erne .r. Q casts Calendar 50 T Analyst Info FAQs J fi S 0 H Ii 02 F" ft R H * Email Aiertti * Inveatcr Kits Time Frame Compare To Indicators Time: Moving Average-. Careers 11 year � ' JIMA �jjI None Date Range; Business Networks I t Frequency: Daily ...t Re-draw Copyright 0 1998-2002 MarketWatch.com Inc.User agreement applies. Historical and current end-of-day data provided by interactive Data Corp, Intraday data is at least 20-minutes deiayed.All times are EDT. Intraday data provided by S&P Comstock and subject to terms of use. Copyright O 2001 Charter Communications.All rights reserved,lap es and polici_0s http://www.corporate-ir.net/ireye/ir_site.zhtml?ticker-CHTR&.script=350&layout=7 6/4/02 AOL Time Warner Investors j Historical Stock Prices Page i o!'2 June_4_2002' investors Historical Stock Prices cm printable ver laterattive Chartingtool illustrating the hislahtaf stock performance and trading volume of AOL Financials Quarterly Earnings Trending Schedules SEC Filings This interactive charting tool below illustrates the historical stock Annual Reports performance and trading volume of AOL at various time intervals, in comparison with major stock indices. Stock Historical Stock Prices The data includes historical stock information for America Online, Stock Split&Dividend prior to the merger with Time Warner on January 11, 2001. History Fixed Income Securities To review the historicalstock performance of Time Warner Inc. prior Largest Shareholders to the merger with America Online, click here. News&Analysis Events&Presentations This tool and data are provided for informational purposes only. Past Analyst Coverage performance of AOL Time Warner stock is not necessarily--.indicative of future performance. We encourage you to confirm all information'before Shareholder Services making an investment decision. Frequently Asked Questions Order Investor Packet Receive'Materials Online Newsletter Chart of AOL Time Warner Contact Investor Relations AOL f' Year, Da i l y t6r3/01 - 6r3t021 High-Low-Open-Close ... 55.00 150.00 45.00 �... w_ .__.__„ .... ..,. 40.00 35.00 ..._ __ ..._:'... ..�_..::. � 80.'.00 25.00 .atF<_�Ya 5us3Crr1l: 20.,00 15.00 Volume Cc) A02 Amer,'ea Online, Inc. 80 Fl .. _ .�.. F _ 60 40 i 1i i 20 Jul Aug Sep Oct Nov Dec J02: Feb Mar Apr May Jun closed"up closed down unchanged data provided by Prophet Time Frame:Chart Type: Show: Indicators: 1-year High/Law/CloseSplits TNone> Compare'to: <None> ©rrw Chaft Refresh V. http://www.aoltimewamer.cam/investors/historical stock_prices.adp 6/4/42 AOL Time Warner Investors j Historical Stock Prices Pale ? Of' June-4 2002 II■ N,� Investors Historical Stock Prices o printable ver IJ interactive Charting total illustraiing the tiistortrat stock performance and trading voiuml=of AOL Financials Quarterly Earnings ' Trending Schedules SEC Filings This interactive charting:,tool below Illustrates the historical stock Annual Reports comparison and trading volume of AOL at various time intervals, in comparison with major stock indices. Stock - historical Stock Prices The data includes historical stock information for America Online, Stock Split&Dividend prior to the merger with Time Warner on 3anuary 11, 2001. History Fixed Income Securities To review the historical stock performance of Time Warner Inc. prior Largest Shareholders to the merger with America Online, click here: News&Analysis Events&Presentations This tool and data are provided for informational purposes only. Past Analyst Coverage performance of AOL Time Warner stock is not necessarily indicative of future performance. We encourage you to confirm all information before Shareholder Services making an investment decision. Frequently Asked'Questions Order Investor Packet Receive Materials online Newsletter Chart of AOL Time Warner Contact Investor Relations AOL 2 Year, 'Dai I (6r3/00 - 6/3/02) High-Lbw-Open-CI.ose . ....... . . ...._. ....... _.._.... __.__. .. � ....,. ._.___ _ --_65.00' i 55.00 - 50.0 ;45.00 E 40.00 35.00 U ti,rl_S .FEl..3t,.i ..... ,._....,., .......... .. .,....., 3®.00.. 25.00 .YfClsko SkaK+Strlk.t. ..yy �y�yy i Uo i ume (c)...2002-Riiier�i oa On I i ne, Inc: _,_ ... 80 M E 3 -._._ .._ m. _.._.._. t 60 40 i lI` Rk 4161 It e Jun00 Oct00 Feb01 Jun01 ct01 k=ebO2 Jun02 closed up closed down unchanged data provided by Prophet Time Frame:Chart Type: Show: Indicators: 2-year High/Low/Close Sprits <None> ► Compare to: <None> D,6 Chartt Refresh http://www.aoltimewamer.com/investors/historical_stock_prices,adp 6/4/02 AOL Time Warner Investors 'Historical Stock Prices Page l of JUne_4_200 �. ...` _._. . .., , ... 4.. w..... ............,_... _. . Investors i Historical Stock Prices c, printable ver Interactive Charting tool illustrating the)iistorkaT stock perforrvianee-and trading vcturz P of AO Financials Quarterly Earnings Trending Schedules SEC Filings This interactive charting tool below illustrates the historical stock ,annual Reports performance and trading volume of AOL at various time intervals, in comparison with major stock indices. Stock Historical stock PricesThe data includes historical stock information for America Online, Stock Split&Dividend prior to the merger with Time Warner on January 12, 2001 History Fixed Income securities To review the historical;stock performance of Time Warner Inc. prior Largest Shareholders to the merger With America Online, click here. News&Analysis Events&Presentations This tool and data are provided for informational purposes only. Past Analyst Coverage performance of AOL Time Warner stock is not necessarily indicative of future performance. We encourage you to confirm;,all information before Shareholder Services making an investment decision. Frequently Asked Questions Order Investor Packet Receive Materials Online Newsletter Chart of AOL Time Warner Contact Investor'Relations ROL 2 Year, Daily (613x00 - 613x02) H i gh-Low-Open-C i ose 65.00 60.00 55.00 __ ... ..........___ 50.00 _,:. .. 45.00 40.00 35.00 •:ti•�i*tLat;t,scr€ia� .. ,_.._w._ .,M. ..,�. .... �._. _:,:..._. . _.:,: _ ..,..._._. _.: .._.25.06 25.00 Volume (c) 2002 ismer i ea On l i tne, I ric. 80 M _. 66 1ILI 120 Jun00 oct00 Feb0I' Juno! 07t'ei Feb02 Jun02 closed up closed down unchanged data provided by Prophet Time Frame:Chart Type: Show: Indicators: 3-year JHigh/Low/Close Splits y Compare to: <None>' Craw Wharf Refresh http://www.aoltimewamer.corn/investors/historical_stock_prices.adp 6/4/02 AOL Time Warner Investors Historical Stack prices Pa�,e i:of June_4_2002 { *• Investors Historical stock Prices Q printable ver lnleractivti Charting tool illustrating iter iristorl-u-str�r.i perturrnance and trading volume of AOL Financials Quarterly Earnings Trending,Schedules SEC Filings This interactive charting'..tool below illustrates the historical stock Annual Reports performance and trading volume of AOL at various time intervals, in comparison with,,major stock indices. Stock Historical stock Prices The data includes historical stock information for America Online, Stock split&Dividend prior to the merger with Time Warner on January 11, 2001. History Fixed Income Securities To review the historical stock performance of Time"Warner'Inc. prior Largest Shareholders to the merger with America Online, click here, News&Analysis Events&Presentations This tool and data are provided for informational purposes;,only. Past Analyst Coverage performance of AOL Time Warner stock is not necessarily indicative of future performance. We encourage you to confirm all information before Shareholder Services making an investment decision. Frequently Asked Questions Order Investor Packet Receive Materials Online Newsletter Chart of AOL Time Warner Contact Investor Relations ROL $_0f1P ; 3 Year, Ila i I y t6r3/99:- 6r3t027 Compar i son t %Chg 7 _. ........... _..._ .. :_ _.. 120% i ... 80? ycA m 607. 407. 20% ix pig . _. - ... ------ -207 -40% 60 Jun99 Dec99 Junco Deo00 Jun91 Dec01' tc7 ;2002 dimer i ca Online,`Inc. closed up closed down unchanged data provided by Prophet Time Frame:Chart T e: Show: Indicators: 3-year H!gh/Low/Close Splits _� <'None> Compare';to: NASDAQ Draw Chiart Refresh http://www.aoltimewamer.com/investors/historical stock_prices.adp 6/4/42 AOL Time Warner( .Investors Historical Stock Prices 1'age i oA' ' June_4_2002 i �i �•� �� Investors Historical Stock Prices c printable ver i.. lnleractivti chaning tool illustrotirirgthe hislon'a at stor. pertormanc and trading vo-Ju o of AO Financials Quarterly Earnings Trending Schedules SEC Pilings This interactive charting tool below illustrates the historical stock Annual Reports performance and trading volume of AOL at various time intervals, in comparison with major stock indices. Stock Historical Stock Prices The data includes historical stock information for America Online, Stock Split&Dividend prior to the merger with Time Warner can January 11, 2001. History Fixed Income Securities To review the historical stock performance of Time Warner Inc. prior Largest Shareholders to the merger with America Online, click here. Newsy&Analysis Events&`Presentations This tool and data are provided for informational purposes only. Past Analyst Coverage performance of AOL Time Warner stock is not necessarily indicative of future performance. We encourage you to confirm all information before Shareholder Services making an investment decision, Frequently AskedQuestions Order Investor Packet Receive Materials Online Newsletter Chart of AOL Time Warner Contact investor Relations AOL $INnU 3 Year, Dai I (6/3/93 - 6/3/02) Comparison 7Chg i 407. 207 R �t e r+. A. . ..: ".r':.. -40% -607. Jun99 Ilec99 JunOO Dec00 Jun01 Dec01 tea 2002 Amer,i ca On I i ne, I nc. closed up closed down unchanged data provided by Prophet Time Frame:Chart Type: Show: _ Indicators: 3-year Fllgh/Low/Close j splits �tj > Compare to: DJIA �. braw Chart Refresh http://www.aoltimewamer.com/investors/historical_stock_prices.adp 6/4/42 SECURITIES AND EXCHANGE COMMISSION Washington,D.C. 20549 FORM IO-Q [x I QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)OF THE SECURITIES EXCHANGE ACT of 1934 for the quarterly period ended March 31,2002 or [ I 'TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)OF THE SECURITIES EXCHANGE ACT of 1934 for the transition period from to Commission file number 1-15062 AOL TIME 'WARNER INC. (Exact name of registrant as specified in its charter) Delaware 134099534 (State or other jurisdiction of (I.R,S.Employer incorporation or organization) Identification Number) 75 Rockefeller Plaza New York,New York 10019 (212)'484-8000 (Address,including zip code,and telephone number,including area code,of registrant's principal executive offices) Indicate by check mark whether the registrant(1')has filed all reports required to be filed by Section 13 or 15(d)of the Securities Exchange;Act of 1934 during the preceding 12 months(or for such shorter period that the registrant was required to file such reports),and(2)has been subject to such filing requirements for the past 90 days. Yes x No: Indicate the number of shares outstanding of each of the issuer's classes of common stock,as of the latest practicable date. Shares Outstanding Description of Class as of April 30 '2002 Common Stock-S.01;;par value 4,281,522,278 Series LMCN-V Common Stock-$.01 par value 171,185,826 L.� AOL TIME WARNER INC. MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION—(Continued) S40 trillion,respectively,compared to$53 million,$49 million and S6$million,respectively, for the three months ended March 31,2001, RESULTS OF OPERATIONS Transactions Affecting Comparability of Results of Operations Pro Forma Items AOL Time Warner's results for 2002 have been impacted by certain transactions and events that cause thein not to be comparable to the results reported in 2001. In order to make the 2001 operating results more comparable to the 2002 presentation and crake an analysis of 2002 and:2.001 more meaningful, the following discussion of results of operations and changes in financial condition and liquidity is based on pro forma financial information for 2001 that has been adjusted for the items discussed in the following paragraphs. • New Accounting Standard for Goodwill and Other Intangible Assets.During 2001,the Financial Accounting Standards Board ("FASB")issued Statement of Financial Accounting Standards No. 142"Goodwill and Other Intangible Assets"("FAS 142"), which requires that,effective January 1,2002,goodwill,including the goodwill included in the carrying value of investments accounted for using the equity method of accounting,and certain other intangible assets deemed to have an indefinite useful life,cease amortizing(Note 3). FAS 142 does not require retroactive restatement for all periods presented,however,the pro forma information for 2001 assumes that FAS 142 was in effect beginning January 1,2001. « Consolidation of AOL Europe:S.A.{"AOL Europe").On January 31,2002,AOL;Time Warner acquired 80%of Bertelsmann AC's ("Bertelsmann") 49.5% interest in AOL Europe for $5.3 billion in cash and has committed to acquire the remaining 20% of`Bertelsmann's interest for SI A5 billion in cash in July 2002 (Nate 5). As a result of the purchase of Berteismann's interest in AOL Europe;AOL Time Warner has a majority interest and began consolidating AOL Europe, retroactive to the beginning of 2002. The pro forma information for 2001 assumes the remaining interest in AOL Europe was acquired on January 1,2001. • Consolidation of IPC Group Limited("IPC"). In October 2001,AOL Time Warner's Publishing segment acquired IPC, the parent company of IPC Media, from Cinven,one of Europe's'leading private equity firms, for approximately$1.6 billion, including transaction casts.The pro forma information for 2001 assumes that IPC was acquired on January 1,2001. New Accounting Standards In addition to the pro forma adjustments previously discussed, in the first quarter'of 2002 the Company adopted new accounting guidance in several areas that require retroactive restatement of all periods presented to reflect'the new accounting provisions;therefore,these adjustments impact both pro forma and historical results.These adjustments are discussed below. Reimbursement cif` 'Out-of-Pocket"Expenses In November 2001;the FASB Staff issued as interpretive guidance Emerging Issues Task Force ("EITF")Topic No. D- 103, "Income Statement Characterization of Reimbursements Received for'Out-of-Pocket'Expenses Incurred"("Topic D-103"). Topic D-103 requires that reimbursements received for out-of-pocket expenses be classified'as revenue on the income statement and was effective for AOL Time garner in the first quarter of 2002. The new guidance requires retroactive restatement of all periods presented to reflect the new accounting provisions. This change in revenue classification impacts AOL Time Warner's 4` AOL TIME WARNER INC. MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION (Continued) Cable and Music segments,resulting in an increase in both revenues and costs of approximately$99 million on both a pro forma and historical basis in the first quarter of 2001. Emerging Issues Task Force Issue No.01-09 In April 2001, the FASB's EITF reached a final consensus on EITF Issue No. 00-25, "Vendor 'Income Statement Characterization of Consideration Paid to a Reseller of the Vendor's Products,"which was later codified along with other similar issues,into EITF 01-09,"Accounting for Consideration Given by a Vendor to a Customer or a Reseller of the Vendor's Products" ("EITF 01-09'). EITF 01-09 was effective for AOL Time Warner in the first quarter of 2002. EITF 01-09 clarifies the income statement classification of costs incurred by a vendor in connection with the reseller's purchase or promotion of the vendor's products, resulting in certain cooperative advertising and product placement costs previously classified as selling expenses to be reflected as a reduction of revenues earned from that activity. The new guidance impacts AOL,Time Warner's AOL, Music and Publishing segments.As a result of applying the provisions of EITF 01-09,the Company's revenues and costs each were reduced by an equal amount of approximately$62 million on both a pro forma and historical basis in the first quarter of 2001. Other Significant Transactions and Nonrecurring Items As more fully described herein and in the related footnotes to the accompanying consolidated financial statements, the comparability of AOL Time Warner's operating results has been affected by certain significant transactions and nonrecurring items in each period. As previously discussed,the Company adopted,effective January 1,2002,new accounting rules for goodwill and certain intangible assets. Among the requirements of the new rules is that goodwill and certain intangible assets be assessed for impairment using fair value measurement techniques. During the first quarter of 2002, the Company'completed its impairment review and has recorded a S54 billion noncash pretax charge for the impairment of;goodwill, substantially all of which was generated in the Merger. The charge reflects overall market declines since the Merger was announced in January 2000, is non- operational in nature and is reflected as a cumulative effect of an accounting change in the accompanying consolidated financial statements(Note 3). In order to enhance comparability;the Company compares current year results to the prior year exclusive of this charge i In addition to the $54 billion impairment charge to the cumulative effect of an accounting P g g change, AOL Time Warner's operating results for the three months ended March 31, 2002 included (i) merger and restructuring costs of approximately$107 million(Note 2)and(ii)a noncash pretax charge of approximately$581 million to reduce the carrying value of certain investments that experienced other-than-temporary declines in market value,including$571 million related to the write- down of AOL Time Warner's investment in Time Warner Telecom Inc. ("Time Warner Telecom"), a 44%-owned equity investee f (Note 4). i For the three months ended March 31,2001,AOL Time Warner's operating results included (i) merger-related costs of approximately S71 million(Note 2)and(ii)a noncash pretax charge of approximately$620 million in 2001 to reduce the carrying value of certain investments that experienced other-than-temporary declines in market value(Note 4). 5 AOL TIME WARNER INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued) (Unaudited) approximately $12 million of other merger costs, primarily relating to costs incurred in connection with the termination of AOL Time Warner's merger discussions with AT&T regarding their broadband businesses. As of March 31, 2002,approximately$55.3 million of the$250 million had not been,paid and is primarily classified as a current liability in the accompanying consolidated balance sheet. Restructuring Costs During the first quarter of 2002, the Company has incurred and accrued other restructuring costs of$107 million related to various contractual terminations and obligations, including certain contractual employee termination benefits. No amounts have been paid against these accruals as of March 31,2002. As such, the entire amount is primarily classified as a current liability in the accompanying consolidated balance sheet. These costs are included in"merger and restructuring costs"in the accompanying consolidated statement of operations. Included in the 2002 restructuring charge is$64 million related to lease obligations of the AOL segment for network modems that will no longer be used.as network providers upgrade their networks tonewer technology. Specifically, under certain existing agreements with 'network providers, AOL is leasing the modems used in providing network services from a third-party.During the first quarter of 2002,a plan was established under which a network provider would upgrade and replace the AOL supplied moderns. Accordingly, the Company accrued the remaining lease obligations,less estimated recoveries,for the period that these modems will no longer be in use. In addition to the lease costs referredto above,there is one remaining network arrangement that continues to use AOL supplied modems, in which AOL has a remaining modem lease obligation of$74 million. AOL is currently in discussions with the network provider regarding the use of AOL supplied modems. If the network provider of this remaining network arrangement shouldsimilarly decide to replace the AOL modems, the Company could be required to recognize an additional restructuring charge in subsequent periods for the portion of the remaining lease obligation,less estimated recoveries,related to the period the AOL modems would not be in use: 3. GOODWILL AND INTANGIBLE ASSETS As discussed in Note 1, in January 2002, AOL Time Warner adopted FAS 142,which requires companies to stop;amortizing goodwill and certain intangible assets with an indefinite useful life. Instead,FAS 142 requires that goodwill and intangible assets deemed to have an indefinite useful life be reviewed for impairment upon adoption of FAS 142(January 1,2002)and annually thereafter. The Company will perform its annual impairment review during the fourth quarter of each year,commencing in the fourth quarter of 2002. Under FAS 142,goodwill impairment is deemed to exist if the net book value of a reporting unit exceeds its C estimated fair value.The Company's reporting units are generally consistent with the operating segments underlying j the segments identified in Note.10 – Segment Information. This methodology'differs from AOL Time Warner's l 1 previous policy,;as permitted under accounting standards existing at that time, of using undiscounted cash flows on an enterprise-wide basis to determine ifgoodwill'is recoverable, r Upon adoption of FAS 142 in the first quarter of 2002, AOL Time Warner recorded a one-time, noncash charge of approximately$54 billion to reduce the carrying value of its goodwill. Such charge is nonoperational in nature and is reflected as a cumulative effect of an accounting change in the accompanying consolidated statement of t 24' AOL TIME WARNER INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-- (Continued) (Unaudited) operations. In calculating the impairment charge, the fair value of the impaired reportingunits underlying the segments were estimated usingeithera'discounted cash flow methodology or recent comparable transactions: f The FAS 142 goodwill impairment is associated solely with goodwill resulting from the Merger. The amount of the impairment primarily reflects the decline in the Company's stock price since the Merger was announced and valued for accounting purposes in January of 2000. Prior to performing the review for impairment, FAS 142 required that all goodwill deemed to be related to the entity as a whole be assigned to all of the Company's reporting units,including the reporting units of the acquirer. This differs from the previous accounting rules where goodwill was assigned only to the businesses of the company acquired. As a result, a portion of the goodwill generated in the Merger has been reallocated to the AOL,segment. A summary of changes in the Company's goodwill during the quarter,and total assets at March 31,2002,by business segment is as follows(in millions): Caodwtll Total Assets January 1, Acquisitions& March 31, Mirth 31, 2002"1 Adiud stmentstx3 lm airmeutst-t 2002: 2002 AOL S 27,729 $7,036 S - $34,765 S 41,160 Cable 33;263 (22,980) 10,283 48,350 Filmed Entertainment(4) 9,110 (92) (4,091) 4,927 15,736 Networks"' 33,562 22 (13,077) 20,507 31,642 Music 5;477 13 (4,796) 694 7,431 Publishing 18,283 (22) (9,259) 9,002 14,240 Corporate - 1,798 Total $ ` $6,957 $ 4th 2f13) $ 1 (1) Reflects the reallocation of goodwill to the AOL reporting unit under FAS 142. (2) Adjustments primarily relate to the Company's preliminary purchase price allocation for several acquisitions.Specifically,the ultimate € goodwill associated with certain acquisitions(including IPC,Business 2A,Synapse,AOL Europe,and This Old Nouse)continues to be adjusted as the value of the assets and liabilities(including merger liabilities)acquired are finalized. (3) The impairment charge does not include approximately$36 million related to goodwill impairments associated with equity investecs. (4) Includes impairments at Warner Bros.$(2851 billion)and at the Turner filmed entertainment businesses$(1.240 billion). (5) Includes impairments at the Turner cable networks$(10.933 billion),HBO$(1.933 billion)and The WB Network$(211 million). As of March 31, 2002 and December 31, 2001, the Company's intangible assets and related accumulated amortization consisted of the following(in millions):.. As of March 31,2002 As of December 3I,2001 - i Accumulated Accumulated j fi—roL5 A,tmorLaa(ion –N-d firon Amortization 1149 1 Intangible assets subject to amortization: Music catalogues and copyrights $3,157 S (196) $2,961 $3,080 S (153) $2,927 Filen library 3,559 : (244) 3,315 3,559 (196) 3,363 i Customer lists and other intangible M assets 1.738 (595) 1,143 1,519 (520) 999 j I Total S . $J=) $� : $ $ ),_ S �4 25 AOL TIME WARNER INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued) (Unaudited) l Intangible assets not subject to amortization: i Cable television franchises 528,456 $(1,878) 526,578 $28,452 S(1,878) 526,574 Sports franchises 500 (20) 480 500 (20) 480 Brands,trademarks and other intangible assets 10.990 (320) 10:670 10,974 (320) 10,654 Total $39.946 $0.2a) S22JZ S2 S(Z-118) SEJO The Company recorded amortization expense of$166 million during the first quarter of 2002 compared to $166 million on a pro forma basis during the first quarter of 2001. Based on the current amount of intangible assets subject to amortization,the estimated amortization expense for each of the succeeding 5 years are as follows: 2002: $648 million;2003: $637 million; 2004: $613 million;2005: $560 million;and 2006:$429 million.Asacquisitions and dispositions occur in the future and as purchase price allocations are finalized,these amounts may vary: During the first quarter of 2002,the Company;acquired the following intangible;assets; ' Weighted Average million Amortization Period Musiccatalogues and copyrights ......... $ 77 15 years Cable television franchises..,.... ......... ......... ......... ......... 4 Indefinite Customer lists: ........: ............................. 219 6 years Brands,Trademarks and other'intangible assets;. ....:............. 16 Indefinite r Total .. . .. ......................................... ' i The 2001 results on a historical basis do not reflect the provisions of FAS 142. Had AOL Time Warner adopted FAS 142 on January 1, 2001, the historical net income (loss)and basic and diluted net income (loss)per common share would have been changed to the adjusted amounts indicated below: Three Months Ended March 31 2001 (millions,except per share amounts) Net income Net income Net income (loss)per basic (loss)per diluted floil common share common share As reported–historical basis................ 5(1,369) $ (0,31) $ (0.31) Add:Goodwill amortization 1,295 0.29 0.2'9 Add:Intangible amortization............................... 364 0.08 0.08 Add:Equity investee goodwill amortization........ 143 0.03 0.03 Minority interest impact (17) - - t Income tax impact tai....: ......... .. ......... 196} 4) Adjusted ......... (a) Because goodwill is nondeductible for tax purposes,the income tax impact reflects only the ceasing of intangible amortization and equity investee goodwill amortization. 26 TIME WARNER ENTERTAINMENT COMPANY, L.P. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued) (Unaudited) Reclassifications Certain reclassifications have been made to the prior year's financial"information to conform to the March 31, 2002 presentation. 2. MERGER AND RESTRUCTURING COSTS America Online--TimeWarner Merger In connection with the Merger,TWE has reviewed its operations and implemented several plans to restructure the operations of America Online and Time Warner("restructuring'plans").As part of the restructuring plans,TWE recorded a restructuring liability of approximately$301 million during 2001. The restructuring accruals relate to costs to exit and consolidate certain activities at TWE,as well as costs to terminate employees across various business units. Such amounts were recognized as liabilities assumed in the purchase business'combination and included in the allocation of the cost to acquire Time Warner. Accordingly, such amounts resulted in additional goodwill being recorded in connection with the Mer$er. Of the total restructuring costs, $107 million related to work force reductions and represented employee termination benefits. Because certain employees can defer receipt of termination benefits for up to 24 months, cash payments will continue after the employee has been terminated.Termination payments of approximately$19 million were made in 2001 (none of which was in the first quarter)and an additional$13 million was made in the first quarter of 2002. As of March 31, 2002, the remaining liability of approximately $75 trillion was classified as a current liability in the accompanying consolidated balance sheet. The restructuring charge also includes approximately $194 million associated with exiting certain activities. Specifically, TWE has exited certain under-performing operations, including the Studio Store operations included in the Filmed Entertainment --<segment. The restructuring accrual associated with exiting activities specifically' includes incremental casts and contractual termination obligations for items such as leasehold termination payments and other facility exit costs incurred as a direct result of these plans,which will not have future benefits.Payments related to exiting activities were approximately S88 million in 2001 ($5 million of which was paid in the first quarter)and an additional$25 million was paid in the first quarter of 2002. As of March 31,'2002,the remaining liability of$81 million was primarily classified as a current liability in the accompanying consolidated balance sheet: Selected information relating to the restructuring plans follows(in millions): Employee Exit Costs Total Terminatio n Initial accruals... ......... ....................... S 107 $ 194' $301 Cash paid—2001 ......... . (19) (88) (107) Restructuring liability as of December 31,2001 . S 88 $ 106 $ 194 Cash paid—2002 .........__..... ........ (13) (25) (38) Restructuring liability as of March 31,2002........ S 75 S 81' $ 15b 60 TIME WARNER ENTERTAINMENT COMPANY, L.P. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued), (Unaudited) 3. GOODWILL AND INTANGIBLE ASSETS As discussed in Note'1, in January 2002, TWE adopted FAS 142, which requires companies to stop amortizing goodwill and certain intangible assets with an indefiniteuseful life. Instead,FAS 142 requires that goodwill and intangible assets deemed to have an indefinite useful life be reviewed for impairment upon adoption of FAS 142(January 1, 2002) and annually thereafter.. The Company will perform its annual'impairment review during the fourth quarter of each year, commencing with the fourth quarter of 2002. Under FAS 142, goodwill impairment is deemed to exist if the net book value of a reporting unit exceeds its estimated fair value. The Company's reporting units are generally consistent with the operating segments underlying the segments identified in Note 6 — Segment Information. This methodology differs from TWE's previous'policy, as permitted under accounting standards existing at that time,of using undiscounted cash flows on an enterprisewide basis to determine if goodwill is recoverable. Upon-adoption of FAS 142 in the first quarter of 2002, TWE recorded a one-time, noncash charge of approximately$22 billion to reduce the carrying value of its goodwill'. Such charge''is nonoperational in nature and is reflected as a cumulative effect of an accounting change in the accompanying consolidated statement of operations.; In calculating the'impairment charge,the fair value of the impaired reporting units underlying the segments were estimated using either a discounted cash flow methodology or recent comparable transactions. The FAS 142 goodwill impairment is associated solely with goodwill resulting from the Merger. The amount of the impairment primarily reflects the decline.in AOL Time Warner's stock price since the Merger was announced and valued for accounting purposes in January of 2000.Prior to performing the review for impairment,FAS 142 required that all goodwill deemed to be related to the entity as a whole be assigned to all of the Company's reporting units,including the reporting units of the acquirer. This differs from the previous accounting rules where goodwill'was assigned only to the businesses of the company acquired. As a result-,effective January 1,2002,$6.857 billion of the goodwill generated in the Merger, which was previously allocated to the TWE segments, has been reallocated to the AOL segment of AOL Time Warner: A sunvnary of changes in the Company's goodwill during the quarter, and total assets at March 31, 2002, by business segment is as follows(in millions): Goodwill Total Assets' January 1, Acquisitions& March 31, March 31, 2002(4)(2) Adiustments ]MRairments 2002 2002 Cable..:. ......... $19,048 $ S(16,768) $ 2,280 32,482 Filmed'Entertainment.... .....♦!.. 6,164 20 (2,851) 3,333 12,570 Networks(3) 8,934 22 (2,144) 6;812 10,203 Corporate.......... .. ....`. - - - - 626 Total.:.: (6) Reflects the reallocation of goodwill of$6.857 billion to the AOL segment of AOL Time Warner under FAS 142. (7) Excludes goodwill of$9.857 billion at January 1,2002 and$9.904 billion at March 31,2092 associated with deferred tax liabilities created during the Merger. Neither the deferred tax liabilities nor the corresponding goodwill are recorded in TWE's standalone financial statements,because TWE is a non-taxable entity.The excluded goodwill relates to the Cable(S8.069 billion at January I and March 31),Filmed Entertainment($1.432 billion at January 1 and SI A57 at March 31),and Networks($356 million at January I and $378 million at March 3l)business segments. (8) includes impairments at HBO$(1:933 billion)and The WB Nctwork$(211 million): 61 TIME WARNER ENTERTAINMENT COMPANY,L.P. NOTES TO CONSOLIDATED FINANCIAL S'TATEMENITS (Cont need)' (unaudited) As of March 31, 2002 and December 31, 2001, the Company's intangible assets and related accumulated amortization consisted of the following(in millions): As of March 3l,200 As of December.3t,2001 Accumulated Accumulated Gross Amortization Net Gross Amortization Net Intangible assets subject to amortization: Film library.... .............. $2,529 S(173) $2,356 $2,529 S(138) S2,391 Customer lists and other intangible assets................................. 215 (133) 82 204 x,131) 73 Total;. ........ ....... .............. ) ) S2,464 Intangible assets not subject to amortization: Cable television franchises...... S21,914 S(1,644) 520,270 $21,911 S(1,644) $20.267 Brands,trademarks and other intangible assets.....:.: .. ........... 2.150. ---L61) 2.089 2,150 (61) 2,089 Total........................................................ _ ) Ski M) S22,356` The Company recorded amortization expense of$37 million during the first quarter of 2002 compared to $36 million on a pro forma basis during the first quarter of 2001.Based on the current amount of intangible assets subject to amortization, the estimated amortization expense for each of the succeeding 5-years are as follows: 2002: $156 million; 2003: '$156 million; 2004: $150 million; 2005: $150 trillion; and 2006: $150 million. As acquisitions and dispositions occur in the future and as purchase prig allocations are finalized,these amounts may vary. During the first quarter of 2002,the Company acquired the following intangible assets: Weighted Average' millions Amortization Period Other intangible assets ......: ......... ......... .....::. ......... S 11 25 years Cable television franchises....... 3 Indefinite Total.:, .... ....:...... The 2001 results on a historical basis do not reflect the provisions of FAS 142. Had TWE adopted FAS 142 on January 1,2001,the historical net income(loss)would have been changed to the adjusted amounts indicated below: Three!Months Ended March 3' .2001 (millions)' Net income lass As reported—historical basis'.. .......... ........ $(350) Add: Goodwill amortization,... 413 Add:Intangible amortization .. ......... 232 Add:Equity investee goodwill amortization..... ......... ......... 36 Minority interest impact ............................................. 2 Income tax impact ........ ......................... ................... Adjusted.............................. ............... .......................... ......... 62 TIME WARNER ENTERTAINMENT COMPANY, L.P. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-{Continued} (Unaudited) 4. INVENTORIES Inventories and film costs consist of March 31,2002 December 31.2001 (millions) Programming costs,less amortization.... ........ . 51,358 81.285 Merchandise...:: . ........ ... 178 158 Film costs-Theatrical:' Released,less amortization, ......... .. ......... 659 650 Completed and not released ......... ......... ........: ......... ......... 193 285 In,production.............. .... ...... ..... .. ... 433` 346 Development and pre-production;.. .......... ......... 39 36 Film costs-Television: Released,less amortization, ......... ......... .... ..... .......:. ............ 168 123 Completed'and not released ...... 142 95 In production.......: ......... ............ 24 59 Development and pre-production.... 4 2 Total inventories and film costs(')....................... ........... 3,198 3.039 Less current portion of inventory ......... 948 852 Total noncurrent inventories and film costs...::.... .. .......... ....... .. ......:.. ... .. S V (b) Does not include$2.356 billion and$2.391 billion of fihn library costs as of March 31,2002 and December 31.2001,respectively which are included to intangible assets subject to amortization on the accompanying consolidated balance sheet.See Note 3: 5. PARTNERS'''CAPITAL TWE is required to make distributions to reimburse the partners for income taxes at statutory rates based on their allocable share of taxable income,and to reimburse AOL Time Warner for stock options granted to employees of TWE based on the amount by which the market price of AOL Time Warner common stock exceeds the option exercise price on the exercise date or,with respect to options granted prior to the TWE capitalization on June 30, 1992,the greater of the exercise price or the 59.25 market price of AOL Time Warner common stock(adjusted for the Merger)at the time of the TWE capitalization. TWE accretes a stack option distribution and a corresponding liability with respect to unexercised options when the market price of AOL Time Warner common stock increases during the accounting period, and reverses previously accrued stock option distributions and the corresponding liability when the market price of AOL Time Warner common stock declines. During the three months ended March 31, 2002, TWE accrued 8159 million of tax-related distributions and reversed previous stock option'distribution accruals of$233 million, based on closing prices of AOL Time Warner common stock of$23.65 at March 28,2002 and$32.10 at December 31 2001.During the three months ended March 31, 2001,TWE accrued S35 million of tax-related distributions and 5310 million of stock option distributions as a result of an increase at that time inthemarket price of AOL Time Warner-common'stock. During the three months ended March 31, 2002, TWE paid distributions to the AOL Time Warner General Partners in the amount of$174 million, consisting of $159 million of tax-related distributions and $15 million of stock option related distributions,-.During"the three months ended March 31, 2001,,TWE paid the AOL Time Warner General Partners distributions in the;amount of 8198 million, consisting of S35 million of tax-related distributions and'S 163 million of stock option related distributions. 63 Report: Turner blast led to Levin's<departure from AUL - Jun. 4,2002 Paine l of .- Netscape Pre i< MEWs > CompOnies �tyE Ted tirade cited in ACYL shit Best Pli AUTOS Turner outburst at board meeting said to have sparked Get Strep CEO Levin"s departure. Video-, i� .June 4, 2002 8:05 AM ED Erriail_i Horne; DewsLOS ANGELES {Reuters} - AOL Time companies + ' Warner Inc 's former CEO Gerald Levin cmpnreserch was forced out of the company after an deals angry boardroom outburst by major ci stockholder Ted Turner marked a firnart�r�!newt in °' turning point when no other directors brl_ef rose to Levin's defense, a magazine said irldustry tcb Monday. �ntern�#tlon.�x Vanity Fair, quoting an;unnamed company insider, said that Markets&Stocks contrary to the public impression that Levin retired in May of his Commentary own accord, he was ousted after the volatile Turner blasted his Technology leadership during a board meeting in the fall of 2001. Personal Finance AOL Time Warner spokeswoman Tricia CE�>&AVETHIS Retirement Primrose disputed the magazine's story, ,� i C*® EMAIL THIS Mutual'Funds saying. Gerry.Levin's decision to retire was Money'101 his own, and any other speculation is just C ta PRMT THIS Money's Best not factual." C** MOST PQPULAP i Track your stacks AOL Time Warner is the parent company of CNN/Money. (4Calculators r " Vanity Fair said Levin and Turner had declined interview requests for the article. CNNfn on Tl/: , watch CN'Nfn_vltieg According to an account by Vanity Fair contributing editor Nina Buy shpw__videos Munk, Turner, the company's vice chairman, banged his fist on the . rocs table and yelled, accusing Levin of personally destroying AOL Time CNN&m Warner, demoralizing employees and encouraging rivalry between ,0X$!Qm its AOL and Time Warner divisions. MONEY Magazine Customer rv�P Turner, 63, also was reported to have r M_ reminded the board that the company's share FE price had declined by half in just four months. As of last January, Turner held a 3.5 percent stake in the media giant and was the click:hem company's largest individual shareholder. .° 3 Vanity Fair said Turner's outburst was followed , E-MAIL by silence, and none of the board members NEWSLETTERS present, not even Levin himself, rase to his http://money.cnn.com/2002/06/04/news/companies/turner levin.reut/index.htm 6/4/02 Report: Turner blast led to Levin's departure from AOI.,- ,tun. 4, 2002 Page 2 oit 47 sial defense. The unidentified insider with Gerald Levin knowledge of the incident told Munk that after a brief pause, the *AantCxO MOBILE ivews meeting continued as though nothing unusual had occurred, but AvBlt elan! that;Turners" ""assault was a shocking+f turning point. "It was like realizing the emperor has no clothes," the source told ii IIIJU1":�.11-SPU" "UN Munk. According to the magazine, ,"Turner's direct attack on Levin Try an issue of MONEY that day forced AUL Time Warner's board of directors to see the magazine FREE! obvious: Levin had to be replaced, fast." NameAfter gathering his lieutenants In November to plan a graceful exit for the CEO, AOL Time Warner Chairman Steve Case confronted Address Levin privately and told him, '"This just isn't working," and Levin apparently agreed, the magazine reported. The following month, Levin, then 62, made his surprise city announcement that he would retire in May of this year, citing his Idesire to pursue "moral and social issues"that he felt strongly State/ Zile/ about and saying that the Sept. 11 attacks had renewed the grief Province Postai he suffered from the murder of his schoolteacher son in 1997. E-mail' Later in December, ADL Time Warner said Turner had renewed his contract as vice chairman of the company after Levin's replacement, CEO-designate Richard Parsons, asked him to stay Please do not contact on. me via e-mail with offers from Time Inc, and In November,Turner had spoken bitterly at a luncheon of cable TV CNN/Money executives in Anaheim, Calif., about having felt sidelined at AOL- Offer Details Time Warner when he was replaced in January 2001 as head'of I flike MONEY,I'll � Turner BroadcastingSystems. eive 11 more issues, y in all,for just$19.95. "I never thought I'd get prematurely retired, he said then. Priv c -R° cy- According to Vanity Fair, Levin's ouster came amid an environment of open hostility between the two wings of the company -- with AOL loyalists regarding Time Warner employees as uncooperative, while Time Warmer executives described AOL devotees as "Moonies" and "Inexperienced," Asked about the article's characterization of internal tensions at the company, Primrose said, "This is vintage Vanity;Fair, and we're not taking what they write seriously at all." She declined to comment further. Shares of ASL TimeWarner (A©L Research, Esti./sate fell 61 cents to $18.09 in Monday trading. :ar Copyright 2002 Reuters All rights reserved.' This material may not be published, broadcast, rewritten, or redistributed. SPECIAL: Click here for a FREE trial issue o€Ntt?NEY rnaaaz ne! Cbe�SOWS THIS COLO S dAILTHIS C j— fR1NT THtS C1Z�r M0ST PQPUL!#R http://moncy.cnn.com/2002/06/04/news/companies/turner levin.reut/index.htm 6/4/02 Comcast Investor Relations Page l oi' 1 + � ►. INVESTOR RELATIONS Entertainment Products My Membership Support& Service =Corporate/Careers CMCSK Mock Graph Stock informa Stock Quote Quote I Graph I Price Lookup CMCSK CMCSA Stock Split Hit 1:Year Mock Graph Tax Basis Allo 111 Comcast Carp Glass A Special CMCSK Daily 1$46 IR 1$46 Request Finan 44 Email Alerts 42 FAQs _ 40' 38 IR Hotline Nut 010'L' 36 34 888-281-21flU 32 V .. 3.0 28 26 24 s J J A S 0 N 6 02 F M A M 5'x,61 M 44.71 _ .__ ... .._. .. . . �_.,. . ._...'.. ..�. 29.81 14.90 irii.�rdc 1t1 �ta.4..u�i;lt�riirrY►ar�w�ir�w ��itt� �r��#��iit��l>liI�t�Y ��li�i��il, o.ao N Volume Period Bench Percent 1 YeartUone [] Update Graph ' CEJ 2002 Comcast Corporation inve$tor Relations Press Room Privacy Statement visitof http://www.cmcsk.com/stockchart.cfm?ticker---CMCSK 6/4/02 Comcast Investor Relations Page i of i I� I� IN IIII SII lel � comcast INVESTOR RELATIONS Entertainment Products My Membership Support'&Service sCorporate/Careers CMCSK Stock Graph * Stock Informal> Stock Quote Quote I Graph l Price Lookup CMCSK €MCSA Stock Split Hi 2 Year Stock'Graph Tax Basis Allo 'Comcast Corp Class A Special CMCSK Daily ' Contact Iii $49.50 Request Finan 47.00 )retail Alerts 44.50 FAQs 42.00 39.50 IR Hotline Nur 37.00 888-281-2100 r 34.50 32.00 29.50 27.00 24.50 22.00 Jul Oct 01 Apr Jul Oct 02 Apr 59.61 M _...... _._.... .._.. !. 44.71 129.81 a _ mj14,90 0.00 ■Volume Period Bench Percent 12 Years None ri Update Graph ' CQ 2002 Comcast Corporation investor Relations PressRoom Privacy Statement visitor bttp://www.emesk.comistockcliart.cfm?Period=24&Bench 1— 6/4/02 Comcast investor Relations Pays; i 01' 1- N IUI Idly I SII VIII IBJ ► . �. INUE Tt3R RELATIONS Entertainment Products My Membership Support&Service '&Corporate/Ca reers CMCSK Mack Graph �.- Stock Informs Stack Quote Quote I Graph ( Prue Lookup CMCSK GMCSA Stock Suit His 3 Year Stock Graph ,rax Basis Allo ■Comcast Corp Class A Special CMCSK Daily Contact IR $60 Request Finan _ 55 Email Alerts 50 FAQs I 45 IR Hotline Nut 40 888-281-2100 35 30 25 20 Jul Oct 00 'Apr Jul Ott 01 Apr Jul Oct 02 Apr 5'9.61 M 44.71` 29,81 -1 1#.90: 1 - 1.0,00 ■Volume Period Bench Percent 3 Years lNone , ❑ Update Graph Q 2002 Comcast Corporation Inuestar Relations Press Room Privacy Statement visitol http.//www.cmcsk.com/stockehart.cfm?Period=36&Benchl= 6/4/02 Comcast Investor Relations Page i oI_i . ► : ` INVESTOR RELATIONS Entertainment Products My Membership Support&Service mCorporate/Careers CMCSK Stock Graph' ., Stock Informa Stock Quote Quote I Graph I Price Look.up CMCSK CMCSA Stock Split Hif 5 Year Stock Graph Tax Basis Allo ■Comcast Corp Class A Special CMCSK ZT €: Daily Contact IR t$70 Request Finan 6o Email Alerts FAQs 50 xIR Hotline Nui 40 $$8-281-2300 30 20 10 0 J 698A J 0 99 A J b 00A J 001 A 402A 59.61-M .44.71 j _,... .... _. ... , ... 29,81 1 g.9© L 4141 0.00 .Volume Period Bench Percent 5 Years lNone ❑ Update Graph 2002 Comcast Corporation Investor Relations Press Room Privacy.Statement visitor http://www.emcsk.com/stockchart.cf n?Period=60&Benchl 6/4/02 Winsite Page I of Tuesday, MQ Welcc d Multichannel flews ©All of TVinsite Registet for ext ARCHIVES 1 EVENTS CLAS5IFi : Sections >Top Stories >Broadband Week >Through the Wire >Programming You are here:>TYlnsite >Multichannel News>Breaking News >Pay Per View >People BREAKING NEWS STORY >Marketing/Advertising , >Policy >Finance AT&T Fla. Billing Under Fire PrinlervFr endly >Op-Ed versl4n >Supplement Multichannel News �■ E-mail this to-a Resit 6/4/2002 6:00:00 PM Colleague '.+Inlornratian. The Florida Attorney General's office confirmed"that an investigation of AT&T . l .�� : Broadband -- initiated by complaints from Jacksonville city officials-- has been IIII expanded into a statewide probe. specialSign up todayfor including free e- The AG's office is examining alleged bilking irregularities by the MSD. An AT&T lettersp Broadband spokeswoman has said that the cable system is cooperating with the access to archives, iand much more. nvestigation. David Lewis of the AG's economic-crimes unit, which enforces consumer-protection rules, said once the Jacksonville,inquiry was made public, subscribers and localities in other parts of Florida lodged similar complaints. Most fell into the franchise- _° Q dispute category, but some could be categorized as chronic overbilling, the state agency said. Publications TVlnsite AT&T Broadband swapped billing vendors last year, and the transition to CSG Broadcasting&Cable Systems International Inc. was not smooth. The company and vendor are in alevision arbitration regarding the future of their relationship. Multichannel.News The operator may not be able to argue to investigators that the billing errors are TVinste International the result of technical problems. Mul channel Now in#erriationai The AG's office will determine if the billing errors violate the state's deceptive- Tet vision Eurcxae trade-practices law, Lewis said, adding that the errors don't have to be deliberate Television Latin Ameri a to violate state law. Toolbox Archives Events Printer-Friend ver lon E-mail th s o a colleague In-Stat Research http://www.tvinsite.com/m ultichannelnews/ind ex.asp?l ayout=story&doc-id=89042&display=... 6/4/02 t Vinsite Paze 2 of Print;Subscriotigm Industry Links Asstse+ tions Classifieds Alt Classifieds Jobs to'ons e—Mi-9 cLogiC 64 TM HOME 1 ABOUT US I ADVERTISE 1 CONTACT US \ REGISTER/LOG IN Q 2002 Reed Business Information,a division of Reed Elsevier Inc.All rights reserved. Use of this Web site is subject to its Terms of Ilse Privacy Policy http://www.tvinsite.co /multichannelnews/index.asp?lays ut-story&doc_id=89042&display=... 6/4/02 s Ln LAN ' , CIN! . cm M CNcoLxi r. h hl o Nr 0fnrr X I'n f: kD + c cn s O -moi a c Q` o n , r "' f 0 eA vi� r` c c) en N » ' c s' to S etn 5_ (Q Forbes able Consolidation T&T Broadband: A Hard Self m DICarlo,Forbes.com,10.25.01,6:00 PM ET July,AT&T rejected a$58 billion stock offer(including debt)from Comcast for its broadband division,holding out for more money. T&T's reluctance was understandable,since the tetecom giant($66 billion in sales)had paid over$100 billion for those very same assets tly two years earlier. ,ut nearly four months later,AT&Ts(nyse:T-news-people)$8.7 billion(sales)broadband division is worth even less than what Comcast -sasdaq.QMCSA-news-people)offered.Why?The division has problems that will be inherited by Comcast or whoever buys the )usiness. these problems include strained relationships with municipalities,who award long-term cable contracts.The cities are miffed about poor :ustomer service.Several have levied ftnes against the company for failing to meet minimurn standards.Those fines are capped at only a few hundred dollars a day,but are an indication of frustration at the local level. Second,municipal officials say the company Is behind schedule in upgrading networks for advanced digital services.Indeed,61%of AT&T Broadband's networks nun at 750 MHz,compared with about 80%for Its competitors.These faster 750 MHz networks have greater capacity and give subscribers more choices in programming and services. AT&T;certainly had grand ambitions when It bought TCl and MedlaOne to get Into the cable business The plan was to use high-speed pipes to deliver phone,cable and Internet service.But penetration in new markets has been low:Today,23%of customers pay for digital video services and 14.8%for broadband'telephony.Worse,AT&T Broadband's margins,at 25%,are well below the industry average. AT&T Broadband's installed base of almost 14 million cable subscribers ring up average monthly bills of just$57,not enough to justify the $58 billion that Comcast offered can July 8.Comcasrs stockhas fallen since then,but If the some offer were made today,the deal would' still be worth$50 billion,Including debt Some analysts say Comcast"s offer Is at the very;top range of what AT&T Broadband Is worth.'The Comcast offer was fair,and its unlikely they'll raise It,because its the only bona fide offer on the table,"says Orake Johnstone of Davenport and Co, "Comcast certainly doesn't have to raise Its bid,"says Scott Cleland,chief executive of the precursor Group,an Independent telecommunications consultancy.`AT&T devalued the property(byj massively increasing spending with the hope of future profits that never materialized,` Last calendar year,AT&T Broadband's capital expenditures were$4.2 billion,$1.3 billion of which was spent on plant upgrades.The new owner will assume billions in responsibility for upgrading AT&T Broadband's systems.The owner will also have to mend fences with municipal officials,some of which are holding up franchise renewals to get Ironclad promises for better service and new networks. Last week,Fort Lauderdale,Fla.,city commissioners did something almost unheard-of—they refused to renew the city's cable franchise agreement with AT&T Broadband until they are convinced that customer service has Improved. The service complaints do not appear to be Isolated.Its the same story in the suburbs of Chicago;central Massachusetts,Miami-Dade County;Tustin,Calif.,,5t.Paul,r'Minn.:and Fayette County,Ca.The city of Plantation,Fla.,went so far as to sue A&T'Broadband in September because It did not build what its attorney says was a promised'Institutional network: "Irs possible the franchises won't be renewed until a new ccmnrltment is underway"says Stuart Chapman,a telecommunications consultant who advises municipalities. He says that AT&T Broadband had started building a new network in suburban Chicago but then abruptly stopped last year."The systems that are there have barely been maintained.In early 2000 they started paring back operations as they prepared to spin off the business.' AT&T Broadband spokesman Andrew Johnson acknowledges that the company is not where it wants to be in upgrading systems—due to a capital crunch that has hit all telecommunications companies.It hasn't happened as quickly as we'd like,but thars not to suggest that we are hacking away"from upgrading the infrastructure,he notes.Johnson says the proposed sale of AT&T Broadband has not affected the build'.-out of new systems. AT&T Broadband is not alone in having low customer satisfaction.An August J.D.Power study found that only Cox Communications (nyse:,Q=-news-people)and RCN(nasdaq.RGNC-news-people)scored above average.it is generally believed that service Is sub- par because there isn't a lot of competition.Consider that only eight companies own most of the cable systems in the U.S. Johnson says that the service problems are isolated to"a handful of areas"and that they re"taking steps to right the ship"In these problematic spots. With over 14 million subscribers in 12 major markets,some degree of frustration with poor service can probably be expected.But AT&T Broadband exacerbated the situation by consolidating 140 local call centers to what will ultimately be 20 national and regional centers, some of which will be outsourced to a third party.AT&T,Johnson says,is trying to keep the impact of its call-center consolidation to zero. htm:/hwww.forbes.com/2001/10/25/1025att nrint.htmI 02/2212002 Forbes.corn-Magazine Article Page 2 o 2 But customers might almost be willing to put up with bad service if they had advanced digital services.Many systems are in the process of renewing franchise agreements and are looking for ironclad promises;from AT&T Broadband—promises for better customer service and upgraded networks that ultimately will have to be kept by a new provider. 'We will put the new buyer on notice that they are obligated to comply with the contractual obligations made by AT&T,"says Mario Goderich,director of Miami-Dade'CounVs consurner protection division. AT&T hes reportedly set a Nov.30 deadline to submit bids for the broadband unit.Its possible the company could still spin it off or take on an investor,especially if no one offers a price it thinks is adequate.AT&T couldn't have foreseen the way the world would change since July 8--but all things considered,it should have taken Comcast`s very generous offer. .lucci wrote the attorney general last week alleging that AT&T'may have vio- T&T * Wit, Fraud lancet" practices.Florida statute regarding false, deceptive or unfair trade ctices.Tine * • matter was turned over to the Tallahassee a Florida office of the state's Economic Crimes'Unit for consideration, Complaints stem from customer service problems in Jacksonville At this point I can't saywhether we wM or will not pursue this as a full-scale investi. x stag D. KR Ahi eR gation,"said Joe Bizzaro,a spokesman for ehises involved in the AT&T-Comcast the Florida attorney general. n eight-mouth scuffle over AT&T Broad- merger nationally as the behemoths seek The request for an inquiry hints indi- land's handling c+fc ammer grievances in transfer oflocal franchise ownerships into rertly at claims a former AT&T employee s 260,000-subscriber JacksonvMe,Fla.,sys- the new parent organization. filed in US.District Court that state AT&T !m escalated last week as Florida's attorney ' is could be a multiheaded dragon falsified customer service records given to :neral agreed to consider a request from that's going to be approaching the city in 2041.Late last cal government officials that he launch a AT&T and Comcast,"says Klatt Lei � ill year Kei McAnany sued and investigation,into AT&T's customer bowitx,a veteran Florida cable AT&T over employment prac- rvice practices in the city, attorney and franchise consultant, tices and alleges she was Jacksonville is one of several AT&T ars- who represents a number of forced to falsify records;she —,ner service hot spots in Florida since big Florida franchise authorities has provided the city with changes the MSC)made last summer in including Miami.His,newest data that she says back up installations,customer and call cen- client is Jacksonville,which is not '" her claim.Carlucci's letter ter services.Local government officials required to approve the transfer. " refers to"voluminous there are irate that AT&T' in the process of In Florida's Broward County, records,and further exam- completing a$72 billion merger of its which hosts 23 franchise authori- ples ofbusiness practices by nationwide network of cable TV operations ties,officialsviem so incensed by AT&T,which are of grave with Comcast Corp:has'not adequately AT&Ts customer service fall-off AUM310imAmrspacdas concernn to the city." redressed a tidal wave of complaints made that they banded together to mar have been de eptive, Taylor says the lawsuit is its the wake of its service weigh the viability,of wunce pmident Cowed sags. "only tangentially related" changes. OPENING A attracting a competitor to the city"s rest"we're The AT&T Jacksonville FRAUD INQUIRY to AT&r.Clay County paid for a fea- letting that run its course on its own,"he face-off:Local officials COULD ATTRACT si'bility study to determine says.But the allegations encouraged the are demanding cash creel FRANCHISEwhether it would make sense to city to try to reconcile its awn data with its for consumers inrun its own,cable System and reports furnished by AT&T and the treater- return for AT&T's 2001 AM Ri7'I ES recently decided the financial risk. iai McAnany provided."when we tried to service woes,while FROM OTHER would be too high.Ft.Lauderdale verify those numbers,we started to realize AT&Ts proposal includes CidMMalNITIES. used the leverage of a franchise it was very different,"Taylor says. a donation to charity. renewal to solve its problems The local spat may get ironed out this coupons for free pay-per-view-movies and "F.fwe'd been moving in a more positive week as Jacksonville officials meet for the a free premium channel for a week. manner.we wouldn't be in this place," first time with Ellen Filipiak,the newly Whether the matter remains a minor admits Mario Taylor.director of the city's appointed AT&T SVP for Florida(see headache for AT&T or blossoms into a full- Department ofRegulatory and Environ- related story on page 5).AT&T could not bore migraine depends somewhat on mental Services.The number of complaints have a better person than Ellen in that whether Florida Attorney General.Robert made directly to the city ballooned to more position,"says Leibowitz."'The question Butterworth enters the fray by opening a than 1.200 a month before dropping below from me is whether Ellen has been given fraud inquiry,which in turn could attract 200,but were still'four times the monthly the appropriate resources."He adds, franchise authorities from other commu- average in prioryears.Lately those num AT&T and Comcast have;to address this pities,in a widening AT&T investigations. bers have started to rise again,Taylor says, on a larger basis...there has to be a sub- "l don't think it has any ramification adding to their concern. stantial commitment of money and outside ofJacksonville,"says Rick Bailey,' Jacksonville City Council President Matt resources to fix the call centers."0 senior vice president and chief counsel of AT&T Broadband."we feel very comfortable with our position in Jacksonville.we feel at all times we acted appropriately and cor- rectly'Bailey said AT&T is cooperating with the city and would continue to do so if the attorney general starts an inquiry. Saber-rattling tactics among franchise officials and their representatives have increased as government:authorities look to gain an upper hand in the local tussle.Local governments have begun pressing for more leverage in some of the 5,000 or so frau. s= 6 CABLE WORLD February 112002 Challe��es kirou Cmc ' AT&T Bid Cable: Consumer sumer Federation is made up of Federation asks local 280 consumer groups,including the American Assn. of Retired Per- regulators to oppose sons,and represents about 50 mil- lion members,Cooper said.It plans deal,saying rates will to file:complaints with regulators rise,service deteriorate. in other cities,he said. The Justice Department and From Bloomberg News Federal Communications Commis- sion are reviewing the deal be- Opponents of Comcast Corp.'s- tween New York-based AT&T and planned $72-billion purchase of Philadelphia-based Comcast. The AT&T Corp.'s cable television , new company would have 22 mil- business are taking their case to lo- lion customers in more than 40 cal regulators to get municipalities states, involved alongside federal reviews. shares of Comeast fell 15 cents The Consumer Federation of to$30.10 on Nasdaq.AT&T fell 20 America asked officials in Canty-', cents to $13.50 on the New'York bridge,Mass., Dallas;Montgomery Stock Exchange. County,Md.;and San Francisco to Comcast spokeswoman Karen oppose the acquisition,research di Dougherty Buchholz and AT&T rector Mark Cooper'said. Cable spokesman Jim McGann declined companies have to win approval to comment. from local authorities to operate in The companies will need to a given area. spend time and energy resolving A larger Comcast will lead to consumer complaints and may higher rates and poor service, the need to agree to some conditions consumer group says. Comcast demanded by local regulators,'said says it will save money with the ac Jimmy Schaeffler, chief executive quisition and boost sales, allowing of research firm Carmel Group.; it to expand programming and "It'll just be a nuisance,"he said. services while limiting rate in "They may have to give up some creases for basic cattle television. concessions." "Quality will deteriorate',as call The effort probably won't block centers move farther away," the combination, said Schaeffler Cooper said. and Maria Kovacs, an analyst at The Washington-based Cort- Commerce Capital Markets Inc. (o) SEGMENT REPORTING AT&T's results are segmented according to the way we manage our business: AT&T.Business, AT'&T Consumer and AT&T Broadband, In connection with our corporate restructuring program set forth in late 2000, our existing segments reflect certain managerial changes since the; publication of our 2000 annual report. The changes are as follows: AT&T Business was expanded to include the results of international operations and ventures. In addition, certain corporate costs that were previously recorded within the Corporate and Other Group have been allocated to the respectivesegments in an effort to ultimately have the results of these businesses reflect all direct corporate costs as well as overhead for shared services. All prior period results have been restated to reflect these changes. Total assets for our reportable segments generally include all assets, except intercompany receivables. Reflecting the dynamics of our business, we continuously review our management model and structure, which may result in additional adjustments to our operating segments in the future. For the Three Months For the Nine Months Ended September 30, Ended September 30, 2001. 20002001 2000 Revenue AT&T Business external revenue S 61750 $ 71022 $ 20,550 S 21,172 AT&T Business internal revenue 135 200 597 529 Total AT&T Business revenue 6,885 7,222 21,147 21,701 AT&T Consumer external revenue 3,922 4,651 11,654 14,651`, AT&T Broadband external revenue 2,390 2,416 -1,411 5,687 AUT Broadband internal revenue 3 4 12 6 Total AT&T Broadband revenue 2,393 2,420 7,423 5,693 Total "Portable segments 13,100 14,293 40,184 42,045' Corporate and other (a) (13) (117) (220) (422) Total revenue i $ 13,087 $ 14,176 S 39,964' S 41,623 (a) Includes revenue related to ExciteQHome of $140 and $418 for the third quarter and year-to-date period of 2001, respectively, and $79 for the quarter and year-to-date period ended September 30, 2000. RECONCILIATION OF EARNINGS BEFORE INTEREST AND TAXES (EBIT) TO INCOME BEFORE INCOME TAXES For the Three For the Nine Monthe Ended Months'Ended September 30.. : :September 30, 2001 2000 2005 2000 AT&T 9usiaess S(4,377) $ '11690 $(1,933) S 4,428 AT&T Consumer 1,282 1,806 31817' ` 5,271 AT&T Szosdband (538) (640) (1,834) (771} Total reportable segments (3,633) 21955 5o 8.928 Corporate and other (a) (21) 106 (3,505) (247)' Deduce. Pretax Minority interest income (expense) - - 171 64 922 - (87)'. Add. Pretax losses from other equity iavestWants" 224 374 725 1.034 Interest expense 786 896 2,426 2,000 Total (loss) income from continuing operations before income taxes S(4,381) S 2,376 $(61078) S 7,752 (a) Includes $(294) and $(235) related to ExeiteeKome for the third quarter of 2001 and 2000, respectively. Also includes $(714) and $(699) related to ExcitecHome for the nine months ended September 30, 2001 and 2000, respectively. ASSETS At September 30, At December 31, 2001 2000 AT&T'Business $ 40,236 $ 42,747 AT&T Consumer 2,555 3,150 AT&T Broadband 104,054 114,848 Total reportable segments 146,845 160,745 Corporate and Others Other segments- 1,152 1,174 Prepaid pension costs 3,269 3,003 Deferred income taxes 1,362 406 other corporate assets (a) 7,421 7,518 Investment in Liberty 'Media;Group and related receivables,_net -- 34,290 Net assets of discontinued operations -- 27,224 Total assets $160;049 $234,360 (a) Includes $2,541 related to ExciteSHome at December 31, 2000. AT&T BROADBAND AT&T Broadband offers a variety of services through our cable broadband network, including traditional analog video and advanced services such as digital video service, high-speed data service and broadband telephony service. Three months ended Nine months ended September 30, September 30, Dollars in Millions 2001 2000 2001 2000 Revenue $:. 2,393 2,420 $ 7,423 S 51693 EBIT (5381 (540) (1,834) (7-7 EBITDA excluding other income* 602 448 1,496 1,196 OTHER<ITEMS Capital additions $ 782 $ 1,252 $ 2,641 S 3,586` At September 30, 2001 At December 31, 2000 Total assets $104,054 $114,848 * EBITDA for AT&T Broadband excludes net losses from,equity investments and other income The results of operations for the three and nine months ended September 30, 2001 and the three months ended September 30, 2000 include a full period of MediaOne operations, while the nine months ended September 30, 2000, includes only 3 months and two weeks of operations for MediaOne. RE,'4Tf' "JE Broadband revenue declined $27 million, ,or 1.1%, for the three months ended September 30, 2001 compared with the corresponding prior year period. This decrease in revenue was impacted by the net dispositions of cable systems of approximately $0.3 billion, almost entirely offset by revenue growth from new services ('broadband telephony and high-speed data) of approximately $0.2 billion and revenue growth from other video services, primarily expanded basic cable and digital video, of approximately $0.1 billion. AT&T Broadband revenue grew $1.7 billion, or 30.4%, for the'nine months ended September 30, 2001, compared with the corresponding prior year period. Approximately $1.0 billion of the increase was due to the 'acquisition',of MediaOne offset by the net dispositions of cable systems. In addition, the increase was attributable to revenue growth from new services of approximately $0.4 billion and growth in other video services, primarily expanded basic cable and digital'video, 'of, approximately $0.2 billion. At September 30, 2001, Broadband serviced approximately 13.7 million basic cable customers, passing approximately 24.6 million homes, compared with 16.1 million basic cable customers, passing approximately 28.0 million homes at September 30, :.2000. 'At September 30, 2001, we provided digital video service to approximately 3.2 million customers, high-speed data service to approximately 1.4 million customers and broadband telephony service to approximately 0.9 million customers. This compares with 2.5 million digital-video;customers, approximately 0.9 million high-speed data customers, and 0.3 million broadband telephony customers at September 30, 2004. EBIT/EBITDA EBIT for the third quarter,of 2001 was a deficit of $0.5 billion, an improvement of $0.1 billion from the comparable prior year period. This improvement was primarily due to the impacts associated with the growth in new services of approximately $0.1 billion, growth in other video services, primarily expanded basic cable and digital video, of approximately $0.1 billion and lower pretax equity losses of $0.1 billion. Partially offsetting this increased EBIT was the impacts of net dispositionsof cable systems of approximately $0.1 billion and. $0.1 billion of` higher' net loss on the sales of businesses and investments. The EBIT deficit for the nine months ended September 30, 2001 increased $1.1 billion From the comparable prior year period deficit of $0.8 billion. This increase was:largely due to the impacts of the acquisition of'Mediaone and the net dispositions of cable systems of approximately $0.7 billion as well .as higher restructuring and other charges and increased depreciation and amortization,, programming and advertising expenses of approximately $0.`7 billion. in addition, the increase was attributable to $0.5 billion of lower net gains on sales of businesses and investments These increases were offset by $0.4 billion of lower pretax equity losses, impacts associated with the growth in new services of approximately $0.2 billion and growth in other video services, primarily expanded basic cable and digital video, of approximately $0.,2 billion. EBITDA, which excludes net losses from equity investments and other income, was $0.6 billion for the three months ended September 30, 2003, an improvement of $0.1 billion, or 20.91, from the comparable prior year period. This improvement was primarily due to the impacts associated with the growth in new services of approximately $0.1 billion and growth in other video services, primarily expanded basic cable and ',digital video, of approximately $0.1 billion. Partially offsetting this increased EBITDA were the impacts of net dispositions of cable systems of approximately $0.1 billion. EBITDA, for the nine months ended September 30, 2001 was $1.5 billion, an improvement of $0.3 billion, or 25.14, from $1.2 billion in the comparable prior year period. This improvement was primarily due to the acquisition of MediaOne of $0.4 billion and the impacts associated with the growth in new services of approximately $0.2 billion and growth in other video services, ° primarily expanded basic cable and digital video, of approximately $0.2 billion. Partially offsetting this improvement was increased programming and advertising expenses of $0.2 billion, the impact of net dispositions of cable systems of $0.2 billion and higher restructuring and other charges of $0.1 billion. OTHER ITEMS Capital additions decreased 37.54to $0.8 billion for the three months ended September 30, 2001 from $1.3 billion for the comparable prior year period. This decrease was primarily driven by reductions in plant upgrades and launches of advanced services. Capital additions decreased 26.3* to $2.6 billion for the nine' months ended September 30, 2001 from $3.6 billion for the comparable prior year period. This decrease was primarily driven by a $0.5 billion decrease in contributions to various non-consolidated investments Total assets at September 30, 2001, were $104.1 billion compared with $114.8 billion at December 31,' 2000. The decrease in total assets at September 30, 2001 is primarily due to- cable-system sales. COMCAST CORPORATION AND SUBSIDIARIES FORM 10-Q QUARTER ENDED SEPTEMBER 30, 2001 PART 1. FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS CONDENSED CONSOLIDATED BALANCE SHEET (Unaudited) tDoilari-is%Billions, sxcapt sharedate) saptambar 30. December 31, 2003 7000`: ASSETS 1_111. C0'RA$27T A6$ETS Cash and cash squivalents...................;................................... 4648.41 $651.5 1Avsstaea'ts...... 1111... r.:I. ..:.................. .... 1.475..9. 3.059.7 Accounts racaivable less allowance: for doubtful accountsat S252.1-and 4141.7........................................................... 629.7 . Icvestories, nat.' ..................I. ........... .......................... 504.3 438.5 Other current assets.............................. .......1111_.............. 16$.5 102,5 Total Current.asseta.................. ........ . .... 3,429.5 5.144.4 XWESTMSOTS. . .. ................... 3,302.7 2.661:9 . ..-.---- ....... ND PROMM A .VYS?HENT ..... •••• B,9B9.4 6,799.2. Accumulated depreciation..............................................,:...... (2.307.3) i1,s96.51.. Propertyand equipment, net. ., ..... ... .. 6,782.1 5.202.7 ......... - ------- DEMAED CHARGES AND"OTHER ASSETS •••• 30,919.2 26.665.1:. 'Accunulated amortization..<...................................................... £5,652.11 (4,130.4.3 ........ --------- Deferred charges ------•Deferred`charges and other assets. hot.............................:........... 25.167.2 22,72S..6 43C111.4 4 835 744.5 ` LLU=TZCS:AND STDCIO£OLDE". tQ=TY .-.---------------------------------- CURRENT =AZZLITISS Accounts,payable and accrued expenses...... ........................... $3,294.0 $2.Bs2.9 Accrued'.interest ............................................................. 191.5. 10555 '.Oatarrsd'_:.income texsa.............................14.11....................... 104.6 789.9 . Current::portion of long-farm debt r..... ...................••••.......••.-••...,.. $54..4 293..4 ......-- --------- Total current liabilities.......... ,.•.., •• ••••..••..••••• ........ 4,334.5 4«042.2 --------- --------- LONG-TERM DEBT, less Current,portion.......................................1111.. 11,4.94,4 10,517.4" DETERRED IHCOHE TAXES. .. 6.453.1 5,706.7 ` MINORITY INTEREST AND OTHER......'............... ........:.................,. 1.760:2 1,257«2 --------- CCWZTHf:M AND CONTZN=xaES (NOPE 9) CONHON=U%TY POT OPTIONS...................................r.................... .54.6 STOCIMLOERS, T.3£I2TY Preferred stock - authorized, 20,900,000 shares... . 5.2514 series 8<maodatorily redeemable convertible. $1,000.par value issued. zero and 59.450'at redemption value.................................. 59.5 Class A:.special coemon stock, $1 par value authortzed, 2,S00,000,000 shares, issued; 936,940:066 and 931,340.103; outstanding, 913,655,155 and 90&1015.192... ............... ....I....................-.1............ 513.7 908.0 Class A Comm t. stock. $1 par value- authorized, 200,090,000 shares, issued. 21,529,432 and 21,833.280......................... 25..8 21.6 1111 Class N':cosmos stock, $1,par value - authorized,:.. 50,000,000 shares: issued, 9,444,375................4....................... 9.4 9.4 Additional capital............... ...........:.......`..................... 11.742.5 11,598..8 . Retained ssraings..................4 ...... .....................,:.............. 1.9522.0 11056.5 Accumulated other Comprehensive.income...:..................................... 19913432.4 ........ ....... Total stoekholdaxn•equity................................................. 14,836;6 14,086..4 $31,762.-.4 : 435,744.8 Sae nates to condensed consolidated financial statements. 2 1 COMCAST CORPORATION AND S'UBSII}=IES `+ FORM 10-0 QUARTER ENDED SEPTEMBER 30, 2001 CONDENSED CONSOLIDATED S'TATSMT OF OPERATIONS AND RETAINED EARNINGS (ACCIIMMUTED DEFICIT) (Unaudited} (Amoo.Cts in millions. except par'share arta}... Three Months Ended .Nine Months Ended' September 30, September 30,' .2001 2100 2001 : 2000 AsVFSIL- Service reveausa....:.....,...,............................,.....,.:i.......$1..460.1 $1.139.7 :b4.195.0 53.399.2. Nat sal as.from electronic retailing..'r.................................... fps.i 820.3 .2.659.1 2,411..9 •.2.355.5 +.:1.960.0. 6,s50.11 5.32--0. COSTS':AND =PENSEE Operating.............................. ...... 679.1 $14.5 1,991.6 1.594.4 Cast of goods sold._fxom electronic retailing............................ 373.#, 929.2 1.485.6 1,544,4 Selling, general andadministrative.'..................................... 396.8.. 308.9 11126.8 874..8.. Depreciation........ ...................................................... 288.2 : 223.2..: 760.459919 -..Amortization.............................................................. SOS.$ 458.9 1,696.7 1.242.3, 2,533.7 • •2.016.4: 7,262.1' 5.451.8 ......... ......... .......+... ........ OPERATING LOSE.......................... ...................................... ...(176.2) (S6.4). (412.0) (46;8) OTHER:INCOME (EXPENSE) Intaraat expense...:.............................'............... .........1 - (190.7) (175.21: (549.2) (507:0) :Invaatsaant i=0".-......<........'.......................... 1..,...... : 324.3 65,4.'.' 1.045.7' 1,024.5 Iname related to indexed debt ....... . 11064.0 466:0 Equity is not losses of affiliatea...................... .............,. (19.3) 11.71::. (24.1) (7:.7) Other Inco a (expense)..... ..........I...... ............................. (7.0)''k.133.1.:. 1,180.9. 1.124.5 •• 111.12.063.6. 1.651.3 2.300.5. INCOME (1ASS1 BEFORE INCOME TAXES, MINORITY INTERYST, EXTRAORDINARY ITEMS AND''CMCn ATIVE EFFECT OF ACCOUNTING 01ANGE...............:....... (67.3) ,2,021.2 1.231.7 2,253.1 INCOME TAX EXREN4t......................................I..................>.. (13.5)': (752.3) (602.91 (9o$..6). ;.• INCOME (10451"9E80RY MINORITY IItTEAESS EXTRAORDINARY ITEMS ARD y. COMOLATIYE.EFPECT OF ACCOUNTING CHANGE 480.61 1.274.9 636.4 1.348,2 Z,. MINORITY ISTVX aT........................................................... (26.2) t (29.11 (89.6) (06.71 INCOMR (LOSS)'.UP`=ZXTRAOROINART ITEMS:AND CUMULATIVE EFFECT or ACCOUNTING camwx.......'................................................... (106.0) :'1.249.1 546.6 1.241.5 EXTAAOROINARY:ITEMS...'f....................................._................. (2.31: (1.5) (18.5) cumnACTIVE ERFECI'OF''ACCOUNTING".CHANGE............:............................. 384-.$ ......... ......... X= INCOME (LOSS).-.......................................................... (106.91'. 1.249.8 929':f l,iil:.fl PREFERRED DIYIDENOS.............1.4............................................. ...... .. (7.:8) (22'..7) ..... ........ --------- NET INCOME NET'INCOME (IAS$) FOR COMMON STOCMOLDEFS................................... (5206.!)':$1,239.2 $529.6 $1,220}3 .. ......... ..... RETAINED zm=NG6 (ADL CCOMATED Dencir1 : Beginning of period.................................................... $2.075.8 48478.71 $LOSS 5 ($415.9) Net income Clonal....,.. ......,............ .I.......................... (106./1' 1.244.5 929:4 1.243..0 .. :Retirement of cocoon stock................... .........................'. (17.0): (50.2) (34.3) (314.8) End of period....................... ........ ..,..•............ $1,952.0.` $304.4 $1,952:0 $301.4 BASIC EARNINGS (LOSS) FOR COMMON STOCKHOLDERS PER COMMON;SNARE income (lone) before abcrsordinary items and CUmtlative affect. of accounting.Choose................................................ ($0.11} $1.37 $0..56 $1.40 Extraordinary itesa............................... . (0.02) Cumulstive affectof accounting change................................. 0,40 Nat income (loss)............ ..................:........... ($0.111 41.37 $0..9s $1,38 BASIC WEIGHTED AVERAGE NUMBER or COMMON'SNARE&OUTSTAxornr................. 951.5 los.1s 949.3 $65..1 DILU'T'ED EARNINGS (LOSE) FOR COMMON STOCXHOLDERS PER COMMON SNARE > Income {los&) before extraordinary items andcvmulative effeet of accouatiag ehaage ($0..11) $1.29 $0.56 $1.34 extraordinary items........,.......:...................................... (0.02) Cumula%ive affect r of accounting change................................................. .0.40 '----'- Not income (lass)........................ .......................::. (50.11) $1.24 $0.96 $1.32 ..... . DILDTEO WEIGHTED AVERAGE It"5R OF COMMON SRA1=OOTSTANDiNG........ 951.5: 965.6 964.7 .943.1 See notes to condensed consolidated financial statements. -.� 3 COMCAST CORPORATION ANI7 SUBSIDIARIES FORTH 10-Q QUARTER ENDED SEPTEMBER 30, 2001 CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS Mnaudited3 (Dollarsin millions) Mins Months Ended September.30, 2001.. 2000 OPERATING ACTIVITIES, Net income:.........,.........................'...,....,....... $929..6. .$1.243,0 Adjustment. to reconcile net ince" to net cash Provided ;.by operating activities: Depreciation..... ........................................................ 760.4: $99.9. Amartixation............................................................... 1,698.7::, 1,242.3, . Non-cash interest expense ancaes!'.. not................................................ ..31.2. (29.9) Non•caeh income related to indexed'-debt............,..................:....... (666.0) EgLoy in net losses of affiliates..................I...................... 26.1 7.7 Gains an investments and other incoms, net................................... .(2,172.1) .(2,036.8).. Minority interest.......................................................... 59.5 66:7 Extraordinary items.............:.......... ....................................' 1.5: 19.5 - Csmstlat ve sffect of accounting change.., t... ........................... (384.5) Deterred income taxes and'lcons,................._........................... (126.1) 596.2 .651.3:. •1.0236.... Changes in worsting capital................................................. 402.4 (208.9) ....... Not ceeh provided by operating activities............................ 1,254.7 614..7 ......... --------- FINANCING A=TVITIES Proceeds from borrowings......I................ ............................ 51030.9" :3,189.3 Retirements and repayments of debt........................................... ' (3,791..23 (3.991.11 Issuances:af common stock and *alas:af put options on common attack..... 23.2: 23.8 Repurchases of easrcon stock................................. (27.1) (390:3:) Deterred financing costs..................................................... (22.5) (14_4): Net cash provided by (used in) financing activities.... .. 1.213.4 (1.103.2) ......... ......... INVESTING ACTIVITIES Requisitions, not of cash acquired .. (917.1) (161.0) Proeaada tram*41a4 at (Purchases of) short-term investments, net : ... (173.3) 904.6 Purchases"of investments.... : (238.7) (333.3).. Increase in notes receivable................................................. (400.0) (50.0) Praeeeds from sale; of investments.........'..............r..... ............. 1.151.5 992.6 'Capital expenditures.......'.................... .................:. ............ - (1,691.2) (11056.01 , Additional to deferred charges................:.................................. (192.0) (334.9) Nat cash used in investing activities ................................. {2,461.23 (57.8-1 6`.9 INCREASE (DEGH.i'ASE) IN CASH AND CASH EOt02VALEti25. .......:..........:.....:. (346.3)...... CASH AND CASH E(?C VAL&NTS, beginning of period.................................. 6S1.S. 922:3 "" ...... CASH AND CRSS E04I7AUSTS, and of period........................................ $658.4 $575.9 See notes to condensed consolidated financial statements. 4 i COMCAST CORPORATION ANIS SUBSIDIARIES FORM 10-Q QUARTER ENDED SEPTSMSER 30, 2001 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - CONTINOED (Unaudited) 10. FINANCIAL DATA BY BUSINESS SEGMENT The following represents the Company's significant business. segments, „Cable" and "Commerce." The components of net income (loss) below operating income (lass) are not separately evaluated by the Company's management on a segment basis (dollars in millions).. Corporate>And cable Commerce Other (1) Total Three months coded September 30,-2001 ....... Revenues.................(.....................I........ $1,109.4 5555.1 SSSS.O 82.355.:5 Operating ina me (loss) before depreciation and 6mortitation (2).......... .................... 572.3 s53.7 (20.2).'.. 705.6 . . Deprec stLon and amortization.:. 765.7 ,15.2 63.1 594..0 Operating imams (10es).............................. (192.4) 116.5 (101.3) -:(176.27 . - Interest expanse......................... .......r..... . . .143.9 ::4.7 60.1 190.7 . Capital expenditures................................. 449.6 39.4 43..3 $32.1 Nina Months Boded September 30, 7001 Revenue s..............................I.............. .$3,704.4 $2.695.1 $490.6 $6,650.1'. Operating ineoas (loss)':before depreciation and amortization (2.).......:........ ........... 1:510.0486.2 (49.1) 2.047.1. Depreciation and amortization............................. '2.179.0 105.6 177,5 2,459.1 Operating income (loss):'............................. ..(365.0) .279.6 (226.6) 4412.0). Interest expeoaa..,..................... ........ ..... 409.4 :21.6 122.0 549.2.. Capital 43pe0"turso............. .................... 1,196.9 107.4 : 234.9 1.691.1 Three Months ....d Bn....... 10 :2000 Rsysauas...................I—,....I................. 81..052.6 6920.3 821.1 .61.860.0 Operating income (lass) 'before depreciation and amortization (2)............................... 490.1 :179.3' (23..7)... 603.7 Depreciation and amoftizatian_..................... 602.7. ':32.0` 27.6 662-..1 Operating income (loan):............................... {112.1)'. .107.1. (51:1).. (36.4). Interest expanse...................................... . .129..4 5.7 37.3 175.2'. Capital expenditures-................................ - ..399.0:. $1.3 35.6 444.9 Nine.Months Ended September 30, 2000 - __ Revsnoes......r........ ............................. _ $3.056.9 62.411.9.. $342.2 $S,811.0 Operating income (look) before depreciation and amortisation (2)...............`.,........... 1,394.4 416.0 (17.0) 1,795.4 Depreciation and amortization...4..................t... 1;674.1... :91.0 75..4 11842.3-: .. Operating income (lase)......... ..................... (260.4) 327.0 493.:4) (46.5).:., Interest expense...................................... 172.4 ...26.7 107-.9 S07:0:. Capital expenditures................................. 649.E 129,2 77.2 1.056.0. As aE--Septambar 30, 2001 --------------------- Asset ..................................=.............. :29..114.1 2.545.4 7.121.9 $38,761.4: :. Long-.term debt; lass current portion...:.............. 7,574:6 121.8 3.496.4 `11,494.8 Am of:.December'.31, 2000:. ----------------------- Assets................................................. '625;750.3 $2,503.0 $7,491.2 $35,744:5 Long-.tarn debt, leas current portion.:....... ......... "'6,711.0 302.0 3.504:4 10,517.4 COMCAST CORPORATION AND SUBSIDIARIES FORM 16-Q QUARTER ENDED SEPTEMBER 30, 2001 NOTES TO COMI ENSED CONSOLIDATED F3NANCIAL STATEMENTS - CONCLUDED (Unaudited) (1.) Other includes segments not meeting certain quantitative ,guidelines for reporting "including the Company's content and business communications operations as well as elimination entries :related to the segments presented. Corporate ;,and other assets consist primarily of the Company's investments (see Note 5)'. (2) Operating income; (loss) before depreciation and 'amortization is commonly referred to in the Company's businesses as "operating cash flow (deficit) ." Operating cash flow is a measure of a company's ability to generate cash to service its obligations, including debt service obligations, and to finance capital and 'other;;expenditures. In part due to the capital ' intensive nature of the Company's "businesses and the resulting significant level of non-casts depreciation and amortization expense, operating cash flow is frequently used as one of the bases for comparing businesses in the 'company's industries, although the Company's measure of operating casts flow may not be comparable to similarly titled measures of other companies. Operating cash flow is the primary basis used by the Company's management to measure the operating performance of its businesses. operating cash flow does not purport to represent net income or net cash provided by operating activities, as those terms are defined 'under' generally accepted accounting principles, and should not be considered as an alternative" to such measurements as an indicator of the Company's performance: 16 Report: 'Turner blast led to Levin's departure from AOL - Jun. 4, 2002 Pace 3 of RELATED LINK' AQ# ime Warner CNNmoney contact us I magazine customer service I site map I CNN/Money glossary OTHER NEWS: CNN I CNNSI I Mutual Funds I Fortune I Business 2.0 Time Copyright 0 2002 CNN America,Inc.An AOL Time Warner Company ALL RIGHTS RESERVED. Terms under which this service is provided to you.`privacY policy http://money.enn.com/2002/06/04/news/companies/turner levin.reut/index.htm 6/4/02 k. Business 5 Tuesday,Tune 4,2002 BRIEFLY asdaq de based in rural Coudersport, Pa.,is under investigation by embattled Adelphia the Securities and Exchange over debt debacle commission and grand juries in Pennsylvania and New PNIIADELPIHIA• Adelphia fork. Comxnunieations stock was dropped Monday from the Nasdaq composite index, tightening the financial tan- gle ensnaring the sixth-largest cable-television company since it divulged billions of dollars in off-the-books debt in March. Nasdaq notified Adelphia last week that the stock was being delisted because of the company's failure to file fi- nancial statements,including its annual 10-K report,which was due April L Adelphia officials didn't immediately return calls for comment Monday. The stock was at 75 cents Monday on the over-the-counter market known as the pink sheets,5 cents more than its close Fri- day on the Nasdaq. The stock has plunged 95 percent from$20.39,before Adelphia began divulging in- formation March 27 about dealings with the family of founder john J. Rigas,in- cluding off-the-books debt now estimated at more than $3 billion,for which the corn pang would bear liability should the Rigases default. The company,which is :}i::.i:'f::•u.`;v3:;r,.:a.:s +`asi�:ie p:::Y.::9:!:�^^Sz3i:ie:e:iTo-:i::... .. : .n, .:. .. � �.'F' r p...:�... .r a': ...� .....:$,:5..-sH?»_::ts•:ti::::Y.. ....e:i:;.sPiiDs��riifY....�, had..::;q..e:aa:-,:Try3r .....::::.::u...iti. ce-:i^ax�Ne..=rtir?!�"sT25^.F'�1;fl`.3:�lk�a.��:�>�"^'�7AshK,L"4...t„r�ur:i,s.�4:°`fi..riN'�-hiS�3:::� ,:y :s^,lFli. :t;N3's§... J.: 'M� ..:1?':."W ,3.: 3• Winsite 'ale 1 cif Tuesday. Welc Registe for ex ARPHIVES 5 EVENTS 5 Ci ASS#FE£ >Top Stories ;=fes >Broadband Week >Through the Wire ..... .. . .< ... >Programming >Pay Per View BREAKING Nl WSrrSTO3RY >People >Marketing/Advertising >Policy >Finance Adelphia Outlines Rigas Family deals Printer-Friendly version >Op-Ed >Supplement I= NIE-mailthistoa colleague sin*ss `*information. Adelphia Communications Corp. disclosed details of its co-borrowing agreements and deals,it cut with Rigas-family businesses in an 8-K Securities and Exchange Commission filing Friday night, and Adelphia investors returning from the holiday weekend will be stunned when they see the level of nepotism outlined by the inct"ding free e- company, uli and much more. As of April 30, the MSO said the amount outstandingunder i - is co-borrowing credit. facilities was $4.58 billion. And it mapped out a complex system for moving cash from the company to private businesses owned by Rigas-family members, including the National Hockey League's Buffalo Sabres, Eleni interiors (furniture store), Wending Creek (maintenance company), Dobaire (design firm), the Coudersport Theatre and ErgoArts and SongCatcher Films--the latter two being film companies owned by TVins te, Adelphia founder John Rigas and his daughter, Ellen Rigas Venetis. Broadcasting&,Cable Cablevision Among the transactions a special committee formed by the Adelphia board is Multichannel News investigating is a purchase from Highland -- an off-balance-sheet partnership -- of TVinste International 58 million shares of Adelphia class-B common stock and $166.4 million in bonds. Multichannel News The committee is investigating whether 'certain employees of the company may Internatio1.nal have prepared documentation' in January 2002 'to support the accounting Television Europe Television Latin America treatment of this transaction as a cash transaction,' according to the 8-K. Other highlights: Archives Events • Adelphia said it doesn't know whether Wending Creek, Eleni, ErgoArts and In-Stat Research SongCatcher did business with anyone other than Adelphia and the Rigas family. TVinsite Pad e ? c7t Print Subs.criptiuns , In 2001, Adelphia paid Eleni$12.4"million and Dobaire $371,000'primarily for Industry Links office furniture and fixtures and related installation and design services.' Associations •It paid Wending Creek$2 million for maintenance, including snow removal and Ali Glassifreds landscaping. Jobs -_ Stations •Adelphia gave $100,000 to Rigas-family members and entities for office and Services warehouse rent payments. �, •In 2001, it paid Ellen Rigas Venetis $50,000 for `community-service and public- relations consulting services.' Fvc"mdsy; •The Rigas family obtained margin loans that were;backed up by Adelphia equity is and debt. The family has made $241.2 million in payments tied to the margin calls eLoorsince January 2001, Adelphia said. •The committee its investigating whether former vice president of finance Jim Brown got a $700,000loan from Adelphia. • Adelphia paid Niagara Frontier Hockey LP,which owns the Sabres, $744,004 for luxury suites and tickets for employees. • Adelphia spent$13 million to build a golf course on John Rigas"Wending Creek property. •The committee is investigating whether Adelphia`s ACC Operations subsidiary spent$26.5 million for timber rights on land owned by the Rigas family, and whether the deal represented-the fair market value of the rights. , Adelphla bought 50 automobiles from Preston Motors in 2001. John Rigas owns a material stake in the car dealer. •Adelphia funds may have been used by the Rigas family to construct, acquire or maintain condominiums in Beaver Creek, Colo., and Cancun, Mexico, Adelphia said. (teal estate records show that former Adelphia chief financial officer Tim Rigas> bought a $2.4 million condo in Beaver Creek In 1997 and that he got a $2.6 million mortgage to purchase another Beaver Creek condo in December 1995. Printer-Friendly version Email this to a colleague PRESENTS HOME t ABOUT US ADVERTISE t CONTACT US 4 REGiSTERILOG IN O 2002 Reed Business Information,a division of Reed Elsevier Inc.All fights reserved. Use of this Web site is subject to its Terms of Use Privacy Policy Marticorena, Bill From: Michael J. Friedman [michaeljfriedman@compuserve.com Serb: Monday, June 03, 2002 10:05 AM To: SCAN Listserve;Bob Abrahams; Richard Adams; Cindy Aller-Sterling;Andy Belknap; Jena Chanel; Fred Cunningham; Kenneth Duran; Barry Fraser; Gregory Fuentes (City); Mark S. Geddes; Robin F. Gee; Helen Goss;Vicki Gray;Terry Halberg; Maggie Tephany Healy; Susan Herman; Pastor Herrera, Joe Hreha; Carolyn Johnson; Frank Keller; Jonathan L. Kremer;Ed Leaton; Peter Lemrnon; Darren Madkin;William M. Marticorena; Steve McClary; Mark Orme; Lori Panzino; Stacy Park; Bert Perry; Darlene L. Peysar; Hugh Riley; Phil Romney; William Rudell Angela Rushen;Omar Sandoval; Dan Singer; Rhonda Stark; Deborah Steller(work); Fern Taylor;Steve Temple; Carol Tubelis; Kate Vernez;AI Vollbrecht; Matt Weintraub (work); Steve Williams; Shelly Wishner; Brian Yanez; Gale Young (work) Subject Adelphia Board Puts Off Decision on Bankruptcy' http: //www.nytimes.com/200'2/06/03/business/03CABL.html'?oagewanted=print&position=bottom NY Times June 3, 2002' Adelphia Board Puts Off Decision on Bankruptcy By JONATHAN D. GLATER with GERALDINE FABRIKANT i'rectors' at the embattled cable company Adelphia Communications decided on Saturday not to seek bankruptcy protection, at least for now, according to people close to the situation. Still, the people said, the `board`would probably discuss a possible filing at another meeting, which could come as early as this week. The options available will depend on how effective Adelphia is in cutting costs and on how successful it is in selling assets, people closeto the situation said. A bankruptcy filing remains a possibility, they said. Adelphia, which owns and operates cable systems in several states, is under pressure to find new sources of cash to ,satisfy creditors People close to the company have said that several companies, including Charter Communications and the private equity firms Apollo Advisors and the Blackstone Group, have explored purchases of assets from Adelphia. The company's need for cash is sufficiently serious that the Rigas family, which owns the majority of Adelphia shares, is negotiating to sell timber rights that the family owns in New York in Pennsylvania. People close to the situation said a sale of these assets could bring from $15 to $21 million and could close within three weeks. The proceeds would be transferred to Adelphia: The Nasdaq exchange is expected to delist Adelphia today, which could put it in default of other loan provisions and could force it to buy back $1.4 billion in convertible bonds in cash within 40 days. The delisting is the result of Adelphia's failure to file required financial disclosures for the 2001 fiscal year on time. The company must make a $50 millioninterest payment on outstanding debt on June 15, and failure to make that payment' could entitle bondholders to push the company into filing for bankruptcy. For now, Adelphia has enough cash to continue for several weeks, though probably not months, said a person close to the company. Because it has already defaulted' on other loans, it cannot easily borrow any more money from banks. The surprise on Saturday was the relative civility of the board meeting, people close to the company said. Last week, a bitter exchange of letters by Leonard Tow, the largest Adelphia shareholder after the Rigas family, and the company's interim chief executive,' Erland E. Kai-lbourne, spilled into the open. Mr. Tow, who last Wednesday proposed that he be named chairman of the board, criticized efforts to sell off some of the company's assets and instead favored an outright sale of the company; Mr. Kailbourne `rejected the proposal. Last week, Adelphia was negotiating to sell cable systems with about 450, 000 subscribers in Los Angeles and 550,000 subscribers in Georgia;, South Carolina and North Carolina to the entrepreneur Paul G. Allen, people close to the talks say. Mr. Allen is the chairman of Charter Communications. j1 I (�f The status of those talks wa unclear yesterday,; but one peY _on close to the sit idn pointed out that if a deal were imminent, then Adelphia's board probably would have e;t_er approved or rejected it on Saturday. The fact that no decision was made means that no decision had to be made yet, the person said. Putting off a bankruptcy filing is good news for equity investors, who usually recover nothing or very little when a company seeks protection, analysts said yesterday. Adelphia has been in turmoil since it disclosed in March that it had guaranteed some $2.3 billion in loans to the`Rigas family. The, company has said it needs time to restate several years of its financial reports to 'reflect the loans. Recent disclosures show about $3.1 billion in loans to the Rgas family,- and have revealed other questionable dealings between it and the company. As a result, all -ive members of the family have resigned from the board and from management positions. 2 Marticorem, Bii! From: Jonathan L. Kramer{kramer@cabletv.coml Sent: Saturday, June 01, 2002 10:59 AM To: SCAN NATOA; members@natoa.org Subject: Adelphia Watch-6/1 NYT Article NY Times 6!1102 Hope for Adelphia Deal Fades Under Investors' Opposition By GERALDINE FABRIKANT Adelphia Communications continued to negotiate the sale of some of its cable systems to the entrepreneur Paul Allen" yesterday, but it seemed increasingly unlikely that the two sides would pull off a deal, people close to the discussions said yesterday. The talks have been continuing despite strong opposition from Leonard Tow, the chairman of Citizens Communications, who owns 10 percent of Adelphia's stock and is the largest stockholder outside of the Rigas family. Mr. Tow and either large shareholders, including Highfields Capital Management, are opposing a last-minute sale at what: could be depressed prices for valuable cable systems. Highfields, which owns 6.5 percent of Adelphia'a stock, sent a letter yesterday to Adelphia's interim chief executive, Erland E. Kai'lbourne, protesting;'the proposed sale, involving systems with about 450,000 subscribers in Los Angeles and 550, 000 subscribers in areas including Georgia and the Carolinas. The letter from Highfields echoed Mr. Tow's complaints.. If Adelphia's outside directors continue to seek to sell the systems, it is likely to make a board meeting scheduled for today a particularly hostile confrontation between Mr. Tow and his associate on the board and the five other members, led by Mr. Kailbourne. Investors punished Adelphia's stock, which Nasdaq plans to deiist on Monday because the company has not yet filed its 2001 financial report with the Securities and Exchange Commission: The shares fell 46 cents yesterday, to 70 cents, one indication that equity investors doubt the company can avoid bankruptcy. Because of the delisting, holders of $1..4 billion in convertible bonds are entitled to sell them back to the company for cash in 40 days. But a payout is farther away than that because the bond agreements give the banks the power to block the payment for an additional 180 days 'because they supersede bondholders in debt recovery. However, Adelphia still faces an interest payment. of $50 million on bonds outstanding by Jure 15. If it cannot pay the interest, a vote by holders representing the majority of the dollar value of a single issue of bonds can force the company into bankruptcy. Analysts said it appeared increasingly likely that, Adelphia would have to seek bankruptcy protection. That has angered many shareholders who think that if Mr. Tow was named chairman, as he has requested, he might be able to put the company back on track and help orchestrate a smoother sale of assets 1 Marticorena►;,Bill From Jonathan Kramer[krarrmer@cabletv.com] Sent: Sunday,June 02, 2002 3:25 PM To: SCANNATOA@ListServe.com; members@natoa.org Subject: Adelphia Watch From Reuters. . Adelphia in Default; Shares Sink Friday May 31, 7: 12 PM EBT By Jonathan Stempel NEW YORK (Reuters) -- Adelphia Communications Corp. (ADLAE) , the embattled cable television operator, ,said on Friday several units have defaulted on bankloans, as Nasdaq prepared to delist its stock and big shareholders blasted the company's plans to right itself. The defaults and delisting leave the No. 6,,U.S. cable TV operator, which serves nearly 6 million subscribers in 32 states and 'Puerto Rico, facing a cash crunch and a possible bankruptcy, analysts said. Adelphia shares fell 40 percent. The scheduled June 3 delisting give holders of $1.4 billion of Adelphia convertible bonds the right to sell the bonds back to Adelphia for cash it may not have. "I am fortunately not a convertible bondholder, " said Ravi Malik, managing director at Froley Revy Investment Co. in Los Angeles, which invests $2.2 billion in convertibles. "There are assets„ but concern over the self-dealing and the potential liabilities makes you wonder if there is enough to satisfy claimants," he added. Adelphia shares have plummeted since the company's disclosure in March of multibillion-dollar off-balance sheet financing deals involving its founding Rigas family.: Chief Executive John Rigas, the company founder, and Chief Financial Officer Timothy Rigas, his son, resigned this month. Adelphia shares closed Friday on the Nasdaq, at 70 cents, down 46 cents. They have fallen 98 percent this year. Nasdaq announced the delisting of Coudersport, Pennsylvania-based Adelphia on Thursday after Adelphia failed to produce an annual report for 2001. Adelphia suspended an audit by Deloitte & Touche LLP this month. On Friday, Highfields Capital Management LP, with a 6.5 percent Adelphia stake, urged in a securities filing that Adelphia sell itself whole, rather than piecemeal at the expense of shareholders and certain creditors. It ;oined Leonard Tow, a new board member with a 12 percent stake, in publicly opposing Adel.phia's asset sale plans. "There continues to be a high risk of a bankruptcy for Adelphia, given the many hurdles that the company faces, " Aryeh Bourkoff, ' high-yield telecommunications analyst for UBS Warburg LLC; said in a Friday research report. DEFAULTS 1 Adelphia said on Friday it in talks to obtain new cap-J.:,, in the near term" and was trying tt �e11 assets. Adelphia pledged `iV.Vbrsdaynot to sell assets before a Saturday board meeting, after Tow disclosed his concern that- a sale would take place by Friday. The bank defaults let lender's "accelerate the maturity" of their loans, forcing Adelphia to pay the money back sooner. Adelphia said it was , talking with lenders about the defaults, which a source familiar with the matter said affect at least two Adelphia units The company, which is being probed by two federal grand juries, also missed more than $44.7 million of interest and dividend payments this month. It has until June 15 to make those payments without going into default Analyst Bourkoff said while "we do not believe" Adelphia can now fund a $1.4 billion convertible band buyback, the June 15 interest payment deadlines and discussions with bank lenders have more "relevance" to the company's ultimate prospects. "Senior bondholders should be fine, and convertible bondholders should recover some of their investment, but anything junior to "that may not see any recovery" in a bankruptcy, Malik said. Adelphia's 10.875 percent notes maturing in 2010 fell about 2.5 cents on the dollar to 72.5 cents on Friday, traders said. Its 6 percent convertible notes maturing in 2006 fell about 4-.5 cents on the dollar to 38 cents, traders said. t2002 Reuters Limited. 2 Marticorena Bill From: Michael J. Friedman [michaelifriedmancompuserve.com] Seat: Friday, May 31, 2402 5:27 PM To: SCAN Listserve; Bob Abrahams; Richard Adams; Cindy Aller-Sterling; Andy Belknap; Jena Chanel; Fred Cunningham; Kenneth Duran Barry Fraser„ Gregory Fuentes (City); Mark S Geddes; Robin F. Gee; Helen Goss;Vicki Gray; Terry Halberg; Maggie Tephany Healy; Susan Herman; Paster Herrera;Joe Hreha Carolyn Johnson; Frank Keller; Jonathan L. Kramer; Ed Leaton; Peter Lemmon; Darren Madkin; William M. Marticorena;Steve McClary; Mark Orme; Lori Panzino; Stacy Park; Bert Ferry; Darlene L. Peysar, Hugh Riley; Phil Romney;William Rudell;Angela Rushen; Omar Sandoval; Dan Singer; Rhonda Stark; Deborah Steller(work); Fern'Taylor; Steve Temple; Carol Tubelis; Kate Vernez;Al Vollbrecht; Mutt Weintraub (work); Shelly Wishner; Brian Yanez;Gale Young(work) Subject: 'Delisted'Adelphia is In Full Free-Fall From Monday's Multichannel News http://www.tvinsite.com/multichannelnews/index.asp? Layout=print_page&doc id=&articlelD=CA220163 Bankruptcy Looms _ 'Delisted' Adelphia Is In Full Free-Fall By MIKE FARRELL Multichannel News 6/3/2002 The specter of bankruptcy loomed larger for Adelphia Communications Corp. last week, after the NASDAQ exchange said it would delist the company on June 3, a move that could possibly force the troubled Coudersport, Pa.-based MSC) into default on more than $1.4 billion in bonds. News of the NASDAQ delisting came amid a very public fight between Adelphia's interim CEO, Erland Kailbourne, and newly elected, director Leonard Tow. News of the pending delisting initially sent Adelphia stock down, although the company's shares gained 13 cents each, to $1.29, in morning trading last Friday. Adelphia's stock is down about 90 percent since late March. Last Thursday, Tow _.. who owns about 12 percent of Adelphia stock through personal and family holdings -' fired off a letter to Kailbourne, taking issue with published reports that said Adelphia was close to hammering out a deal to sell systems with 1 million subscribers in Los Angeles and in the Southeast to Charter Communications Inc. chairman Paul Allen. Tow, who was named to Adelphia's board May 28 along with colleague Scott Schneider, took issue with the MSG's negotiating to sell systems without his input. In his letter, Tow said selling' systems now at bargain prices could devastate the MSO. "Such a sale would strip the company of its ability to conduct an orderly and profitable disposition of the remainder of the company's cable assets, when and if it is necessary, " Tow- wrote. Kailbourne wasted no time with his response, claiming that Adelphia was not in serious talks about any asset sale, and that Tow would be briefed on any negotiations at a scheduled June I board meeting. Kailbourne also seemed perturbed that Tow had approached Leslie Gelber - an Adelphia board member and chairman of a special committee of independent directors that is now essentially running the MSO - and requested that he be named chairman of, the company. "I certainly hope that your letter is, and your participation as a member of the board, W4 ll be directed towards what will benefit all of the company's shareholders, and not in pursuit of a separate agenda, " Kailbourne wrote. CRAWFORD BACKS TOW Making Tow chairman of Adelphia is not a newidea. influential media investor Gordon 1 Crawford - whe 'owns 12 mi l7 shares of Adelphia stock, c u 4 .8 percen c outstanding,shares, `t,irough' _.ss Capital Research Managemenu taid Capital Guardian Trusty funds — has been pushing for Tow to run the company for weeks. Last week, Crawford sam Tow is still the best man for the job. "I'm hoping the board does the right thing, " Crawford said. "There is no cable management there. " Crawford has been assembling shareholders to force changes at Adelphia for weeks. Last week, according to sources, he made some preliminary moves to begin organizing bondholders. According to sources familiar with the matter, Crawford held a conference call with bondholders last Thursday to solicit those who hold at lease $75 million in Adelphia bonds to join an informal committee to protect their interests in the event of a bankruptcy. Adelphia is experiencing a power vacuum, after the resignations of its top four officers and directors —=co-founder John Rigas and his sons Timothy, Michael and James -- amid growing evidence that the Rigas family used Adelphia like a personal bank account.. While Tow was not involved in the self-dealing arrangements with the Rigas family, he is not without his own baggage. Tow became chairman of Citizens in 1990, about a year after purchasing 900, 000 shares of Citizen stock for $48 million from then-chairman Richard Rosenthal and two company board members. But his first few years on the job were rocky ones. According to a 1993 report in The New York Times, Tow came under fire after the board which included his wife Claire and several close associates — approved, a compensation package worth $21 million for hire, millions more than the salaries of the top five telecom executives at that time. Around that same period one of Citizens's largest shareholders the California Public Employees Retirement System — fired off a letter to the company's directors comparing them to "pigs at the trough. " The Times article also accused Tow of shifting cash between Citizens and his MSO, Century Communications Corp., which Citizens later denied. in a statement after the Times article was first published, Citizens said that any transactions between it and Century were done at "arm's length. " OREN COHEN'S VIEW' Merrill Lynch & Co. high-yield debt analyst Oren Cohen said he doesn't believe that convertible noteholders would force Adelphia into bankruptcy — they are too subordinate and would likely end up with nothing in a Chapter 11 process. But he does believe that the company is closer to a ban-kruptcy filing than ever .before. "I 'm sticking to my guns here, Cohen said. "The delisting triggers a default on the convertible notes and those are subordinated. The subordinated noteholders are very junior in the capital structure. "My sense is that it is not the convertible noteholders that are going to push this thing into bankruptcy -- it's either going to be the banks or the bondholders, " he said. "If Paul Allen does not come through< with a last-minute 11th-hour, white-knight dead to give this company liquidity, they're headed for .bankruptcy, plain and simple. Sources told Multichannel News the talks with Allen were never really that serious, a notion Kailbourne seemed to support in his letter to Tow. Published reports Friday said talks with Allen broke down because Adelphia was asking too much for the systems. But asset sa?es would help Adelphia raise desperately needed cash, on the heels of a May 24 securities filing that revealed a .startling amount of self-dealing transactions between the Rigas family and the MSO they founded. Several press reports last week said Adelphia was negotiating a deal to sell Allen 450, 000 subscribers in the Los Angeles suburbs, as well as another 550, 000 in Georgia, North Carolina and South Carolina, for $3.2 billion to $3.3 billion. 2 Left out of the deal - at 1 -st for the time being - woulo another 800,000 subscribers in Los Angeles jointly owned by Adelphia and AT&T Corp. AT&T owns about a 25 percent stake in those systems, but has approval riants on any sa)-. The Adelphia-owned properties are mainly in outlying areas such as Palmdale, Thousand Oaks, El Monte and Ventura. The real money is in the properties inside the AT&T partnership, including such affluent Los Angeles neighborhoods' as Pacific Palisades, Brentwood, Bel Air, Manhattan Beach and Redondo Beach. Although a Charter deal appears to be unlikely now, several sources said that AT&T Corp. also is trying to work out a deal to unwind a joint 'venture with the company outside of Los Angeles. Adelphia also was said to be negotiating with private equity investors Blackstone Group, Providence Equity Partners, Texas Pacific Group, Cypress Group and Apollo Group about a $1 billion investment in the MSO. According to sources in the financial community who asked not to be named, AT&T is consideringbuying out Adelphia's 66.7 percent interest in a joint partnership for systems in Buffalo, N.Y., Erie, Pa. and Parts of ,Ohio. AT&T owns a 33 percent interest in that partnership, which was formed in 1998 by AT&T predecessor Tele-Communications Inc. While the Buffalo system was not part of the package of systems' Adelphia put on the block in April., some observers said an AT&T deal makes sense. Although not one of its largest properties, Buffalo is one of the Rigas family's most prized'systems. Home of the National Hockey League's Buffalo Sabres a Rigas family holding - Buffalo is only a few hours' drive from Adelphia's Coudersport, Pa. headquarters. The city also is the site of a major Adelphia real estate Project. The MSCI had planned to build a $130 million national operations center on the Buffalo waterfront, consolidating customer-service ',operations from several states. But according to reports in the Buffalo News, Adelphia's waterfront development' plans are likely on hold, .in light of the fiscal crisis. Groundbreaking was originally expected for the fall. Adelphia and TCI formed the Buffalo partnership in 1998, when Adelphia contributed 298,000 subscribers in Western New York and Lorrain, Ohio. AT&T contributed its Buffalo system, as well as properties in Ashtabula and Lake County, Ohio, with about 171, 000 subscribers. ".AT&T is sniffing around about effectively buying Adelphia out of its partnerships with them, " a source in the financial community said. "They can do it fast because they don't need FCC (Federal Communications` Commissionj approval. And AT&T needs to spend $700 million quickly. ', An AT&T Broadband spokeswoman declined comment AT&T is under pressure to buy systems that could cancel out the capital-gains tax implications of its sale of 820, 000 subscribers in Montana Wyoming and parts of Colorado to Bresnan Communications Inc. for $720 million. Although the Bresnan acquisition doesn't officially close until the end of the third quarter, sources said that AT&T may want to line up a' deal before then. With about 470,000 subscribers in the Buffalo partnership, buying out Adelphia's 66.7 percent would amount to about $780 million, given a 10-times multiple on annual cash flow of $250 per subscriber. CASH RUNNING OUT Despite the rumors, one thing is very clear. Adelphia needs cash and it needs it fast. Although the MSO dodged a bullet on Thursday when its bank lenders gave it an extension on interest payments on about $7 billion in debt, source's said last week that the company W4 ll run out of cash shortly. Adelphia normally burns through about $1 billion a year just to run its onerations. So far, Adelphia has missed about $50 million in interest payments. It has another �iC, interest payment due on June 15, While those deadlines are looming, there is no 'indications that the banks won't give Adelphia additional extensions, Cohen said. "The banks are doing what banks do in these situations -" they've put [Adelphia] on an extremely short leash and they're waiving violations now, week-to-week, " Cohen said. "The' point is, don't aet obsessed with firm deadlines. There is no such thing as a fi-rm deadline in; the real world; everything is negotiable. " But as Adelphia's board determines its options, the long.-awaited May 24 filing revealed - without the help of the Rigas family - a tangled web of self-dealing partnerships that funneled money between Rigas-owned entities and supplied funds for the family to purchase stock. Among the revelations in the filing: Adelphia purchased about $12.7 million worth of office furniture and equipment and interior decorating services in 2001 from two companies - Eleni Interiors and Dobaire - that are controlled by Doris Rigas, the wife of former Adelphia chairman and cc-founder John Rigas; It purchased 50 automobiles from a car dealership Preston Motors --- in which John Rigas had a material interest; It spent $13 milliontobuild an 830-acre golf course - The Golf Club at Wending Creek Farms --- on Rigas property, Wending Creek received $2 million from the MSO for maintenance, including snow removal and landscaping; It gave $100,000, to Rigas-family members and entities for office and warehouse rent payments; And in 2001, Adelphia paid Ellen Rigas Venetis $50,000 for "community--service and public- relations consulting services. ,' The Rigas family 'obtained margin loans that were backed up by Adelphia equity and debt. The family has made $241.2 million in payments tied to the margin calls since January 2001. The committee is investigating whether former vice president of finance Jim Brown received a $700,000 loan from Adelphia. Adelphia paid Niagara Frontier Hockey ISP, which owns the Sabres, $744, 000 for luxury suites and ticket's for employees-. The committee is investigating whether Adelphia's ACC Operations subsidiary spent $26.5 million for timber rights on land owned by the, Rigas family, and whether the deal represented the fair market value of the rights Adelphia funds may have been used by the Rigas family to construct, acquire or maintain condominiums in Seaver Creek, Colo., and Cancun, Mexico, Adelphia said. Real estate records show that former Adelphia chief financial officer Tim Rigas bought a $2.4 million condo in Beaver Creek in 1997 and that he received a $2.6 million mortgage to purchase another Beaver Creek condo in December 1998. Adelphia helped finance two motion-picture companies owned by John Rrgas's daughter, Ellen Rigas Venetis, and sank $3 million into her last production,' a feature film titled SongGatcher.` Adelphia committed to, making a $65 million investment in Praxis Capital Management, a New York venture capital firm that in which Rigas son-in--law and Adelphia board member Peter Venetis is a managing director. Adelphia also paid Venetis's salary of $1.3 million in 2001. Most surprising about the 8-K filing, according to some cable executives, was that it showed that the Rigases's self-dealing has been going on for years. Some were startled at the pettiness of some of the transactions. "At first I ,wondered whether the [Rigas] boys had just become a little more, aggressive in theirfinancial dealings and that John was unaware of what was happening, " said one cable executive, who asked not to be named.: "But after looking at the 8-K, there was no way he [John Rigas]` was caught unawares. The surprising thing is that all this is pretty petty on a relative scale.. These are really not huge numbers here_ " 4 Marticorena, Bill From: Jonathan L. Kramer[kramer@cabletv.com] Sent: Thursday, May 30,2002 10:35 PM' To:, members@natoa.org Subject: Adelphia to be Delisted NASDAQ ,to Delist Adelphia By Steve Donohue Multichannel News 5/30/2002 9:48:00 PM NASDAQ said Thursday night that it will delist Adelphia Communications Corp. on Monday, 'June 3rd. The delisting will likely force Adelphia into bankruptcy, since its bondholders can demand that the MSO convert $1.4 billion in debt into cash — money that Adelphia doesn't have. Word of the dell-sting came at the end of a day that saw dissident shareholder Leonard Tow battle with Adelphia interim CEO Erkie Kailbourne over the MSO' s attempts to dump some of its cable systems. Tow also proposed, to Adelphia board member Leslie Gelber that Tow be appointed chairman of the board, according to a letter Kailbourne sent to Tow. In" a letter filed with the SEC, Tow said he had heard Adelphia was: in talks to sell one of its 'most valuable cable properties' and that management was under directions to complete the sale by Friday evening. Although Tow didn't name the assets, several published' reports this week said that Adelphia was in intense negotiations with Charter chairman Paul Allen to sell about 450,000 subs in 'Los Angeles - as well as another 550, 000 customers in Georgia, South Carolina and North Carolina - for between $3.5 billion and $Q billion. 'Such a, sale 'would strip the company of its ability to conduct an orderly and profitable disposition of the remainder of the company's cable assets when and if it is necessary, ' Tow wrote in the letter to Kailbourne. 'Because of the complexities of Adelphia's financial structure, sales of assets without careful tom, planning as to the availability of proceeds could have an unfair impact on creditors Kailbourne responded that Tow's letter was the first N indication' that Tow wanted more info about the planned asset safes before 'a board meeting that is scheduled on Saturday. C 'In light of your objection to the planned asset sales, I would ask you to provide me in as 'much detail as you are now able, what specific, concrete alternative or alternatives you propose. You will, I know, understand,that general ideas without concrete details as to how they will be implemented' are of little use at this time, ' Kailbourne wrote. The wrangling over the whether Adelphia should sell systems in order to raise cash and reduce its debt now may be irrelevant, considering that the NASDAQ delisting may trigger' a bankruptcy 1 Marticorena, Bill From: Michael J. Friedman[michaeljfriedman@compuserve.corn] Sent: Monday,,June 03,2(342 5:42 PM To: Bob Abrahams; Richard Adams; Cindy Aller-Sterling; Charles Alvarez; Andy Belknap;Jena Chanel, Fred Cunningham, Kenneth Duran,Barry Fraser;Gregory Fuentes (City), Mark S. Geddes; Robin F. Gee; Helen Goss; Vicki Gray;Terry Hal;berg; Maggie Tephany Healy; Susan Herman;Pastor Herrera;Joe Hreha; Carolyn Johnson; Frank Keller; Jonathan L. Krasner; Ed Leaton; Peter Lemmon; Darren Madkin;William M Marticorena Steve McCiary; Marie Orme; Lori Panzino; Stacy Park; Bert Perry;i Darlene L.Peysar; Hugh Riley; Phil Romney;William R Edell,Angela Rushe ; Omar Sandoval; Dan Singer; Rhonda Stark; Fern Taylor; Steve Temple;Carel Tubelis; Kate Vernez;Al Vollbrecht;'.Matt Weintraub (work); Shelly Wishner; Brian Yanez; Gale Young{work} Subject: Cities Could be,Among[Adelphia] Creditors Apologies for the cross posts. http://www.inside.com/product/product.asp?entity=CableWorld&pf-ID=2E348AOF-38D6-4054-8282- 62'3AAAF52523' Cableworlt3 June 3,; 2002 Cities Could be Among creditors By Andrea Fiedler With its financial woes mounting, Adelphia Communications has stiffed the franchise boards in Los Angeles, Beverly Hills and Newport Beach. Even as the company discusses the sale of certain assets in the Los Angeles area, as of last week, Adelphia has not yet paid its first-quarter franchise fees for: the. three California cities`. Adelphia' owes these cities about $2 million combined plus any associated fines, under franchise agreements that expire this summer. The company's failure to pay franchise fees is considered a breach of contract that ultimately could lead to revocation of Adelphia's franchise agreements and could prove nettlesome for any prospective buyers, "Clearly any breaches would have to be reconciled prier to any transfer ,prior to any sale, " says Bill Marticorena, a partner at the law firm Butan & Tucker. "A public entity has no obligation to approve a franchise transfer that has-= been breached. It would have to be cured as a condition. " However', should Adelphia file for bankruptcy protection, these three' municipalities could end up on what promises to be a very long queue of creditors seeking relief. Adelphia has apparently paid its <franchise .fees to other municipalities. Susan Martin, utilities financial analyst for the Vermont Department of Public Service, said Adelphia has paid its Vermont franchise bills for the first quarter:. She was not surprised, ' however, that some of the systems proposed for sale in Southern''California had not. "They are not: going to pay there, " she said. "They are looking to sell them. They are ``hoping that any buyer will pay the fees. " But another system potentially for sale--the system serving the. city` of Boca Raton, Fla. -- was paid in full for the first quarter, according to the city manager, who noted that Florida municipalities get reimbursed by Ad,elphia's payment to the state. Larry Windsor, director of government relations for Adelpha's Southern California division, said the company's nein management is 'trying to prioritize what` gets;paid this-;week"versus next week. "I haven't seen any indication that there has been any preference for one side of the country or whatever issue like that, " he said. For example,'; Windsor said the company decided late last 'week to cut a check for Beverly Hills, although the city hadn't received the payment as of press time. Rutan & Tuck is Martidoren Ays Adelphia may be picking G shoos ng which franchise fees it pays based. on the legal time frame it has to remedy 4Ae violation. California cities :tend .'to give an operator between 20 to 60 days to cure any franchise violations, he said. "Rightnow, we're just trying to.communicate with them and see if, against all odds, they are willing to pay it, " said rave Kiff, assistant city manager for Newport Beach. z k.,,q. �-Zc / i u,u a ;;6E)6 F .,., xAVAAA"a.,+,U as tarot�,ut�,.�.11Qt 6C! ,•"" + i I + � Page l Of*2 >IliT/ii �r Tue' i 411208 l .�! e coin M&A, Private equity Venture Capital 1110 M&A CALENDAR Bankruptcy 628 ft un _ a The M&A-related slate deadlines to look for in of June. Adelphia seen as burring Charter RABBLE BABBLE The Corporation byPeter a >Read+xthat people wr Tech News Updated 10;27 AM EST,Jun-4-2002 in chat roams Law&Regulation DEALMAKERS Mtwara shakersAs Adelphia Communications Corp.sinks closer to # Corp,Dealmaker bankruptcy,the troubled cabler is also dragging dawn its Would-tae rescuer: Paul Allen's Charter 1bIE DEAL STATS Communications Inc: Arbitral a Shares of St, bolls-based Charter dipped another 10.9%, CCid'' Intera lMr ics or 76 cents,Monday.June 3,to close at a 52-week tow of Irlterhs�t»etri�s League'tables $8.21.The weakened share price suggests that investors Basi liuitrpres believe a deal for Adelphia assets is,still possible.And for a highly leveraged Veal Scoraboard company without strong borrowing power with banks and high-yield markets, an acquisition only complicates matters. Sam rch'thec►eal "Charter'alread hard stock price problems because of sector-based issues,"said .. Database Gary Farber,a SunTtuat Robinson Hurnphrvy analyst, "Now the pressure is Events Calendar coming from transaction talk.And that pressure becomes circular in that Career Research value price afyFect�sj whaitthey earl pay, making a`:deal less accretive, Career Center YR lue neutral or even diiutl�/erp Subscribe Legal News from LaEw.corn That may be why Charter,after declining to comment on Adelphia's negotiations Insert Ticker Symbol for weeks,now denies that such talks are under way.The denial'came in,a published report in Charter`s hometown newspaper,the St. Lour Past-Dispatch. Charter executives did not return repeated cauls for comment, TOO BUSY 0 "WT Tull ARIKU No such denial was forthcoming from Allen,a Microsoft Corp,cofounder, 0 Mw w Tait art ltt VERGING however,and sources said Adelphia was working furiously to avoid bankruptcy ► sm*Tinis IA mem AUTO by dealing with Allen."People are continuing to work to gat a deal done,"`said one source close to the discussions, "but there's also a realization that such an 700M i COMRAN IES event may not be doable" iWAt If Charter and Adelphia are talking,It means Adelphia has lured,Alen back to the bargaining tattle after he brake off negotiations last week.Sources attributed the breakdown to a'measure of Allen's posturin in an'att,mpt to close the gap EDS lt1 between'his$2,700 per subscriber bid and de;lphie's$3,5O0 per subscriber asking price for cable systems in Los Angeles and the Carolinas', KAL!N' At "Allen realizes he doesn't have to go,out and pay a premium,"said The Carmel Group's Sean Badding. "He's in the control position. If he can get Acdelphla down to a per-subscriber price range of$2,700 to$3,300, 1 think he pulls the trigger on >Adelphia near Ch,'11 a deal." >A fight for Global Crc >Strugggling to make r, >Wall Street 10005 Bedding's thoughts are Adelpihia`s hopes,While the.Coudersport, Pal.-based >Strang profit for Willi. cabler,the nation's si t-largest,got through Monday without filing for bankruptcy,the source said Saturdays board meeting put into place contingency of carts-should a'deal not get done and bankruptcybecomes CORPORATE CONTR inevltahle"Wh la tha_srsurne shier Adalnhia helipma bankruntrw is not near Iqxwv IA%vsam and invo- ...ITDStaodardArticle&33oxl=NIJt..,l'.&Box2 NULL&banner--NULL&c=TDDArticle&cid.tf1227'6535874 614102 TheDeal.com-Adelphia seen as Charter Page 2r of') enough tb require csnctete'.plan,t i cormp;�ny may eventual�y draw p s pre- have ma �cA their rtu packed Chapter 11 filing wft Its banks supplying debtor-!n.-possession that effect a change in w financing, Make it youm Allen also may want Adelphis to avoid bankruptcy,at least until he can complete a;deal.Of Charter's systems,the Los Angeles and Carolina regions encompass nearly 20%of Its existing subscriber bee.Adelpn 's troubles gyre Charter the opportuni to pick up systems, Including those in Los Angeles,the second- largest t1 S. television market after New York,at a'below-market value, according to Farber. Such valuations would'be a change for Allen,who typically paid inflated multtples'during the acquisition bingelthat built Charter. Badding characterized Allen's decision not to adopt the waft-and-see annmarh of tdectaing characterized Allen's decision not to adopt the i alt-arid-seg:approach of other potential buyers as smart de almaking logistes."Now there are fewer :competitors l'' 1 to step up for Ad+elphla's systems,"he sr "By going after therm now,Alle. .an sidestep the feeding frenzy among bido rs that would result from a'bankruptcy court auction," Even if Adelphia and Allen reach an agreement,ban, kruptcy may still await the former Rigas faimlly--contt'olied entity."A Ileal Is only,a Band-Aid solution to buy Adelphia more time,"Badding said. "Even a multi-billion«dollar transaction would only buy the company six months at best.'They need to make some serious` decision about hour to financially restructure the company, and they'll continue to hemorrhage until they do so." HOME i MY ACCOUNT I HELP i CONTACT US i ADVERTISE I PRIVACY POLICY i TERMS AND CONDITIONS j OCepyright 2142,rhe Deer,LLC.AG rights mstarved,Please send all teehmcat questions,cammsnts or coneems to the Webmaster, r y AGA S' two to Ulk tg��, rl ts t„ roa 9 �.�.�, „�/+1 ��.,,�• ,,,. �° cc cep <o � ,�, w' v G ��'3 � �'Vis+ec ",� � r� n N..t � ps�� {�. rfl �.•s cu'' �n ro •i�.� �« � � �.'■`� r� ��'e6 [s`t� � ,c�Fa`tea•o��Cs•�o ,9 '��'� 4x � ri '�r 0'ryp,� � � 'v�jl. _.'y�'..•� t j'ka•�s�°+: ` � ••"-'� u, tp +,,.o v SfG+''`� 'l�+��p rw-Li? r yD +�,fUC17 .^S�Y� � �s.�q"fir p �3" sn t�T. '� .�• d in �,�'r°�� "°� i� C1r�� Sj� 5`/'"'f � R+y�;cG�'" �''�G?•��' r P?.yam,,. to c '�'�-. �, �S yr mss• �, st+ +� p� �.� C � �pA��W x� S-✓ '�f' s".n.�, C�Ji �' �{" ^J 4 �' t� � e'� �'P°G x»•w',"�1..�?� Viet: .i'�� '�r� '�'.�� "" fir*�� " `C�i `"' ��' �3 oy w+ y't ✓• �%�� es la tzfffl Too o.�� .• ' 1'+Ct' Ts �a r•+•" ° `� Pr ra,:r� n" w '° Imo.. � ak p vis Fd3 e 0, Put® ON c •rs •, °° rtb ,`" dram~flat taco r=:uM :Chu/�iD i Gal -4F. + 3420 29b4:0ts 1.. ice. 1 flee? F.�cr C� Tile resigning directors are: ixnli rUPTCY Would ' nsipBeu, tiscr�nut the business recovery wnue maxlm12t Soifer,wlu3 is l,,nran`s 1Rngeststsnc' i_ said, „That deal wasn't being honored.". eturns for the creditors because'"th rector having joined prior to the i; ,:al W.Neil Eggleston,who represents tit ,rum the company. The board and';rne creation of Enron in 1985,Wendy Gramm, departing directors, said they resigned agement want "to re-create a real'b4 the former ebalrlilan of the U.S.Cominod- "tai permit the orderly transition of me ness and kens,veople working," he sa:ic Intel's . arecast Cuts ZVnal Lower Dernacnds f icer PC Continzw4 Nom PdGE Ay ason and Bony Corp.,Mr.Raba said.Na. .After those positive signs in the firs sa les of analog chips will grow 25%to$30 tional prof ected that revenue will rise 5%t quarter, "we got':a little aggressive it billion In 2003. while microprocessor to 8% in the current period, while its our forecast," Mr. Bryant said. sales are expected to grow just 12%next gross profit margin should improve to Intel isn't yet adjusting any expecta, year, also hitting$30 billion. 44"Io to 45%from 43%. tions for the rest of the year,which cr0; "It's no longer Intel or the PC that is Intel, on the other land, ,abruptly for stronger second half'according to the bellwether for the;semiconductor in- reversed a positive trend in its profit- normal seasonal patterns. The projec dustry," argued Brian TRalla,National's ability.'' The company,had produced a tion for average gross margin for the chief executive officer. Intel is really welcome surprise in the first quarter by year remains at 53%a, but Mr. Bryant kind of in a niche at this point." posting a margin of 53.5%—topping its conceded that that figure is likely to be National swung in its fourth quarter original 5110 projection—and suggtatcd revised downward by a percentaRo 4 to ti profit of$17-1 million,or nine cents a margins could stay at the 53176 level for point or so. C. share, from a year-earlier lose of'544.4 the remainder of the year. Besides results from operations, In. t million,or2G cents a share.Rxcluding an But unit sales of microprocessors, tel said it expects to take a 5230 million SIL S million tax refund.National put its which tame in at the logia end of the expense from acquisition-related amore- earnings at three cents a share,much bet- company's seasonal pattern. and a MIX zanon In ttse second quarter, compared ter than the consensus of a lass of eight of less-profitable products caused the with a previous projection of $115 mil- cents a share forecast by analysts sur- adjustment yesterday to 49%. tion. The change is primarily due to a vcycd by Thomson Vinancial/First Call. "The lower revenue you can get write-off associated with aline network- Shares of National were up.22 cents over.but the gross margin is really the ing circuit boards'acquired when Intel to$30.88 at p.m.in composite trading shocker," Mr. Osha said. bought Xircom Inc. last year. on the New York Stock Exchange. Andy Bryant,Intel's chief financial of- The news from Intel capped a tumid- National's revenue rose 4.6%to:64is.5 ricer, said the average'sciling prices of tuous day for semiconductor stocks.trig- million in me fourth quarter from the the eompany'schips"took ahit,"writrib. rered by a downgrade of seven compa- year-earlie r. period, and was up nearly uting to the margin shortfall.In the.first tries by Merrill's Mr. Osha. In a. re 1 1417..from its thi rd-quarter mark of$359.5 quarter,prices for its low-end chips were search note,he argued triat signs or an 1 million.The company benefited,in par- strong because Intel couldn't meet cus- accelerated recovery for the Industry tical ari from sales of analog chips for cell- tomer demand.in the second q uarter,av- are evaporating, ,.making many chip phones to Noltia Corp.and SonyErimson, erage prices fell as Intel vaugbt up with makers' stocks look overvalued at the theiaintventure ofTalefonABL.M.Ede. demand for inexpensive chills. he said. moment. � i .Adelphia Cable Base Is Called Into Question r;ontinuecf ) m Page AS suggesting Adelphia's public subscriber investigating the.company are focusing I been made on whether to file,Adelphia is counts were much riper than the count on a transaction that involved a transfer i running out of options ane the board is used ininternal documents.The number of digital converter boxes to an entity now seriously 'weighing the possibility, represents between 7%to look of the com owned by the Rigas family, Which these people said.. pany's reported subscriber base of 5.8 foundedAdelphia.According topeoplefa- The directors are expected to meet million. miliar with the transaction, Adelphia sometime over the next two days to get an Adelphia's advisers briefed the SEC made a bulk purchase of set-top boxes at ' update from advisers on the asset sale yesterday on itis findings, according to a,discount,and transferred$100 million ' and to discuss the best course for Adel- people familiar with the situations. worth of boxes to a Rigas partnership. phla.Blit time is rUnDing out.The com- Adelphia representatives declined to Although the Rigas partnership paid pany faces a June 1 r deadline to pay more comment on,the report or the cable-sub- for the boxes in the form of a company re- 44 than U. 0 million to interest expense to scriber numbers. ceivable,the partnership didn't need the i bondholders..While the company is try- According to people familiar with the boxes for its own operations,these peop►e ingto sell assets or raise as mikh as$1 bil- situation, Adelpl Ws publicly disclosed said.The transaction had the not effect lion in private equity,neither is happen- numbers were based on a.more generous of artificially reducing Adelphia's debt ing QUIticly. "The more time that passes accounting system than the ttt+mbers load by parkizz the unneeded goods in without a resolution, the more likely a used internally.For instance,in its pub- the Rigas-held entity.People close to the bankruptcy option becomes."said aper- lie disclosures,the eampany counted cus- investigation said Adelphia also stiug3it son close to the company. tomers who bought high-speed Taternet to boost its stature on Wall Strect by in- While investigators have known for connections as cable subscribers.It also flating the amount of capital spending it weeks that Adelphia appeared to liave in- counted c—nections to,ultifarally tents was doing.While,Adelphia told ana ysts flated Its subscriber nurnbcrs,eariy'esti- as multiple cormections—even; though it was upgrading about 50% of its ca- mates were tbut the discrepancies aver- each unit may have brad only one paying ble-TV systems,people close to the inves- aged about 60,000. In recent days, how• subscriber. tigatlon said tete company actually re- ever, investigators found new evidence In addition, the federal grand juries built less than 40%. t' Received Jun-07-02 10:5.1 am Prom-881 454 3420 To-RUTAN TUCKER,LLP Page 02 WSJ: Adelphia Dept 2 Sets of.,Rqpks Page l of? rrk i Reuters diRCH # ► # +f4 ��„ " xf �. rekaa LOG IN IJOSPast 3t} Days + I REGISTER NOW. --30 a ,..�^ E-Mail This, C CE International 4-"" F rinter-Fher National `-__ MostE-Maik Politics Ms WSJ: Adelphia Dept 2 Sets of Books AVINCLE rs Acivertising � sr��s:yen�v - YVorld Bisiness Your Money By REUTERS' - Markets REUTER Company Research Filed at 4:00 a.m. ET Mutuaif unos _ Columns NEW YORK(Reuters) -Investigators have found that Adelphia Track news t scie I' y c rnrn nzcations Corr). (ADELA.PK)kept two sets'of accounting books Scit:nce , Create Your,Q Health and inflated its subscriber data, raising concerns the firms questionable Tak Sp s accounting practices may be broader than originally thought, the Wall New_Yotk Region Sig p fo Education Street Journal reported. Weather ?laituaries The inquiry is also focusing heavily il on the role Deloitte & Touche NYT Fron2,Page '� ry g Co rection$ DLTE.UL played as Adelphia's auditor,the report added, with regulators taking a close look at what Deloitte knew about certain transactions that Talking nlloney dltortlst{7p-EdRead a collectio led to the company's plunge. about famous p ReadersOpinions they handle then HE F Glick here to,le JA Arts You ran solve t Books Times crosswor Movies Click here to le Travel. D#ning&Wine Home&Garden Fashion&Style blew York Today Crossword/Games X111 B Cartoons Magazine cE'.me Week',in Review CLICK TO OPEN What isshe'main r Photos use in your small t ; College Learnin Netuvork Archive Classifieds Personals Theater Tickets Premium Products Yx On its online edition Friday, the Journal said investigators had ICY r stare uncovered evidence that Adelphia,the No. 6 U.S. cable company, kept NYT,Mtwo sets of books for its capital expenditures,one of which was shown -C & E-CardAj More p About;'NYTo itwal to Wall Street and boosted the amount the company spent to upgrade its tubs t_NYTC3igital cable systems: Online Media Kit WSJ Adelphia dept? Sets of- Page? of, our Avertisear_s Citing people familiar with the situation, the Journal said Adelphia # inflated the number of its cable television subscriber by between Your Profile E-Mail 400,000 and 500,000, or as much as 10 percent of the company's total Preferences customer base. News'rracke Pre_rr�iurn Account sb Relp One source told the Journal that the SEC is concerned that Deloitte Pr�vac "knew things and didn't bring them to the board's attention,"this person said. Home't?elivery Customer Service Electrnic Edifon Adelphia shares were delisted on Monday following months of Media Kit uncertainty after disclosing in March multibillion-dollar off-balance TexdVersion sheet financing deals involving the founding Rigas family. With the bankruptcy ghost haunting Adelphia,the company is currently Advertiser Unks: being probed by the Securities and Exchange Commission(SEC)and Fol Mo,re_Ow two federal grand juries over possible accounting irregularities. Forest Experience Orbitz! Join.Arrsaritrade and.gat,a special Oar. ®E-Mail This Article FA P rinter-FriendlyssFormat $7 Trades, 1,60 {maces No MostE-Mailed Articles inactivity Eees k xrxc tor��s N �N I�� Wake up to the world with home 9F�DNSOIIED H1 delivery of The New York Times newspaper. Chick Herefor 50%off. Home,I Back to Reuters E Search( Corrections!Herr I Copyright 2002 Reuters LtdJ Privacy Policy Marticorgna,,Bili From: Michael J. Friedman [m chaeljfriedman a@compuserve.co ] Sent: Friday, June 07,2002 14:27 AM To; Blind.Copy.Receiver@compuserve.corn Subject. AdelphiaFacing'Subscriber Flap New York Times http.//www.nytimes.com/aponline/business/AP-Adelphia.html?pagewanted'=print&position-bottom June 7, 2002 Adelphia Facing Subscriber Flap By THE ASSOCIATED PRESS Filed at 12:36 p.m. 'ET PHILADELPHIA (AP) ' -- Adelphia Communications, under investigation by the Securities and Exchange Commission and two federal grand juries, apparently overreported its cable television subscribers by 358, 000 by including all the customers in joint ventures it owns only portions of, an analyst said. USB Warburg analyst Aryeh Bourkoff on Friday warned of "the very high likelihood of a near-term bankruptcy filing' ' by Adelphia, the nation's sixth-largest cable company. Adelphia's board met Friday at attorney David Boies' office in New York, a secretary at the office said. Company officials wouldn't comment on ,the meeting or a potential bankruptcy filing, said spokesman Eric Andrus. He said they also wouldn't comment on the subscriber count or on a report in The Wall Street Journal that the company kept two sets of accounting books to boost the amount it said was being spent to upgrade cable systems. Adelphia's stock cent into a tailspin in March after ,it began revealing dealings with the family ;of founder John J. Rigas, including off-the-books debt now estimated at more than $3 billion for which Adelphia could be liable if the Rirgases default. Rigas and other family members resigned executive positions last month, and the company said in an SEC filing Thursday that it won't pay for attorneys for Rigas, two ;of his sons and two: other former company officials in any lawsuits concerning their management of the struggling cable television company. Bourkoff said Adelphia apparently reported as its own all subscribers in a Century-TCI joint venture of which it owns 75 percent, and in another joint venture, Farnassos, -of which it owns two-thirds As a result, he said Adelphia's reported 5.81 million subscribers was actually about 5 .45 million. The Wall Street Journal has reported Adelphia inflated its subscriber count, by 400,000. to 500, 000. With its bonds downgraded, its stock price collapsed and disgruntled stockholders seeking damages, bankruptcy attorney Richard. Tilton said,, "It has all the earmarks of a classic Chapter 11. 11 Moody's Investors Service downgraded about $4 .9 billion worth of Adelphia senior unsecured notes on Wednesday from Caal to Caa2, signifying bonds "of poor standing. — A report by Moody's' senior vice president Russell Solomon said the value of Adelphia's common stock 11 will almost certainly be wiped out in its entirety. ' , The stock was delisted from the Nasdaq Stock Market on Monday. In over-the-counter trading the shares fell 65 percent i3 cents Friday morning. 2 " A W RUTAN 1116&4412 'S TUCKER.SR 11115-1 9 50+ JAMES R.MOgRE• 70€t D.XUPEkBERG lEFFR; M FAM APRIL EE POSE ER hSfN MARK 7 AUSTIN PAUL FRED£R#t MARK STEVEN A NICHOLS R.XEvI APRIL tEf WASTER -AMY HAl'. . RUTAN R#CHARD.A CURHUTT THOMAS G.BROCKJNGTgh L+YNE w KILTER KAREN ELIZABETH wntTER. TRACE'M QUACn JOHN B.HURLBUT.1R. EVRSDJKI(VICK#)DALLAS L,SKI HARRISON:. NATALIE SIOSALD DVNDAS MEL#SSA 5.FONTES � � T MICHAEL tWMLLI RANDAGREGG AM BABBUSH LARRY A McCAI ALISONJOHN A R KAREN ROBERT w MARCERFAU MILFORD W.DAHL.IR MARY GREEN CAROL CARTY JOHNW HAMILTON JR STEVEN BURT THEgDOREI Wh1LACE..JR' GREGG AMBER PATRICKD McCALLA JgHNA RAM#REZ NO— DVZM+n. GILBERT N.KRUGER MICHAEL f SITZER RICHARD K HOWELL PHILIP I SLANCHARD JOSEPH.D.CARRLITH THCMIAS J.CRANE ..JAMES S WEESZ`... TERENCE J.GALLAGHER RICHARD.-P$1.5 MARK'B FRAZIER: DAVID HOCHNER DELA M.HEMINGWA5 S JAMES B:O'NEAL PENELOPE PARMES A PATRICK MUNOZ JULIE W RUSb J A T T 0 R N E Y A T t. A W ROBERT C BRAUN M KATHERINE JENSON S.DANIEL HARBOTTLE DENISE. MESTER THOMAS 5,SALE NGfR' DUKE F WAHQUIST PAUL 1,SIEVERS W.ANDREW:MOORE.. DAVID C LARSEN' RICHARD G MONTEVIDEO JOSEPH L MAGA fit CHARLES A DAVENPORT III CUJ`FORD E.FRIEDEN: LORE EARNER SMITH KRAIG C KILGER JULIE DREW SCHISLLI A PARTNERSHIP INCLUDING PROFESSIONAL CORPORATIONS MICHAEL 0,RUSIN ERNESTWKLATE,RE KENT.CLAM. WHARDDARKO 611 ANTON BOULEVARD,FOURTEENTH FLOOR IRAQ RIVIN' KIM 0,THOMPSON DAN SLATER:: MARK.MALOVOS OFCOUNSEt- itFFREYM.ODERMAN` JAYNE TAYLOR KACER- MARK BUDENSIE% NIKKI NGUYEN LEONARD It. COSTA COSTA MESA,CALIFORNIA 92626.1931 STAN WOLCOTT DAVID COSGROVE STEVEN I GOON JENNIFER S ANDERSON EDWARD D HBES E, DIRECT ALL MAIL 7O.POST OFFICE BOC 1950 ROBERTS BOWERHANS VAN LIGTEN DOUGLASJOIR . I DENNCNGION HN T.BRADLEY MAkCJA.A FffRSYTH STEPHEN A FLUS ?RIG A JULANDER ALti50N LE.NOINE4U4 DAVID 1 GARISAiDL III COSTA MESA,CALIFORNIA 92528^3950 WILLIAM M.MAATICOYIENA MATTHEW K ROSS YOOD O UTFIN :KAREN t KEATING WILLIAM)CAPLAN TELEPHONE 714-641-5100 FACSIMILE 714.546.9035 IAMES/:MORRIS JEFFREY WERTHEIMER KEARA S.CARLSON T LAN NGUYEN WC14AEL T.HORNAK ROBERT O GWEN CR#STY tOMENZO.PARKER LISA NEAL NICHOLAS 'A PROFESSIONAL. INTERNET ADDRESS www.rutan.com PHILIP D:KOHN ADAM N VOLKERT Jf FPREY T MELCHING JENNIFER L.OHILLON CORPORATION Direct Dial:(714)641-3416 E-mail:bmaTticorena@rutan.comn May 29, 2002 F. Kent Leacock Vice President Government Affairs and Franchising Bay Area Markets AT&T Broadband 12647 Alcosta Road P.O.Box 5147 San Ramon, CA 94583 Re: City of Berkeley,. California; City of Richmond, California, City of Santa Cruz, California, Contra Costa County, California; and the County of Santa Cruz, California (collectively, the "Franchising Authorities")' Supplemental Questionnaire Relating to;AT&T/Comcast Corporation Merger Dear Mr. Leacock: As you know, this office serves as Special Counsel to the Franchising Authorities in relation to the above-described matter.. Please find enclosed the Supplemental Questionnaire of each of the Franchising Authorities relating to the above-described matter (the "Supplemental Questionnaire"). As indicated in the Supplemental Questionnaire, the Applicant, as defined in the Questionnaire,,is required to respond to the Supplemental Questionnaire, and provide all the information requested therein,within ten (10) days of the date of receipt. If you have any questions in this matter, please do not hesitate to contact me. However, please be advised that the ten (10) day response period will continue to run notwithstanding the submission, or lack thereof, of any questions by you or any other representatives of the Applicant. 134/011597.0001 288532.01 605/28/02 +�`�J 4 TAN CX CKERI AT T 0R N 6V'S AT 1.hW _ F. Kent Leacock May 29,2002 Page 2' Sincerely, RUTAN & TUCKER, LLP G William M. Marticorena WMM:vb cc. Manuela Albuquerque, Esq.,City Attorney,City of Berkeley Roger Miller, City;of Berkeley Patricia Burke, Contra Costa County Eric Xavier, City of Richmond Richard C. Wilson,City of Santa Cruz Pat Buser, County of Santa Cruz Jeremy Stem, Esq.,Cole,''Raywid &Braverman, LLP 124/011597-0001 285532.01 a€15/28102 AT&T/CONICAST CORPORATION TRANSFER SUPPLEMENTAL {QUESTIONNAIRE 1. RULES OF ENGAGEMENT, The Applicant is hereby directed to provide'complete and accurate answers to the above- described questions withinten (10) days of receipt of this,request. Please be further advised that information presented by the Applicant within the 'next ten (10) days, whether pursuant to this Request or otherwise, will be included'within the information evaluated by Staff and submitted to the >City Council/Board of'Supervisors, for ultimate decision. Please be advised that information submitted subsequent to that date may or may not be considered by Staff and the City Council/Board of Supervisors in making a decision upon the Application. The Applicant is strongly encouraged to provide as comprehensive and thorough information as possible within the next ten ('10) days in that information provided subsequent to that time, unless specifically requested by the Franchising Authorities, may or may not be considered. Finally, the Applicant should be informed that the Franchising Authorities reserve the right to collect information from extrinsic and third-party sources and utilize said information in its decision making process with or without notice to or comment by the Applicant. II. DEFINITIONS. "Applicant"means the party submitting the Application. "Application"means the FCC 394 dated February 25, 2002 relating to the Merger. "Franchise" means the legal authorization of the Franchisee to construct and operate a cable system and provide cable services within the jurisdiction of the Franchising Authorities, "Franchisee" means the legal entity granted the Franchise by each of the Franchising Authorities. "Franchising Authorities" means the Cities of Berkeley, Richmond, Santa Cruz, Contra Costa County and the County of Santa Cruz, California. "Merger" means that transaction bywhich the cable television systems and other assets currently owned or controlled by AT&T Corp. are merged with the cable television systems and other assets owned or controlled by Comcast Corporation and ultimately owned or controlled by AT&T/Comcast Corporation as described in the APM. III. QUESTIONS, A. QUESTIONS RELATING TO INTERNAL/EXTERNAL CONTROLS OF CONFLICTS OF INTEREST AND/OR SELF-DEALINGS BETWEEN AND AMONG' AT&T/COMCAST CORPORATION OR ANY RELATED ENTITY' THEREOF, AND/OR ANY OFFICER, 1241011597-0001 288573.01 aOS129(02 DIRECTOR OR 5% OR GREATER SHAREHOLDER, OR ANY RELATED'ENTITY EREOF. (1) Describe, in detail, any and all procedures which are currently in place, or which will be in place, as of the date of closing of the Merger, which are designed and/or intended to prevent and/or minimize the ability of any officer, director, or 5% or greater shareholder of AT&T/Comcast Corporation to engage in acts or omissions with AT&T/Comcast Corporation which constitute Self-Dealing 'Transactions or Conflicts of interest. For the purposes of this Supplemental Questionnaire, the terms"Conflicts of Interest" and "Self-Dealing Transactions shall be interpretedin their broadest sense and shall meant any transaction in which n officer, director, or shareholder, or any related entity receives, or is deemed to receive, directly;or indirectly; any financial benefit from the transaction. (2). Do any of the documents relating to the Merger, including but not limited to the AFM, any shareholder'agreement, or any ether form of agreement, sanction or allow any Conflict of Interest or Self-Dealing Transaction between any officer, director, or shareholder of AT&T/Comcast Corporation, or any related entity, and AT&T/Comcast Corporation, or any related entity, which would otherwise be barred or prohibited pursuant to applicable law in the absence of said provision. If so,please identify said provision'by document title, section or paragraph, and substantive contents thereof, and provide a copy of said document. (3) Subsequent to the closing of the Merger,would an officer, director, or shareholder of more than five percent (5%) of the outstanding shares of AT&T/Comcast Corporation be prohibited from acquiring, for his/her own account, cable systems'which,'at least in theory,could have been acquired by AT&T/Comcast Corporation? (4) Are there any arrangements, written, oral or otherwise, either currently in existence or contemplated to exist subsequent to the closing of the Merger, by which AT&T/Comcast Corporation, or any entity affiliated therewith, may or will perform services for any officer, director, or shareholder of more than five percent (5%) of the outstanding shares of AT&T/Comcast Corporation ,or vice-versa? B. (QUESTIONS RELATING TO INCURRENCE'' OF DEBT BY AT&T/COMCAST CORPORATION. (1) As of the date of closing of the Merger, please describe in dollars how much total debt will be incurred and carried by AT&T/Comcast Corporation, or any direct or indirect subsidiary thereof. (2) As of the date of closing of the Merger, what will be the debt-to- equity ratio of AT&T/Comcast 'Corporation? Said debt-to-equity ratio' should be stated as a function of both book equity and market capitalization equity: (3) What assurances, if any, can the Applicant provide to the Franchising Authorities that either the absolute amount of debt and/or the.debt-to-equity ratio will not be materially increased subsequent to the closing of the Merger? 1241011547.0001 288573.01 205129/02 -2- (4) Would the Applicant agree in an appropriatelyworded Transfer Agreement to limit the amount of debt which it carrieson a going forward basis subsequent;to the closing of the Merger to an amount not to exceed 105% of the amount of debt carried as of the date of closing of the Merger? (5) Would the Applicant agree, as part of an appropriately worded Transfer Agreement, not to increase the debt-to-equity ratio on a going forward basis subsequent to the closing of the Merger to a level in excess of that which existed as of the date of closing of the Merger? C. QUESTIONS RELATING TO "OFF-BALANCE SHEET" BORROWINGS. (l) Has Comcast Corporation, or any affiliated-entity,;engaged in the past ten (10) years in "Off-Balance Sheet"borrowings whereby obligations were incurred by an entity related to or controlled. by Comcast Corporation, or any officer, director, or controlling shareholder'or group of shareholders, which obligation(s) could, pursuant to any contingency regardless of its remoteness or lack thereof, become the obligation of Comcast Corporation?` If the answer is yes, please provide details as to said "Off-Balance Sheet"borrowing, including the date of said transaction( ), the amount of said transaction(s), the entities involved, the terms and conditions of the borrowing, whether said borrowing has been repaid, and whether or not said borrowings were disclosed upon the balance sheets of Comcast Corporation as an actual or contingent liability. (2) What assurances, if any, can be provided by the Applicant to the Franchising Authorities that sufficient internal/external controls exist within AT&T/Comcast Corporation to prevent the type of"Off-Balance Sheet" borrowings which have apparently been utilized by entities affiliated' with 'Enron Corporation and entities affiliated with Adelphia Communications Corporation? Please describe, in detail, said internal/external controls or limitations and whether or not the Applicant is willing to covenant, as a condition of transfer approval, to the creation and/or continuation of said controls and limitations subsequent to the closing of the Merger. 124/01159'7-0001 288573.01 s05/29103 —3- w M� <f �f �T Al ,s rf r ' uicken.com=News Pae 1 of i�M I � ii II VIII n� WY 1=MN ` TSS .RSTtEMENT' .t SAWINGLOANS Bii��3 •��i��_��x Investing Center I Portfolio Alerts I Markets I Stocks 1 Funds i News 1 Quotes I Quicken 20C Century Communications Files Petition for Tracker sWcha,the market, Chapter 1'i " an mfr by emalll Updated.'Monday,Juste 10,2002 09.04 PM ET Primer-Merdiv versign latest ADLAE Headlines •Adelphia Issues Statement On COUDERSPORT, Pa.--Century Communications Corp., a unit of Adelphia Communications The Resignation Of Dirs Dow Corp. (ADLAE, news,Mga),filed for Chapter 11 bankruptcy protection Monday, a move Jones,June 10,2002 Century Communications said it made to protect its 50%stake In a joint venture. •Adelphia Dtssjder►t Throws in: 1e Tpwl.Hosted by Century Communications said TheStreet.com, June 10, 2002 Monday it was notified by ML Tow,.Bcott�chi�eider Media PartnersLP that it ` intended to seize control of the tZe;�ignrng Frrriri Adelphte Board;: Dow Juries,Jane 10,2002 Century/ML Cagle venture at the #Ade i is Communica#ions start of business Tuesday by, Confirms Firing Of Deloitte foreclosing on the half Century T_ auct�ie'Ctow Junes,June 10 Communications owns. 2002 ML Media intends to take this •Adelphia dismisses Auditor action unless the venture or. Deloitte Report Hosted by CBS Adelphla completes the MarketWatch,`June 10,2302 purchase of ML Media's 50% MoreAAE.News interest for$270 million by the Stock Insight close of business Monday, g Century Communications said. Symbol Last Change The venture owns and operates AQLAE 0.70 +0.00' cable television systems serving Index the Cities of San Juan,' Dow,lone 9737.34 +91.94 Levittown,Toa Alta, Catano and Toa Sajo, Puerto Rico, 1544.85 +14,16 In response, Century Communications said it sought, but wasn't able to obtain,a temporary More Analysis restraining order in the Supreme Court of the State of New York that would have prevented • See AnalM Ratino L Media from foreclosing on Century's 50%interest and seizing management Control. • Co mgare Growth Trends' •` Get tine-- ick Smu Copyright 2002'Dow Jones&Company, Inc. Enter symboi(s)* All Rights Reserved I Don't know the symbol? More News` • My PS MWg News us,Market Mews • TOP%WnessN 0 Anaahtg Mews • TO News site StUff Sign Up Heeig Canter Free Newsletters htm://www.ouicken.com/nvestments/news/story/djbn/?story/nevus/stories/dj/20020610/ON200206100006... 6/11/02 Marticorena, Bill From: Bob Abrahams [babrahams@weho.org] Sent: Monday,June 10, 2002 3:56 RM To 'SCAN NATC?A, Subject: SCAN NATOA Century Communications files for bankruptcy Adelphia affiliate seeks bankruptcy protection Last Updated: June 10, 2002 06:34 PM ET ' NEW YORK, June 10 (Reuters) - Century Communications Corp. an affiliate of embattled. cable TV operator Adelphia Communications Corp. , filed for bankruptcy protection from creditors on Monday, a court filing shows Century, like Adelphia based in Coudersport, Pennsylvania, filed for chapter 11 protection with the U.S. Bankruptcy Court in Manhattan. Century has subscribers in several parts of the United States, including many in California, according to UBS Warburg LLC research. Century board 'members Erland Kailbourne, Christopher Dunstan., Randall Fisher and Steven Teuscher authorized the filing, court papers show. Kailbourne is also interim chief executive at Adelphia, the No. 6 U.S. cable TV operator. Adelphia, which many analysts believe may seek bankruptcy protection itself' as soon as this week, on Monday fired Deloitte & Touche as its auditor and revised its 2000 and 2001 sales and subscriber estimates downward.. Shareholder Leonard' Tow resigned his board position on Monday, attacking Adelphia,s "serial disclosures of wrongdoing. Adelphia has disclosed it guaranteed billions of dollars of loans to its founding Rigas;. family. It is the subject of a Securities and: Exchange Commission probe and two federal grand,jury investigations. Its shares closed Monday at 18 cents, down 12 cents. They peaked at $871n May 1999. 1 Marticorena, Bili From: Jonathan Kramer[kramer@cabletv.com] Sent: Monday,June 1O, 2€302 8:28 PM To: SCANNATOA@ListServe.com,members@natoa.org;sete-list@lists.scte.org Subject: Adelphia Files for Bankruptcy in former L.A. Century Systems' Importance: High' Two stories. . . .. Adelphia Unit Files for Bankruptcy By REUTERS Filed at 7:34 p.m. ET NEW YORK (Reuters) A unit .of cable operator Adelphia Communications Corp. (ADELAPK) , filed for bankruptcy protection on Monday, as its parent struggled to avoid its ownn complete collapse against the backdrop of federal investigations into its accounting. The Chapter 11 filing by Century Communications Corp. , which holds Adelphia's cable systems in Los Angeles, came the same day as Adelphia revised its 2000 and 2001 sales and subscriber numbers downward, citing errors in previous reports, and fired Deloitte & Touche as its auditor. "This is likely to be the first of many filings, ' ' said SoundView Technology analyst >Jordan Rohan. "Oncethey determine>> what the assets and the cash flow of the other units are, it's reasonable to expect the parent company to file for bankruptcy as well.. ' ' Company executives''did` not return phone calls requesting comment. The Coudersport, Pennsylvania, company is the target of a Securities and Exchange Commission accounting probe and two federal grand jury investigations into multibillion-dollar off-balance-sheet loans to its founders, the Rigas family. The family has relinquished control of Adelphia's board of directors. John Rigas resigned as chief executive last 'month, and his son Timothy stepped down as chief financial officer a day later. The new management subsequently disclosed a web of dealings that included $2.45 billion in company-backed loans, rent-free New York Apartments and a questionable $26 million timber deal. The company has been trying to sell 'some of its cable systems to stave off a cash crunch. The company will be in default of three bond, issues if it does not meet a $44 .7 million interest and dividend payment by Saturday: ASSETS EASIER TO SELL The filing could make it easier for the company to sell those cable systems, believed by many to be the crown jewel of Adelphia's properties, Soundview's Rohan said. "It could add some transparency to the liabilities that make iteasier to sell the systems, ' ' he said. "Because it was difficult to trust the company's financial statements up to this point, many 'buyers have been holding off. , , Century filed for bankruptcy protection with the U.S. Bankruptcy Court in Manhattan. 1 on Monday, Adelphia's largest zi reholder, Leonard Tow, reaigni�-,.. _:.. orn n} its board after less than two weeks. In a letter to Chief Executive gland Kailbourne, Tow cited ' 'revelations of the unreliability of corporate data as well as the ongoing serial disclosures of wrongdoing. Tow had opposed Adelphia's plan to self some of its cable systems to raise cash, saying that such a sale would hamper the company's ability to sell the rest of the assets if necessary. Adelphia shares closed down 12 cents at 18 dents on the Pink Sheets market SUBSCRIBER FIGURE RESTATED Adelphiaoffered no reason for the termination of Deloitte & Touche as its accountant, but said further information will come in subsequent filings. The Wall Street Journal, citing unnamed sources, reported on Monday that Adelphia accused Deloitte & 'Touche of failing to inform the company's audit committee about questionable accounting practices and self-dealing. Deloitte, which suspended its audit of the company's books in late May, shortly after the new management took over, said Adelphia asked the company to resume and complete the audit. The accounting firm told Adelphia as recently as Sunday it would not resume the audit until the company completed its own investigation. On Monday, Adelphia revised its 2001 revenues down 2 percent from its March unaudited report. It cut its 2001 earnings before interest, taxes, depreciation and amortization -- a measurement of cash; flow -- by 15 percent. For 2000, the company lowered its revenue figure by 2 percent and cut EBITDA by 13 percent. SET-TOP BOX DEALS Adelphia said the company's previous management accounted for some costs, such asset-top boxes, in a' way that reduced expenses and inflated its profit' margin. Adelphia's set-top-box suppliers raised prices by $26 a box. Separately, they agreed to pay Adelphia a marketing fee of the same amount, although Adelphia did not actually provide the marketing services for which it was paid, the company said in the filing. The result was the agreements inflated the company's capital expenditures for set-top boxes and the marketing support payments were in 'turn credited against expenses. 'Consequently, the company's EBITDA was inflated by $54 million in 2001 and $37 million in 2000. ------------------------------------------------------------------ From Bloomberg; 06/10 21:24 Adelphial's Century'Communications Seeks Chapter 11 (Update4) By Jeff St.Onu New York, June 10 (Bloomberg) -- Adelphia Communications Corp. �s Century Communications unit sought Chapter 11 protection from creditors, a move that may precede a bankruptcy filing by the cash-strapped parent as 2 well, analysts said. Century directors Erland E. Kailbouurne, Christopher T. Dunstan, r.anda:ll s D. fisher and Steven B. Teuscher authorized the filing in U.S, Bankruptcy Court in Manhattan, according to;court papers. It follows today's announcement by Adelphia, the sixth largest U.S. gable operator, that it had fired auditor Deloitte & Touche LLP and restated financial results for the past two years. A bankruptcy filing by Adelphia, in default on $7 billion in bank loans, may be imminent, some investors said. The cable company, whose shares have plunged 99 percent in the past year, missed $45 million in interest and dividend payments and was delisted by Nasdaq for failing to file an annual report, "It's another nail in the coffin for Adelphia, ' ' said Sean Egan, managingdirector of Egan-Jones Ratings Co. Coudersport, Pennsylvania-based Adelphia acquired Century in 1999 for about $4:,.96 billion. The acquisition was Adelphia's largest, giving it an additional 1.6 million subscribers and allowing the cable operator to expand into California, Colorado and Puerto Rico. Sought Court Order Century said in the bankruptcy filing that if it got a temporary restraining order against ML Media Partners LP today in a lawsuit filed in New York State Supreme Court, then the board resolutions approving the Chapter 11 case would be "null and° voice ' ' Century was unable to get the court 'order, Adelphia said in a statement. Century made the bankruptcy filing to protect its 50 percent interest in a joint venture with ML;Media Partners that owns and operates cable Tv systems in Puerta Rico, Adelphia said in a statement.' Century was trying to prevent ML from foreclosing on the Puerto Rican assets, the statement said. ML,told Century that it will seize management control of the joint venture tomorrow and foreclose on Century's interest unless the joint venture or Adelphia completes the purchase of ML's interest for $275 million by today, the statement said. "Despite our continuous, good faith efforts to reach an agreement with ML, it has taken actions that left Century with no other choice but to seek the protection of the bankruptcy court to avoid the wrongful seizure of a valuable asset, ' ' Adelphia interim Chief Executive Kailbourne said in a statement. Directors Resign Separately, shareholder Leonard Tow and associate 'Scott Schneider, who joined Adelphia's board on May 24 resigned their posts, saying in a U.S. regulatory filing that the company's "serial disclosures of wrongdoing' ' made it impossible for thein to help organize a rescue. Tow was ,chief 'executive of Century Communications from 1973 to 1999.` Adelphia shares have tumbled since the company announced that it guaranteed billions in leans to entities run by the family of founder John Rigas that weren't included on the balance sheet. The 'company's former telephone unit, Adelphia Business Solutions Inc. , filed for Chapter 11 protection in New 'York in March. 3 Martleorena,;Bili From: Jonathan L. Kramer[kramer@cabfetv.com] Sent: Monday,;lune 10, 2002 6:30 M To: members@natoa.org Subject., Adelphia;Downdate {Note to list: I'll have pictures of several of the things described in this article up on www.CableTV.com after 12:00 p.m. EDT today. Jlk} Local Operations Feeling the Pain Adelphia's financial turmoil trickles down by K.C. Neel and Andrea Figler Cableworld Monday, June 10, 2002 The effects of financial turmoil at Adelphia Communications is trickling dawn to its local operations. Franchise fee payments have been missed, construction: in all but a handful of cases has halted and hiring freezes are in effect. In some cases, city officials have started:default procedures: in places where promises aren't being met. "We sent them a default notice when we didn't receive their franchise fee, which was due in April, " says Mike Abrouserhal, Cleveland's assistant finance director. "They have told us verbally we'll get the money, but we haven't seen anything yet. Adelphia is supposed to pay Cleveland $600,000 for the first quarter; based on gross revenues, 10* less than last year. "Every line item is down this year, " Abrouserhal says. In nearby Brunswick, Ohio, Adelphia has ceased rebuilding its system there, which could, according to the company's franchise, put it in violation if the rebuild isn't completed within 24 months.' In somecases, halts in construction can create not only a breach of contract, but violations of public safety codes. For example, a cable line connected to a telephone poll has started ' to fall in West Los Angeles, Calif. Casings; covering cable wires are not secured in Moreno Valley, Calif. And trenches dug to upgrade boxes or put them underground--a measure'required by several cities--also remain open in Newport Beach, Calif: "These sorts of things cause a safety hazard to the community," says Angela Rushen, media and communications administrator for the city of Moreno Valley. ,'These are ,things that need to be corrected so that people don't get hurt and service doesn't get suspended or interrupted. " The city notified Adelphia on May 29 that it is in violation of its franchise agreement, which calls for a rebuild as well as secure lines. It gave Adelphia 15 days to respond. Jonathan Kramer, a, principaltechnologist hired by Moreno Valley and several other franchising authorities nationwide, has been reviewing Adelphia systems for the past two months Y o2,1-174 "Adelphia has walked away atrmleft things,°, says Kramer, who recently'.noticed cracks .in a system in West Los Angeles. "There' is a cable line that is 'being held up to a pole by a piece of string--not even a 'rope, but a piece of string. T was literally watching the system decompose. " Larry Windsor, Adelphia''s director of government relations, says he has received the letter as well as messages of concern from other cities. The list of technical violations from Moreno Valley "will be examined and 'corrected if there's any problem and completed,by the'end of next week." The construction problems are on the list of concerns for Southern California cities with Adelphia franchises to be discussed at a meeting next week. The California and Nevada chapters of the National Association for Telecommunication officers and Advisors has invited 130 franchises in Southern. California to meet to discuss what to do about the operator's potential bankruptcy, failure to pay franchise fees and safety violations. "We're all in; the same boat for the most part, Moreno Valley's Rushen says. "And it's not a` happy boat to be in." The city also has not received its franchise fee payment for the first quarter. City regulators outside California are also trying to'stay on top of the situation. The halt of construction work is also having an effect on contractors. One, Cable 'Express, based in Columbus, Ohio, says Adelphia owes it a substantial amount of money. Contracted to provide installations in Adelphia systems in New York., Pennsylvania, Ohio and Florida, Cable Express had about 130 employees working in Adelphia properties until two weeks ago when the;, MSO :said their services were no longer needed, according to Cable 'Express SVP Chris Steininger. Since then, about 50 have been called back to service but the installer has yet: to be fully paid for its services. "We've gotten two payments in the last three weeks, " he says. "But they're far from being current. They'd not .be current if they 'gave rye 12r payments Steininger figures he's caught in a catch-22 when it comes to working for Adelphia these clays. Even though Adelphia owes Cable Express money, he's loathe to stop working for the MSO altogether because. if Adelphia should File for bankruptcy,, Steininger figures he's,got a better chance of recouping some funds if he's i a current vendor. 2 A W RUTAN(IBBD.1972). IUCKM 515:I V18-195f) - PAUL HAR ARLINE AR EOCEVEN A BL,KFwN MBLTAN RICHARDA. URNUTT TOMAS C. ROCKNGTON AYNE N MEIZER KAREN ELIZABETH TRCEY MQUAL. JOHN 8'HURtBUT,IR:. EVRIDJKJ:fVICK1!DALLAS L W HARRISON NATALIE SIBBALD:DUNOAS MELISSA SFONTES 21HAEL WJMMELL RANDALL M&ABOLISH LARRY A CERUTTI ALISON.KADIN ROBERT N MARCfREAU MILFORD W..DAHL.JR GMARY REGG PATRICK CAROL D DARTY JOHN: HAMILTON,tft STEVEN W BURL U, CKER &T, THEODORE i.WALLACE;K` GREGG AMBER PATRK O MBcCktLA IOHN A A RAMI'€Z : NOAH I DUZMIAn GILBERT N KRUGER MICHAEL F SITZER RICHARD K HOWELL PHILIP i.BLANCHARD IOSEPH D.CARRUTH THOMAS.I CRANE JAMES 3 WRtSZ`. TERENCE I GALLAGHER RICHARD is SIMS MARK B_FRAZIER DAVID HOCHNfR:. DEJA-HfMINGWAY �y I.WES b O'NEAL PENELOPE PARMES A.PATRICK MUNOZ. JULIE W RUSS V A T T R N E }r S A T L A W ROBERY C BRAUN M.KATHERINE JENSON S.DANIEL HARBOTTLE DENISE L MESTER.. THOMAS S.SALINGER' DUKt I.WAHLOUIST PAUL}.:SIEVE'S W:.ANDREW MOORE DAVID C-LARSEN' RICHARDG.MONTEVIDEO IOSEPH.I MAGk III CHARLES A DAV€NPORT.III CLIFFORD C FRIEDEN LORI SARNIA SMITH KRAIG C RILGER JULIE.DREW SCHM R A PARTNERSHIP INCLUDING PROFESSIONAL CORPORATIONS MICHAELS):RUBIN ERN£ST W KLATTE.III Kf NT M CLAYTON RICHARD D ARKO 611 ANTON BOULEVARD,FOURTEENTH FLOOR IRAG,RN181` Kim THOMPSON DAN UATtR MARK M.MALOVOS OE:COUNStt, ""NY M QDERMAN• IAYNE TAYLOR KACEK MARK RUDENSIEK NIKKI NGUYEN LEONARD E HAMPEL COSTA MESA;CALIFORNIA 92626-1931 STAN WOLCOTT DAVID R COSGROVE STEVEN)GOON JENNIFER S.ANDERSON EDWARD O 5YBE5MA IR ROBERT S.80WER PLANS VAN LIGTEN DOUGLAS j DENNINGTON JOHN T.BEAGLES DIRECT ALL MAIL TO:POST OFFICE BOX 1950 DAVID I GARIBALDI III WILLIMARCAM A A fo"YTHMARTIC MATTHSTEPHEN A MIS TO A:.LLITFIN R. KA ALLISON I.L EATINE-6V1 WILLIAM I.CAPLAN COSTA MESA,.CALIFORNIA 92628-19$0 WtitIAM M.MARTICORfNA MIATTHEWK ROSS TODDO LITHN KAREN I.KEATING.. TE:LEPHONE:774+641.51�C3 fAC$INl1LE 774-$46-9035 JAMES L MORRIS JEFFREY WERTHEIMER KERRA-S CARI$ON T LANNGUYEN MICHAEL T.HORNAK ROBERT O OWEN CRISTY LOMENZO PARKER LISA:NEAL NICHOLAS •A PROFESSIONAL INTERNET ADDRESStNWW.rUt$n.GDJY1 PHILIP D:KOHN ADAM N;YOLKERT JEFFREY tMELCNING I€NNIFHLDHILLON CORPORATION Direct Dial:(714)641-3416 -mail:bmarticorena@rutan.com March 18, 2(}0 Dent Leacock AT&T Broadband P.O. Box 5147 San Ramon,CA 945$3 Re City of Berkeley, California - City of Richmond, California - City of Santa Cruz, California - County of ;Santa, Cruz, California; (collectively, the "Franchising Authorities"); Questionnaire Relating to AT&T Comcast` Corporation Transfer Dear Mr.Leacock: This office serves'as Special Counsel to the Franchising Authorities in relation`to the above-described matter. Please find enclosed the Questions ''re of each of the Franchising Authorities relating to the above-described matter (the "% nnaire"). As indicated in the Questionnaire,, the Applicant, as defined in the Questionnaire, is required to respond to the Questionnaire, and provide' all of the information requested therein, within;ten (10) days of the date of receipt: If you have any questions in this matter, please do not hesitate to contact me. However, please be advised that the ten (10) day response period will continue to run notwithstanding the submission,,or lack thereof, of any questions by you or other representatives of the Applicant. Sincerely, RUTAN &TUCKER, LLP William M. Marticorena MM: b Enclosure 124/01 1597-0001 ,,,.��^^^ 268252.01 a03118/02 r AT&T COMCAST CORPQRATION TRANSFER UESTIONNAIRE CITY OF BERKELEY,CALIFORItiIA QUESTIONS K. QUESTIONS RELATING TO AGREEMENT AND PLAN OF MERGER DATED AS OF DECEMBER 19 2001 BY AtD AMONG AT&T CORP. AT&T BROADBAND CORP. COMCAST CORPQRATION AT&T BROA BAND ACQLASITION CGRP. COMCAST ACQUISITION CORP. AND AT&T COMCAST CORPQEATION THE "APM" (1) Please provide a complete and unredacted set of exhibits, schedules and annexes to the APM. (2) Please provide a copy of the"Registration Statement", as that term is defined and utilized in Section 5.09 of the APM, and the"Joint Proxy Statement", as that term is defined and utilized in Section 5.09 of the APM. If one or both of these documents are not available in final form at this point in time,please provide a draft thereof and indicate your agreement to provide a final version of said document(s) as soon as it is available and specify the projected date of availability. (3) Please provide a copy of the"Opinion of Financial Advisor", as that term is defined and utilized in Section 5.15 of the APM, of Morgan Stanley& Co., Inc., JP Morgan St Inc., and Merrill, Lynch, Pierce, Fenner&Smith, Inc. , < (4) Please provide a copy of the"Opinion of Financial Advisor", as that term is defined and utilized in Section 6.15 of the APM,'ofCredit Suisse First Boston and Goldman, Sachs & Co, (5) Please provide a copy of the"Neutrality Agreement", as that term is defined and utilized in Section 8.05 of the APM. (6) Please provide a copy of any budget,'financing plan, or other document evidencing the recommendations of the Interim Financing'Committee, as that term is defined and utilized in Section 9.15 of the APM, as it relates to the charges and assignments of the Interim Financing Committee pursuant'to Section 9.15 of the APM. (7) Please provide a copy of the"Exchange Agreement", as that term is defined and utilized in Section 9.21 of the APM. 124/011597-€001 255064.01 a03/15/02 II. QUESTIONS RELATING TO SEPAMTION AND DISTRIBUTION AGREEIIENT'BY AND BEEN AT&T CORP. AND AT&T BROADBAND CORP. DATED AS OF DECEMBER. 19,2001 (THE"SDA'a. (1) Please provide complete and unredacted copies of all exhibits,schedules, and annexes to the SDA. (2) In relation to Section 2.07 of the SDA,please indicate whether the- provisions of Section 2.07(b)which indicate that"in addition,the person retaining such assets shall take such other actions as may be reasonably requested by the person to whom such asset is to be transferred in order to place such person, insofar as reasonably passible,in the same position as if such asset had been transferred as contemplated hereby and so that all benefits and burdens relating to such AT&T Broadband asset(or such AT&T Communications asset, as the case maybe), including possession,use,risks of loss,potential for==gain, and dominion,control and command of such assets>are to inure from and after the distribution date to the AT&T Broadband Group (or the AT&T Communications Group, as the case may be imposes an obligation on any direct party or third-party beneficiary of the SDA to transfer all indices of ownership of the asset in question, other than bare legal title,to the intended transferee? If not,please indicate why not. III. QUESTIONS RELATING TO MANAGEMENT STABILITY. (1) Please provide an organizational chart which shows by title and name all management positions relating to the Franchise and/or Franchisee at the system level, regional level; and headquarters level as of the date that the transactions closed which transferred control of the Franchise and/or Franchisee to AT&T Corp. ("AT&T„). (2) Please provide an organizational chart showing the same information:as of January 1, 2000. (3) Please provide an organizational chart showing the same information as of January 1, 2001. (4) Please provide an organizational chart showing the same information as of January 1, 2002. (5) Please provide any and all information which you would like the Franchising Authority to consider and evaluate relating to any plan which exists, or is intended to be created, which would provide management;,stability at the local,regional, and national levels in relation to management;positions affecting the Franchise and/or the Franchisee including, without limitation, any managementcontracts, employee contracts employee agreements, "stay bonus"programs, stock option programs,'or any other' devices or programs which are intended to maintain management stability and expertise upon close of the Merger and for thirty-six (36)months thereafter. (6) It has been widely reported in the trade press and popular press that high ranking executives of Comcast Corporation("Comcast")have asserted that the corporate 12VO 11597-0001 263464.01 a03715(02 -2- overhead of AT&T is excessive by both industry standards and the overhead charges incurred by Comcast. Please provide detailed information as to how Comcast intends to reduce said overhead including,without limitation,any anticipated or contemplated reductions in management staffing or other cutbacks which would directly or indirectly reduce the corporate overhead or other overhead charges incurred by the AT&T assets being transferred to the Transferee upon closing of the Merger. Please farther indicate, with specificity,how these reductions,if they are contemplated or planned, can be: undertaken without reductions in the quality of video service, customer service, or other aspectsof the cable system operations which affect subscribers or the Franchising Authority. V. QUESTIONS RELATING TO POTENTIAL CONSOLIDATION OF THE OPERATIONS OF AT&T AND COMCAST INTO AT&T'COMCAST CORPORATION. A. The Franchising Authority possesses;concerns and questions regarding the ability of AT&T and Comcast to merge their respective cable television operations into a single entity without a significant degree of operational disruption, subscriber inconveniences, and other'associated problems. Please provide the Franchising Authority with any and all plans,projections, timetables,budgets,operating plans, or any other information which the Applicant desires to be considered by the Franchising Authority in assessing the impact of said consolidation upon subscribers. To the extent that the Applicant possesses`any farm of plan or strategy as to the consolidation strategy,please provide it to the Franchising Authority'. If no operating plan or strategy exists,please so indicate. V. QUESTIONS RELATING TO SELECTION OF CABLE MODEM SERVICE` PROVIDERS.' (1) It is has come to the attention of the Franchising Authority that its subscribers have experienced significant disruption, inconvenience, and other problems relating to the conversion from the At-Home Cable Modem Network to AT&T's proprietary network. Please indicate whether the merger of AT&T and Comcast will, in any way, affect the continuous and stable provision of cable modern service to subscribers or result, or potentially result,in a further conversion or changeover from AT&T's proprietary network to any network associated with Comcast or any affiliate thereof. (2) Please present and discuss any and all plans relating to any material changes in the delivery of cable modem service within the;jurisdiction of the Franchising Authority within the first thirty-six (36)months subsequent to the closing of the Merger. If no plans exist or are contemplated, please so indicate. VI. QIMSTLONS RELATING TO'CHOICE BETWEEN S ITCHEDA TERNET PROTOCOL f 1P'!J TELEPHONE TECHNOLOGY DEPLOymEw (1) It has been reported in the Trade Press that AT&T has elected to utilize switched telephone technology for deployment upon its broadband systems. It has also 124/011597-0001 265064.01 aG3i15102 -3- been reported that Comcast has avoided utilization of switched telephony technology in favor of IP telephony. Please provide any and all information available to the Applicant regarding plans,or potential plans,for the introduction of telephone service within the Franchising.Authority and the technology which will be utilized for said telephony' deployment. (2) Does the Applicant, or any related affiliate thereof,have any plans of any type to offer telephony service within the jurisdiction of the Franchising Authority within the next thirty-six (36)months? If so,what type of technology, Switched or IP, or other, will be deployed? VII. QUESTIONS RELATING TO NEUTITY AQUEMENT. Section 8.05 of the APM reads as follows: `Section 8.45 Neutrality Agreement. Notwithstanding any other provision of this agreement,AT&T shall not renew,extend or modify the Neutrality And Consent Election Agreement (the "Neutrality Agreement")among AT&T,the Communication Workers of America and the International Brotherhood of Electrical Workers, such that such agreement,as so renewed, extended or modified,will apply to or otherwise bind or purport to apply to or otherwise bind, after the effective time, AT&T Broadband, any of the AT&T Broadband subsidiaries,parent, Comcast or any of the Comcast subsidiaries, either as a matter of contract or term or condition of employment. AT&T shall not enter into any other agreement or arrangement with respect to the same or similar matters as the matters covered by the Neutrality Agreement if such agreement or arrangement would apply to or otherwise bind or purport to apply to or otherwise bind,after the Effective Date, AT&T Broadband, any of the AT&T Broadband subsidiaries,parent, Comcast or any of the Comcast subsidiaries, either as a matter of contract or term or condition of employment.** (l) What is the purpose of the Neutrality Agreement? (2) When does the Neutrality Agreement expire? (3) What are the parties' objections to the Neutrality'Agreement? (4) Have the Communication Workers of America and/or the International Brotherhood'of Electrical'Workers been informed of the contents of Section 8.05 of the APM (5) Describe the Applicant's plans in relation to replacement or modification of the Neutrality Agreement, or the subject matter to which it relates, subsequent to closing of the Merger. 124tOS159707 265064.01203/15/02 -4- (b) If the Neutrality Agreement is not satisfactorily replaced or modified, is there a potential of employee disruption? If so,what are the Applicant's plans or contingency arrangements to deal with any potential employee disruption? (7) What employees,if any,which perform services that directly or indirectly relate to the Franchise or the Franchisee are affected'by the Neutrality Agreement? (8) Are there any other labor agreements'which the Applicant does not intend,' to survive closing of the Merger or which the Applicant intends to materially modify subsequent to closing. If so,please identify with specificity those agreements. VIII. QUESTIONS RELATING TO Lt7CAL TELEPHONE SERVICES. In a document entitled "AT&T Comcast Corporation Informational Presentation for Local Franchise Authorities", distributed by purportedly authorized representatives of AT&T and/or Comcast at a SCAN-NATtA meeting of March 13,"2002,the Applicant represents to Local Franchising Authorities as follows: "AT&T Comcast will be committed to deploying new and exciting video services,High-Speed Cable Internet and a choice for local phone services at competitive prices to more customers across the United States." (P. 23) AT&T Comcast further represents: "AT&T Comcast will expand its efforts to offer customers a choice of local phone service. . .within a year of closing AT&T Comcast expects to introduce local phone choice to at least one million additional homes." (1) Please indicate,with specificity, what agreements, if any,will exist subsequent to closing between and among,as the case may be,AT&T Comcast Corporation,or any direct or indirect subsidiary thereof, on the one hand, and AT&T Corp., or any direct or indirect subsidiary thereof, on the other hand.,relating to the utilization,or right to utilize,any assets, as that term is defined in the broadest sense, of either entity, or series of entities,>for the provision of local'telephone service subsequent to closing of the Merger. (2) If, and to the extent,AT&T Corp., or any direct or indirect subsidiary thereof,;possesses any type of agreement with any entity controlled by or affiliated with AT&T Broadband Corp. relating,to the provision of local telephone service,please indicate what will happen, if anything,to that agreement, or series of agreements,upon closing of the Merger. In other words,will AT&T Corp. retain any rights subsequent to closing of the''Merger to utilize the assets or properties of AT&T"Comcast Corporation or any direct or indirect subsidiary thereof, in relation to the provision of local telephone service? If so please identify those agreements with specificity,provide copies thereof, and indicate the impact of the Merger upon these agreements. 124/011597-0001 265054.01 a03/15/02 — (3) Please identify,with specificity,the plans of AT&T Comcast to introduce local phone choice to at least one million additional homes." As to that statement,please indicate the existing targeted area,for the provision of thoseservices, the anticipated roll out date and roll out schedule for those'services, the anticipated technology(switched, IP, or otherwise), and any and all information which the Applicant desires to be considered by the Franchising Authority in evaluating the alleged `Benefits of the.Merger"in relation to the expanded deployment of local phone service (4) As part of the FCC 394 review process relating to the TO—AT&T Merger in 1998-1999,representatives of those entities indicated, in these words or words of equivalent substance, to the Franchising Authority that one of the significant"public Benefits"of the TCI'—AT&T Merger would be the rapid deployment of local phone service on a competitive basis throughout the franchise areas previously served by TCI. Now, almost three years subsequent to the closing of the TO y-AT&T Merger,there appears to be deployment of competitive local exchange telephone service by AT&T Broadband in its cable television service areas. Please provide any information which you would like to be considered by the Franchising Authority as to why the Franchising Authority should believe that the merger of AT&T with Comeast will any more effectively deliver these premised benefits than did the TO—AT&T Merger. IX. QUESTIONS RELATING TO IMPACT OF MERGER UPON RATES AND SERVICES. (1) The Franchising Authority has questions about the potentially`deleterious impact of the Merger upon cable'television rates. Please provide any and all information which you desire to be considered by the Franchising Authority in evaluating the impact, positive or negative,of the Merger upon rates charged to subscribers for the provision of cable television services. (2) The Franchising Authority has,questions about the potentially deleterious impact of the Merger upon cable television services. Please provide any and all information which you desire to be considered by the Franchising Authority in evaluating` the impact,positive or negative, of the Merger upon,cable television services: RULES OF ENGAGEMENT Pursuant to 47 C.F.R. § 76.502, the Applicant is hereby directed'to provide complete and accurate answers to the above-described;questions within ten(10)days of the receipt of this request. Failure to provide complete and accurate responses to all of the questions set forth herein within ten(10)days of the date of receipt of this request shall result in a determination that the information provided by the Applicant pursuant to 47 C.F.R. § 76.502(a) shall not be deemed to be accepted within the meaning of 47 C.F.R. § 76.502(b). In addition,please be advised that failure to provide complete and non-redacted versions of all of the documents set forth in the.Exhibits to the FCC 394 within tent(10) days may result in a determination that the Applicant has not complied with 47 C.F.R. § 76.502(a)and that, as a result thereof, the 120-day review period set forth therein has failed to commence, 1241011597-0001 245064,01 03915/02 -6- Please be further advised that information presentedby the Applicant within the next ten (10)days,whether pursuant to this request or otherwise,will be included within the information evaluated by Staff and submitted to the City Council for ultimate decision. Please be further advised that.information submitted subsequent=ta that date may or may not be considered by City Staff and the City Council in making a decision upon the Application. The Applicant is strongly encouraged to provide as comprehensive and thorough information as possible within the next ten(10) days in that information provided subsequent to that time, unless specifically requested by the City,may or may not be considered. Finally,the Applicant should be informed that the City reserves the right to collect information from extrinsic and third-party sources and utilize said information in its decision making process with or without notice to or comment by the Applicant, X. DEFINITIONS, "Applicant"means the parties submitting the-Application, "Application„means the FCC 394 dated February 25,2002 relating to the Merger. "Franchise"means the legal authorization of the Franchisee to construct and operate a cable system and provide cable service within the jurisdiction of the Franchising Authority. "Franchisee"means the legal entity granted the Franchise' y the Franchising Authority. "Franchising Authority"means the City of Berkeley, California. "Merger"means that transaction by which the cable television systems and other assets currently owned or controlled by AT&T Corp. are merged with the cable television system and other assets owned or controlled.by Comcast Corporation and ultimately owned or controlled by AT&T Comcast Corporation as described in the APM. "TCI-AT&T Merger"means the 1998 transaction'whereby AT&T Corp. acquired control of the Cable Television Systems owned or controlled by TCI,Inc. 124/011597-0001 263064.01 a03J13l02 -7- RUTAN n T T O R N E Y`5 AT LAW Kent Leacock March 18, 2002 Page 2'' cc; Manula Albuquerque,Esq., City Attorney,City of Berkeley Roger Miller, City of Berkeley Eric Xavier, City of Richmond Richard C. Wilson, City of Santa Cruz Pat Busch, County of Santa Cruz 1241011597:0003 258252.01 43/18102 AT&TCOMCAST CORPORATION TRANSFER UESTI®NNAIRE CITY QF—'RICHMOND, CALIFGRNIA QUESTIONS 1. QUESTIONS RELATING TO AGREEMENT ANIS PLAN OF MERGER DATED AS OF DECEMBER 19 2001 BY AM AMCNQ AT&T CORP.,AT&T BROADBAND CORP, COMCAST CORPORATION AT&T BRQADBAND AC UISITION CORP. COMCAST AC UISITION CO .'AND AT&T CGMCAST M ORATION LHE (1) Please provide a complete and unredacted set of exhibits, schedules and annexes to the APM. (2) Please provide a copy of the"Registration Statement" as that term is defined and utilized in Section 5.09 of the APM, and.the"Joint Proxy Statement",:as that term is defined and utilized in Section 5.09 of the APM. 1f one or both of these documents are not available in final form at this point in time,please provide a draft «thereof and indicate your agreement to provide a final version of said'document(s)'as soon as it is available and specify the projected date of availability. (3) Please provide a copy of the"Opinion of Financial Advisor' as that term is defined and utilized in Section 5.15 of the APM of Morgan Stanley & Co., Inc., 3P Morgan Security, Inc., and Merrill, Lynch,Pierce,Fenner& Smith, Inc. (4) Please provide a:copy of the"Opinion of Financial Advisor" as that term is defined and utilized in Section 6.15 of the APM of Credit Suisse First Boston and Goldman, Sachs & Co. (5) Please provide a,copy of the"Neutrality Agreement", as that term is defined and utilized in Section 8.05 of the APM. (6) Please provide a copy of any budget,financing plan, or other document evidencing the recommendations of the Interim Financing Committee, as that term is defined and utilized in Section 9.15 of the APM,as it relates to the charges and assignments of the Interim Financing Committee pursuant to Section 9.15 of the APM. (7) Please provide a'copy of the"Exchange Agreement", as that terra is defined and utilized in Section 9.21 of the APM 224/015736.0001 257792.01 203115/02 r LIESTLONS RELATING TO SEPARATION Al` D DISMaUTICJN AGREEMENT BY AND BETWEEN AT&T MRP".' AM AT&T BROADBAND CORP: DATED AS OF DECEMBER 19 ?,2001 (M"SIVA"l. (1) Please provide complete and unredactd copies of all exhibits,schedules, and annexes to the SDA. (2) In relation to Section 2.47 of the SDA,please indicate whether the provisions of Section 2.07(b)which indicate that"in addition, the person retaining such assets shall take such other actions as may be reasonably requested by the person to whom such asset is to be transferred in order to place such person,insofar as reasonably possible, in the same position as if such asset had been transferred as contemplated hereby and so that all benefits and burdens relating to such AT&T Broadband asset(or such AT&T Communications asset, as the case maybe), including possession, use,risks of loss,potential for gain, and dominion, control and command of such assets are to inure from and after the distribution date to the AT&T Broadband Group (or the AT&T Communications Group,as the case may be) imposes an obligation on any direct party or third''-party beneficiary of the SDA to transfer all indices of ownership of the asset in question., other than bare legal title,to the intended transferee? If not,please indicate why not. III. QUSTI(�NS ;ELATING T4 MANAGEM ENT STABILITY. (1) Please provide an organizational chart which shows by title and name all management positions relating to the Franchise and/or Franchisee at the system level, regional level, and headquarters level as of the date that the transactions closed which transferred control of the Franchise and/or Franchisee to AT&T Corp. ("AT&T"). (2) Please provide an organizational chart showing the same information as of January 1, 2000. (3) Please provide an organizational chart showing the same information as of January 1, 2001. (4) Please provide an organizational chart showing the same information as of January 1,2002. (5) Please provide any and all information which you would like the Franchising Authority to consider and evaluate relating to,any plan which exists, or intended to be created,which would provide management'stability at the local,regional, and national levels in relation to management;positions affecting the Franchise and/or the Franchisee including,, without limitation, any management contracts,employee contracts, employee agreements, "stay bonus"programs, stock option programs,or any other devices or programs which are intended to maintain management stability and expertise upon close of the Merger and for thirty-six(36)months thereafter. (6) It has been widely reported in the trade press and popular press that high ranking executives of Comcast Corporation("Comcast")have asserted that the corporate 124/015736-0001 267792.01 a03115ro2 -2- overhead of AT&T is excessive by both industry standards and the overhead charges incurred by Comcast. Please provide detailed information as to how Comcast intends to reduce said overhead including,without Jimitation,any anticipated or contemplated' reductions in management staffing or other cutbacks which would directly or indirectly reduce the corporate overhead or other overhead charges incurred by the AT&T assets being transferred to the Transferee upon closing of the Merger. Please further indicate, with specificity,how these reductions,if they are contemplated or planned, can be undertaken without reductions in the quality of vides, service, customer service, or ether aspects of the cable system operations which affect subscribers or the,Franchising Authority. IV. QUESTIONS RELATING TO POTE ''I'IAL CONSOLIDATION OF THE OPERATIONS OF AT&T AND COMCAST C►AT&T'CGM AST'CO RPORATION:, A. The Franchising Authority possesses'concerns and questions regarding the ability of AT&T and Comcast to merge their respective cable television operations into a single entity without a significant degree of operational disruption,subscriber inconveniences, and other associated problems. Please provide the Franchising Authority with any and all plans,projections,timetables,budgets,operating plans, or any other information which the Applicant'desires to be considered by the Franchising.Authority in assessing the impact of said consolidation upon subscribers. To the extent that the Applicant possesses any form of plan or strategy as to the consolidation strategy,please provide it to the Franchising Authority. If no operating plan or strategy exists,please so indicate. V. QUESTIONS RELATING TO SELECTION OF CABLE MODEM SERVICE PROVIDERS. (I) It is has come to the attention of the Franchising Authority that its subscribers have experienced significant disruption,;.inconvenience, and other problems relating to the conversion from the At-Home Cable Modem Network to AT&T's proprietary network. Please indicate whether the merger of AT&T and Comcast will, in any way, affect the continuous and stable provision of cable modem service to subscribers or result, or potentially result,in a further conversion or changeover from AT&T's proprietary network to any network,associated with Comcast or any affiliate thereof.' (2) Please present and discuss any and all plans relating to any material changes in the delivery of cable modern service within the jurisdiction of the Franchising Authority within the first thirty-six (36)months subsequent to the closing of the Merger. If no plans exist or are contemplated,please so indicate. VI. UESTIONS RELATING TO CHOICE BETWEEN SWITCHED/INTERNET PROTC3COL(`'IP")TELEPHONE TECHNOLOGY DEPLOYMENT. (1) It has been reported in the Trade Press that AT&T has elected to utilize switched telephone technology for deployment upon its broadband systems. It has also 124101573"001 267792.01 a03115102 -3- been reported that Comcast has avoided utilization of switched telephony technology in favor of IP telephony, Please provide any and all information available to the Applicant regarding plans, or potential plans, for the introduction of telephone service within the Franchising Authority and the technology which will be utilized=for said telephony. deployment. (2) Does the Applicant, or any related affiliatethereof,have any pians of any type to offer telephony service within the jurisdiction of the Franchising Authority within the next thirty-six (36)months? If so,what type of technology,°Switched or IP, or other, will be deployed? VII. QUESTIONS RELATING TO NEUTRALITY"AGREEMENT. Section 8.05 of the APM reads as follows: "Section 8.05 Neutrality Agreement. Notwithstanding any other prevision of this agreement,AT&T shall not renew, extend or modify the Neutrality And Consent Election Agreement(the "Neutrality Agreement")'among AT&T, the Communication Workers of America and the International Brotherhood of Electrical Workers,such that such agreement,as so renewed, extended or modified,will apply to or otherwise bind or purport to apply to or otherwise bind, after the effective time,AT&T Broadband, any of the AT&T Broadband subsidiaries,parent, Comcast or any of the Comcast subsidiaries, either as a matter of contract or term or condition of employment. AT&T shall not enter into any other agreement or arrangement with respect to the same or similar matters as the matters covered by the Neutrality Agreement if such agreement or arrangement would apply to or otherwise bind or purport to apply to or otherwise bind, after the Effective late, AT&T Broadband, any of the AT&T Broadband subsidiaries,parent, Comcast or any of the Comcast subsidiaries, either as a matter of contract or term or condition of employment." (1) What is the purpose of the Neutrality Agreement? (2) When does the Neutrality Agreement expire? (3) What are the parties' objections to the Neutrality Agreement? (4) Have the Communication Workers of America and/or the International Brotherhood of Electrical Workers been informed of the contents of Section 8.05 of the APM? (5) Describe the Applicant's plans in relation to replacement or modification of the Neutrality Agreement, or the subject matter to which it relates, subsequent to closing'of the Merger. 124M 5736-Ml 267792.01 a03/15/02 -4- (6) If the NeutralityAgreement is not satisfactorily replaced or modified, is there a potential of employee disruption? If so,what are the Applicant's plans or contingency arrangements to deal with any potential employee..disruption? (7) What employees, if any, which perform services that directly or indirectly relate to the Franchise or the Franchisee are affected by the Neutrality Agreement? (8) Are there any other labor agreements which the Applicant does not intend to survive closing of the Merger or which the Applicant intends to materially modify subsequent to closing. If so,please identify with specificity those agreements. VIII. QnSTIONS RELATING TO LOCAL TELEPHONE SERVICES. In a document entitled".AT&T Comcast Corporation Informational Presentation for Local Franchise Authorities",distributed by purportedly authorized representatives of AT&T and/or Comcast at a SCAN-NATCJA meeting of March 13,2402,the Applicant represents to Local Franchising.Authorities as follows: "AT&T Comcast will be committed to deploying new and exciting video services,High-Speed Cable Internet and a choice for local phone services at competitive prices to more customers across the United States." (p. 23) AT&T" Comcast further represents: "AT&T Comcast will expand its efforts to offer customers a choice of local phone service. .'.within a year of closing AT&T Comcast expects to introduce local phone choice to at least'one million additional homes." (1) Please indicate, with specificity,what agreements, if any, will exist subsequent to closing between and among, as the case may be, AT&T Comcast Corporation, or any direct or indirect subsidiary thereof, on the one hand, and AT&T Corp.,'or any direct or indirect subsidiary thereof, on the other hand,relating to the utilization,or right,to utilize, any assets, as that term is defined in the broadest sense, of either entity, or series of entities, for the provision of local telephone service subsequent" to closing of the Merger.', (2) If, and to the extent, AT&T Corp., or any direct or indirect subsidiary thereof,possesses any type of agreement with any entity controlled by or affiliated:with AT&T Broadband Corp. relating to the provision of local telephone service,please indicate what will happen, if anything, to that agreement, or series of agreements, upon closing of the Merger. In other words,will AT&T Corp. retain any rights subsequent to closing of the Merger to utilize the assets or properties of AT&T Comcast Corporation or any direct or indirect subsidiary thereof, in relation to the prevision of local telephone service? If so,please identify those agreements with specificity,provide copies thereof, and indicate the impact of the Merger upon those agreements. 124/415736-0001 267792.41&03/15142 -$- (3) Please identify,with specificity,the plans of AT&T Comcast to". . introduce local phone choice to at least one million additional homes." As to that statement,please indicate the existing targeted area for the provision of those'services, the anticipated roll out date and roll out schedule for those:services,the anticipated technology(switched, IP, or otherwise), and any and all information which the Applicant desires to be considered by the Franchising Authority in evaluating the alleged`Benefits of the Merger"'in relation to the expanded deployment of local phone service'. (4) As part of the FCC 394 review process relating to the TO —AT&T Merger in 1998-1999,representatives of those entities indicated, in these words or words of equivalent substance, to the Franchising Authority that one of the significant"public benefits"of the TO--AT&T Merger would be the rapid deployment of local phone service on a competitive basis throughout the''franchise areas previously served by TCI. Now, almost three years subsequent to the closing of the TO—AT&T Merger,there appears to be little deployment of competitive local exchange telephone service by AT&T Broadband in its cable television service areas. Please provide any information which you would life to be considered by the Franchising Authority as to why the Franchising.Authority should believe that the merger of AT&T Corp with Comcast will any more effectively deliver these promised benefits than did the TCI-AT&T Merger. IX. QUESTIONS RELATING TO IMPACT f3F MERGER UPI'+T'RATES AND SERVICES. (1) The Franchising Authority has questions about the potentially deleterious impact of the Merger upon cable'television rates. Please provide any and all information which you desire to be considered by the Franchising Authority in evaluating the impact, positive or negative, of the Merger upon rates charged to subscribers for the provision of cable television services. (2) The Franchising Authority has questions about the potentially deleterious impact'ofthe Merger upon cable television services. Please provide any and all information which you desire to be considered by the Franchising Authority in evaluating the impact,positive'or negative,of the Merger upon cable'television services. RULES OF ENGAGEMENT. Pursuant to 47 C.F.R. § 76.502, the Applicant is hereby directed to provide complete and accurate answers to the above-described questions within ten(10)days of the receipt of this request. Failure to provide,complete and accurate responses to all of the questions set forth herein within ten(10)days'of the;date of receipt of this request shall result in a determination that the information provided by the Applicant pursuant to 47 C.F.R. § 76.502(a) shall not be deemed to be accepted within the meaning of 47 C.F.R. § 76.502(b). In addition,please be advised that failure to provide complete and non-redacted versions of all of the documents set forth in the Exhibits to the FCC 394 within ten(10)days may result in a determination that the Applicant has not complied with 47 C.F.R. § 76.502(a)and that, as a result thereof, the 12£3-day review period set forth therein has failed to commence. 124/01573&000I 267792.01 a03115102 —6— Please be further advised that information presented by the Applicant within the next ten (10)days,whether pursuant to this request or otherwise,will be included within the information evaluated by'Staff and submitted to the City Council for ultimate decision. Please be frier advised that information submitted subsequent to that date may or may not be considered by City Staff and the City Council in making a decision upon the Application. The Applicant is strongly encouraged to provide as comprehensive and thorough information as possible within the next ten(10)days in that information provided subsequent to that time,unless specifically requested by the City,may or,may not be considered. Finally,the Applicant should be informed that the City reserves the right to collect'information from extrinsic and third-party sources and utilize said information in its decision making process with or without notice to or comment by the Applicant. X. DEFINITIONS. "Applicant"'means the parties submitting the Application. "Application"means the FCC 394 dated February 25,2002 relating to the Merger. "Franchise"'means the legal authorization of the Franchisee to construct and operate a cable system and provide cable service within the jurisdiction of the Franchising Authority. "Franchiseej'means the legal entity granted the Franchise by the Franchising Authority. "Franchising Authority" means the City of Richmond, California. "Merger"means that transaction by which the cable television systems and ether assets currently owned or controlled by AT&T Corp. are merged with the cable television system and other assets owned or controlled by Comcast Corporation and ultimately owned or controlled by AT&T'Comcast Corporation as described in the APM. "TCI-AT&T Merger"means the 1998 transaction whereby ATB T Corp. acquired control of the Cable Television Systems owned or controlled by TCI, Inc. 124/015736..0401 267792.01 WVIS142 -7- AT&T COMCAST CORPORATION TRANSFER QULESTIOhEAIRE CTT ' OF SANTA CRUZ CALIFORNIA' QUESTIONS I. QUESTIONS RELATING T_O AGREEMENT AND PIAN OF MERGER DATED AS OF D CEMBER 1' 2001 BY ANI)AMONGAT&T.C RP. AT&T BROADBAI C( RP. OMCAST CQTION AT&T BROADBAND ACQUISITION CORP! COI CAST ACQUISITION CORP.AND AT&T QP CORPOP TIONI TIME (1) Please provide a complete and unredacted set of exhibits, schedules and annexes to the APM. (2) Please provide a copy of the"Registration Statement' as that term is defined and utilized in Section 5.09 of the APM, and the"Joint Proxy Statement", as that term is defined and utilized in Section 5.09 of the APM. If one or both of these documents are not available in final form at this point in time,please provide a draft thereof and indicate your agreement to provide a final version of said document(s) as soon as it is available and specify the projected elate of availability. (3) Please provide a copy of the"Opinion of Financial Advisor' as that term is defined and utilized in Section 5.15 of the APM,of Morgan Stanley&Co., Inc.,JP Morgan Security,Inc., and Merrill, Lynch,Pierce,''Fenner& Smith,Inc. (4) Please provide a copy of the"Opinion of Financial Advisor", as that term is defined and utilized in Section 6.15 of the APM, of Credit Suisse First Boston and Goldman, Sachs & Co. (5) Please provide a copy of the"Neutrality Agreement", as that term is defined and utilized in Section 8.05 of the APM. (6) Please provide a copy of any budget, financing plan,or other document evidencing the recommendations of the Interim Financing Committee,as that term is defined and utilized in Section 9.15 of the APM, as it relates to the charges and assignments of the Interim Financing Committee pursuant to Section 9.15 ofthe APM. (7) Please provide a copy of the"Exchange Agreement", as that term is defined and utilized in Section 9.21 of the APM. 124/411706-0010 267795.01 a03/15102 {,,AL1 STIONS RELATING TO SEPARATION AND DIST UTIQN AGREEMENT BY AMID BETWEEN AT&T CORP. AND AT&T BROADBAND CORP. DER 19 2001 (THE"SDA"). (1) Please provide complete and unredacted copies of all exhibits, schedules, and annexes to the SDA. (2) In relation to Section 2.07 of the SDA,please indicate whether the provisions of Section 2.07(b)which indicate that"in addition, the person retaining such assets shall take such other actions as may be reasonably requested by the person to whom such asset is to be transferred in order to place such person,insofar as reasonably possible,in the same position as if such asset had been transferred as contemplated hereby and so that all benefits and burdens relating to such AT&T Broadband asset(or such AT&T Communications asset,as the case may be), including possession, use,risks of loss,potential for gain, and dominion,control and command of such assets are to inure from and after"the distribution date to the AT&T Broadband Group (or the AT&T Communications Group, as the case may be)imposes an obligation on any direct party or third-party beneficiary of the SDA to transfer all ihdices of ownership of the asset in question, other than bare legal title, to the intended transferee? If not,please indicate why not. III. MSTIONS RELATING TO MANAGEMENT STABILITY.' (1) Please provide an organizational chart which shows by title and name all management positions relating to the Franchise and/or Franchisee at the system level, regional level,and headquarters level as of the date that the transactions closed which transferred control of the Franchise and/or Franchisee to AT&T Corp. ("AT&T"). (2) Please provide an organizational chart showing the same information as of January 1, 2040. (3) Please provide an organizational chart showing the same information as of January 1,2001. (4) Please provide an organizational chart showing the same information as of January 1,2002. (5) Please provide any and all information which you would like the Franchising Authority to consider and evaluate relating to any plan which exists,or is intended to be created,which would provide management stability at the local, regional, and national levels in relation to management,positions affecting the Franchise and/or the Franchisee including, without limitation,any management'contracts,employee contracts, employee agreements, "stay bonus"programs, stock option programs, or any other devices or programs which are intended to maintain management stability and expertise upon close of the Merger and for thirty.'-six (36)months thereafter. (6) It has been widely reported in the trade press and popular press that high ranking executives of Comcast Corporation ("Comcast")have asserted'that the corporate 124101 1706-0010 267745.01 a0Y15102 —2— overhead of AT&Tis excessive by both industry standards and the overhead'charges incurred by Comcast. Please provide detailed information as to how Comcast intends to reduce said overhead including,without limitation,any anticipated or contemplated reductions in management staffing or ether cutbacks which would directly or indirectly reduce the corporate overhead or other overhead charges incurred by the AT&T assets being transferred to the Transferee upon closing ofthe Merger. ''Please further indicate, with specificity,how these reductions, if they are contemplated or planned, can be undertaken without reductions in the quality of video service,customer service, or other aspects of-the cable system operations'which affect subscribers or the Franchising Authority. N. QUSTIONS,RELATING TCt POTENTIAL CONSOLIDATIfr}N OF!HE OPERATIONS OF AT&T AND COMCA T'INTO'AT&T COMCAST CORPORATION. A. The Franchising Authority possesses concerns and questions regarding the ability of AT&T and Comcast to merge their respective cable television operations into a; single entity without a significant degree of operational disruption,subscriber inconveniences,and other associated problems. please provide the Franchising Authority with any and all plans,projections,timetables,budgets, operating plans, or any other information which the Applicant desires to be considered by the Franchising Authority in assessing the impact of said consolidation upon subscribers. To the extent that the .Applicant possesses any form o.f plan or strategy as to the consolidation strategy,please provide it to the Franchising Authority. If no operating plan or strategy exists,please so indicate. V. OIMSTIONS RELATING TO SELECTION OF CABLE MODEM SERVICE PROVID RS (1) It is has come to the attention of the Franchising Authority that its subscribers have experienced significant disruption, inconvenience, and other problems relating to the conversion from the At-Home Cable Modern Network to AT&T's proprietary network. Please indicate whether the merger of AT&T and Comcast will, in any way, affect the continuous and stable provision 0fcable modem service to subscribers or result, or potentially result, in a furtherconversi-ori or changeover from AT&T's proprietary network to any network associated with Comcast or any affiliate thereof (2) Please present and discuss any and all plans relating to any material changes in the delivery of cable modem service within the jurisdiction of'the Franchising Authority within the first thirty-six (36)months subsequent to the closing of the Merger. If no plans exist or are contemplated,please so indicate. VI. UESTIONS RE ATING TO'CHI E BETWEEN SWITCHED/INTERNET PROTOCOL t"W")TELEPLIONE TECFINOL,OGY'DEPLOYMENT. ;(1) It has been reported in the Tracie Press that AT&T has elected to utilize switched telephone technology for deployment upon its broadband systems. It has also 124/431705-O010 257795.01 a03/15102 —3— been reported that Comcast has avoided utilization of switched telephony technology in favor of IP telephony. Please provide any and all information mailable to the Applicant regarding plans, or potential plans,for the introduction of telephone service within the Franchising Authority and the technology which will be utilized for said telephony' deployment. (2) Does the Applicant,or any related affiliate thereof, have any plans of any type to offer telephony service within the jurisdiction of the Franchising,Authority within the next thirty-six(36)months? If so,what type of technology, Switched or IP, or other,' will be deployed? VII. JM_STIONS RELATING TC?'NEUTRALITY'ACaREEMENT. Section. 8.05 of the APM reads as follows: "Section 8.05 Neutrality Agreement. ;Notwithstanding any other provision of this agreement,AT&T shall not renew, extend or modify the Neutrality And Consent Election Agreement(the "Neutrality Agreement")among AT&T,the Communication Workers of America and the International Brotherhood of Electrical Workers, such;that such agreement,as so renewed, extended or modified,will apply to or otherwise bind or purport to apply to or otherwise bind,after the effective time; AT&T Broadband, any of the AT&T Broadband subsidiaries,parent, Comcast or any of the Comcast subsidiaries, either as a matter of contract or,term or condition of employment. ATT shall not enter into any other agreement or arrangement with respect to the sante or similar matters as the matters covered by the Neutrality Agreement if such agreement or arrangement would apply to or otherwise bind or purport to apply to or otherwise'bind, after the Effective Date, AT&T Broadband, any of the AT&T Broadband subsidiaries,parent, Comcast or any of the Comcast subsidiaries, either as a matter of contract or term or condition of employment."' (1) What is the purpose of the Neutrality Agreement? (2) When does the Neutrality Agreement expire? (3) What are the parties} objections to the Neutrality Agreement? (4) Have the Communication Workers of America and/or the International Brotherhood of Electrical Workers been informed of the contents of Section 8.05 of the APM? (5) Describe the Applicant's plans in relation to replacement or modification of the Neutrality Agreement,or the subject matter to which it relates, subsequent to closing of the Merger. 124/011706-0010 267795.01 aO3/15102 -4- (6) If the Neutrality Agreement is not satisfactorily replaced or modified, is there a potential of employee disruption? If so,what are the Applicant's plans or contingency arrangements to deal with any potential employee disruption? (7) what employees, if any,which perform services that directly or indirectly relate to the Franchise or the Franchisee are affected by the Neutrality Agreement? (8) Are there any other labor agreements which the Applicant does not intend to survive closing of the Merger or which the Applicant intends to materially modify subsequent to closing. If so,please identify with specificity those agreements. VIII. QUSTLONS RELATING TO LOCAL TELEPHONE SERVICES. In a document entitled."AT&T Comcast Corporation Informational Presentation for Local Franchise Authorities", distributed by purportedly authorized representatives of AT&T and/or Comcast at a SCAN-NATOA meeting of March 13,2002,the Applicant represents to Local Franchising Authorities as follows: "AT&T Comcast will be committed to deploying new and exciting video services,.High-Speed Cable Internet and a choice for local phone services at competitive prices to more customers across the United States." (p. 23) AT&TComeast further represents: "AT&T Comcast will expand its efforts to offer customers a choice of local phone service. . . within a year of closing AT&T Comcast expects to introduce local phone choice to at least one million additional Homes." (1) Please indicate,with specificity, what agreements, if any, will exist subsequent to closing between and among,as the case may be, AT&T:Comcast Corporation,or any direct or indirect subsidiary thereof,on the one hand, and AT&T Corp., or any'direct'or indirect subsidiary thereof, on the other Hand,relating to the utilization, or right to utilize, any assets, as that term is defined in the broadest sense, of either entity, or series of entities, for the provision of local telephone service subsequent to closing of the Merger, (2) If, and to the extent, AT&T Corp., or any direct or indirect subsidiary thereof,possesses any type of agreement with any entity controlled by or affiliated with AT&T Broadband Corp. relating to the provision of local telephone service,please' indicate what will happen, if Anything, to that agreement,or series of agreements, upon closing of the Merger. In other words,will AT&T Corp. retain any rights subsequent to closing of the Merger to utilize the assets or properties of AT&T Comcast Corporation.or any direct or indirect subsidiary thereof, in relation to the provision of local telephone service? If so,please identify those agreements with specificity,provide copies thereof, and indicate the impact of the Merger upon those agreements. 1 24/01 1 706-4(}10 c 267795.01 03115102 !- (3) Please identify,with specificity,the plans of AT&T Comcast to ". introduce local phone choice to at least one million additional homes." As to that statement,please indicate the existing targeted area for the provision of those services, the anticipated roll out date and roll out schedule for those services, the anticipated technology(switched,IP,or otherwise), and any and all information which the Applicant desires to be'considered by the Franchising Authority in evaluating the alleged"Benefits> of the Merger"in relation to the expanded deployment of local phone service. (4) As part of the FCC 394 review process relating to the TCI—AT&T Merger in 1998-1999,representatives of those entities indicated,in these words or words` of equivalent substance,to the Franchising Authority that one of the significant"public benefits" of the TCI—AT&T Merger would be the rapid deployment of local phone service on a competitive basis throughout the franchise areas previously served by TCI. Now, almost three years subsequent to the closing of the TO—AT&T Merger,there appears to be little deployment of competitive local exchange telephone service by AT&T Broadband in its cable television service areas, Please provide any information which you would like to be considered by the Franchising Authority as to why the Franchising Authority should believe that the merger of AT&T with Comcast will any more effectively deliver these promised benefits than did'the TCI--AT&T Merger. I.X. QjMSTIONS RELATING TO IMPACT QF MERGER UPON RATES AND SERV CES. (1) The Franchising Authority has questions about the potentially deleterious impact of the Merger upon cable television rates. Please provide any and all information which you desire to be considered by the Franchising Authority in evaluating the impact,' positive or negative, of the Merger upon rates charged to subscribers for the provision of cable television services. (2) The Franchising Authority has questions about the potentially deleterious impact of the Merger upon cable television services. Please provide any and all information which you desire to be considered by the Franchising Authority in evaluating the impact, positive or negative, of the Merger upon cable television services. BI LE �LF EN— AGEMENT. Pursuant to 47 C.F.R. § 76.502, the Applicant is hereby directed to provide complete and' accurate answers to the above-described questions within ten(10)days of thereceipt of this request. Failure to provide complete and accurate responses to all of the questions set forth herein within ten(10) days of the date of receipt of this request shall result in a determination that the information provided by the Applicant pursuant to 47 C.F.R. § 76.502(a)shall not be deemed to be accepted within the meaning of 47 C.F.R. §76.502(b). In addition,please be advised that failure to provide complete and non-redacted versions of all of the documents set forth in the Exhibits to the FCC 394 within ten(10)days may result in a determination that.the Applicant has not complied with 47 C.F.R. § 76.502(a)and that, as a result thereof,the 120-day review period'set forth therein has failed to commence, 124/011706-0010 26'795.01 a03115J02 -6- Please be further advised that information presented by the Applicant within the next ten (10)days,whether pursuant to this request or otherwise,will be included within the information evaluated by Staff and submitted to the City Council for ultimatt decision. Please be further advised that information submitted subsequent to that date may or may not be considered by City Staff and the City Council in making a decision upon the Application.' The Applicant is strongly encouraged to provide as comprehensive and thorough information as possible within the next ten (10)days in that information provided subsequent to that time,unless specifically requested' by the City,may or may not be considered. Finally, the Applicant should be informed that the City reserves the right to collect information'from extrinsic and third-party sources'and utilize said information in its decision making process with or without notice to or comment by the Applicant. X. DEFINITLONS. `{Applicant"means the parties submitting the Application. "Application"means the FCC 394 dated February 25,2002 relating to the Merger. "Franchise"means the legal authorization of the Franchisee to construct and operate a cable system and provide cable service within the jurisdiction of the Franchising Authority. "Franchisee"means the legal entity granted;the Franchise by the Franchising Authority. "Franchising Authority"means the City of Santa Cruz, California. "Merger"means that transaction by which the cable television'systems and other assets currently owned or controlled by AT&T Corp. are merged with the cable television system and other assets owned or controlled by Comcast Corporation''and ultimately owned or controlled by AT&T Comcast Corporation as described in the APM. "TCI'--AT&T Merger"means the 1998 transaction whereby AT&T'Corp. acquired control of the Cable Television Systems owned or controlled by TO,Inc. 124/011706-0010 267795.01 x03115/02 -7- AT&T CQMCAST CQ OI TI—ONN TR-ANSFEE R QIMSTIONNAIRE COUNTY QF SQA CLUZ CAI WORNI.A QUESTIQNS I. U—ESTIQNS RELATING T AGRE MENT. PI AN OF MERGER' DATED AS OF DEC ,B R l9 2001 BY f7NG AT&T CORP. T&T BROADBAID CORP. COMCAST C RPORATION .AT&T BROAL)B ACQUISITION CORP., CQ CAST ACQUISITIQN CORP.AND AT&T Q0MCAST COUQRATIQN THE (1) Please provide a complete and unredacted set of exhibits, schedules:,and annexes to the APM. (2) Please provide a copy of the"Registration Statement", as that term is defined and utilized in Section 5.09 of the APM,anti the"Joint Proxy Statement",as that term is defined and utilized in Section''5.09 of the APM. If one or both of these documents are not available in final form at this paint in time,Tease provide a draft thereof and indicate your agreement to provide a final version of said document(s)as soon as it is available and specify the projected date of availability. (3) Please provide a copy of the"Opinion ofFinancial Advisor";;as that term is defined and utilized in Section 5.15 of the cAPM,;of Morgan Stanley& Co., Inc.,JP Morgan Security, Inc.,and Merrill, Lynch,fierce,Fenner& Snaith,Inc. (4) Please provide a copy of the"Opinion of Financial Advisor",';as that term is defined and utilized in Section 6.15 of the APM,;of Credit Suisse First Boston and Goldman, Sachs &'Co. (5) Please provide a copy of the"Neutrality Agreement",as that term is defined and utilized in Section 8.05 of the APM. (6) Please provide a copy of any budget,financing plan,or other document evidencing the recommendations of the Interim Financing Committee, as that term is defined and utilized in Section 9.15 of the APM,as it relates to the charges and assignments of the Interim Financing Committee pursuant to Section 9.15 of the APM. (7) Please provide a copy of the"Exchange Agreement", as that term is defined and utilized in Section 9.21 of the APM. 124/011706-0010 267796.01 a0311SX02 H. Ousim!ELATING 14 SEPAlkATIQN A I ISTRIBLITIQN AGREEMENT BY BI T"4 EEN A4T&I CRP., AND AT "T BSL AD 3� CORP. I7A EIS AS 3F DECEMBER 19-2(01 (THE"SDX1 (1) Please provide complete and unredacted copies of all exhibits,schedules, and annexes to the SDA. (2) In relation to Section 2.07 of the SIVA,please indicate whether the provisions of Section 2.07(b)which indicate that"in addition, the person retaining such assets shall take such other actions as/may be reasonably requested by the person to whom such asset is to be transferred in order to place such person, insofar as reasonably possible, in the same position as if such asset had been transferred as contemplated hereby and so that all benefits and burdens relating to such AT&T Broadband asset(or such AT&T Communications asset,as the case may be), including possession., use,risks of loss,potential for gain, and dominion, control and command of such assets are to inure from and after the distribution date to the AT&T Broadband Group(or the AT&T Communications Group,as the ease may be)imposes an obligation on any direct patty or third-party beneficiary of the SDA to transfer all indices of ownership of the asset in question,other than bare legal title,to the intended transferee? If not,please indicate why not. III. LTESTIONS RELATING TQ MANA-ME W STABILITY. (1) Please provide an organizational chart which shows by title and name all management positions relating to the Franchise and/or Franchisee at the system level, regional level, and headquarters level as of the date that the transactions closed which transferred control of the Franchise and/or Franchisee to AT&T'Corp.;("AT&T"). (2) Please provide an organizational chart shoving the same information as of January 1,2000. (3) Please provide an organizational chart showing the same information as of January 1,2001. (4) Please provide an organizational chart showing the same information as of January 1, 2002. (5) Please provide any and all information which you would like the Franchising Authority to consider and evaluate relating to any plan which exists, or is intended to be created,which would provide management stability at the local,regional, and national levels in relation to management positions affecting the Franchise and/or the Franchisee including,without limitation, any'management contracts, employee contracts, employee agreements, "stay bonus"programs, stock option programs,or any other devices or programs which are intended to maintain management stability and expertise upon close ofthe Merger and for thirty-six (3'6)months thereafter. (ti) It has been widely reported in the trade press and popular press that high ranking executives of Comcast Corporation C Comcast")have asserted that the corporate 124/011706-0010 267796.01 x03/15102 -2- overhead of AT&T is excessive by both industry standards and the overhead charges incurred by Comcast. Please provide detailed information as to how Comcast intends to reduce said overhead including,without limitation, any anticipated or contemplated reductions m*management staffing or other cutbacks which would directly or indirectly reduce the corporate overhead or other overhead charges incurred by the AT&T assets being transferred to the Transferee upon closing of theMerger. Please mer indicate, with specificity,how these reductions,if they are contemplated or planned, can be undertaken without reductions in the quality of video service,customer service, or other aspects of the cable system operations which affect subscribers or the Franchising Authority. IV. US IaNS REL,A ING TCS PCTEN_TIA:L CONSOLIDATION OF THE OPERATIONS OF AT&T'AND''COMCAST INTQ'AT&T Ct)IyICAST CGRPORATION. A. The Franchising Authority possesses concerns and questions regarding the ability of AT&T and Comcast to merge them respective cable television operations into a single entity without a significant degree of operational disruption, subscriber inconveniences, and other associated problems. Please Iprovide the Franchising Authority with any and all plans,projections, timetables,budgets,operating plans,or any ether information which the Applicant desires to be considered by the Franchising Authority in assessing the impact of said consolidation upon subscribers. To the extent that the Applicant possesses any form of plan or strategy as to the consolidation strategy,please provide it to the Franchising Authority. If no operating plan or strategy exists,please so indicate. V. QIMSTIONS RELATING TO SELECTION OF CABLE MODEM SERVICE PROVIDERS. (1) It is has came to the attention of the Franchising Authority that its subscribers have experienced significant disruption,inconvenience, and other problems relating to the conversion from the At-Home Cable Modem Network to AT&T's proprietary network. Please indicate whether the merger of AT&T and Comcast will, in any way,affect the continuous and stable provision of cable modern service to subscribers or result, or potentially result,in a further conversion or changeover from AT&T's proprietary network to any network associated with,Comcast or any affiliate thereof (2) Please present and discuss any and all plans relating to any material' changes in the delivery of cable modern service within the jurisdiction of the Franchising Authority within the first thirty-six (36)months subsequent to the closing of the Merger. If no plans exist or are contemplated,please so indicate. VI. QUSTIONS RELATING TO'CHOICE BETWEEN SWITCHED/INTERNET PROTOCOL "1P" TELEPH NE_TECHNOLOGY DEPLOYMENT. (1) It has been reported in the Trade Press that AT&T has elected to utilize switched telephone technology for deployment upon its broadband systems. It has also 124101170&0010 257796.01 a03/15/02 -3- been reported that Comcast has avoided utilization'of switched telephony technology in favor of IP telephony. Please provide any and all information available to the Applicant regarding plans, or potential plans, for the introduction of telephone service within i the Franchising Authority and the technology which will be utilized for said telephony deployment. (2) Does the Applicant,or any related affiliate thereof, have any plans of any type to offer telephony service within the jurisdiction of the Franchising Authority-within the next thirty-six. (36)months?` If so,'what type of technology,Switched or IP, or other, will be deployed? VII. OAMSTIONS RELATI Q TO UTRALITY AGREEMQ T. Section 8.45 of the APM reads as follows. "Section 8.115 Neutrality Agreement. Notwithstanding any other provision of this agreement,AT&T shall not renew,extend or modify the Neutrality And Consent Election Agreement(the "Neutrality Agreement") among AT&T,the Communication Workers of America and the International Brotherhood of Electrical Workers, such that such agreement, as so renewed, extended or modified, will apply to or otherwise bind or,purport to apply to or otherwise bind,after the effective time, AT&T Broadband, any of the AT&T Broadband subsidiaries,parent, Comcast or any of the Comcast subsidiaries, either as a.matter of contract or term or condition of employment. AT&T shall not enter into any other agreement or arrangement with respect to the same or similar matters as the matters covered by the Neutrality Agreement if such agreement or arrangement would apply to or otherwise bind or purport to apply to or otherwise hind, after the Effective bate, AT&T Broadband,any of the ATT Broadband subsidiaries;parent, Comcast or any of the Comcast subsidiaries, either as a matter of contract or term or condition of employment." (1) What is the purpose of the Neutrality Agreement? (2) When does the Neutrality Agreement expire? (3) What are the parties" objections to the Neutrality Agreement?' (4) Have the Communication Workers of America and/or the International Brotherhood of Electrical Workers been informed of the contents of Section 8.05 of the APM? (5) Describe the Applicant's plans in relation to replacement or modification of the Neutrality Agreement, or the subject matter to which it relates, subsequent to closing of the Merger. 124/011706-0010 267796.0103/15/02 -4- � ) If the Neutrality Agreement is not satisfactorily replaced or modified, is there a potential of employee disruption's If so, what are the Applicant's plans or contingencyarrangements to deal with any potential employee disruption? (7) What employees, if any,which perform services that directly or indirectly relate to the Franchise or the Franchisee are affected by the Neutrality Agreement? (8) Are there any other labor agreements which the Applicant clogs not intend to survive closing of the Merger or which the applicant intends to materially modify subsequent to closing. If so,please identify with specificity those agreements. VIII. STIt NS RELATING TO LOCAL TELEPHM SERVICES. In a document entitled"AT&T Comcast Corporation Informational Presentation for Local Franchise Authorities,;distributed by purportedly authorized representatives of AT&T and/or Comcast at a SCAN--NATOA meeting of March 13, 2002,the Applicant represents:to Local Franchising Authorities as follows: "AT&T Comcast will be committed to deploying new and exciting video services,High-Speed Cagle Internet and.a choice for local phone services at competitive prices to more customers across the United States." (p.23) AT&T Comcast further represents: "AT&T Comcast will expand its efforts to offer customers a choice of local phone service. . . within a year of closing AT&T Comcast expects to introduce local phone choice to at least one million additional homes." (1) Please indicate,with specificity, what agreements, if any, will exist subsequent to closing between and among,as the case may be, AT&T'Comcast Corporation,;or any direct or indirect subsidiary thereof,on the one hand, and AT&T Corp.,or any direct'or indirect subsidiary thereof, on the either band, gelating to the utilization,or right to utilize, any assets, as that term is defined in the Broadest sense, of either entity, or series of entities, for the provision oflocal telephone servicesubsequent to closing of the Merger. (2) If, and to the extent,AT&T Corp.,or any direct or indirect subsidiary thereof,possesses any type of agreement with any entity controlled by or affiliated with AT&T Broadband Corp. relating to the provision of local telephone service,please indicate what will happen,if anything,to that agreement, or series of agreements,upon closing of the/Merger. In other words,will AT&T Corp.retain any rights subsequent to closing of the Merger to utilize the assets or properties of AT&T Comcast Corporation or; any direct or indirect subsidiary thereof, in relation to the,provision of local telephone service? If so,please identify those agreements with specificity,'provide copies thereof, and indicate the impact of the Merger upon those agreements. 324IOIY706-o i{t 267796.03 a01115102 -5- (3) Please identify,with specificity, the pians of AT&T Comcast to". . introduce local phone choice to at least one million additional homes." As to that statement,please indicate the existing targeted area for the provision of those services, the anticipated roll out date and.roll out schedule for those services,the anticipated technology(switched,IP, or otherwise),and any and all information which the Applicant desires to be considered by the Franchising Authority in evaluating the alleged"Benefits of the Merger"in relation to the expanded deployment of local phone service. (4) As part of the FCC 394 review process relating to the TO—AT&T Merger in 19981999, representatives of those entities indicated, in these words or words of equivalent substance,to the Franchising.Authority that one of the significant"public benefits"of the TO--AT&T Merger would be the rapid deployment of local phone service on a competitive basis throughout the franchise areas previously served by TCI. Now, almost three.,years subsequent to the closing of the TO—AT&T Merger,there appears to be little deployment of competitive localexchange telephone service by AT&T'Broadband in its cable television service areas. Please provide any'information which you would like to be considered by the Franchising Authority as to why the Franchising Authority should believe that the merger of AT&T with Comcast will any more effectively deliver these promised benefits than did the TCI—AT&T Merger. X QUESTION5 RELATING TO IMPACT OF MERGER CCN RATES A SERVICES. (1) The Franchising Authority has questions about the potentially deleterious impact'of the Merger upon cable television rates. Please provide any and all information which you desire to be considered by the Franchising Authority in evaluating the impact, positive or negative,of the Merger upon rates charged to subscribers for the provision of cable television services. (2) The Franchising Authority has questions about the potentially'deleterious impact of the Merger upon cable'television.services'. Please provide any and:,all information which you desire to be considered by the Franchising Authority in evaluating the impact,positive or negative, of the Merger upon cable'television services'. k.ULEa OF ENGAGEMENT. .Pursuant to 47 C.F.R. § 76.502, the Applicant is hereby directed to provide complete and accurate'answers to the above-described'questions within ten(1,0) days of the receipt of this request. Failure to provide complete and accurate responses to all of the questions set forth herein within ten(10)days of the date of receipt of this request shall result in a determination that the information provided by the Applicant pursuant to 47 C.F.R. § 76.502(a)shall not be deemed to be accepted within the meaning of 47 C.F.R. § 76.502(b). In addition,please be advised that failure to provide complete and non-redacted versions of all of the documents set forth in the Exhibits to the FCC 394 within ten(10) days may result in a determination that the Applicant has not complied with 47 C.F.R. § 76.502(a) and that, as a result thereof, the 120-day review period set forth therein has failed to commence. 124/011706.Mlo 267796.01 4031[3102 -6- Please be fin-ther advised that information presented by the Applicant within the next ten (,10)days,whether pursuant to this request or otherwise,w ill be included within the information evaluated by Staff and submitted to the City Council for ultimate decision. please be f irther advised that information submitted subsequent to that date may or may not be considered by City Staff and the City Council m making.4 decision upon the Application. The Applicant is strongly encouraged to provide as comprehensive and thorough information as possible within the next ten(10)days in that information provided subsequent to that time,unless specifically requested by the City,may or may not be considered. Finally,the Applicant should be unformed that the City reserves the right to collect information from extrinsic and third-party sources and utilize said information in its decision malting process with or without notice to or comment by the Applicant. X. DEFR 1TQNNS. "Applicant°"means the parties submitting the Application. "Application"means the FCC 3194 dated February 25,2002 relating to the Merger'. "Franchise"means the legal authorization of the Franchisee to construct and operate a cable system and provide cable service within the jurisdiction of the Franchising Authority. "Franchisee"'means the legal entity granted the Franchise by the Franchising Authority. "Franchising Authority"means the County of Santa Cruz, California.' "Merger"means that transaction by which the cable television systems and other assets currently owned or controlled by;AT&T Corp. are merged with the cable television system and other assets awned or controlled by Comcast Corporation and ultimately owned or controlled by AT&T Corneast Corporation as described in the APM. "TCI-AT&T Merger"means the 1998 transaction whereby AT& T Corp. acquired control ofthe'Cable Television Systems owned or controlled by"TCI, Inc. 124{01 f 706�tkllfi 267796.01 a03t15102 —7— AW,RUTAN 110 0-197V - TUCKER SR fIA66-i4S6� JAMES it,MOORS' JOEL O KU#£RDEIECr, F.KEVx, KARENELIZA4CfM WALTER T#A£fY M#ZETA€N PAUL#REDERIC MARX STEVEN A-NICHOLS LAYNFN r.'v'EkY£R: NATALII SISSALD OUNDAS NICOLE QUINTANA RICHAIIV A.CURNUTT THOMAS G.BROCIatTCTON E SKI HA911 :. ALISON M.6MILAROW MELISSA S.FONTES LEONARD A HAhIF£L EVRIE3ikE W1€KI3 Dr114 IA51" A LERUTFt. JOHN W HAMILTON,tR. :ROBERT N MARE`ERf hU il(flwoflla' RANDALL M.SAIJUSH t4*63 D.€ARTY JOHNA RAMIREZ -5TEVEN W.SUO CHAEL IVKMMELL MARY-:M GREEN PATRICK D.MCCALIA PHILIP I,JILANCHARD NOAM E.0VZ4AN EFORD W.DAHL,IR MOaG AMUR RICHARO K HOWELL TERENCE;GALLAGI ERTOCKER EE#DORE3 WAEtACE.tR' THOMICHAEL1,SRANE JAME4S.WDSVH6C I f HEMENGWAY •i ,N,KRfiGER THOMAS I CRANE pKVED N,IRSfEiNER lUit#W RUS5 - JOSEPH-.D CARRUTH : MARX 9-FRAZIER - A PATRICK MUNt7Y DENISE L,MISTER 11041490 P.SIMS PENELOFE PARMES Sr-DANIEL HARBOTTLE W.ANDREW MOORE A 1" T 0 R N E Y S A T 1. A W JAMES 6 O'NEAL M_KATHERINE JERSEY FAVL I.SIEV£RE CHARLES A.DAVENPORT.III ROBERT:[BRAUN OUKE-:F WAHLQUIST JOSEPH L MAGA..III JULIE DREW SCHISL£R THOMAS S SALINCLEA' RICHARD G MDNTTVIDEO KRAIG€FLOM RICHARD 0 ARKO DAVID C.LARSEN. 1.091 SARNIA SMITH.. KENT M CLAYTON :'MARK M MALOVOS A PARTNERSHIP INCLUOWC3 PROFESSIONAL CORPORATIONS CLIFFORD E.FRIOEN ERNEST W.KLAM.Rel DAN SLATER NIKKI NcuYEN MICHAEL D.RUREN KIM D:.THOMPSON : MARK SUOENSIEK J£NN00 S.ANDERSON 611 ANTON BOULEVARD,FOURTEENTH FLOOR IRAs RtVIN• JAYNETAYLOR KACER STEVEN EGOON LIMN T,"AJ,YLWY COSTA MESA,CALIFORNIA92621;-1931 FiFFRfYM.ODERMAN• DAVID&COSCROVE DOUGLAS LOF"INGTON ALLISONLEMOIN14UI STAN WOLCOTT KAN$VAN LIGTEN TREE A JULANDEK KAREN L.KFATINC OF COUNSEL:, :DIRECT ALL MAIL TO:POST OFFICE BOX'1350 ROBERT S.BOWER STEPHEN A.ECUS TODD A Lim. T LAN NGUYEN. EDWARD O,SY6fSMA,IR COSTA MESA,CALIFORNIA 92$ 8-1950 MARCIA A#ORSYTH MATT"9W K.ROSS KERkA s€ARLSON LISA V NICHOLAS DAVID R GAEfBALOI,RI WILLIAM M,MARTICORENA JEFFREY WERTHEIMER CRISTY LOMENZO.PARKER IENNIFfIt I.OHILLON WILLIAM.1.CAPLAN TELEPHONE 714-641=5100 FAC=SIMILE 714-546.9035 JAMES L.MORRIS ROSIXT 0.OWEN JEFFREY T,MELCHING MARKT.A13STm MICHAEL T,HORNAK ADAM N.VOLMIT : MARLENE POSE JURCENSEN AMY),HALL 'A PROFESSIONAL INTERNET ADDRESS www.r4otan.com PHILIP 0.KOHN JEFFREY A.GOLMARS APRIL LEE WALTERJENNIFER I,YOXOYAMA CORPORATION Direct Dial:(714)641-3416 E-mail:bmarticorena@ruw.com March 28,2002 VIA QjMR_' 913T DELIVERY Dent Leacock AT&T:Broadband 12647 Alcosta Road P.O. Box 5147 San Ramon,CA 94583 Re: Contra.Costa'County, California; Questionnaire Relating;to AT&T Comcast Co oration Transfer Dear lir. Leacock: This office serves as Special Counsel to Contra costa County (the "Franchising Authority'') in relation to the above-described matter. Please find enclosed the Questionnaire of the Franchising Authority relating to the above-described matter (the "Questionnaire"), As indicated in the Questionnaire, the Applicant, as defined in the Questionnaire, is required to respond to the Questionnaire, and provide all of the information requested therein, within ten (10)clays of the date of receipt, If you have any questions in this matter, please do not hesitate to contact me. However, please be advised that the ten (10) day response period will continue to run notwithstanding the submission, or lack thereof, of any questions by you or other representatives of the Applicant, Sincerely, RUTAN&TUCKER,.LLP William M. Marticorena WM1 .vb Enclosure cc: Patricia Burke 124AD62395 OI 271870,01!83128;02 AT&T CQMCAST CQRIURATIQN TRANSFER QUESTIONNAIRE CONTRA COSTA CQl.1NTY CALIFQRNIA QUESTIONS I. UESTIQNS RELATING TQ!AGREEMENT AND PLAN OF MERGER DATED AS QF DECEMBER 19 20 1 I3Y ANDA IQNG ATe`TCO P. AW BRQADBA;N CORP. COMCAST CQRPQRATIQN AT&T BRQAI)BAND AC UISITIQN CARP., COhiCAST ACQUISITIQN CD . AND AT&T CQ CAST CQ QRAT'IQN 'THE "ARM") (1) Please provide a complete and unredacted set of exhibits, schedules and annexes to the APM. (2) Please provide a copy of the"Registration Statement",as that term is defined anal utilized in Section 5.09 of the APM,anis the"Joint Proxy Statement",as that term is defined and utilized in Section 5.139 of the APM. If one or both ofthese documents are not available in final form at this point in time,please provide a draft thereof and indicate your agreement to,provide a final version of said document(s)as soon as it is available and specify the projected date i of availability. r (3) Please provide a copy of the"Opinion of Financial Adviser",as that term is defined and utilized in Section 5.15 of the APM, of Mongan Stanley&Co., Inc., JP Morgan Security, Inc.,and Merrill, Lynch, Pierce, Fenner& Smith, Inc. (4) Please provide a copy of the "Opinion of Financial Advisor",as that term is defined and utilized in Section 6.15 of the APM, of Credit Suisse First Boston and Goldman, Sachs &. Co. (5) Please provide a copy of the"Neutrality Agreement",as that terra is definedand utilized in Section 8.05 of the APM. (6) Please provide a copy of any budget, financing plan, or ether document evidencing the recommendations of the Interim Financing Committee,as that term is defined and utilized in Section 9.15 of the APM, as it relates to the charges and assignments ents ofthe Interim Financing Committee pursuant to Section 9.15 of the APM. (7) Please provide a copy of the "Exchange Agreement", as that term is defined and utilized in Section 9.21 of the APM. 1241062345.Q061 271968,01 aWY28102 Il. QUESTIQNS RELATINQ TO ,S.EPARATI.QN:A—ND.QlTRIBUTIQN AGRE 1 ENT B' `N BETWEEN_AT&I CQ&P ASM AUT BROADBAND CORP. DATED A5 QF DECEMBER I9, aOql JE-SPA" . (1) Please provide complete and unredacted copies of all exhibits;schedules, and annexes to the SDA. (2) In relation to Section 2.07 ofthe SDA,please indicate whether the provisions of Section 2.07(b)which indicate that"in addition,the person retaining such assets shall take such ether actions as may be reasonably requested by the person to whom such asset is to be transferred in order to place such;person, insofar as reasonably passible, in the same position as if such asset had been transferred as contemplated hereby and so that all benefits and burdens relating to such AT&T Broadband asset (or such AT&T Communications asset, as the case may be),including possession, use,risks of loss,;potential for;gain,and dominion, control and command of such assets are to inure from and after the distribution date to the AT&T Broadband Group(or the AT&T Communications Group, as the case may be);imposes an obligation on any direct party or third-party beneficiary of the SDA to transfer all indices of ownership of the asset in question, other thanz bare legal title, to thez intended transferee? If not,please indicate why not. Ill. QUESTIQNS.RELAIING TO MANAGEMENT STABILITY. (1) Please provide an organizational chart which shows by title and name all management positions relating to the Franchise and/or Franchisee at the system level, regional level,and headquarters level as of the date that the transactions closed which transferred control of the Franchise and/or Franchisee to AT&T Corp. {"AT&T"). (2) Please provide an organizational chart showing the same information as of January 1, 2000. (3) Please provide an,organizational chart showing the same information as of January 1,2001. (4) Please provide an organizational chart showing the same information as of January 1, 2002. (5) Please provide any and all information which you would like the Franchising Authority to consider and evaluate relating to any plan which exists,or its intended to be created, which would provide management stability at the local,regional, and national levels in relation to management`positions affecting the Franchise and/or the Franchisee including,without limitation, any management.contracts, employee contracts, employee agreements, `stay bonus"programs, stock;option programs, or any!otlier devices or programs which are intended to maintain management stability and expertise upon close of the Merger and for thirty-six(36)months.thereafter. (6) It has been widely i reported in the trade press and popular press that high ranking executives of Comeast Corporation ("Comcast")have asserted that the corporate 1211D62395-0001 271868.01 x0318102 -2- overhead of AT&T is excessive by both industry standards and the overhead charges incurred by Comcast. Please provide detailed information as to how Comcast intends to reduce said overhead including,without limitation,any Anticipated or contemplated reductions in management staffing or other cutbacks which would directly or indirectly reduce the corporate overhead or other overhead charges incurred by the AT&T assets being transferred to the Transferee upon closing of the Merger. Please farther indicate, with specificity,hove these reductions,if they are contemplated or planned,can be undertaken without reductions in the quality of video service, customer service,or other aspects of the cable;system operations which affect subscribers or the Franchising Authority. IV. UE TIONS REL:ATI:NG Td POTENTIA CE)NSC)L IDATIfld T OF THE OPERA`I IONS OF AT&T'AND CQM AST INTO A.T&T C IVC T CORP{)RATION' A. The Franchising Authority possesses concerns and questions regarding the ability of AT&T and Comcast to merge their respective cable television operations into a single entity without a significant degree of operational disruption, subscriber inconveniences, and other associated problems. Please provide the Franchising Authority with any and all plans, projections, timetables, budgets, operating plans, or any other information which the Applicant desires to be considered by the Franchising Authority in assessing the impact of said consolidation upon subscribers. To the extent that the Applicant possesses any form of plan or strategy as to the consolidation strategy,please provide it to the Franchising Authority. If no operating plan or strategy exists,please so indicate. V. UE TIONS REL TING TO,SELECTION E3F CABLE MODEM SERVICE PROVIDERS. (1) It is has come to the attention of the Franchising Authority that its subscribers have experienced significant disruption, inconvenience, and other problems relating to the conversion from the At-Home Cable Modexn Network to AT&T's proprietary network. Please indicate whether the merger of AT&T and Comcast will,in any way,affect the continuous and stable provision of cable modern service to subscribers or result, or potentially result, in a further conversion or changeover from AT&T's proprietary network to any network associated with Comcast or any affiliate thereof. (2) Please present and discuss any and all plans relating to any material changes in the delivery of cable modem service within the jurisdiction'of the Franchising Authority within the first thirty-six(36)months subsequent to the closing of the Merger. If no plans exist or are contemplated,please so indicate. VI. OUSTIONS RELATING TO CHOICE BETWEEN SVVITC ED/IN'T �T PROTOCOL "IP" TELEP110NE TECHNOLOGY ENT. (l) It has been reported in the Trade Press that AT&T has elected to utilize switched telephone technology for deployment upon,its broadband systems. It has also 1241062345.0001 271869.01 aD3128/02 -3- been reported that Comcast has avoided utilization of switched telephony technology in favor of IP telephony. Please provide any and all information available to the Applicant regarding plans, or potential plans,for the introduction of telephone service within the Franchising Authority and:the technology which will be utilizedfor said telephony; deployment. (2) .Does the Applicant,or any related affiliate thereof, have any Mans of any type to;offer telephony service within the jurisdiction of the Franchising Authority within' the next thirty-six (36)months? If so,what type of technology, Switched or IP, or other, will be deployed? II. . UESDONS ESI TI wIG TES N UTRA ITY'_A __EENT, Section 8.05 of the APM reads as follows: "`Section 8.05 Neutrality Agreement. 'Notwithstanding any other provision of'this agreement,AT&T shall not renew, extend or modify the Neutrality And Consent Election Agreement(the "Neutrality Agreement")'among AT&T,the Communication Workers of America and the International Brotherhood of Electrical Workers,such that such agreement,as so renewed, extended or modified,will apply to or otherwise bind or purport to apply to or otherwise bind.,after the effective time, AT&T Broadband,any of the AT&T Broadband subsidiaries,parent, Comeast or any of the Comcast subsidiaries;either as a matter of contract or term or condition of employment. ATT shall not enter into any other agreement or arrangement with respect to the same or similar.matters as the matters coveredi by the Neutrality Agreement if such agreement or arrangement would apply to or otherwise bind or purport to apply to or otherwise bind,after the Effective Date, AT&T Broadband, any of the AT&T Broadband subsidiaries,parent, Comcast or any of the Comeast subsidiaries, either as a matter of contract or term or condition of employment." (1) What is the purpose of the Neutrality Agreement? (2) When does the Neutrality Agreement expire? (3) What are the parties' objections to the Neutrality',Agreement?` (4) Have the Communication Workers of America and/or the International Brotherhood of Electrical'Workers been informed ofthe contents of Section 8.05 of the APM. (5) Describe the Applicant's plans in relation to replacement or modification of the Neutrality.Agreement,or the subiect matter to which it relates,subsegment to closing of the Merger. 124/062395.0001 271868,0143/28/02 -4- {6} If the Neutrality Agreement is not satisfactorily replaced or modified, is there a potential of employee disruption? If so,what are the Applicant's plans or contingency arrangements to deal with any potential employee disruption? (7) What employees,ifany which perform services that directly or indirectly relate to the Franchise or the Franchisee are affected by the Neutrality Agreement? (8) Are there any other labor agreements which the Applicant does not intend to survive closing of the Merger or which the Applicant intends to materially modify subsequent to closing. If so,please identify with specificity those agreements. VIII. QUESTIt3NS I�.ELAMG TO LC?CAL TELEPHa—E SERVICES. In a document entitled"AT&T Comcast Corporation Informational Presentation for Local Franchise Authorities", distributed by purportedly authorized representatives of AT&T and/or Comcast at a SCAN-NATOA meeting of/March 13,2002,the Applicant represents to Laical Franchising Authorities as follows. "AT&T Comcast will be'committed to deploying new and exciting video services,High-Speed Cable Internet and a choice for local phone services at competitive prices to more customers across the United States." (p. 23) AT&T Comcast further represents; "AT&T Comcast will expand its efforts to offer customers a choice of local phone service. . . within a year of closing AT&T Comcast expects to introduce local phone choice to at least one million additional homes." (1) Please indicate, with specificity,what agreements,if any, will exist subsequent to closing between and among,as the case may be,AT&T Comcast Corporation, or any director indirect subsidiary thereof,on the one hand, and AT&T Corp.,or any direct or indirect subsidiary thereof,on the other hand,relating to the utilization,or;right to utilize,any assets, as that term is defined in the broadest sense,of either entity, or series of entities,for the provision of local telephone service subsequent to closing of the Merger. (2) If, and to the extent, AT&T Corp.,or any direct or indirect subsidiary thereof, possesses any type of agreement with any entity controlled by for affiliated with AT&T Broadband Corp. relating to the provision of local telephone service,please indicate what will happen, if anything,to that agreement,or series of agreements,upon closing;of the:Merger. In other words,will AT&T Corp.retain any rights subsequent to closing of the Merger to utilize the assets or properties of AT&T Comcast Corporation or any direct or indirect subsidiary,thereof, in relation to the provision of local telephone service? If so,please identify those agreements with specificity,provide copies thereof, and indicate the impact of the Merger upon those agreements. 124/062395.0001 ,271868.01 a03/28/02 �` (3) Please identify, with specificity,the plans of AT&T Comcast to". . introduce local phone choice to at least one million additional homes." As to that statement,please indicate the existing targeted area for the provision of those services, the anticipated roll out date and roll out schedule for those,services,the anticipated technology(switched, IP,or otherwise); and any and all information°which.the Applicant desires to be considered by the Franchising.Authority in evaluating the alleged "B enefits. of the Merger"in relation to the expanded deployment of local phone service. (4) As part of the FCC 394 review,process relating to the TO--AT&T Merger in 1998-1999,representatives of those entities indicated, in these words or words of equivalent substance,to the Franchising Authority that one of the significant-public benefits"of the TCI—AT&T Merger would be the rapid deployment of localphone service on a competitive basis throughout the franchise areas previously served by TCI. Now, almost three years subsequent to the closing of the TO-AT&T Merger,there appears to be little deployment of competitive local exchange telephone service by .AT&T Broadband in its cable television service areas. Please provide any information which you would like to be considered by the Franchising Authority as to why the Franchising Authority should believe that the merger of AT&T with Comcast will any more effectively deliver these promised benefits than did the TO—AT&T Merger. IX. QUESTIONS—RELATING TO IMPACT OF MERGER UPQN RAT_`E5 ANIS SERVICES. (1) The Franchising authority has questions about the potentially'deleterious impact of the Merger upon cable television rates. Please provide any and all information w=hich you desire to be considered by the Franchising Authority in evaluating the impact, positive or negative,of the Merger upon rates charged to subscribers for the provision of cable television services. (2) The Franchising authority has questions about the potentially'deleterious impact of the Merger upon cable television services! Please provide any and all information which you desire to be considered by the Franchising Authority in evaluating; the impact,positive or negative,of the Merger,upon cable television services. RULES OF ENGAGEMENT. Pursuant to 47 C.F.R. § 76.502,the Applicant is hereby directed to provide complete and accurate'answers to the above-described questions within ten(10) days of the receipt of this request. Failure to provide'complete and accurate responses to all of the questions set forth herein within ten(10)days of the date of receipt ofthis request shall result in a determination that the information provided by the Applicant pursuant to 471 C.F.R. § 76.502(a) shall not be deemed to be accepted within the meaning of 47 C.F.R. § 76,502(b). In addition,please b advised that failure to provide complete and non-redacted versions of all of the documents set forth in the Exhibits to the FCC 394'within tett(10)days may result in a determination that the Applicant has not complied with 47 C.F.R. 76.502(a) and that,as a result thereof,the 120-day review period set forth therein has failed to commence. 124/062395-MOI 271868,01 aU3128102 -6- Please be Anther advised that information presented by the Applicant within the next ten (1;0)days, wheaer pursuant to this request or otherwise,will be included within the information evaluated by Staff and submitted to the City Council for ultimate decision. Please be Anther advised that inoannation submitted subsequent to that date may or may not be considered by City. Staff and the City Council in making a decision upon the Application. The Applicant is strongly encouraged to provide as comprehensive and thorough information as possible within the next ten (1 0)days in Haat information provided subsequent to that,time,unless specifically requested by the City, may or may not be considered. Finally,the Applicant should be informed that the City reserves the right to collect information from extrinsic and third-party sources and utilize said information in its decision making process with or without notice to or comment by the Applicant. X. l7UI l'ITI(4NS. "Applicant"means the parties submitting the Application. "Application"means the FCC 394 dated February 25,2002 relating to the Merger.' "Franchise"means the legal authorization of the Franchisee to construct and operate a cable system and provide cable service within the jurisdiction of the Franchising Authority. "Franchisee,"means the legal entity granted the Franchise by the Franchising Authority. "Franchising Authority" means the Contra Costa County,'California. merger"means that transaction by which the cable television systems and other assets currently owned or controlled by AT&T Corp. are merged with the cable television system and other assets owned or controlled by Comcast Corporation and ultimately owned or controlled by AT&T Comcast Corporation as described in the APM. `PTCI--AT&T Merger" means the 1998 transaction whereby AT& T Corp. acquired control of the Cable Television Systems owned or controlled by TCI, Inc. 1241062395.0001 27185801 a03/28/02 —7— ATT Broadband p.C.Box 514,`' San Ramon CA 44553 March 29, 2002 William M. Marticorena, Esq. Rutan &Tucker, LLP 611 Anton Boulevard, 10 FI VIA FACSIMILE & Costa Mesa, California 92626-1931> OVERNIGHT MAIL Re: March 18 2002 Information Request of the City of Berkeley, California; City of Richmond, California; City of Santa Cruz, California; County of Santa Cruz, California, (collectively the "Franchising Authorities") Questionnaire Relating to ` the AT&T/Comcast Merger: Dear Mr. Marticorena: We are writing in response to your March 18, 2002 letter, ;received on March 20; 2002, sent in response to the FCC Form 394 filings for the merger (the "Transaction") of AT&T Broadband ("ATT-B" or the "Company„) and Comcast Corporation ("Comcast") ' For the sake of convenience, we are responding to all four questionnaires received from you on behalf of the Franchising Authorities. It is readily apparent from the requests for'`. information in your letter that many of the requests ::have no relevance to the Transaction. Rather, the letter requested responses to a variety of matters unrelated to the Transaction, which is a change of control. Nevertheless, as a courtesy we have endeavored to provide responses to the requests. FCC Form 394 Application On February 27, 2002, we provided the Franchising Authorities with a completed FCC Form 394 Application requesting any consent or »other determination by the respective Franchising Authorities that may be required as a result of the Transaction' (the "Application");. The Application answers any relevant questions about the Transaction and provides the information reasonably necessary for the Franchising Authorities to make any required determinations. According to the FCC, the Form 394 (which formed the basis of the Application) is designed' to provide the 'information necessary to assess the financial, legal and technical qualifications of the proposed new controlling entity that will result from the Transaction. In fact, the Application describes the Transaction in `.detail, and provides extensive information about the legal, technical Recycled Paper � , March 29, 2002 Page 2 and financial qualifications of the proposed new controlling party, AT&T Comcast Corporation ("AT&T Comcast"). The Transaction The Transaction is described in detail in the Application. It is a merger at the top parent company level. Neither the cable systems nor 'franchises are being sold, transferred or assigned. The cable systems will continue:to be owned by the current entities (the "Franchisees"). The current Franchisees are not experiencing a corporate change. The terms of the franchises remain unchanged. In light of the above, much of the requested information is unrelated to the Transaction or qualifications of AT&T Comcast and is clearly beyond the Franchising" Authorities' scope of review related to the Application. It also bears noting that the ultimate parent of the Franchisee is currently the largest cable operator "MSO" in the country, and upon closing, AT&T Comcast, the new parent, will be the largest cable operator in the country. Scope of Review Federal law limits the scope of review and information the Franchising Authorities may require as part of the Application approval process.' Beyond the 'information required by the FCC Farm 394, franchise or applicable local law, a :.local 'franchising authority ("LFA") may only request "such additional information as may be reasonably necessary to determine the qualifications of the;proposed transferee.»z A federal court has recently confirmed that a cable operator need not answer any requests for information that are outside this scope or are otherwise unreasonable, and such refusal may not be used as a basis for>>denying LFA consent to the FCC Form 394 Application.3 The Transaction is entirely at the top parent company level. Many of the requests for information contained in your March 18 letter appear to be precisely the type of inquiry that would be deemed unreasonable and/or beyond` the appropriate, scope of review in this proceeding. For example, your request for information pertaining ' See. e.-g., Charter Communications. Inc. v. County of Santa Cruz, 133 F.Supp.2d 1184, 1201 (N D.Cai.':.2001) (Federal law imposes"certain outer limits on the LFAs''power to request information over and above that required by Form 394"). 2 lmolementation of Sections:11 and 13 of the Cable Television and;Corngetition,Act of 1992, Report and Order, 8 F.C.C.R. 6828, ¶86(1993). See also id. at 85, Sea Implementation of Sections 11 and 13 of the Cable Television Consumer Protection and Competition Act of 1992,Memorandum Opinion and Order on Reconsideration, 10 F.C.C.R.`4654, 4676,IT 50-53 (1995). In addition,::within the first thirty' days of receiving the FCC Form 394 Application, an LFA may require the applicant to provide additional information to cure an application inaccuracy or incompleteness.-'See 47 C.F.R. § 76.501(b). 3 §ee. e.g., Charter Communications. Inc. v. County of Santa Cruz, 133 F.Supp.2d at 1208 ("an operator may spurn an unreasonable request` for information; "if an LFA imposes unreasonable information demands, it may not then deny the application on the ground that the applicant refused to answer them") March 29, 2002 Page 3 to: a) confidential information; b) cable modern service; c) telephone service technology and local exchange telephone service offerings; and d) labor relations. In addition to being unrelated to the financial, technical and legal qualifications of AT&T Comcast, the questions, both individually and collectively, constitute the sort of "sweepinginquisition" which would be deemed unreasonable and thus beyond the Franchising Authorities' authority to require as 'part of the review of the Application, Indeed, in Charter Communications Inc. v.' County of.;Santa Cruz, the court specifically condemned as unreasonable the kind of broad inquiries made in your March 18t' letter.4 This is especially true where, as here, the volume of questions and the amount of additional work to create and/or compile such data would be extremely burdensome and time consuming. Specific Resimnses Notwithstanding the foregoing, reserving all rights, ;and in an effort to accommodate the Franchising'Authorities' reasonable and,lawful need for information, we provide, for informational purposes' only, the responses set forth below. By responding, the Company does not waive any arguments regarding the relevance of such information or the Franchising Authorities' authority to make such :a request. Additionally, nothing hereinafter is intended to expressly or implicitly agree with or otherwise accept the "Rules of Engagement" set forth in Section IX of your Questionnaire. I. QUESTIONS RELATING TO AGREEMENT AND PLAN OF MERGER GATED AS OF DECEMBER 13, 2001 BY AND-AMONG AT&T CORP. AT&T BROADBAND CORP. COMCAST CORPORATION AT&T BROADBAND AC UOTION CORP., CO ICAST ACQUISITION CORP.' AND AT&T COMCAST CORPORATION '(THE' „API"' (1) Please provide a complete and unredacted set of exhibits,°schedules'' and annexes to the APM. As explained in Exhibit 2 to the FCC Form 394, certain exhibits and schedules to the Agreement and Plan of Merger dated'December 19, 2001 and the Separation and Distribution Agreement dated December 19, 2001 (collectively the "Agreements") were omitted'. The instructions to FCC Form 394 state that exhibits and schedules are to be submitted only if "necessary in order to understand the terms" of the transaction that has resulted in a change of control of the cable franchise. These instructions further 4 ISee id. at 1209-1211. 5 Id. at 1210{"the large,number[of questions]actually propounded and the bone-crushing work the answers would have entailed rendered them unreasonable in scope"). March 29, 2002 Page 4 provide that confidentialtrade, business, pricing or marketing information, or 'other information not otherwise publicly available, may be redacted. Certain other exhibits to the Agreements have been summarized as part of the FCC Form 394. Section 1, Part 6 of the FCC Form 394 requires a description of documents, instruments, contracts or understandings relating to the ownership or future ownership rights of AT&T Comcast: A description of those documents is set forth in Exhibit 7 of the FCC Form 394. In addition, Exhibits A, D-1, D-2, D-3 and D-4 and an updated version of Exhibit E to the Merger Agreement and Exhibits C and G and an updated version of Exhibit A to the Separation and Distribution Agreement are either summarized or included in the Proxy, which we have enclosed in response to Question 1 (2)• AT&T and Comcast believe that none of the exhibits or schedules that have been omitted' is necessary to understand the terms of the Agreements. Through this response, the parties confirm that the omitted exhibits or schedules do not include information necessary to understand the terms of the Agreements or contain confidential trade, 'business, pricing or marketing information or other information not otherwise publicly available. As expressly permitted by the FCC Form 394, AT&T and, Comcast are not required to submit such information. Federal law strictly limits the Franchising 'Authorities' authority to require: information in conjunction with a .cable franchise change of control to the;information required in the initial Application and such additional information as may be "reasonably necessary to determine the qualifications of the proposed transferee. Notwithstanding the foregoing, we have enclosed as Exhibit A a list of the schedules and exhibits to the Agreements that details the subject or title of each schedule and exhibit. This list confirms that, as the Company and Comcast'have concluded, such documents are not necessary to understand the Agreements. After reviewing this list, as well as the information contained in the Proxy, we believe you will agree that such documents are not necessary to your review of the Application. We hope the foregoing information fully explains why the Application contains all information necessary to your review of the proposed Transaction, without the need for additional exhibits or schedules. We understand, however, that you may, after your review, continue to desire to review some of the documents not otherwise provided. We request that you review the attached list with a view toward the exhibits that you have already received as a part of the Proxy,:, as well as the issues of relevance and the sensitive mature of the information. If, after reviewing the information included with this letter, you feel that certain of the exhibits and schedules to the Agreements not otherwise provided are necessary to your review, we would be happy to discuss the passibility of your reviewing such exhibits and schedules that are reasonably necessary to determining the qualifications of AT&T Comcast pursuant to an 'appropriate confidentiality agreement. March 29, 2002 Page 5 (2) Please provide a copy of the "Registration Statement", ;as that term is defined and utilized in Section 5.09 of the APM, and the "Joint Proxy Statement" as that term is defined and utilized in Section 5.09 of the APM. If one or both of these documents 'are not available in final` form at this paint in bine, please provide a draft thereof and indicate your agreement to provide a final version of said document{s) as soon as it is available and specify the projected date of availability. A copy of the Preliminary Joint Proxy Statement/Prospectus filed by AT&T Comcast with the "'Securities and Exchange Commission on February 11, 2002 is enclosed (the "Proxy"). We will provide a final copy of the Proxy once the Registration Statement has become effective, which is expected to occur in the second quarter of this year, (3) Please provide a copy of the "Opinion of Financial Advisor", as that tem is defined and utilized in Section 5.15 of the APM, of Morgan Stanley & Co., Inc., JP;Morgan Stanley, inc., and Merrill, Lynch, Pierce, Fenner& Smith, Inc.' Such information is not within the Franchising Authorities` appropriate scope of review related to the Application. The document requested by this item would not pertain to the Transaction or the qualifications of the proposed new entity to assume control of the Franchisees. Notwithstanding the foregoing and without waiving our rights with respect to the relevance of this question, the referenced opinion is attached as an annex to the enclosed Proxy. (4) Please provide a copy of the "Opinion of Financial Advisor", as that>= term is defined and utilized In Section 6.15 of the APM, of Credit Suisse >»First Boston and Goldman, Sachs'':& Co; See answer to Question 1 (3)above. (5) Please provide a copy of the "'Neutrality Agreement", as that term is defined'and utilized in Section 8.05 of the APM. Neither the Neutrality Agreement nor matters related;,to labor unions is within the Franchising Authorities' appropriate scope of review' related to the Application. The document requested by this item would not pertain to the Transaction or the qualifications of AT&T Comcast. Accordingly, the Company is not under any obligation to provide such information as part of this proceeding. (6) Please provide a copy of any budget, financing plan, or other<document evidencing the recommendations of the Interim Financing Committee, as: that term is defined and utilized in Section 9.15 of the APM, as it relates to the charges and assignment of the interim Financing Committee pursuant to Section 9.15 of March 29, 2002 Page 6 the AP . Any budgets, financing plans or other documents related to the recommendations of the :Interim Financing Committee are confidential and proprietary. Furthermore, they are not within the Franchising Authorities' appropriate: scope of review related to the Application. The documents requested by this', item would not pertain to the Transaction or the qualifications of the' proposed new controlling entity. Accordingly, the Company is not under any obligation to provide such information as part of this proceeding. The financial qualifications of AT&T Comcast, together with its 'financing plans, are set forth in the Application and the additional information that is being provided to you. We believe that this information is more than sufficient to determine that AT&T Comcast has the necessary legal, financial and technical qualifications to assume control of the Franchisees. (7) Please provide a copy of the "Exchange Agreement" as that term is defined and utilized in Section 9.21 of the APM, The Exchange Agreement is described in detail in the Proxy. Once the Exchange Agreement has become public, we can provide a copy to you if you would like. II.: QUESTIONS RELATING TO SEPARATION; AND DISTRIBUTION AGREEMENT BY AND BETWEEN AT&T RP., AND AT&T BROADBAND CORP. DATED AS 4F DECEMBER 19. 2001 (THE "SDA-1. (1) Please provide complete `and unredacted copies of all exhibits, schedules, and annexes to the SDA. See answer to Question 1 (1)above-and Exhibit A. (2) 1n relation to Section 2.07 of the SDA, please indicate whether the provisions of Section 2.07(b)which indicate that"in addition, the person retaining such assets shall take such other actions as may be reasonably requested by the person to whom such asset is to be transferred in order to place such person, insofar..as reasonably possible, in the same position as if such asset had been transferred as contemplated 'hereby and so that all benefits and burdens relating to such AT&T Broadband asset (or such AT&T Communications asset, as the case may be), including possession, use, risks of loss, potential for gain, and dominion, control and command of such assets are to inure from and after the distribution date to the AT&T Broadband Group (or the AT&T Communications Group, as the case may be ) imposes an obligation on any direct party or third-party beneficiary of the SDA to transfer all indices of ownership of the asset. in question, other than bare legal title,to the intended transferee's If not, please ........... March 29, 2002 Page 7 indicate why not. The provision accurately describes the obligations of the parties to the Separation and Distribution Agreement with respect to such assets. Ill. QUESTIONS RELATING TO MANAGEMIENT STABILITY. (1) Please provide an organizational chart which shows by title and name all management positions relating to the Franchise and/or Franchisee at the system level, regional level, and headquarters level as of the date that the transactions closed which transferred control of the Franchise and/or Franchisee to AT&T Corp. ("AT&T"). We do not believe that information related to management positions at the system, regional and headquarter level during prior years are relevant to this Transaction or the qualifications of the transferee entity, AT&T Comcast. Accordingly, the Company is not under any obligation to provide such information as part of this proceeding. Additionally, we note that AT&T Comcast has not been involved with any current or past management decisions regarding positions relating to the Franchises or the Franchisees. It is unknown at this time if there will be any changes to local, regional and/or national management that Will affect the Franchises or Franchisees. As with all business transactions of this nature, AT&T Comcast will evaluate the management teams and make decisions as appropriate to best support the products and service provided to customers drawing from the best of both companies. Mr. Brian Roberts, President of Comcast, well be President and Chief Executive Officer of the new company with all day-to-day authority over the operation of the business. Mr. Roberts, as CEO, will also be responsible for all matters relating to other officers and employees of the new company, and will consult with the Chairman, C. Michael Armstrong, with respect to senior officers. Mr. Roberts and the management team he selects will be responsible for the full operational control of the merged company. Mr. Roberts plans to continue Comcast's demonstrated track record in system upgrades, deployment of new services and customer care. (2) Please provide an organizational chart showing the same information as of January 1, 2000. See answer to Question Ill (1) above. (3) Please provide an organizational chart showing the same information as of January 1, 2001. March 29, 20102 Page $ Sae answer to Question 111 (1) above. (4) Please provide an organizational chart showing the same informatlon as of January 1, 2002. See answer to Question I11 (1) above. (5) Please provide any and all information which you would like the Franchising Authority to consider and evaluate relating'to any plan which exists, or is intended to be created, which would provide management stability at the local, regional, and national levels in relation to management positions affecting the Franchise and/or the Franchisee including, without limitation, any management contracts, employee contracts, employee agreements, „stay bonus" programs, stock option programs, or any other devices or programs which are intended to maintain management stability and expertise upon close of the Merger and for thirty-six (36)months thereafter. See answer to Question 111 (1) above. (6) It has been widely reported in the trade press and popular press that high ranking executives of Comcast Corporation ("Comcast") have asserted that the corporate overhead'of AT&T is excessive by both industry standards and the overhead charges; incurred by Comcast. Please provide detalled information as to how Comcast intends to reduce said overhead including, without limitation, any anticipated or contemplated reductions in management staffing or other cutbacks which would' directly or indirectly reduce the corporate overhead or other overhead charges incurred by the AT&T assets being transferred to the Transferee upon closing of the Merger. Please further indicate, with specificity, how these reductions, if they are contemplated or planned, can be undertaken without reductions in the quality of video service, customer service, or other aspects of the cable' system operations which affect 'subscribers or the Franchising Authority. AT&T Comcast believes that it should be able to decrease amounts spent on overhead by the Company and Comcast for corporate services, such as corporate management, development, strategic development, treasury, accounting, tax and in- house legal services. Currently all of these functions are performed separately by or for both companies. After the Transaction, AT&T Comcast intends to consolidate redundant services within a single corporate management structure. Such reductions in corporate overhead should have no impact on the quality of video service, customer service or other aspects of the cable system operations that affect subscribers or the Franchisees. IV. QUESTIONS RELATING TO POTENTIAL CONSOLIDATION OF THE OPERATIONS OF AT&T'AND COMCAST INTO AT&T COMCA T Ct3RPORATION. March 29, 2002 Page 9 A. The Franchising Authority possesses concerns and questions regarding the ability of AT&T and Comcast to merge their respective cable television operations :into a single entity without a significant degree of operational disruption, subscriber inconvenience, and other associated problems. Please provide the Franchising Authority with any and all plans, projections, timetables, budgets, operating plans, or any other information which the Applicant desires to be considered by the Franchising Authority in assessing the impact of said consolidation upon subscribers.. To the extent that the Applicant possesses any form of plan or strategy as to the consolidation strategy, please provide it to the"`Franchising Authority. If no operating plan or strategy exists, please so indicate. AT&T and Comcast believe that they will be able to merge the respective °cable operations without a significant degree of operational disruption, subscriber' inconveniences and other associated problems. No public documents exist with respect to operating pians, budgets, timetable or ether projections. V. QUESTIONS RELATING TO SELECTION OF CABLE MODEM: SERVICE PRO HERS'. (1) It is has come to the attention of the Franchising Authority that its subscribers have experienced significant disruption, inconvenience, and other problems relating to the conversion from the At-Home Gable Modem Network to AT&T's proprietary network. Please indicate whether the merger of AT&T and Comcast will, in any way, affect' the continuous and stable provision of cable modem service to subscribers or result,' or potentially result, in;, a further' conversion or changeover from AT&T's proprietary' network to any network associated I with Comcast or any affil late thereof, Such information is not within the Franchising Authorities' appropriate scope of review related to the Application as cable modern services were classified by the FCC on March 14 2002, as an "interstate information service",'and are therefore no longer regulated as a cable service. Notwithstanding the 'foregoing, it is AT&T Comcast's expectation that there will be continuous and stable provision of cable modem service now that the provisioning of such service has been moved: in-house. No further conversions from the existing network are currently expected as a result of the merger,' however, we reserve the right to make changes,,to the network in the ordinary course of business. (2) Please present and discuss any and all plans relating to any material changes in the delivery of cable modem service within the jurisdiction of the Franchising Authority within the first thirty-six (36) months subsequent to the closing of the Merger. If no plans exist or are contemplated, please so indicate. March 29, 2002 Page 10 Such information is not within the Franchising Authorities' appropriate scope of review related to the Application as;cable modern services were classified by the FCC on March 14, 2002, as an "interstate information service", and are therefore no longer' regulated as a cable service. Notwithstanding the foregoing, we have no current plans to change the delivery of cable modem service within the franchise areas in question, however, we reserve the right to make changes to the service in the ordinary course of business. Vi. QUESTIONS RELATING TO CHOICE BETWEEN SWITCHED/INTERNET PROTOCOL ("IP")TELEPHONE TECHNOLOGY ©EPLOYIVIENT. (1) It has been reported in the Trade Press that AT&T has elected to utilize ''sw'itched telephone> technology for deployment upon its broadband systems. It has also been reported that Comcast has avoided utilization of switched telephony technology in favor of IP telephony. Please provide any and all information available to the Applicant regarding plans, or potential' plans, for the introduction of telephone service within the Franchising Authority and the technology which'will be utilized for said telephony deployment. Such information ;is not within the 'Franchising Authorities' appropriate scope of review related to the Application, which is a change of: control of a Title VI :.cable« operator. The merger will have no implications on the regulation of telecommunications services provided under Title -.11 of the Communications Act or the regulations of state regulatory agencies. The information requested by this item would not pertain to the Transaction or the qualifications of AT&T Comcast. Accordingly, the Company is not under any obligation to provide such information as part of this proceeding. Notwithstanding the foregoing, AT&T Comcast has announced that it will support switched circuit telephony in the communities in which it was been introduced, such as the City of Berkeley. However, AT&T Comcast reserves the right to make changes to such telephone service:in the ordinary course of business and in accordance with federal and state regulations. (2) Does'the Applicant, or any related affiliate thereof, have any plans of any type to offer telephony service within the jurisdiction of the Franchising Authority within the next thirty-six (36) months? If so what type of technology, Switched or IP, or other, will be deployed? See answer to Question VI (1). VII. QUESTIONS RELATING TC!''NEUTRALITY AGREEMENT. Section 8.05 of the APM reacts as follows: "'Section 8.05 Neutrality Agreement. Notwithstanding any other provision of this agreement, AT&T shall' not renew, extend or modify the Neutrality And March 29, 2002 Page 11 Consent Election Agreement (the "Neutrality Agreement") among AT&T, the Communication Workers of America and the international Brotherhood of Electrical Workers, such that such agreement, as so renewed, extended or mortified, will apply to or otherwise bind or purport to apply to or otherwise bind, after the effective time, AT&T Broadband, any of the AT&T Broadband subsidiaries, parent, Comcast or any of the Comcast subsidiaries, either as a matter of contract or term or condition of employment. AT&T shall not enter into any other agreement or arrangement with respect to the same or similar matters as the matters covered by the Neutrality Agreement if such agreement or arrangement would applyto or otherwise bind'or purport to apply to or otherwise bind, after the Effective Date, AT&T Broadband, any of the AT&T Broadband subsidiaries, parent, Comcast or any of the Comcast subsidiaries, either as a:matter of contract or term or condition of employment." (1) What is the purpose of the Neutrality Agreement? See answer to Question 1 (5). Such information is:not within the Franchising Authorities' appropriate scope of review related to the Application. The information requested by this item does not pertain to the Transaction or the qualifications of AT&T Comcast. Accordingly, the Company is not under any obligation to provide such information as part of this proceeding. Notwithstanding the foregoing, we note that since the Neutrality Agreement applies only to AT&T Corp. and its wholly owned subsidiaries, it will not apply to employees of AT&T Comcast after the close of the merger. Until the merger closes, matters involving AT&T Broadband employees are the sole responsibility of the Company, and AT&T Comcast has no position on such matters.' Fallowing the closing of the Transaction, AT&T Comcast's labor relation's policies will be governed by relevant labor laws and the terms of applicable agreements with various labor' organizations. Any matters relating to agreements with the Communication Workers of America and/or the International Brotherhood of Electrical Workers will be discussed with such organizations >>by the Company and, following closing, by AT&T Comcast. (2) When does the Neutrality Agreement expire? See answer to Question VII (1). (3) What are the parties' objections to the Neutrality`Agreement? See answer to Question VII (1). (4) Have the Communication Workers of America and/or the International'Brotherhood of Electrical Workers been informed of the contents of Section'8.05 of the APM? March 29, 2002 Page 12 See answer to Question Vli (1). (5) Describe the Applicant'spians in relation to replacement or modification of the Neutrality Agreement, or the subject matter to which it relates,` subsequent to closing of the Merger. See answer to Question V11 (1). (6) if the 'Neutrality Agreement is not satisfactorily replaced or modified, is there a potential of employee disruption? If so,,what are the Applicant's plans:' or contingency arrangements to deal with any potential employee disruption? See answer to Question V11 (1). (7) What' employees, if any, which perform services that directly or. indirectly relate to the Franchise or the Franchisee are affected by the Neutrality Agreement? See answer to Question Vil (1') (S) Are there any other labor agreements which the Applicant does not intend to survive closing of the Merger or which the Applicant intends to materially modify`< subsequent to closing. If so, please identify with specificity those agreements See answer to Question VII (1). VIII. QUESTIONS RELATING TO LOCAL TELEPHONE' SERVICES. In a document entitled "AT&T Comcast Corporation Informational' Presentation for Local Franchise Authorities", distributed by purportedly authorized representatives of AT&T and/or Comcast at a SCAN-NATi3A meeting of March 13, 2002, the Applicant represents to Local Franchising Authorities as follows; "AT&T Comcast will be committed to deploying new and exciting video services, High-Speed Cable Internet and a choice for local phone services at competitive prices to more customers across the United States." (p. 23) AT&T Comcast further represents_ "AT&T Comcast will expand its efforts to offer customers a choice of local phone service...` within a year of closing AT&T Comcast expects to introduce local phone choice to at least one million additional homes. March 29, 2002 Page 13' (1) Please indicate, with specificity, what agreements, if any, will exist subsequent to closing between and among, as the case may be, AT&T Comcast Corporation, or any direct or indirect subsidiary thereof; on the one hand,'and AT&T Corp., or any direct or indirect subsidiary thereof, on the other hand, relating to the utilization, or right to utilize, any assets, as that term is defined in the broadest sense, of either entity or series of entities, for the provision of local ; telephone service subsequent to closing of the Merger. Such information is not within the Franchising Authorities' appropriate scope of review related to the Application of the change of control of a Title VI' cable operator. AT&T Comcast, anti/or its affiliates as appropriate, will obtain any necessary and lawful federal, 'state or local authorizations prior to the introduction of telecommunications services over any cable system. The merger will have no implications on the regulation of telecommunications services provided under Title ll of the Communications Act or the regulations of state regulatory agencies. The documents requested by this item do not pertain to the Transaction or the qualifications of AT&T Comcast. Accordingly, the Company is not under any obligation to provide such information' as part of this proceeding. Notwithstanding the foregoing, AT&T will assign to AT&T Broadband all of the assets of AT&T's broadband business, as indicated in the Separation and;; Distribution Agreement, including these assets that will be utilized for the provision of local telephone service. (2) If, and to the extent, AT&T:Corp.., or any direct or indirect subsidiary thereof, possesses any type of agreement with any entity controlled by or affiliated with AT&T Broadband Corp. relating to the provision of local telephone service, please indicate what'will happen, if anything, to that agreement, or series of agreements, upon closing of the Merger. In other words, will AT&T Corp. retain any rights subsequent to closing of the Merger to utilize the assets or properties of AT&T Comcast Corporation or any direct or indirect subsidiary thereof, in relation to the provision of local telephone service? if so, please identify those agreements with specificity, provide copies thereof, and indicate the impact of the Merger upon those agreements. See answer to Question Vll1 (1) (3) Please identify, with specificity, the plans of AT&T Comcast to . introduce local phone choice to at least one million additional homes."As to that statement, please indicate the existing targeted area for the provision of those services, the anticipated roll out date and roll out schedule for those services, the anticipated technology'switched, 'IP, or otherwise), and any and all information which the Applicant desires to be considered by the Franchising Authority in evaluating the alleged "Benefits of the Merger" in relation to the expanded' deployment of local phone service'. See answer to Question Vill (1). Notwithstanding the foregoing, on a national March 29, 2002 Page 14: basis, AT&T Comcast believes that the merger will expedite the deployment of 'local telephone service. However, no specific plans exist with respect to the deployment of such service in those franchise areasnot already served. (4) As part of the FCC 394 review 'process relating to the TCI - AT&T Merger in 1998-1999, representatives of those entities indicated, in these words or wands of equivalent substance, to the Franchising Authority that one of the significant "public benefits" of the TCI - 'AT&T Merger would be the rapid deployment .of local phone' service on a competitive basis throughout' the franchise areas previously served by TCI. Now, almost three years subsequent to the closing of the TCI AT&T Merger, there appears to be little deployment of competitive, local exchange telephone service by AT&T Broadband in its cable television service areas'. Please provide any information which you, would like to be considered by the Franchising Authority as to why the Franchising Authority should believe that the merger of AT&T with Comcast will any more effectively deliver these promised benefits than did the TCI -AT&T Merger. See answers to Question Vlll (1), (2)and (3). Notwithstanding the foregoing, the Company disagrees with your assertion that there has been little deployment of competitive local exchange telephone services in its cable television service areas. The Company currently' offers a choice of local phone service to more than 6.8 million homes. IX. QUESTONS` RELATING TO IMPACT OF MERGER UPON RATES AND SERVICES. (1) The Franchising Authority has questions about the potentially deleterious impact of the Merger upon cable television rates. Please provide any and all information which you desire to be considered by the Franchising Authority in evaluating the Impact, positive or negative, of the Merger upon rates charged to subscribers'for the provision of cable television services. Regulated rates will continue to be set in:conformance with FCC regulations that are generally designed to cover inflation, programming costs and other costs related to system operations. Cather rates will continue to be established based on various market and operational factors. (2) The Franchising Authority has questions about the potentially' deleterious2 impact of the Merger upon cable television services. Please provide any and all information which you desire to be considered by the Franchising Authority in evaluating the Impact, positive or negative, of the Merger upon cable television services. Although comprehensive plans or time frames have not yet been developed, and no specific pians or time frames exist for the systems, economies 'of scale should;; March 29, 2002 Page 15 enhance AT&T , Comcast's ability to upgrade systems and deploy new services, including new cable television services. . Thank you for your letter confirming receipt of the Form 394 Applications. Now that the Form 394 Applications have been submitted, the review and consent process has commenced as of February 27, 2002. We very much look forward to working with you as the Franchising Authorities complete their review and to receiving the Franchising Authorities' consent within the 120-day period. Very truly yours, F. Kent Leacock Vice President Government Affairs & Franchising Bay Area Market AT&T Broadband Enclosures cc. Manuela Albuquerque, Esq. Roger Miller Eric Zavier Richard C. Wilson Pat Busch Jeremy Stern, Esq. ATT Broadband MOM- P.0 Bcx 5147 San Raman.CR 94583 April 4, 2002;, VIA QVERNIGHT MAIL William M. Mlarticorena, Esq. Rutan &Tucker, ILP 611 Anton Boulevard, 14th FI Costa Mesa,'California 92626-1931 Re: March 28 2002 Information RequeStL of Contra Costa County, California;.Questionnaire Relating to the AT&T/Comcast Merger. Dear Mr. Ma ticorena: We are writing in response to your March 28, 2002 letter, received on March 29, 2002, sent in response to the FCC Form 394 filings for the merger (the "Transaction") of AT&T Broadband ("ATT-B„ or the "Company„) and Comcast Corporation ("Comcast"). It is readily apparent from the requests for information in your letter that many of the requests have no relevance to the Transaction. Ratner, the letter requested responses to a variety of matters unrelated to the Transaction, which is a change of control. Nevertheless, as a courtesy we have endeavored to provide responses to the requests. FCC Form 394 Application On March:: 8, 2002, we provided Contra Costa County (the "Franchising Authority„) with a completed FCC Form 394 Application requesting any consent or other determination by the Franchising 'Authority that may be required as a result of the Transaction (the "Application"). The Application answers any relevant questions about the Transaction and provides the information reasonably necessary for the Franchising Authority to make any required determinations. According to the FCC, the Form 394 (which formed the basis of the Application) is designed to provide the information necessary to assess the financial, legal andL technical qualifications of the proposed new controlling entity that will result from the Transaction. In fact, the Application describes the Transaction in detail, and provides extensive information about the legal, technical and financial qualifications of the proposed new controlling party, AT&T Comcast Corporation ("AT&T Comcast"). �(� Recycled Paper William M. I' articorena, . April 4, 200 Rage 2 The Transa The Transaction is described in detail in the Application. It is a merger at the top parent company level. Neither the cable systems nor franchises are being sold, transferred or assigned. The cable systems will continue to be owned by the current entities (the "Franchisees"). The current Franchisees are not experiencing;a corporate change. The terms of the franchises remain unchanged. In light of the above, much of the requested information is unrelated to the Transaction or qualifications of AT&T Comcast and is clearly beyond the Franchising Authority's scope of review related to the Application. It also bears noting that the ultimate parent of the Franchisee is currently the largest cable operator "MSO" in the country, and upon closing, AT&T Comcast, the new parent, will be the largest cable operator in the country. Scope of Review Federal law limits the scope of review and information the Franchising Authority may require as part of the Application approval process.' Beyond the information required by the FCC Farm 394, franchise or applicable local law, a local franchising authority ("LFA") may only request "such additional information as may be reasonably necessary to determine the qualificationsof the proposed transferee,"2 A federal court has recently confirmed that a cable operator need not answer any requests for information that are outside this scope or:are otherwise unreasonable, and such refusal may not be used as a basis for denying LFA consent to the FCC Form 394 Application.` The Transaction is entirely at the top parent company level. Many of the requests for information contained in your March 28tj' letter appear to be precisely the type of inquiry that would be deemed unreasonable and/or beyond the appropriate scope of review in this proceeding. For example, your request for information pertaining to. a) confidential information; b) cable modem service; c} telephone service technology and local exchange telephone service offerings; and d) labor relations. In addition to being unrelated to the financial, technical and legal qualifications of AT&T Comcast, the ' See. g.g., Charter Communications Inc v County of Santa Cruz, '133 F.Supp.2d 1184, 1201 (N.d.Cal. 2001)(Federal law imposes"certain outer limits on the LFAs` power to request information over and above that required by Farm 394"). z Implementation of Sections 11 and 13 of the Cable 'television and Corn etition Act of 1992, Report and Order, 8 F.C.C.R. 6828,¶86 (1993). See also id. at 1185; Sat implementation of Sections 11 and 13 o the able Tei vision c nsumer Protection and Competition Act of 199 2, Memorandum Opinion and Order on Reconsideration, 10 F;C.C.R; 4654,'4676,IM 50-53(1990. In addition; within the first thirty days of receiving the FCC Farm 394 Application, an LFA may require the applicant to provide additional: information to cure an application inaccuracy or incompleteness.' See 47 C.F.R. §76.501(b)• 3 See, e,g., Charter Communications Inc v County of Santa Cruz, 133 F.Supp.2d at 1208 ("an operator may, spurn an unreasonable request" for information; "if, an LFA imposes unreasonable information demands, it may not then deny the application on the ground that the applicant refused to answer them"}, William M. Marticorena �. April 4, 2002 Page 3 questions, both individually and collectively, constitute the sort of "sweeping inquisition" which would be deemed unreasonableand thus beyond the Franchising Authority's authority to require as part of the review of the Application. indeed, in Charter CommOnIgMtrons Inc. v. Cgunty, of Santa C z, the court specifically condemned as unreasonable the kind of broad inquiries made in your March 28h letter.# This is especially true where, as here, the volume of questions and the amount of additional work to create and/or compile such data would be extremely burdensome and time consuming. Specific; Responses Notwithstanding the foregoing, reserving all rights, and in an effort to accommodate the Franchising Authority's reasonable and lawful need for information, we provide, for informational purposes only, the responses set forth below. By responding, the Company does not waive any arguments regarding the relevance of such information or the Franchising Authority's authority to make such a request. Additionally, nothing hereinafter is intended to expressly or implicitly agree with or otherwise accept the "Rules of Engagement" set forth in Section 1X of your Questionnaire. 1. QUESTIONS RELATING TO AGREEMENT AND PLAN OF MERGER DATED AAS QF dECEUSER 191620{)1 E3Y AN AM tNG AT& ` CORP., AT&TEf C AC}I AIVI C RPZ1 C9MCAST CC R.M!ATION AT&T SROACt§AND AC UISITIO CORP. q0_ CAST ACQUISITIQ I CORP. AND AT&T Ct3MCAST CORPORATION JTHE -APM"). (1) Please provide a complete and unredacted' set of exhibits, schedules and annexes to the APM. As explained in Exhibit 2 to the FCC Form 394, certain exhibits and schedules to the Agreement and Plan of Merger dated December. 19, 2901 and the Separation and Distribution Agreement dated December 19, 20031 (collectively the "Agreements") were omitted. The instructions to FCC Form 394 state that exhibits and schedules are to be submitted *only if "necessary in order, to understand the terms" of the transaction that has resulted in a change of control of the cable franchise. These instructions further provide that confidential trade, business, pricing or marketing information, or other information not otherwise publicly available, may be redacted. d Seg id..at 12039-1211:.. 5' td. at 1210("the tare number[of questions)actually propounded and the bone-crashing work the answers would have entailed'rendered them unreasonable in scope"). William M. Marticorena, . April 4, 2002 Page 4 Certain other exhibits to the Agreements have been summarized as part of the FCC Form 394. Section 1, Part 6 of the FCC Form 394 requires a description of documents, instruments, contracts or understandings relating to the ownership or future ownership rights of AT&T Comcast. A description of those documents is set forth in Exhibit 7 of the FCC Form 394. In addition, Exhibits A, D-1', D-2 D-3 and D-4 and an updated version of Exhibit E to the Merger Agreement and Exhibits C and G and an updated "version of Exhibit A to the Separation and Distribution Agreement are either summarized or included in the Proxy, which we have enclosed in response to Question 1 (2). AT&T and Comcast believe that none of the exhibits or schedules that have been omitted is necessary to understand the terms of the Agreements. Through this response, the parties confirm that the omitted exhibits or schedules' do not include information necessary to understand the terms of the Agreements or contain confidential trade, business, pricing or marketing information or other information not otherwise publicly available. As expressly permitted by the FCC;,Form' 394, AT&T and Comcast are not required to submit such information. Federal law strictly limits the Franchising Authority's authority to require information in conjunction with a cable franchise change of control to the information required in the initial Application and such additional information as may be "reasonably necessary to determine the qualifications of the proposed transferee." Notwithstanding the foregoing, we have enclosed as Exhibit A a 'list of the schedules and exhibits to the Agreements that details the subject or title of each schedule and exhibit. This list confirms'that, as the Company and Comcast have concluded, such documents are not necessary to understand the Agreements. After' reviewing this list, as well as the information contained in the Proxy, we believe you will agree that such documents are not necessary to your review of the Application. We hope the foregoing information fully explains why the Application contains all ' information necessary to your review of the proposed Transaction, without the need for additional exhibits or schedules. We understand, however, that you may, after;,your review, continue to desire to review some of the documents not otherwise provided. We request that you review the attached list with a view toward the exhibits that you have already °.received as a part of the Proxy, as well as the issues of relevance and the sensitive nature of the information. If, after reviewing the information included with this letter, you feel that certain of the exhibits and schedules to the Agreements not otherwise provided'are necessary to your review, we would be happy to discuss the passibility of your reviewing such exhibits and schedules that are reasonably necessary to determining the qualifications of AT&T Comcast pursuant to an appropriate confidentiality'agreement. (2) Please provide a copy of the "Registration Statement", as that term is defined'and utilized in Section 5.09 of the A 'M, and the "Joint Proxy Statement"', William M. Marticorena �. April 4, 200 Page as that terra is defined and utilized in Section 5.09.of the APM. If one or both of thesedocuments are not available In final form of this paint in time, please provide a draft thereof and.: Indicate your agreement to provide I a final version of said documents) as soon as it is available and specify the projected date of availability,' A copy of the Preliminary Joint Proxy Statement/Prospectus filed by AT&T Comcast with the Securities and Exchange Commission on February 11, 2002 is enclosed (the "Proxy"). We will provide a final copy of the Proxy once the Registration Statement has become effective, which is erected to occur in the 'second quarter of this year. (3) Please provide a copy of the "Opinion of Financial Advisor", as that term Is defined and utilized In Section 15.15 of the APM, of Morgan Stanley &iCo., Inc,, JP Morgan Manley, Inc., and Merrill, Lynch, Pierce, Penner tit Smith, Inc. Such information is not within the Franchising Authority's appropriate scope of review related to the Application. The document requested by this item would not pertain to the Transaction or the qualifications of the proposed new entity to assume control of the Franchisees. Notwithstanding the foregoing and without waiving our rights with aspect to the relevance of this question,the referenced opinion is attached s an annex to the enclosed Proxy. (4) Please' provide a copy of the "Opinion of Financial Advisor", as that term is defined and utilized in Section 6.15 of the APM, of Credit Suisse First Boston and Goldman, Sachs & Co, See answer to Question 1 (3) above. (5) Please provide a copy of the "Neutrality Agreement" as that term i defined and utilized in Section 8.05 of the APM. Neither the Neutrality Agreement nor matters related to labor unions is within the Franchising Authority's appropriate scope of review related to the Application. The document requested by this item would not pertain to the Transaction or the qualifications of AT&T Comcast. Accordingly, the Company is not under any obligation to provide such information as part of this proceeding. (6) Please provide a copy of any budget, financing pian, or other document evidencing the recommendations of the Interim Financing Committee,� as that term is defined and utilized in Section 9.15 of the APM, as it relates to the charges and assignment of the Interim Financing Committee pursuant to Section 9.15 of the APM. William M. Marticorena tl. April 4, 2002 Wage 6 Any budgets, financing plans or other documents related to the recommendations of the Interim Financing Committee are confidential and proprietary. Furthermore: they are not within the Franchising Authority's appropriate scrape of review related to the Application. The documents requested by this item would not pertain to the Transaction or the qualifications of the proposed new controlling entity. Accordingly, the Company is not under any obligation to provide such information as part of this proceeding. The financial qualifications of AT&T Comcast, together with its financing; plans, are set forth in the Application and the additional information that is being provided to you. We believe that this information is more than sufficient to determine that AT&T Comcast has the necessary legal, financial and technical qualifications to assume control of the Franchisees. (7) Please provide a copy of the "Exchange Agreement", as that term is defined and utilized in Section 9.21 of the APM. The Exchange Agreement is described in detail in the Proxy. Once the Exchange Agreement has become public, we can provide a copy to you if you would like. if. QMESTIQNS RELATING TC! SEPARATION I AND DISTRIBUTION AGREEI1llENT- BY ANb BETWEEN AT&T CORP, AND AT&T BROADBAND CORP. Q ECS AS C3F DECEM BER I 9 2,L01 HE "SIVA" (1) please provide complete and unredacted copiesof all exhibits, schedules,land annexes to the SDA. See answer to Question 1 (1)above and Exhibit A. (2) In relation to Section 2.017 of the SDA, please indicate whether the provisions of Section 2,07(b) which indicate that"in addition, the person retaining such assets shall take such ether actions as may be reasonably requested by the person to whom such asset is to be transferred in order to place such person, insofar as reasonably',passible, in the same I position as if such asset had been transferred as contemplated hereby and so'that all benefits and burdens relating to such AT&T Broadband asset (or such AT&T Communications asset, as the case may be), including possession, use, risks of loss, potential for gain, and dominion, control and, command: of such assets are to inure from and after the distribution date to the AT&T Broadband Croup (or the AT&T Communications Group, as the case may be ) imposes an obligation on any direct party or third-party beneficiaryof the SIDA to transfer all indices of ownership of the asset to +question, other than bare legal title, to the intended transferee? If not, please indicate why not. William M. Marticorena April 4, 2002 Page 7 The provision accurately describes the obligations of the parties to the Separation and Distribution Agreement with respect to such assets. Ill. QUESTIONS RELATING TO MANAGEMENT STABILITY. (1) Please provide an organizational chart which shows by title and name all management positions relating to the Franchise and/or Franchisee at the system level, regionallevel, and headquarters bevel as of the date that the transactions closed which transferred control of the Franchise and/or Franchisee to AT&T Corp. ("AT&T"). We do not believe that information related to management positions at the system, regional and headquarter' level during prior years are relevant to this Transaction or the qualifications of the transferee entity, AT&T Comcast. Accordingly, the Company' is not under any obligation to provide such information as part of this proceeding. Additionally, we note that AT&T Comcast has not been involved with any current or past management decisions regarding positions relating to the Franchises or the Franchisees. It is unknown at this time if there will be any changes to local, regional and/or: national' management that will affect the Franchises or Franchisees. As with all business transactions of this nature, AT&T Comcast will evaluate the management' teams and make decisions as appropriate to best support the products and service provided to customers drawing from the best of both companies. Mr. Brian Roberts, President of Comcast, well be President and Chief Executive Officer of the new company with all day-to-day authority over the operation of the business. Mr. Roberts, as CEO, will:also be responsible for all matters relating to other officers and employees of the new company, and will consult with the Chairman, C. Michael'Armstrong; with°respect to senior officers. Mr. Roberts and the management' team he selects will be responsible for the full operational control of the merged company. Mr. Roberts plans to continue Comcast's demonstrated track record in system upgrades, deployment of new services and customer care. (2) Please provide an organizational chart showing the same" information as of January 1,2000s See answer to Question Ill (1) above. 3) Please provide an organizational chart showing the same information as of January 1,2001. See answer to Question Ill (1) above. William M. Marticorena, ,,,,,q. April 4, 2402 Page $ (4) Please provide an organizational chart showing the same information as of January 1, 2002. Sae answer to Question`II1 (1) above. (5) Please provide any and all information which you would like the Franchising Authority to consider and evaluate relating to any plan which exists, or is intended to be created, which would provide management stability at the local, regional, and national levels in relation to management positions affecting the Franchise and/or the Franchisee including, without limitation, any management contracts, employee'contracts,'employee agreements, "stay bonus" programs, stock option programs, or any other devices or programs which are Intended to maintain management stability and expertise upon close of the Merger and,for thirty-six (36)months thereafter. See answer to Question``111 (1) above. (6) It has been widely reported in the trade press and popular press that high rankingexecutives of Comcast Corporation ("Comcast") have asserted that the corporate overhead of AT&T is excessive by both industry standards and the overhead charges incurred by Comcast. Please provide detailed information as to how Comcast intends to reduce said overhead including, without limitation, any anticipated or contemplated reductions in management staffing or rather' cutbacks which would' directly or indirectly reduce the corporate overhead or other overhead charges incurred by the AT&T assets ging transferred to the Transferee upon closing of the Merger. Please further indicate, with specificity, how these reductions, if they are contemplated or planned, can be undertaken without reductions in the quality of video service, customer service, or other' aspects of the cable system operations which affect 'subscribers or the Franchising Authority. ;AT&T Comcast believes that it should be able to decrease amounts spent on overhead by the Company and Comcast for corporate services, such as corporate management, development, strategic development, treasury, accounting, tax and in- house legal services. Currently all of these functions are performed separately by or for both companies. After the Transaction, AT&T Comcast intends to consolidate redundant services within a single corporate management structure. Such reductions in corporate overhead should have no impact on the quality of video service, customer service or other aspects of the cable system operations that affect subscribers or the Franchisees. IV. gUIESTIONS RELATING TO POTENTIAL , CQNSOLI©ATl©N OF THE OPERATIONS OF AT&T AND CO CA T INTO AUT COMCAST CORPORATION. A. The Franchising Authority possesses concerns and questions' William M. Marticorena� a. April 4, 2002 Page 9 regarding the ability of AT&T and Comcast to merge their respective cable television operations into a single entity without a significant degree of operational disruption, subscriber inconvenience, and ether associated problems. Please provide the Franchising Authority with any and all pians, projections, timetables, budgets, operating plans, or any other information which the Applicant desires to be considered by the Franchising Authority in assessing the impact of said consolidation upon subscribers. To the extent that the Applicant possesses any form of plan or strategy as to the consolidation strategy, please provide it to the Franchising Authority. If no operating plan or strategy exists, please so indicate. AT&T and Comcast believe that they will be able to 'merge the respective cable > operations without a significant degree of operational disruption, subscriber inconveniences and other associated problems. No public documents exist with respect to operating plans, budgets, timetable or other projections. V. QUESTIONS RELATING TO SELECTION OF CABLE MODEM :: SERVICE PROVIDERS.' (1) It is has came to the attention of the Franchising Authority that its subscribers have experienced significant disruption, inconvenience, and other problems relating to the conversion from the At-Home Cable Modem Network to AT&T's proprietary network.. Please indicate whether the merger of AT&T' and Comcast will, in any way, affect the continuous and stable provision of cable modem service to subscribers or result, or potentially 'result, in a further conversion or changeover from AT&T's proprietary "network to any network associated with Comcast or any affiliate thereof. Such information is not within the Franchising Authority's appropriate scope of review related to the Application as cable modem services were classified by the FCC on March 14,;;2002, as an "interstate information service", and are therefore no longer regulated as <a cable service. Notwithstanding the foregoing, it is AT&T Com act's expectation that there will be continuous and stable provision of cable modem service now that the provisioning of such service has been moved in-house. No further conversions from the existing network are currently expected as a result of the merger,. however, we reserve the right to make changes to the network in the ordinary course of business. (2) Please present and discuss any and all plans relating to any material changes in the delivery of cable modern service within the jurisdiction of the Franchising Authority within the first thirty-six (36) months subsequent to the: closing of the Merger. If no plans exist or are contemplated, please so indicate. Such information is not within the Franchising Authority's appropriate scope of review related to the Application as cable modem services'were classified by the FCC William M. Marticorend, ,q. April 4, 2002 Page 1€ on March 14,,2002; as an "interstate information service", and are therefore no longer regulated as a cable service. Notwithstanding the foregoing, we have no current plans to change the delivery of cable modem service within the franchise areas in question, however, we reserve the right to make changes to the service in the ordinary course of business. VI UESTIONS RELATING TO CHOICE BETWEEN SWITCH EDIINTERN ET PROTOCOL ("IP")'TELEPHONE TECHNOLOGY OSPLOYRIlENT. (1) It has been reported in the Trade Press that AT&T has elected to utilize switched telephone technology for deployment upon its broadband systems. It has also been reported that Comcast has avoided utilization of switched telephony technology in favor of IP telephony. Please provide any and all information available to the Applicant regarding plans, or potential plans, for the introduction of telephone service within the Franchising Authority and the technology which will be utilized for said telephony+deployment. Such information is not within the Franchising Authority's appropriate scope of review related to the Application, which is a 'change of control of ''a Title VI cable operator. The merger will have no implications on the regulation of telecommunications services provided under Title 11 of the Communications Act or the regulations of state` regulatory agencies. The information requested by this item would not pertain to the Transaction or the qualifications of AT&T Comeast. Accordingly, the Company is not under any obligation to provide such information as part of this proceeding. Notwithstanding the foregoing, AT&T Comcast has announced that it will support switched circuit telephony where it has already been introduced. For example, switched circuit telephony is currently offered in Pleasant'Hill, Hercules and other parts of Centra Cost County. AT&T Comcast reserves the right to snake changes to such telephone service in the ordinary course of business and in accordance with federal and state regulations. (2) Does'the Applicant, or any related affiliate thereof, have any plans of any type to offer telephony service within the jurisdiction of the Franchising Authority within the next thirty-six (36) months? If so what type of technology, Switched or IP, or other, will be deployed? See answer to Question VI (1). Vil. QUESTIONS RELATING TO NEUTRALITY AGREEMENT. Section 8.05 of the APM reads as follows: "Section 8.05 Neutrality Agreement. Notwithstanding any other provision of this agreement, AT&T shall' not renew, extend or modify the Neutrality And Consent Election Agreement (the "Neutrality Agreement") among AT&T, William M. Marticorena, April 4, 2002 Page 11 the Communication Workers of America and the International Brotherhood of Electrical Workers, such that such agreement,;as so renewed,'extended or modified, will appy to or otherwise bind or purport to appy to or otherwise bind, after the effective time, AT&T Broadband, any of the AT&T Broadband subsidiaries, parent, Comcast or any of the Comcast subsidiaries, either as a matter of contract or term or condition of employment. AT&T shall not enter into any other agreement or arrangement with respect to the same or similar matters as the matters covered by the Neutrality Agreement if such agreement or arrangement would apply to or otherwise bind or purport to apply to or otherwise hind, after the Effective date, AT&T Broadband, any of the AT&T Broadband subsidiaries, parent, Comcast or any of the Comcast subsidiaries, either as a'matter of contract or term or condition of employment." (1) What is the purpose of the Neutrality Agreement? See answer to Question I (5). Such information is not within the Franchising Authorities' appropriate scope' of review related to the Application. The information requested by this item dues not pertain to the Transaction or the qualifications of AT&T Comcast. Accordingly, the Company is not under any obligation to provide such information as part of this proceeding. Notwithstanding the foregoing, we note that since the Neutrality Agreement applies only to AT&T Corp, and its wholly owned subsidiaries, it will not apply to employees of AT&T Comcast after the close of the merger. Until the merger closes, matters involving AT&T Broadband employees are the sole responsibility of the Company, and AT&T Comcast has no position on such matters. Following the closing of the Transaction, AT&T Comcast's labor relations' policies will be governed by relevant labor laws and the terms of applicable agreements with various labor organizations. Any matters relating to agreements with the Communication Workers'of America and/or the International Brotherhood of Electrical Workers will be discussed with such organizations by the Company and, following closing„by AT&T Comcast. (2) When does the Neutrality Agreement expire? See answer to Question`VI I (1). (3) What are the parties' objections to theNeutrality Agreement? See answer to Question VII (1). (4) Have the Communication Workers of America and/or the International'Brotherhood of Electrical Workers been informed of the contents of Section 8.05 of the APM? See answer to Question VII (1). Wimarn M. Marticorena, . . April 4, 2002 Page 12 ( ) Describe the Applicant's plans in relation to replacement or modification of the Neutrality Agreement, or the subject matter to which it relates, subsequent to closing of the Merger. See answer to Question<VI I (1). (6) If the Neutrality Agreement is not satisfactorily replaced or modified, is there a potential of employee disruption? If so, what are the Applicant's plans > or contingency arrangements to deal with any potential employee disruption? See answer to Question V11 (1). (7) What employees, if any, which perform services that directly or indirectly relate to the Francaise or the Franchisee are affected by the Neutrality' Agreement? See answer to Question V11 (1,). (8) Are there any other labor agreements which the Applicant does not intend to survive closing of the Merger or which the Applicant Intends to materially modify subsequent to closing. If so, please identify with specificity those agreements;. See answer to Question:VI I (1). VIII. QUESTIONS RELATING TO LOCAL TELEPHONE' SERVICES. In a document entitled "AT&T Comcast Corporation Informational Presentation for Local Franchise Authorities", distributed by purportedly'> authorized representatives of AT&T and/or Comcast at a SCAN-NATOA meeting of March 13, 2002, the Applicant represents to Leval Franchising Authorities as follows: "AT&T Comcast:will be committed to deploying new and exciting video services, High-Speed Gable Internet and a choice for 'local phone services at competitive prices to more customers across the United States." (p.,;23) AT&T Comcast further represents: "'AT&T Comcast will expand Its efforts to offer customers a choice of local phone service... within a year of closing AT&T Comcast expects to introduce local phone choice to at least one million additional homes." (1) Please indicate, with specificity, what agreements, if any, will exist William M. articorew A. April 4, 2002 Page 13 subsequent to closing between and among, as the case may be, AT&T Comcast Corporation, or any direct or indirect subsidiary thereof; on the one hand, and AT&T Corp.,. or any direct or indirect subsidiary thereof, on the other hand, relating to the utilization, or right to utilize, any assets, as that term is defined in the broadestsense, of either entity or series of entities, for the provision of local telephone service subsequent to closing of the Merger. Such information is not within the Franchising Authority's appropriate scope of review related to the Application of the change of control of a Title VI cable operator. AT&T Comcast, and/or its affiliates as appropriate, will obtain any necessary and lawful federal, state' or local authorizations prier to the introduction of telecommunications services over any cable system. The merger will have no implications on the regulation of telecommunications services provided under Title If of the Communications Act or the regulations of state regulatory agencies. The documents requested by this item do not pertain to the Transaction or the qualifications of AT&T Comcast, Accordingly, the Company is not under any obligation to provide such information as part of this preceeding. Notwithstanding the foregoing, AT&T will assign to AT&T Broadband all of the assets of AT&T's 'broadband business, as indicated in the Separation and Distribution Agreement, including these assets that will be utilized for the provision of> local telephone service. (2) If, and to the extent, AT&T Corp., or any direct or Indirect subsidiary thereof, possesses any type of agreement with any entity controlled by or affiliated with AT&T Broadband Corp. relating to the provision of local telephone service, please Indicate what will happen, if anything, to that agreement, or series of agreements, upon closing of the Merger. In other words, will AT&T Corp. retain any rights subsequent to closing of the Merger to utilize the assets or properties of ATT Comcast Corporation or any direct or indirect subsidiary thereof, in relation to the provision of local telephone 'service? If so, please identify those agreements with specificity, provide copies thereof, and indicate the impact of the Merger upon those agreements. See answer to Question Vlll (1) (3) ' Please identify, with specificity, the plans of AT&T Comcast to " . . . introduce local phone choice to at least one million additional homes.' As to that statement, please indicate the existing targeted area for the provision of those services, the anticipated roll out date and roll out schedule for those services, the anticipated technology switched,' IP, or otherwise), and any and all information which the Applicant desires to be considered by the Franchising Authority in evaluating the alleged "Benefits of the Merger" in relation to the expanded deployment of local phone service. See answer to Question VIII' (1). Notwithstanding the foregoing, on a national basis, AT&T Comcast believes that the merger will expedite the deployment of local William M. Marticorena} �. April 4, 2002 Page 14 telephone service. However, no specific plans exist with respect to the deployment of such service in those franchise areas not already served, (4) As part of the FCC 394 review process relating to the TCI . AT&T Merger in 1898-11959, representatives of those entities indicated, in these words or words of equivalent :substance, to the Franchising; Authority that i one of the significant "public benefits" of the TCI AUT Merger would be the rapid deployment of local phone service; on a competitive basis throughout the franchise areas previously served by TCI. Now, almost three years subsequent to the closing of the TCI - AT&T Merger, there appears to be little deployment of competitive local exchange telephone service by AT&T Broadband in its cable television service areas. Please;provide any information which you, would like to be considered by the Franchising Authority as to why the Franchising Authority should believe that the merger of AT&T with Comcast will any more effectively daliver these promised benefits than did the TCI -AT&T merger. See answers to Question Vlll (1), (2) and (3). Notwithstanding the foregoing, the Company disagrees with your assertion that there has been little deployment of competitive local exchange telephone services in its cable television service areas. The Company currently offers a choice of local phone service to more than 6.8 million homes. IX. gUESTONS RELATING TO IMPACT OFAERGERi UPON RATES AND SERVICES. (1) The Franchising Authority has questions about the potentially deleterious;impact of the Merger upon cable television rates. Please provide any and all Information which you desire to be considered by the Franchising Authority in evaluating the impact, positive or negative, of the Merger;upon rates charged to subscribers for the provision of cable'television services. Regulated rates will continue to be set in conformance with FCC regulations that are generally designed to corer inflation, programming costs and ether costs related to system operations, tither rates will:continue to be established based on various market and operational factors. (2) The Franchising Authority has questions about the potentially deleterious impact of the Merger upon cable television services. Please provide any and all information which you desire to be considered by the Franchising Authority in evaluating the impact, positive or negative, of the Merger upon cable; television services. Although comprehensive plans or time frames'have'not yet been developed, and no specific dans or time frames exist for the systems, economies of scale should enhance AT&T Comcast's ability to upgrade: systems and deploy new services, William M. Marticoren6 .4q. April 4, 200 Page 1 including new cable television services. Thank you for your letter confirming receipt of the Form 394 Applications. Now that the Form 394 Applications have been submitted, the review and consent process has commenced as of Larch S, 2002. We very much look forward to working with you as the Franchising Authority completes its review and to receiving the Franchising Authority's consent within the 120-day period. Very truly yours, v ; F. Kent Leacock' Vice President Franchising & Government Affairs' Bay Area Market Enclosures cc: Patricia Burke Philip Arndt EXHIBIT A LIST OE SCHEDULES;AND EXHIBITS TO TIDE AT&T BROAD AND/C€3MCAST MERGER AGREEMENTS (All documents on this list, unless otherwise publicly disclosed, are considered to be non-public,proprietary, confidential or trade secret documents.) The Exhibits to the Agreement and Plan of Merger are as;follows. Exhibit A Form of Support Agreement* (Described in Exhibit 7 to Form 394)' Exhibit B Form of Rule 145 Affiliate Letter Exhibit CForm of Separation and Distribution Agreement (Provided in Form 394) Exhibit D-1 Form of Parent Charter-Preferred Structure* (Described in Exhibit 7 to Form 394 Exhibit D-2 Form of Parent Charter-Alternative Structure (Described in Exhibit 7 to Form 394)' Exhibit D-3 Form of Parent Bylaws* Exhibit D-4 Form of Comcast Articles amendment*' Exhibit E AT&T Broadband Financial Statements* Exhibit F Admission Agreement AT&T Disclosure Schedule Comcast Disclosure Schedule See Schedules to Agreement and Plan of Merger The Exhibits to the Separation and Distribution Agreement are: Exhibit A AT&T Communications Financial Statements* Exhibit B' Corporate Name Agreement Exhibit C' Employee Benefits Agreement* Exhibit D' Intellectual Property Agreement Exhibit E` Interim Services'and Systems Replication',Agreement Exhibit F Patent Assignment Exhibit G Tax Sharing Agreement* Exhibit H' Trademark and Service Mark Agreement * These;,documents or an updated version of these documents are described in or filed as> annexes to the Preliminary Joint Proxy Statement/Prospectus filed with the SEC on February 11, 2002. The Schedules to Agreement and flan of Merger are as follows: Schedule 6.03 Government Authorizations Schedule 6.04' Nan-Contravention Schedule 6.05(b) Capitalization Schedule 6.06 AT&T Significant IBroadband Subsidiaries Schedule 6.07'` SBC Filings Section 6.08 Financial Statements Schedule 6.10' Absence of Certain Changes Schedule 6.11 No Undisclosed Material Liabilities Schedule 6.12' Compliance with Laws and Court Orders Schedule 6.13'' Litigation Schedule 6.16' Taxes Schedule 6.18 Employee Benefit Plans and Labor Matters Schedule 6.19 Environmental Matters Schedule 6.20' Intellectual Property Schedule 6.21' Contracts Schedule 6.24 Comcast`Securities Schedule 6.25(a) TWE Schedule 6.26 Intercompany Transactions Schedule 6.27' Sufficiency of Transferred Assets Schedule 6.28' Investments Schedule 8.01 AT&T Broadband Interim Operations Schedule 9.08 Approved Directors The Schedules to the Distribution and Separation Agreement are as follows: Schedule 1.14(a) Assets Excluded From the Definition of AT&T Broadband Assets Schedule 1.14(k) ATT Broadband Assets Schedule 1.18(8) AT&T Broadband Contracts Schedule 1.18(1) Monetizat ons of AT&T Broadband'Group Schedule 1.19 AT&T Broadband Entities Schedule 1.21(4) ATT Broadband Group Schedule 1.21(e) AT&T Broadband Group Schedule 1.23(8) AT&T Broadband Liabilities Schedule 1.23(1) Monetizations of AT&T Broadband',Group Schedule 1.230) AT&T Broadband Liabilities Schedule 1.280) AT&T Communications Assets Schedule 1.31(x) AT&T Communications Contracts Schedules 2.04(b) Agreements that shall not terminate as of the Distribution Date (ii), (iii),and(vi) Schedule 2.05(c) Joint Locations Schedule 2.05(4) Joint Locations Schedule'4.03(c) Governmental Consents C*Uny docurnentsXLIST OF SCHEDULES AND 2 EXHIBITS TO THE ATT vl.doc AW RUTAN 08110-19721. TUCKER SR It 8887940, JAMES R MOCHLE' JOEL D.A.NICHOLS : 1,RE t,.. �.•,Atl. APRIL L E POST(URGE VSEh MARK STI. MUL FREDERiC MARX STEVEN A.NICHOLS F KEVIN-.Bx+sZlt APRIL LEE WALTER AMY i ql RUTAN RICHARD A CURNUTT THOMAS C BROCKINCTON LAYNE H MELZER KAREN ELIZABETH WALTER IRA El M OVACH JOHN 8 HURLBUT.IR. EVRIDIKIlVICKII DALLAS L SKI HARRISON: NATALIE SIBBALD:DUNDAS MELISSA;,EDNTES MICHAfI E I EI RANDAL M.RAt$USM LARRY A.C MCC I ALISJOHIN A M.MDIN ROAM I H ZMAN EAU MILFORD W DAHL.A MARY M GREEN CAROL D.CARTY JOHN.W HAMILTON,A STEVEN W BURT fHEODORF I..WALLACE.WALTR.' GREGGGR£GG AMBER PATRICKA M[CALLA IDH4 A 0.AMIRE2 NOAM I DI YMAN &TUCKER GIESE N KRUGER MICHAEL F.SITZER RICHARD K HOWELL PHILIP)BLANCHARD JOSEPH D CARRUTH. THOMAS.I CRANE JAMES S:WEASZ• TERENCE J.GALLAGHER RICHARD P..SIMS. MARK 8:FRAZIER DAVID.H HOCHNER DEJA M HEMINGWAY T 1., JAMES B O`P1f AE PENELOPE PARMES A PATRICK MU'OZ JULIE W RUSS A ! T O R 3 V E Y S A T L A W : ROBERT C BRAUN - M KATHERINE If NSON S,DANIEL HARBOTTLE DENISE L MISTER THOMAS S SALLNGER` DUKE F WAHLOUIST- PAUL I SIEVERS W.:ANDRFw MOORE. DAVID C LARSEN` RICHARD G MONTEVIDEO JOSEPH t-:MAGA.III CHARLES A DAVENPORT,III CLIFFORD E.FRI£DEN LORI SARNER SM17H KRAIG C.KILGER JULIE DREW SCHISLER A PARTNERSHIP INCLUDING PROS:-ESSIONAL CORPORATIONS MICHAEL D::RUSIN. ERNFST W:KLATTT.III KENT M.CLAYTON RICHARD D.ARKO 611.:ANTON.BOULEVARD,FOURTEENTH FLOOR IRAQ RIVIN' KIM D.THOMPSON. DAN SLATER MARK-MALOVOS SEL. OF COUNSEL JEFFREY M ODfRMAN' JAYNE TAYLOR RACER MARK BUDENSIEK NIKKI NGUYEN COSTA MESA,CALIFORNIA 92626.1931 STAN WOLCOTT DAVID BCOSCROVE STEVEN 1,GOON JENNIFER SANDERSONLEONARD. A.MAMPEE ROBERT S SOWER HANS VAN.:LICTEN. DOUGLAS)DENNINGTON JOHN T BRADLEY : EDWARD D:SYRESMA,IR. DIRECT ALL MALL TO:POST OFFICE BOX I9SO MARCIA A.FORSYTH STEPHEN.A.ELLIS. TRIG A.JULANDER ALLISON LEMOINE-BUI. DAVID I GARI$AEDI,IV COSTA MESA,CALIFORNIA 92628.1-.950 WILLIAM M.MARTICORINA MATTHEW K ROSS TODD O..LETEIN KAREN KEATING WILLIAM CAPLAN TELEPHONE 71.4-641-5100 FACSIMILE 714-546-9035.. JAMES I MORRIS JEFFREY W£RTH€IMER KERRA 5::CARLSON T LAN NGUYEN MICHAEL T.HORNAK ROBERT O:OWEN CRISTY LOMENZO PARKER LISA NEAL NICHOLAS `A PROFESSIONAL INTERNET ADDRESS WWW,rutan.COFD PHILIP 0.ROHN ADAM N.VOLKERT JEFFREY T.MELCHING JENNIFER L.DHILLON CORPORATION' Direct Dial. (714)641-3416 E-mail: bmarticorena@rutan.com April 8, 2002 F.Kent Leacock Vice President Government Affairs and Franchising Bay Area Markets AT&T Broadband P.O. Box 5147 San Ramon, CA 94583 Re': City of Berkeley, California - Contra Costa County, California - City of Richmond, California - City of Santa Cruz, California County of Santa Cruz, California(collectively, the "Franchising Authorities") Dear Mr. Leacock: This letter constitutes the response of the Franchising Authorities to your March 29; 2002 letter (the "Letter") responding to my March 18, 2002 Information Requests`(the "Information Requests"). First, in relation to your refusal to provide a complete and unredacted set of Exhibits', Schedules, and Annexes to the APM, please be advised that your correspondence did not include an Exhibit A, although the Letter sloes reference an Exhibit A and another copy of this package sent by Federal Express to me on April 4, 2002 (Fed Ex Tracking No. 831801007427) did contain such a document. Thus, I had no timely way to evaluate the representations made within the body of your Letter regarding why your failure to provide a complete'and unredacted set of Exhibits, Schedules, and Annexes to the APM should not result in a determination that the Applicant has not complied with 47 C.F.R. Section'76.502(a) and that, as a result thereof,the 120-day review period set forth therein has failed to commence. Second, please be advised that based upon the Applicant's failure to provide complete and accurate responses to the following questions, the information provided by the Applicant pursuant to 47" C.F.R. Section 76.502(a) shall not be deemed' to be "accepted" within the meaning of 47 C.F.R. Section 76.502(b): (I) Question Nos. 1(1), (5), (6), and (7). 124/011597-0001 273509.01 a04/08/42 RUTAN &TUCKER ATTORNEYS AT LAW F.Kent Leacock April 8, 2002 Page 2 (2) Question No. II(l). (3) Question No. III (l)— (6). (4) Question No.IV (1). (5) Question No. VII(1)—(8). (6) Question No. VIII(3). (7) Question No. IX (1) (2). Sincerely, RUTAN &TUCKER, LLP William M. Marticorena WMM:vb Enclosure cc: Manuela Albuquerque, Esq., City Attorney,City of Berkeley Roger Miller, City of Berkeley Patricia Burke, Contra Costa County Eric.Xavier, City of Richmond Richard C. Wilson, City of Santa Cruz Pat Busch, County of Santa Cruz 124/011597-0001 273609.01 aG4/08102 AW 0.U7AN Ii BF;EFFR B TUCKER.SR ossa-19$0 POSE A y RUTANJAMES R':MpbR£• JOEL 0.KUPFR$FRC JEFFRE Of ARB MAkt£NF PO5E-JURG£NSfN MARK AU571A PAIL FREDER11 MARK STEV€N A NICHOLS F:KEVII APRIL LIE WALTER AMY I HAIL RICHARD A CURNUTT THOMAS C.BKOCKINGTON 1AYNE n ZER KAREN ELIZABETH WALTER TRACEY M QU.C JOHN B.HURLBUT,IR EVRIDIKI IVICKII.DALLAS L..:SKI HARRISON NAT AL"€SIBBALD OUNDAS MFLISS,5 FONTS, MICHAEL W iRANDALL M,RABBUSH LARRY A. , cCAi ALISJOHN AM KAREZ ROBERT H!Z.AlR€A:. MILFORD W.DAHL,IR, MARY M.GREEN CAROL D CARTY JOHN W H,AMi1TON IR STEVEN W BURT &TUCKER THEODORE t WALLACE,WALAIR' GREGG AMBER PATRICK O McCALLX JOHN A RAMtkE2 NgAM 1 6UZMAA GILBERT N KRUGER MICHAEL f SITZER )"CHARD K HOWELL PHILIP J BLANCHARD JOSEPH 0,CARRUTH :THOMAS I CRANE IAMBS S.WEJSZ• T£RE.NCE I.GALLAGHER RICHARD $1.5. MARK-E FRAZIER. DAVID HOCHNER MIA-HIMINOWAY- -C �} p F.,� ,S ' JAMES 8,OWEAL PENELOPE PARM£$. A.PATRICK MUNOZ JULIE W RUSS A I T V 11 i Y E Y 5 A T L A VV ROBERT C.BRAUN M KATHERINE IEN$ON S DANIEL HARBOTTSE DENISE L M€STER THOMAS 5 SAL"CA" DUKE F WAHLOULST :PAUL F SIFVERS. W.ANDREW MOORE. DAVID-C LARSEN' RICHARD G MONTEVIDEO JOSEPH L MAGA.iii CHARLES A_.DAVENPORT..it: CLIFFORD E fRIEbEN LO/II SAR NER SMITH. KRAIG C.KILLER JULIE DREW SCHISLER A PARTNERSHIP INCLUDING PROFESSIONAL CORPORATIONS MICHAEL D RUBIN. ERNEST W.ALATTE,III KENTM CLAYTON RJCNARD:O.AKKO 611 ANTON BOULEVARD,FOURTEENTH._FLOOR IRA.G.RWIN•. KIM O.THOMPSON. DAN$LATER' MARKM MALOVO$ JEFFREY M ODERMAN' JAYNE TAYLOR KACER MARK BUDENSIEK. NIKKI NGUYEN Of COUNSEL' COSTA MESA,CALIFORNIA 42626.1931 STAN WOLCOTT DAVID B COSGROVE STEVEN 1 GOON JENNIFER 5 ANDERSON LEONARD A:SAMPU BOB RT S BOWER MANS VAN LICTEN DOUGLAS I DENNINGTON .JOHN T BRADLEY EDWARD D DIRECT ALL MAIL TO:POST OFFICE BOX 1454 .$YEEMA.R. MASICIAA FORSYTH. STEPHEN A ELLIS. TRIC A JULANDIA ALLISON LEMCNNE4VI.. DAVIO I.GARIBAL'0,NJ COSTA MESA,CALIFORNIA 92626-1950 WILLIAM M MARTIGORENA MATTHEW K,ROSS 1000 O LITFIN. KAREN L KEATING WILLIAM I CAPLAN TELEPHONE 714-641-5104 FACSIMILE 714-546-9035 JAMESL,.MORRIS. JEFFREY WERTHEIMEk KERRA S.CARLSON. T.LAN NGUYEN MICHAEL T HORNAK ROBERT O OWEN CRISTY LOMENZO PARKER LSSA NEAL NICHOLAS 'A.PROFESSIONAL INTERNET ADDRESS WWW.FLEtBTJxm PHILIP O.KOHN ADAM VOLKERT.. JEFFREY MELCHING JENNIFER.L.DHILLON CORPORATION Direct Dial:(714)6141-3416 E-mail bmarticorena@rutan.com rutan.com - April 18,2002 F. Kent Leacock Vice President Government Affairs and Franchising Bay Area Markets AT&T Broadband P.O.Box 5147 San Ramon, CA 94583 Re: City of Berkeley, California, Contra Costa County, California, City of Richmond, California and the County of Santa Cruz, California (the "Franchising'Authorities" Dear Mr. Leacock: This letter constitutes a'response to your letter to me dated April 4, 2002. Please be advised'that my letter to you dated April 8, 2002 also constitutes a response to your April 4, 2002 letter. Your March 29, 2002 letter did not contain an Exhibit A which purports to be a "list of schedules and exhibits to the AT&T Broadband/Comcast Merger Agreements". However, your April'4, 2002 letter did contain such an exhibit. Thus, without waiving any objection which the Franchising Authorities may have in relation to an untimely response to 'my March 18, 2002 letter,please be advised that the Franchising Authorities desire to review the following schedules and exhibits and believe that said exhibits and schedules are necessary in order to understand the transaction initsentirety. 1. Exhibits to the Amendment and Flan or Merger: a, AT&T Disclosure Schedule. b. Comcast Disclosure Schedule. 2. Exhibits to the Separation and Distribution Agreement: 1241011547-0001 277661,01 a04/18/02', RUTAN &TUCKEF ATTORNEYS AT E A W F. Kent Leacock April 18, 2002; Page 2 a. Exhibit E-Interim Services and System Replication Agreement. 3. Schedules to Agreement and Plan of Merger. a. Schedule 6.03—Government Authorizations. b. Schedule 6.12_Compliance with Laws and Court Orders. C. Schedule 6.13 —Litigation. d. Schedule 6.27—Sufficiency of Transferred Assets. e. Schedule 8.01 -AT&T Broadband Interim Operations. 4. Schedules to the Distribution and Separation Agreement: a. Schedule 1.14(a) — Assets excluded from Definition of AT&T Broadband Assets. b. Schedule 1.14(k)-AT&T Broadband Assets. C. Schedule 1.18(g)—AT&T Broadband Contracts. d. Schedules 2.04(b)(ii), (iii), and (iv) Agreements that Shall Not Terminate As of the Distribution Date. e. Schedule 4.03(c)—Government Consents. I would be happy to discuss a mutually-acceptable confidentiality agreement that complies with all applicable law. Sincerely, RUTAN&TUCKER, LLP William M. Marticorena WMM:vb cc: Manuela Albuquerque, Esq., City Attorney, City of Berkeley Roger Miller, City of Berkeley Patricia Burke, Contra Costa County Eric Xavier, City of Richmond 124M 1597-0001 277661.01 a04/18/02 RUTAN &TUCKER3 ATTO N NE Y5 AT. LAW F. Rent Leacock April 18,2002 Page 3 Richard C. Wilson, City of Santa Cruz Pat Busch, County of Santa Cruz 1241011597-0001 277661.01 a04118!02 • ` AMBroadband m :d; i ?tf�.�Ss,t s rrrt,rsr Star;s, �:ntpus�gsirr.i.,t 1 �.'y!t 4 I fIt`,I3i.yG.._u.S .1,+:.14}Sl.id'r, ss v �illlairn M. Marticorena,;Esq. 714-54 -91335 From. F.Kent Leacock Date: April 23, 2002 W1fr. 14-641-3141 i e: esponse to Request for Information Pages: including cove ument For Ravi" D Pkme C+sntiment © Pkwe Redly 0 PWm Mmycle' Me wage: t.: r);t+i(r.1' in r s is r}l frp4t4 u�t i#s(ttljrik rrntfilt %i�ua;ut",�n} S�� 1t�ri+r t, ;t�tl 1r it t..rci r f f v'unu i?SS{t{s (t: 's t r' 1"r;r rF strit,}ti 3;tilt+#FS}! Iriir`k +au i r r 1{�!st}r5( • • • • • • s • y r Received Apr-23-02 05:03pm Pram-51D '088 8600 �. To-RUTAN t TUCKER LLP, Pace 01 Aft'r Broadband F?D.Bo) 3147 San Par ;r;CA 94593 April 22,2002 MA F LE An MRCMia?iU W William M.Marticarena,Esq. Rutan&Tucker,LLP 611 Anton Boulevard, log'IN Costa Mesa, California 92626-1931 Re: April 8, 2002 Response;on behalf of the City of Berkeley, Califa nia; Contra Costa County, California; City,of Richmond, California;;City of Santa Cruz, California; County of Santa Crttz, California, (collectively the ` =ranchising Aut oritias")relating to the AT&T/Comcast Merger. Dear Mr. Marticorena: We are writing in response to your April 8,2002 letter,which we receive on April 12, 2002, regarding the supplemental information that we provided'relating to our Febti ary 27, 2002 FCC Form 394 filing for the merger (the "Transaction") of AT&T Broadband and C.,mcast Corporation 'Comcast").; As stated in my previous letter to you, we disagree with you assertion ;that our Application was in;,any way incomplete and that, as a result, the statutory 120-(4y deadline for the Franchising Authorities' review of the Application has not begun. While FC( rules permit local franchising authorities to request additional inbormation(subject to limitations),'t 1,.failure to provide such information doses not render the Application incomplete.' To the conts; ry, the FCC rules: prohibit local franchising;:authorities from rendering a filed Application incon llete for failure to include information subsequently requested by a local franchising authority.2 V e also note that, in adopting FCC Form 394, the FCC found that the form;provided the infero ation necessary to establish the legal, technical and financial qualifications of the proposed transfe ve.3 Thus, for the Set Jm2Jg=pAation 0 11, and 13 o Lbe Cable Tolevis and Com,en'tion C of 1992, Report and Order, 8 F.C.C.R'. 6828,¶¶85-86 (1993)011993 FCC Order");Impl=nrdati,n of Sectiong Section1 IWd 1 ele `lion ns mer Protection C SgI m Act of 199-2, Mcnuv•andum Opinion and Order on Reconsideration, 10 F.C.0 R.4654,4676,J 50-53 (1995)(°`1995 FCC Order") z She 1995 FCC Order at 150 (rejecting a request by NATOA that an FCC Fom 394 Application not be deemed complete until information subsequently requested by the LFA is provided): 9 &—e id. at 152("we created FCC Form 394 with the expectation that the inforr %tion required by the form would establish the legal,technical and financial qualifications of the proposed trans teree or assignee.") Recycled Paper Received Apr-20-0'2 05:03pm From-510 960 8600 To-RUTAN TUCKER LLP; Page 02 William M. Marticarena, April 22,2002 Page 2 reasons set forth above, the absence of the information referenced in your April , 2002 letter does not affect the sufficiency or completeness of the Application and will not toll th, statutory 120-day review period. The Application, as filed with the Franchising Authorities on '. cbruary 27, 2002, contained all information requiredby the FCC Form 394 and the licenses,and th, refbre the 120-day deadline was properly commenced as of that day. Further, udder the FCC rules, even if the Application had not been complete s filed, which we dispute.such incompleteness would not be grounds for tolling the 120-day reviev period. Although FCC males permit local fianchisiug authorities to challenge the completeness X the Application within thirty(30) days of filing, the 120-day deadline is only tolled if the applice it fails to cure any such incompleteness within ten(10)days'of their receipt of such challenge.a Witt n this 10-day time flame, the companies previously replied to your letter and clearly deraronstratec how'and whir the Application was complete as filed. Accordingly, FCC rules prohibit any Colli ig of the 1201-day deadline based on this Application as filed. Your letter alleges that our March 29, 2002,correspondence failed to provide Exhibit A, which prevented you from timely evaluating the information provided in st=h letter_ Ea tibit A, which you acknowledge receiving on April 4, 2002, sets forth the list: of exhibits and schec Iles'to the Merger Agreement and the`Separation and Distribution Agreement (the "Agreements' ). Exhibit' A was inadvertently not attached to the March 29, 2002 letter due to a clerical error. He ivever, as we have previously indicated,>we do not believe that the exhibits and schedules must be f ed as a part of the Application. Furthermore, the list'of exhibits are clearly set forth in the indexes !a the Agreements, which you received as part of the Application. In your most recent letter you cite as incomplete or inaccurate twenty--three respov es to your original request for additional information. Of.these, nine of the responses relate to inf rmation regarding labor unions and the Neutrality Agrccrncnt entered into between AT&T and th Communications Workers of America. While we do not believe that information with respect labor matters is within the appropriate scope of inquiry generally, and in any event does not relate to the qualifications of AT&T Comeast,«we are particularly'puzzled as to its relevance to the Franchising Authorities. There are no employees who work in the systems in any of the Fran hising Authorities who are members or a labor union. Three of the responses that you deemed ni m-responsive were offers to provide you with additional documentation, either under a confidenti Glity ;agreement or when such documents became publicly available. A further five respor .es were deemed unresponsive because we failed to provide historical organizational charts c ` all'm=agcrncnt positions at the local,regional and headquarter level during four different time pe ods. However, as noted previously, this information was not related to the:qualification of the transferee, AT&T Comcast, but asked for historical .information =about' the transferor, h seed, in k. CommuniceNgn .Inc v County of Santa Cruz,the court specifically condemned', s unreasonable the kind of broad inquiries made in your letters This is especially true where, as l ,re, the amount of See 47 C.F.R. § 76.502(b),; See also Charter Comm unicat ons. Inc v Count of Santa Cruz. 133 F.Supp.2d 1184, 1207(N.D.Cal.2001). $ S„ce.r.l=.: 8_nts, Cruz, 133 F.Supp.2d at 1201 (Federal law imposes "certain outer limits n the LFAs' power to request information over and above that required by Form 39411). Received Apr-23-112 0543pm From-510 688 8600 To-RUTAN & TUCKIR LLP, Pace 03 William M.Ma ticorena.,_, April 22,2002 Page 3, additional work to create and/or compile such data would be extremely bur, ensoxne and time consuming.s We have submitted ai complete, detailed Application to the Franchising Author;des containing all information reasonably necessary to determine the financial, technical and leg- qualifications of AT&T Comcast as required under federal law and the franchises. Furthermore, we have provided supplemental information to you on behalf of the Franchising Authorities. We have provided information an the respective operations of AT&T and Comcast when relevant t the qualifications of AT&T Comcast and when the'information was accessible without undergoini an undue Burden. We have offered you the 'opportunity to review sensitive documentation undt � a confidentiality agreement. In light of the foregoing, please be more specific about what'additca al information the Franchising Authorities find necessary to review this proposed merger that we ha, a not yet provided or offered to provide,and we will certainly try to meet any reasonable and lawful t cpactations. Since the date of our first response, further information, including the Exchan a Agreement, has become available with the filing of the Public Interest Statement with the FCC. `.his statement can be found at htjgsjCey.rov aou_,,, s or_e, In addition, we are attaching a document entitled Financing Considerations that has recently been prepared by AT&T'Comcast We very much look forward to working with you as the Franchising A thor€ties complete their review and to receiving the Franchising Authorities' consent within the 1201''-o ry period. Very truly yours, r SOCA F.Kent Leacock Vice President Franchising&''Government Affairs Bay Area Market Enclosures Cc wlenclosures(via regular mail): Manuela Albuquerque,Esq. Roger Miller Eric Zavier Riehard'`C_Wilson Fat Busch Jexerrxy Stern, Esq. fid.at 12,10("the large number[of questions]actually propounded and the bode-crushing i ,ark the answers would have entailed rendered them unreasonable in scope"). R®csived Apr-23-02 05:03pm Frust-510 g86 8600 To-RUTAN & TUCKER LLP, Pace 04 AT&T COMCAST CORPORATION FINANCING CONSIDERATIONS Cotntast'■merger with AT&T Broadband wiii create one of the leading entertaiarr -nt, communications,and information companies in the United States. AT&T Comcaai ^orporation's cable systems will pass 38million'homes and serve ZZ million customers,making th company the nation's lamest cable operator and providing a solid base for the introduction of a ide range of new and innovative products and services. With projected revenues'of Sib billion a ad an operating earnings growth rate approaching 20%,AT&T Comeast will have the anaucial stiri agth;.and flexibility needed to maximize broadban,d's growth opportunities and enhance tate, impany's profitability potential Merger Financing. Comcast's merger with AT&T Broadband will be accomplished through a stock- gar-stack exchange and through the assumption or refinancing'of existing AT&T Broadbax .i debt: AT&T's shareholders will receive, subject to adjustment,approximately 0.34 of tT&T Comcast Corporation:Class A shares for each share of AT&T owned, In additi.ori,the eons ins debt of Comoast Cable Communications and the entities acquired under AT&T Broadba d,namely Mcd a One and AT&T Broadband LLC,fk.ea.''TCI,will be combined under the r :w company. Awcomcast test OMCUST e xx AT&T Comcast Corporation: Fina rizing Consldearations April!, 2002 Received Apr-23-02' 05.03pm From-516 988 8600'' Ta-R TAN & TUCKER LLP, Page 05 2 Assumed Debt Under the proposed terms of the merger transaction,it was initially projected tha approximately $25 billion in debt ftm AT&T Broadband and 510 billion in debt from Comcast mould be assumed by AT&T Comcast. This total assumed debt amount will be irmnediate >t reduced by 5 billion however,with Microsoft Corporation's conversion of its holdings in i,T&T Broadband convertible debt into shams of equity in AT&T Comcast. This transt les into an adjusted total debt at closing for AT&T Ctmaeast of Sib billion. It should be noted,too,that any imcrgcr-rclatod debt will be assumcd by the spcc: is parcnt company of'a franchisee,not by any individual community. As such,debt will b assumed by the parent of the fiainchisee. Debt to Cash Flow' "Debt to Casks plow Ratio"is the common industry metric for measuring the fins !ciat strengtb of an M$0. Comcast currently enjoys a significantly stronger balance sheet than A '&T' Broadband,with a ratio of debt to 2001 operating cash flow of less that 4 t 1,cc npared to AT&T bmadband's ratio-.of ever g to 1. The merged company will have a fiat y ar combined debt to operating cash flow ratio of less than 5 to 1.This number de-leverages wi h very conservative assumptions to an excellent ratio of 2.5 to I by 2004 Summery Credit Statistics of Selected Cable Companies Consolidated Results*Source a Merrill Lynch S Co. (Douars In g1t��onsj ATAT Came"t Adelphia As of 12131142 AO Tams Cox cobtsvislan Comm. Ghat .rr insight Madiscorn With$ytt"hid Wamor CMM. ftso tzs (RxAgI ) COM-). Comm LLC Radngd sonlar BAna2MOR 8oa71868 6a202-1- 9216+ 8311 $318- Caw118+ ltinanciais"1 SubWibere 22.0 12.8 0.2 3.0 5.8 7.1 1.3 1.6 2001E ESITOA 56.51*1 09.3 : $1.0 $0.8 $i.6 $1. SO3 $0.3 Tafaf'oolbt&Convenible Debt 930.8 $24.6 ".2' 56A 61+1.6 16 52.6 $2.8 Loveraye Ratio TOW bebt&Convenibis/E81TOA 4.7 x 3.2 x 3.3 x 6.5 x 8.0 x 8,9 8.0 x 8.5 x {1)awrmntly wAar mMm t2)P�O firma far im t"MurAstl amereuone til W.oaav saeac t:Cntati.t�wr..1160Q mlB.n 1n.yhwy,m Investment Grade'Patina Given the above, AT&T Comcast Corporation will be a solid, investment-grade r)mpany. In fact,on March A,2002,Pitch Ratings assigned.indicative ratings of BBB to the=s taioar unsecured dept Obligatiane of AT&T Comcast Corporation. Moody's and Standard and Poor's are currently reviewing the combined entities sting position, although bath funis have suggested that the neer company will maintain its inves went grade status. AT&T Comcast Corporation. Financing Considerations April 1, 200 Received Apr-23-02 05:03pm From-510 988 8600 Tc-RUTAN TACKER LLP, Page Q6 3 Working Capital Succossful aciliticsµbasc d providers of broadband services,such as Comcast,rec lire cash reserves and working capital in order to invest in their infrastructure and business development. We have estimated that somewhere between$'1 billion and S2 billion in funding� 'ill be required at the merger transaction's closing to provide appropriate cash reserves to fund d ;operations and the capital expenditures of AT&T Comcast. We are currently seeking financing for: this warking capital,', the retirement of Al &T Broadband°s inter-company loans to its curront parent AT&T Corp.; and rcfnaor ag of a portion of the dobt AT&T Comcast will assume with she acquisition of AT&T Broadbani . As;of March 1,2002,approximately 80%of the projected amount needed has already be4n sec ured from five leading underwriters,including Morgan Stanley,Merrill Lynch,J.P.Morgan Cha e, B of A Securities,and Citicorp SSB. This early interest in loan syndication remains higl strengthening our expectation that a total S 12.5 billion commitment will be in place by May 20112. In addition, Comcast Cable maintains significant funding availability from extern,d liquidity sources. Comcast Cable currently has an avatlab a qmdit&o-il, t of KS bilLon a Gd funds from this facility will be available to provide additional liquidity,`as needed. With a very strong balance sheet,Comcast is also.currenty goeraUng high `fire ash flow,, ftni its Mations which provides a significant non-debt source of fading for c pital expenditures. Over 95%of Corncast's customers are served by upgraded/rebuilt ilt i stems.With most of this important investment already mane,capital expenditures,are€lecreasi ig resulting its more free cash flaw that can be deployed to accelerate the upgrade of AT&T Bao dband cable systems, Cost Synergies It is estimated that within five years the merger should result in synergies and effi i 1encies worth approximately$1.25 to$1.95 billion.This estimate includes cost savings due to't: a elimination E of corporate'overhead costs,moderation of programming expenditures and i tzpro.ed operating_ margins.The merged company is also expected to save 2001-300 mullion`annuall: from lower prices clue to the increased scale of capital expenditures. Franchise Commitments to Local Communities Our existing commitments to our local ftanchises retrain intact.. Planned system: :builds and upgrades, scheduled service rollouts,and other financial commitments already in; 1e to our local communities will continue. AT&T Comcast Corporation! p'inancing Considerations April 1, 2002 Recetved Apr-29-02 05;03pm Fran-510 988 8800 To-RUTAN TUCKER LLP; rate 07 4 Finally,looldng not so far down the road,the merger of Comcast and AT&T Brc Abend will provide significamt'and diroct benefits to our communities and customers, The c+ rnbfnstion of the companies will establish a sturdy foundation from which to offer ati€tore broad and services to more people more quickly. The merger will facilitate the deployment of new and !xciting video services,high-speed cable Internet and a choice for local phone services at comp ative prices to more customers across the United States. Powerful Platform for Growth M 760+MHx sca7su MHz AT&T Comcast Corporation: Financing Considerations April 1, 2002 Rsceived Apr-23-02 05:03pm From-SID 98S 86€1 To-RUTAN TICKER LLP, Pass 08 COLE, RAYWID & BRAVERMAN', L. L.P. ATTORNEYS AT LAW UIREW STERN 2.381 ROSECRANS AVENUE, SUMS 110 WASJJfNGT0N, o C. OFr1c� ADMJrrE0 IN CA.AND DC EL:SEGUNDO, CALIFORNIA 90245-4290 - �AS 9 PENN5 D.C,Id AVENUE.750 WASwiNoroN,.D.0 2C}4Q6�9?5C DIRECT DIAL TF-LEPHONE (310) 643-7999 TwEpmoxe(20.21.659.9750 310-643-7999 x 100 Fax (310) 643-7997 FAx 12o2)482-0067 JSTERN9CR8LAW.00M WWW.CRSL4W.COM April 30;2002 VIA TELECUPIER AND OVERNIGHT MAIL 714.546.9035 William M. Marticorena,Esq. Rutan& Tucker 611 Anton Blvd., 14th Floor Costa Mesa, CA 92626 Re: AT&T Broadband/Comeast Corporation Form 394 Application Confidentiality Agreement Dear Bill: I am writing in response to your April18,2002 letter received on April 24, 2002 requesting access to certain confidential information. AT&T Broadband and Comcast Corporation have agreed to allow confidential review of certain exhibits and schedules ("Subject Documents") that were not included with the Agreement and Plan of Merger or Distribution and Separation Agreement(collectively, the"Agreements")included in the companies' pending FCC Form 394 Applications that were recently filed withthevarious California municipalities you represent including Berkeley, Richmond, Contra Costa County and Santa Cruz County(the "Communities"). The review would be for the sole purpose of confirming that the Subject Documents are not necessary to understand the terms of the Agreements and, in any event, are not necessary to an analysis by the communities of the qualifications of AT&T Comcast as the new parent company. This Confidentiality Agreement will further memorialize the obligation of the parties and facilitate that review. AT&T Broadband and Comcast, subject to the terms of this Confidentiality Agreement, and execution of this Confidentiality Agreement by you, will make the Subject Documents available for review by you on behalf of the Communities.' Specifically, the Communities' review will be conducted by you at the offices of AT&T Broadband in the Los Angeles area at a specific time and location mutually convenient to you and company representatives. Representatives of AT&T Broadband and Comcast shall have the right to be present during such review. It is further understood that the Subject Documents contain confidential, trade secret 10824 1.D©C COLE, "RAYwID & BRAVER = L,L.P'. April 30, 2002 Page 2 and/or proprietary information and that no codes of the documents will be made. No notes will e generated other than necessary for consultant work product and no such notes will be circulated beyond you and your direct employees on a need to know basis. It is further understood that the review is for the limited purpose set forth above and in order to form and report conclusions related thereto to the Communities. As such, you will assure that no specific information set forth in the Subject Documents will be provided to or otherwise disclosed to the Communities; nor will any information set forth in the Subject Documents be provided or disclosed to any other municipality or other party.The substance of the Subject Documents will not be included in any written report you submit to any Community or its representatives. By permitting review of the Subject Documents pursuant to this Confidentiality Agreement,neither AT&T Broadband, Comcast,nor AT&T Comcast in any way waive the confidentiality of the Subject Documents or the information provided therein or any arguments with respect to whether the Subject Documents are within the appropriate scope of review of the FCC Form 394 Application. You shall he responsible for protecting the confidentiality of any information reviewed and will act in good faith and will not intentionally do anything to deprive AT&T Broadband, Comcast or AT&T Comcast of the benefits of this Confidentiality Agreement. Please indicate your agreement to these terms by signing below. Very truly yours, COLE, RAYWID & BRA VER.MAN, LLP <� .ice-�rrwc•- � `...."�."" eremy'H. Stern cc: Mr. Rick Witherington Mr. Kent Leacock Michael P. Hurst,Esq. Gregory L. Cannon, Esq, This Confidentiality Agreement is agreed to and executed on behalf of the Communities and Mr. William M.Marticorena this day of , 2002 by. William M. Marticorena, Esq. 14824_1.DOC RUTAN A:W.RUTAN 04110-1 5 8,.TUCKER,SR.11888 795D IAMESR MOORS• JOEL DKUPERHOLS ADA OLDF CfIFRE cOMENZO PARKER ttA NtfAUS AUSTIN PAUL fREDERIC MARX STEVEN A NICHOtS IEFFKEY'A.GOLOFARH IFFFREY T M£LCHINC MARK)AU3TtN RICHARD A CURNUTT THOMAS G RRQCKfNGTON f,KEVIN BRAZIL MARLENE POSE}URGEASE N AMY#.HAYDT IOHN B HURLBUT,.III EVRIDIKI IVICKIi DALLAS LAYNE M MEIZER APRIL LEE.WAVIER TRACEY M QL;)AI-H MICHA&TUCKER THEOD L W IWALLtGREGRANDGA M BABBUSH L.SKI L D CAOM KARAL16 N ELlZARETH WAITER STEIII,N 5 FONTES MILFORD W DANT.IR MARYM.GREEN LARRY A CERUTT NATALIE SLBBALD DUNDAS ROBERT H.MARCERtAi! THEODORE 1 WALIACE,!A' GREGG AMBER CAROL D CARTY A1130k M KADin STE YtN W.BL R' EOSFPH1)CARRUTH: MICHAEL F.SETZER PATRICK D M<CALLA IOHN W HAMILTON IF NORM I OUTMAN RICHARD P.SIMS . .THOMAS:1,CRANE RICHARD K'..HOWELL. ION NA A.-RAMIREZ IAMFS B.O'NEAL -'MARKB FRAZIER- IAMES S.WEISZ' PHILIP)BLANCHARD T Y ,L '� L A ROBEAT C BRAUN PENELOPE PARMES DAVID.HOCWNER TERf NCF 1,GALLAGMUL 1 iT 0 r L l� 5 A THOMAS$SALINGER' M KATHERINE 1ENSON A.PATRICK MUNOZ DEIA M HEMI NCWAY. DAVID C.LARSEN' DUKE f WANLQW5T S.DANIEL HARBOTTL£ WOE W RUS_t CLIFFORD£FRIEDEN RICHARD G MONTEVIDEO PAUL I SIEVERS DENISE t MISTER A PARTNERSHIP INCLUDING PROFESSIONAL CORPORATIONS MICHAEL D_RUBfN LORI SARNER SMITH EOSEPHL MAGA.III W ANDREW.MOORS IRA G:RIVIA1 ERNEST W KLATT€,III KRAIG C XLGER CHARLES A DAVENPORT.N1 OF COUNSEL. 611 ANTCON BOULEVARD,FOURTEENTH FLOOR- IEFFREY M ODERAtAN' KIM D,THOMPSON KENT M CLAYTON. RICHARD.D.ARCO LEONARD A.HAMPEL COSTA MESA,CALIFORNIA 92.626-1931 STAN WOLCOTT IAYNE TAYLOR FACER DAN SLATER: MARK M.MMOVOS EDWARD D.5YBES.A..IF ROBERTS BOWER DA4IDH R COSGROVE MARK BUDfNS11K NIKKI.NGUYEN SENATOR DICT.ACKERMAN DIRECT ALL MAIL:M POST OFFICE BOX 1950 MARCIAA FORSYTH HANS VAN UCT£N STEVEN!COON IFAINIFERS ANDERSON DAVID I.GARISALOL III COSTA MESA,CALIFORNIA 92628.19SO WILLIAM AIMARTICORENA STEPHEN A ELLIS DOUGLAS j:.DFNNINCTON IOHN T:BRADLEY WILL'—I.CAPLAN 'TELEPHONE 714-641.5100 FACSIMILE 71'I-S46-9O35 IAMES.L MORRIS MATTHEW K ROSS TREG A IULANDER ALLISON LEMOME RUI MICHAEL T HORNAK. IEFfREY WERTHEIMER 'TODD O UTFIN KAREN L.MATING 'A PROFESSIONAL INTERNET ADDRESS.WWW.TGtan.com PHILIP D.KOHN ROBERT O.OWEN %EARA 5..CARLSON T.LAN NGUYEN CORPORATION Direct Dial:(714)641-3416 E-mail: bmarticorenaf@rutan.com May 1, 2002' Jeremy H. Stern Cole,Raywid &Braverman, LLP 2381 Rosecrans Avenue; Suite 110 El Segundo, CA 90245-4290 Re: City of Berkeley, California - City of Richmond, California - City of Santa Cruz, California - Contra Costa County, California - County of Santa Cruz, California (collectively, the "Franchising Authorities"); AT&T Broadband/Comcast Corporation Merger(the "Transfer'.") Dear Jeremy This letter constitutes a response to your letter to me dated April 30, 2002 (the "Letteri5). Please be advised that the Confidentiality Agreement which you have proposed in relation to my review, on behalf of the Franchising Authorities, of certain exhibits and schedules ("Subject Documents") that were not included with the Agreement and Plan of Merger or Distribution and Separation Agreement (collectively, the "Agreements") included in the pending FCC Form 394 Applications (the "Applications") filed with the Franchising Authorities is not acceptable for the following reasons:' (1) The;scope'of review of the Subject Documents is not limited:to the "sole purpose of confirming that the Subject Documents are not necessary to understand the terms of the Agreements and, in any event, are not necessary to an .analysis by the communities of the qualifications of AT&T/Comcast as the new parent company." On the contrary,a review of the Subject Documents is relevant to the purposes stated above as well as to the potential impact of the transfer upon the provision of cable service within the Franchising Authorities. (2) Provision of the 'Subject Documents to me at the Los Angeles offices of AT&T Broadband without my ability to copy the documents or to make notes thereof is unacceptable. It is not reasonable to expect any attorney or consultant to be placed in a room with a large set of complicated documents for a limited.period of time and expect any type of useful analysis without the aid of selective photocopying and/or extensive note:taking. Simply making 124/011597-0001 ?81115,01 45M/02; t _.._J RUTAN &TUCKER= ATTORNEYSAT LAW Jeremy H. Stern May 1, 2002 Page 2 documents available for a cursory inspection is not the same as fulfilling your obligation to provide all relevant and necessary information to the Franchising Authorities. (3) I am not in the position to agree that "no specific information set forth in the Subject Documents will be provided to or otherwise disclosed to the communities. . ."or to agree that". . . the substance of the Subject Documents will not be included in any written report [I] submit to any community or its representatives." These limitations, berth individually and collectively, render my review of the Subject Documents meaningless and of no value to the Franchising Authorities. Any limitation which precludes relevant information contained within the Subject Documents from being provided to the Franchising Authorities, including relevant members of Staff and elected officials,violates both the spirit and the letter of federal law as well as the local Franchise Agreements. The limitations set forth in your letter constitute an effective denial of access to the Subject Documents. In a spirit of cooperation, I hereby suggest the following alternative procedure: (l) A photocopy of the Subject Documents will be provided to me for review at my offices. (2) 1 will review the Subject Documents solely for purposes relating to the Transfer as it affects and relates to the Franchising Authorities. (3) The Subject Documents will neither be copied nor provided to anyone for review in a location other than the offices of Rutan & Tucker, LLP. (4) To the extent that I determine that the provision of information contained in the Subject Documents is relevant to the decision making process of the Franchising Authorities, such information may be provided to the Franchising Authorities, their Staff and elected officials, by way of summary and narrative description in relevant oral and written'presentations. The actual.Subject Documents will not be made part of any Staff Report or other written document which is made generally available to the public pursuant to applicable law. (5) If, and to the extent, AT&T Broadband, Comcast, or AT&T Broadband/Comcast Corporation challenge any decision of the Franchising Authorities, or any of them, relating to the transfer, the Subject Documents shall be deemed to be a portion of the Administrative Record upon which said decision was made notwithstanding the fact that said Subject Documents were not actually provided to the legislative bodies of the Franchising Authorities. (6) Within thirty(30) days of closing of the Transfer, or within thirty (30) days of the conclusion of any administrative/judicial proceeding relating thereto, the Subject Documents 134/011597-0001 281115.01 a05/01102 RUTAhJ &TUCKERS n T 7 RivFY 5 A T t AW Jeremy H. Stern May 1,,2002 Page 3 shall be returned to you. No copies shall be retained by my office or the Franchising Authorities thereof. The concepts contained in the above-described proposal is consistent with confidentiality protections which have been afforded other cable operators by this office in relation to purportedly sensitive business records. I would certainly be happy to discuss details of my proposal with you at your convenience: Sincerely, RUTAN&TUCKER, LLP William M. Marticorena WMM:vb cc; Manuela Albuquerque, Esq., City Attorney, City of Berkeley Roger Miller, City of Berkeley Patricia Burke, Centra Costa County Eric Xavier, City of Richmond Richard C. Wilson, City of Santa Cruz Pat Busch, County of Santa Cruz 124/011597_0001 281 115,01 a05V01/02 COLE, RAYWID BRAVERMAN L. L.P. ATTORNEYS AT LAW JEREMY STERN 23$I RtJSECRANS AVENUE, SUITE 110 WASHINGTON 0,C. OFFICE: ADMITTED IN CA AND 6C EL SEGUNDO, CALIFORNIA 9072.45-4290 1919 PIENNSKLVANIA AvENuE N-W-. WASHINGTON.p C 20006-9750 DIRECT DIAL TELEPHONE (310).543`7999 TELEPHONE1202)859-9750 3107-643-7999 x 100 JSTERNQCRBLAW.COM. FAX (3'.10) 643-7907r Fax 52021 452=0067. www.CRBLAW.CO 9 May 8,2002 VIA TELECOPIER AND OVERNIGHT MAIL 714.546.9035 William M. Marticorena Esq. Rutan&Tucker 611 Anton Blvd., 14th Floor Costa Mesa, CA 92626 Re: AT&T Broadband/Comeast Corporation Form 394 Application Confidentiality Agreement Dear Bill: As a follow up to our telephone conversation on Friday, May 3, 2002, 1 am writing to propose,a revised version of confidentiality agreement. AT&T Broadband and Comcast Corporation have agreed to allow'confidential review of certain exhibits and schedules ("Subject Documents")that were not included with the Agreement and Flan of Merger or Distribution and Separation Agreement (collectively, the"Agreements")included in the companies' pending FCC Form 394 Applications that were recently filed with the various California municipalities that you and the law firm of Rutan &Tucker represent including the cities of Berkeley, Richmond, Santa Cruz, Contra Costa County and Santa Cruz County(the"Communities"). The Communities have asked the companies`to produce a complete copy of the Subject Documents. The companies have responded that the Subject Documents are not necessary to understand the terms of the Agreements and, in any event, are not necessary to an analysis by the communities' of the qualifications'of AT&T Comcast as the new parent company. The Communities, except those Communities which Rutan & Tucker otherwise identifies in writing, have asked to have Rutan & Tucker conduct an initial review of the documents to determine whether they appear to raise issues relevant to Communities' review of the transaction. By making this request, the Communities do not,waive' any obligations that the companies may have to respond in a timely manner to the Communities' original requests. The Rutan & Tucker review will be for the sole purpose of determining whether the Subject Documents are material to the`Communities at this point in the proceedings in order to understand the terms of the Agreement and analyze the qualifications of AT&T Comcast as the 148524 LDDC ` COLE, RAYW10 & BRAVER,.: L L.P. Letter to William M. Marticorena, Esq. May 6,2002 Page 2 new parent company. If in its reasonable discretion, Rutan & Tucker determines that said Subject Documents or any portion thereof are material to the Communities' understanding of the Agreement or the qualifications of AT&T Comcast as the new parent company, AT&T shall enter into negotiations with Mr. Marticorena to reach an acceptable disclosure arrangement. If an acceptable''disclosure arrangement is not reached, neither the Communities nor AT&T waive their respective legal positions regarding the confidentiality of the Subject Documents or the information provided therein or any arguments with respect to the Communities' appropriate scope of review or the relevancy of the Subject Documents to such review. This Confidentiality Agreement will memorialize the obligation of the parties and facilitate that review. AT&T Broadband and Comcast, subject to the terms of this Confidentiality Agreement, and execution of this Confidentiality Agreement by William M. Marticorena, Esq., will make the Subject Documents available for review by Rutan & Tucker on behalf of the Communities. Specifically, the Communities' review will be conducted by Mr. Marticorena and one of his firm's attorneys at the offices of Cole, Raywid & Braverman in El Segundo, California at a specific time mutually convenient ' to Rutan & Tucker and company representatives. Representatives of AT&T Broadband and Comcast shall have the right to be present during such a review. it is further understood that the Company Asserts that the Subject Documents contain confidential, trade secret and/or proprietary information and that;no copies of the documents will be made. No notes will be generated other than necessary for attorney work product and no such notes will be circulated beyond you and your direct employees on a need to know basis. It is further understood that the:review is for the limited purpose set forth above and in order to form and report conclusions related thereto to the Communities. As such, you will assure that no specific information setforth in the Subject Documents will be provided to or otherwise disclosed to the Communities. Nor will any confidential information set forth in the Subject Documents and derived solely from this review be provided or disclosed to any other municipality or other party. The substance of the Subject Documents derived during this review will be held confidential and not made available for public distribution. By permitting and participating in a review of the Subject Documents pursuant to this Confidentiality Agreement, neither AT&T Broadband, ;,Comcast, AT&T Comcast nor the Communities in any way waive any claims concerning the 'confidentiality of the Subject Documents or the information provided therein or any arguments with respect to whether the Subject Documents are within the appropriate scope of review ;,of the FCC Form 394 Application. Likewise, the Communities do not waive any claim`as to the legal requirement that said Subject Documents be produced without the restrictions of this Confidentiality Agreement'. Rutan & Tucker shall be responsible for protecting the confidentiality of any information reviewed and will not use the information obtained for any purpose other than the limited purposes set forth above. All parties agree this agreement is subject to and limited by applicable state and federal laws. 148524 1.DC?C COLE, RAYwID & BRAVERt"" L.L,P. Letter to William M.Martcorena, Esq. May 6, 2002 Page 3 Please indicate your agreement to these terms by signing below. Very truly yours, COLE,RAYWID & BRAVERMAN,LLP Jeremy H. St cc: Mr. Rick Witherington Mr. Keret Leacock Michael P. Hurst, Esq. Gregory L. Cannon, Esq: This Confidentiality Agreement is agreed to and exe� on behalf of the Communities and Mr.William M. Marticorena this '`day of 1 P � , 2002 by: By: Rutan&Tacker, LLP William M. Marticorena,Esq. 148524t.voc FIGURE COMPARISON OF AT&T BROADBAND AND COMCAST CABLE ($ in millions) AT&T Broadband Comcast(cable svcs.) Nine-Month Revenue(1/1/01-9/30/01) 7,423 3,704 AnnualizedRevenue—2001« 9,897 4,934 Revenue per Year per Subscriber" 707: 617 Revenue per Month per Subscriber 58.91 51.45 Operating Income(Loss)before Depreciation and Amortization(Operating Cash Flow) 1,496 1,169 Nine Months (11/1/01-9/3©/01') Depreciation and Amortization 3,330 2,175 Operating Income.(Loss) (1,834) (565) Operating Cash Flow as a%of Revenue 20.2% 43.5°l0 4/3 x nine months revenue. «* Based on 14,000,000 AT&T subscribers and 8,000,000 Comcast subscribers. 8 Report of Creighton, Bradley & Guzzetta, LLC Relating to the FCC Forms 394 and Related Materials Filed by AT&TCorp. and Comeast Corporation Creighton n Guzzetta, LLC C:onununicaxionc Law Thomas D. Creighton Michael R. Bradley Stephen J. Guzzetta" 5402 Parkdale Drive, Suite 102 Minneapolis,MN 55416 (952)543-1400(Voice) (952) 543-8866(Fax) May 30, 2002 I. INTRODUCTION This Report is prepared on behalf the following local franchising authorities:: Minnesota: the Burnsville/Eagan Telecommunications Commission (Cities of Burnsville and Eagan); the North Metro Telecommunications Commission (Cities of Blaine, Centerville, Ham Lake, Spring Lake Park, Lino Lakes, Ham Lake, and Lexington); the Central St. Croix Valley' Joint Cable Communications Commission (Cities of Stillwater, Bayport, Baytown Township, Oak Park Heights and Stillwater Township); the City of Columbia Heights; the City of Coon Rapids;,the City of Gem Lake, the North Suburban Cable Communications Commission (Cities of Roseville, New Brighton, St. Anthony, Lauderdale,:NorthOaks, Mounds View, Arden Hills,, Shoreview, Little Canada, and Falcon Heights); the Quad Cities Cable Communications Commission (Cities ;of Anoka, Champlin, Andover, and Ramsey); the:Ramsey Washington Counties Suburban Cable Commission(Cities of Maplewood;Oakdale, White Bear Lake, White Bear Township, Dellwood, Birchwood, Grant, Lake Elmo, Mahtomedi, North St. Paul, Vadnais Heights and Willernie); and the South Washington County'Telecommunications Commission (Cities of Woodbury, Cottage Grove,Newport, St.Paul Park and Denmark Township). Tennessee: the Metropolitan Government of Nashville and Davidson County ("Metropolitan Nashville");the City of Murfreesboro;and the Town of Smyrna. Wisconsin: the City of River Falls;and the City of Prescott. The local government entities listed above are collectively referred to herein as the "LFAs" or singularly as an "LFA." The LFAs' local cable television franchises are collectively referred to herein as"Franchises"or singularly referred to as a"Franchise"). This transaction involves a merger of the ownership'interests of the parent companies of the companies holding the Franchises of the LFAs. On December 19, 2001, Comcast Corporation agreed to acquire AT&T Corp.'s AT&T°Broadband subsidiary in a transaction initially valued at $72 billion. AT&T Corp. ("AT&T"), AT&T Broadband Corp. ("ATTB"), AT&T Broadband Acquisition Corp., Comcast Acquisition Corp. and Comcast Corporation ("Comcast") have entered into an agreement to merge ATTB and Comcast, as separate entities,under a new parent corporation called AT&T Comcast Corporation ("AT&T Comcast") (the transaction herein referred to as the"Transaction"). The proposed merger and resulting transfer of control will result from the spin-.off of ATTB, a holding company for AT&T's broadband division, to AT&T's shareholders, and the subsequent merger of ATTB and Comcast into wholly-owned subsidiaries of AT&T Comcast. After the merger is consummated, existing AT&T shareholders will hold 55 percent of the economic interest'"and between 57 and 61 percent of the voting interest of AT&T Comcast; 'existing AT&T Comeast Transfer Application Report May 30,2402 Creighton Bradley&Guzzetta,LLC page l Comcast shareholders will hold 39 percent of the economic interest and between'1 and 5 percent of the voting interest of AT&T Comcast; and Brian L. Roberts will directly or indirectly hold approximately 1.5 percent of the economic interest and approximately 33' percent of the voting interest'of AT&T Comcast. AT&T and Comcast represent that the Transaction will also have the following characteristics: • The existing, indirect wholly-owned subsidiaries of AT&T` and Comcast holding the Franchises'before the Transaction will continue to hold the Franchises after the Transaction. The Transaction will not affect any current obligations under the Franchises. After the Transaction, the franchise holder in each LFA will be bound by its Franchise obligations in the same manner and to the same extent as before the Transaction: e AT&T Comcast anticipates retaining most of each franchise holder's local personnel, including management and technical personnel. Thus, the level of local expertise and experience currently available should not be diminished by the Transaction: • No changes to each franchise holder's current 'service policies and practices are required:, planned or anticipated as a result of the Transaction. The purpose of this report is to provide the LFAs with an understanding of the Transaction,the standard for review,and our analysis and conclusions. H. THE EVALUATION PROCESS The LFAs received an FCC Form 394 from either AT&T or Comcast, through their subsidiaries (AT&T Broadband and Comcast Cable Communications, Inc. ("Comcast Cable")), on or about March 5, 2002. The Forms 394 lay out the Transaction, as described above and in greater detail below. Since the Transaction would result in a total change of control over the Franchises, the prior approval of the LFAs must be obtained, in accordance with the terms of the Franchises and/or applicable law. In the process of evaluating the FCC Forms 394, CBG, on behalf of the LFAs, has done the following: Retained Ashpaugh & Sculco,CPAs, PLC ("A&S") to examine AT&T Comcast's financial qualifications,and the proposed merger's impact on services and rates; Issued an initial data request to AT&T Broadband on March 4 2002, on behalf of all the Minnesota:LFAs, except Geta Lake,' which request solicited certain financial information regarding the Transaction(Bata Request#1); AT&T Comcast Transfer Application Report May 30,202 Creighton Bradley&Guzzetta,LLC Page 2 ➢ Issued an initial data request to AT&T Broadband and Comcast Cable on March 15,2002,on behalf of Gem Lake, the Wisconsin LFAs and the Tennessee LFAs, which request solicited certain financial information regarding the Transaction("Bata Request#2") ➢ Drafted and transmitted a letter to AT&T Broadband,', on behalf of the Minnesota and Wisconsin'LFAs, informing it that the transfer process set forth in Section 617 of the Cable Communications Policy Act of 1984, as amended, 47 U.S.C. § 537, preempts the transfer process specified in state law; Reviewed the FCC Forms 394 for completeness and transmitted a notice of incompleteness to both AT&T Broadband and Comcast Cable on March 29,2002, which notice, among other, things, informed r AT&T Broadband-,and Comcast Cable that the federal 120-day review period had not begun due to the incompleteness of the information received thus far, Informed AT&T Broadband and I Comcast Cable by letters transmitted in March and early April, 2002 (depending on the LFA involved),that the LFAs must be reimbursed for all costs' incurred in reviewing the FCC Forms 394,; and associated documents, and in preparing a report,recommendation and resolutions or ordinances; Negotiatedcomplete reimbursement of the LFAs' transfer-related expenses with a representative of AT&T Broadband and Comcast Cable; Reviewed AT&T:Broadband's',and Comcast Cable's responses to Data Request#1 and Data Request #2, and prepared a third data request, dated April 2, 2002, soliciting information on AT&T Comeast's financial, technical, legal, character and managerial qualifications ("Data' Request#3"); Analyzed AT&T Broadband's=and Comcast Cable's response to Data Request#3, Independently researched information about the proposed transaction and arguments raised by AT&T Broadband and Comcast Cable in the course of reviewing the FCC Forms 394; Drafted a letter, dated May 6, 2002, notifying AT&T Broadband and Comcast Cable that the terms of the proposed merger had materially changed and that the company's transfer applications remained incomplete;' ➢ For the Minnesota and Wisconsin LFAs and Metropolitan Nashville and Davidson County, prepared a written response to AT&T Broadband's/Comcast Cable's correspondence concerning the incompleteness of the companies' applications; Evaluated the impact of the Transaction on competition in the delivery of cable service and services and rates, based on information provided by AT&T Broadband, Comcast Cable and A&S, and information obtained'through independent research;and AT&T Comeast Transfer Application Report May 30,2002 Creighton Bradley&''Guzzetta,LLC Page 3 > Assessed AT&T Comcast's financial, technical, legal, managerial and character qualifications, using data furnished by AT&T Broadband, Comcast'Cable ::and A&S, and information obtained through independent research. All of the documents referenced above are incorporated herein as if a part hereof. Copies of each document are available for review from CBG, except those documents which are protected from disclosure under applicablelaw. CBG's conclusions concerning AT&T Comcast's financial, technical, legal, managerial and technical qualifications, and the impact of the proposed merger on competition, 'subscriber rates and services,are set forth in:detail below. III APPLICABLE FEDERAL, STATE AND LOCAL I LEGAL REouiREMENTS The applicable legal requirements for examining a request for approval of the Transaction may be found at the federal, state and local level. A. Federal Law: The Cable Communications Policy Act of 1984, as amended, 47 U.S.C. § 521, et seq. (the "Federal Cable Act"), and the Federal Communications Commission's regulations do not establish substantive standards for approving or rejecting a transfer application. Section 617 of the Federal Cable Act, 47 U.S.C. § 537, and 47 C.F.R. §'76.502, however, 'contain certain mandatary procedures that the LFAs must follow. In this regard, § '537 requires` a local franchising authority'-to act within 120 ;days of receipt of'a completed' FCC Form 394 that includes all information required by the franchising authority's franchise and state and local law. A local franchising authority and a transfer applicant may agree to-extend the 220-day;deadline provided for in federal law and Federal Communications Commission regulations. Absent an extension of time, if a local franchising authority does not act within 120 days, an applicant's' transfer request will be deemed approved. Although federal law is primarily'procedural with regard to transfers of ownership and control, the Federal Cable Act does delineate two grounds on which a franchising authority may deny a transfer request. See 47 U.S.C. § 533(d). First, a transfer'application may be denied if the proposed transferee owns or controls another cable system in the franchise area. Second, a local franchising authority:may reject a transfer if the proposed transaction would eliminate or reduce competition in the delivery of cable service. B. State and Local Law. State and local law typically establish the substantive legal bases for granting or denying a transfer request, and often set forth the applicable standard of review. In many cases, the LFAs' Franchises or an LFA's municipal"cable ordinance may delineate specific;grounds that may be used, and speck factors that must be considered. In addition, state statutes and court decisions' AT&T Comcast Transfer Application Report May 30,2002 Creighton Badley&''Guzzetta,LLC Page 4 may list criteria that must be considered or may establish standards that must be followed In some cases, state law may also prescribe additional procedures that must be followed by LFAs'. Tennessee Law—Murfreesboro and Smyrna Tennessee state statutes do not contain any substantive standards or requirements governing a LFA's analysis of this Transaction. Thus,unless restricted by the terms of a Franchise,,LFAs in Tennessee should have broad discretion when it comes to reviewing and acting on a transfer application,provided the LFAs do not act arbitrarily or capriciously.' Neither Murfreesboro's nor Smyrna's local ordinances contain any substantive limitation on the LFAs' authority to evaluate, approve or deny a transfer request, although the ordinances do define the types of transactions for which prior approval is required. More specifically, neither Franchise limits the subjects that may be reviewed in connection with a defined transfer or restrict the permissible bases for approval or denial of'a transfer application. Tennessee Law–Metropolitan Government of Nashville and Davidson County The Metropolitan Nashville analysis incorporates the comments above regarding Tennessee state law requirements. As for local law, § 6.08.140 of the Metro Code does not contain any substantive limitation on Metropolitan Nashville's authority to evaluate, approve or deny a transfer request! More specifically, § 6.08.140 does not the limit subjects that may be reviewed in connection with a transfer. Indeed,: § 6.08.140(B)(3) specifies that "f f]or the purposes-of determining whether it shall consent to a transfer, metropolitan Nashville or its agents may inquire into all financial, technical'and legal qualifications of the prospective transferee and such other relevant-matters as metropolitan Nashville may reasonably deem necessary to determine whether the transfer is in the public interest and should be approved, denied, or conditioned." Moreover, the'Metro Code;,does not restrict the permissible'bases''for approval or denial of a transfer application, although it does list specific factors that must be considered. Those factors, however,are not exclusive. They are: (i)the legal, financial,and technical qualifications of the transferee to operate the system;' (ii)any potential impact of the transfer on subscriber rates or services; (iii) whether the incumbent franchisee is in compliance with its franchise agreement and Chapter 6.08 of the Metro Code and, if not, the proposed transferee's commitment to cure such noncompliance; (iv) whether the transferee owns or controls any other cable system in Metropolitan Nashville, and whether operation by the transferee may eliminate or reduce competition in the delivery of cable service in Metropolitan Nashville; and (v) whether operation by the transferee or approval of the transfer would adversely affect subscribers, Metropolitan Nashville's interest under Chapter 6.08, the franchise agreement, other I Chapter 6.08 of the Metro Code does,however,define the types of transactions for which local approval must be sought. See§6.08.020 of the Metro Code,defining the concept of a"transfer." AT&T Comcast Transfer Application Report May 30,2002 Creighton Bradley&Guzaetta,LLC Page 5 applicable law,or the public interest, or make it less likely that the future cable-related needs and interests of the community would be satisfied at'a reasonable cost? Minnesota Statutes and Specific Local Franchise Ordinances Pursuant to Minn. Stat. §238.083, Subd. 4, local franchising authorities must not unreasonably withhold their consent to a proposed sale or transfer of a Franchise, including a sale or transfer by means of a fundamental corporation change.3 Stated differently, state law establishes a substantive standard,which requires that LFAs must have a reasonable basis to withhold approval of a proposed sale or transfer of Franchise. It should be noted that §238.083 does not limit the issues or qualifications that may investigated in the context of such an analysis,or otherwise delineate the grounds on which a denial can be based. Thus,unless restricted by the terms of Franchise,Minnesota LFAs have broad discretion in reviewing this Transaction. None of the Minnesota LFAs' Franchises contain any limitation on the subjects that may reviewed in connection with an analysis of this Transaction,nor do any of the Franchises contain limitations on permissible bases for the approval or denial of this Transaction. That said,the Franchises for Columbia Heights,the South Washington County Telecommunications' Commission and the member cities of the North Metro Telecommunications Commission reiterate that approval of the application at issue in this review cannot be unreasonably withheld. Aside from the substantive standard discussed above, Minn. Stat, § 238.083 contains certain procedural requirements pertaining to the sale or transfer of cable television franchises. More specifically, §238.083 states: Subd. 2. Written approval of franchising authority. A sale or transfer of a franchise, including a sale or transfer by means of a fundamental corporate''change, requires the written approval of the franchising authority. The parties to the:°.sale or transfer of a franchise shall make'a written request to the franchising authority for its approval of the sale or transfer. The franchising authority shall reply in writing within 30 days of the request and shall indicate its approval of the request or its determination that a public hearing is necessary if it determines that a sale or transfer of a franchise may adversely affect the company's subscribers. The franchising authority shall conduct a public hearing on the request within 30 days of that determination. Subd. 3. Notice of hearing. Unless otherwise already provided for by local law,notice of the hearing must be given 14 days before the hearing by publishing notice of it once in a newspaper of general circulation in the area being served by the franchise. The notice roust contain the date, time,;and place of the hearing and must briefly state the substance of the action to be considered by the franchising authority. 2 See§6.08.140(C)(1)of the Metra Code. 3 Minn.Stat. §238.083,Subd. 1 defines a"fundamental corporate change"as"the sale or transfer of a majority of a corporation's assets;merger,including a parent and its subsidiary corporation;consolidation;or creation of a subsidiary corporation. AT&T Comcast Transfer Application Report May 30,2002 Creighton Bradley&Guzzetta,LLC page 6 Subd. 4. Approval or denial of transfer request. Within 30 days after the public hearing,the franchising authorityshall approve or deny in writing the sale or transfer request. The approval mint not be unreasonably withheld: The franchise''ordinances adopted by the City of Columbia Heights,the South Washington County Telecommunications Commission and the member cities of the North Metro Telecommunications Commission reiterate the same procedural requirements. In contrast to state law and the Franchises identified above,the transfer provisions of the Federal Cable Act, as amended,provide that: A franchising authority shall, if the franchise requires franchising authority approval of a sale or transfer, have 120 days to act; upon any request for approval of such sale or transfer. If the franchising authority fails to render a final decision on the request within 120 days, such request shall be deemed granted unless the requesting party and the franchising authority agree to an extension of time. 47 U.S.C. §537. According to the Federal Cable Act, any provision of state or local law, which is "inconsistent" with Title Ur (Cable Communications) is deemed to be preempted and superseded. 47 U.S.C. § 556(c). Accordingly, CBCT has determined that federal law preempts any provision of state or local law that would require LFAs to meet certain procedural deadlines prior to rendering a final decision regarding a transfer request. In short, the federal right' to a 120-day review period cannot be eviscerated by a failure to meet inconsistent state or local procedural requirements. AT&T Broadband does not concur that,federal law preempts the applicability of the procedural deadlines and steps set for in § 238.083. That said,AT&T Broadband has agreed not to assert any violation of state procedural steps or timing deadlines, as long as final action is taken on its applications within the 124-day deadline specified in federal'law, Wisconsin Statutes and Specific Laical Franchise Ordinances Pursuant to Wis. Stat. § 66.082(5)(a), Wisconsin LFAs may not withhold approval of this Transaction without "good cause." It should be noted, however, that § 66.082(5)(a) does not limit the issues or qualifications that may be investigated in the context of this Transaction, or otherwise delineate the grounds on which a denial can be based. Thus, unless restricted by the terms`of a Franchise, Wisconsin LFAs have broad discretion when it comes to reviewing, approving or denying this Transaction. Norte of the Wisconsin LFAs' Franchises contain any limitation on the subjects that may be reviewed in connection with this Transaction, nor is there any limitation on the permissible bases for approval or denial of this Transaction, AT&T Comcast Transfer Application Report May 30,2002 Creighton Bradley&Guzzetta,LLC Page 7 Aside from the substantive standard discussed above, Wis. Stat. § 66.082(5)(a) contains certain procedural requirements pertaining to this 'Transaction. More specifically, Wis. Stat. §'66.082(5)(a)states: A cable operator shall give the municipality that authorized its franchise at least 90 days' advance written notice of the cable operator's intention to transfer ownership or control of a cable television system. During the term of a franchise agreement,a cable operator may not transfer ownership or control of a cable television system without the approval of the municipality that authorized the franchise. A municipality may not withhold approval of an ownership transfer or a transfer of control without good cause. If a hearing is necessary to determine if a transfer may have an adverse effect, a municipality may schedule a hearing to take place within 45 days after the date on which the municipality receives the notice. If a municipality withholds approval of an ownership transfer or a transfer of control, the municipality shall state its objections to the transfer in writing within 60 days after the date on which the municipality receives the notice, Wis. Stat. §.66.082(5)(a). The state's default review period and procedures, however, "may be varied under a written franchise agreement that is entered into, renewed, extended or modified after May 14, 1992:" Wisc. Stat. § 66.092(5)(c). In this regard, the Wisconsin LFAs' Franchises, which have been renewed since '1992, state: "[t]he City shall have such time as is permitted by federal law in which to review a transfer request." Federal law specifies that: A franchising authority shall, if the franchise requires franchising authority approval of a sale or transfer, have 120"'days to act upon any request for approval of such sale or transfer. If the franchising authority fails to render a final decision on the request within 120 days, such request shall be deemed granted unless the requesting,`party and the franchising authority agree to an extension of time. 47 U.S.C. § 537. Thus, pursuant to state and local law, the Wisconsin LFAs have 120 days in which to analyze AT&T's'FCC Forms 394 and any materials requested pursuant to or required by the LFAs.` C. Procedural Issues. The LFAs received AT&T's and Comcast's transfer applications on or about March 5, 2002. If the applications were complete, the 120-day review period provided for in federal law would end on July 3, 2002. As indicated in Section 11 of this Report, CBG has notified bothAT&T Broadband and Comcast Cable, on multiple occasions,'that AT&T's and Comcast's Forms 394 are incomplete. Accordingly, the 120-day review period never started. Both AT&T Broadband and Comcast Cable have disputed this fact; AT&T Comcast Transfer Application Re ort May 30,2002 Creighton Bradley&Guzzetta,LLC Page 8 What cannot be disputed is the fact that on or about May 6, 2002, CBG received information from a public source indicating that AT&T and Comcast had, among other things, significantly changed AT&T Corncast's corporate governance structure. CBG immediately informed AT&T Broadband and Comcast Cable that, at a minimum, the reorganization of the Transaction required notification of the LFAs and extension of the federal review period. In the interest of time, both A&S and CBG began analyzing the new transaction once they were able to obtain' AT&T Comcast's amended Form S-4 which was filed with the Securities and Exchange Commission at the end of April 2002: We should note, however, that it could be argued that the ongoing transfer review proceedings were terminated by the filing of the amended Form S-4 and that new Forms 394 must be filed with the LFAs (thus triggering a new 120-day review period). The LFAs'could also argue that the 120'-day deadline has not begun on the March 5 transfer applications, since AT&T and Comcast never completed those applications, in accordance with applicable laws,ordinances and agreements. Maintaining either position, though, would expose the LFAs to legal uncertainty, and could prejudice their legal rights if a court were to rule that a new Form 394 was not required'and/or that the applicable 120-day deadline expired on July 3, 2002, since absent final LFA action within the federal review period, the Transaction will be deemed approved by operation of federal law. CBG therefore believes it would be prudent for the LFAs to act prior to July 3, notwithstanding the fact that: (i) AT&T and Comcast have asked the LFAs to review a transaction that is entirely different than the one described in the FCC Forms 394 and related materials; and(ii)neither company has completed its transfer applications. IV STANDARD OF REVIEW At the time of awarding the original Franchises and in subsequent transfers of the Franchises, the LFAs considered and approved the technical ability, financial capacity, legal qualifications and character of the original and subsequent owners of the cable systems,,as well as other appropriate factors. The same considerations apply to the current review. The sources of information used in evaluating these factors 'included the FCC Form 394, its exhibits, the current Franchises, various FCC rules and regulations regarding cable communications systems, state and federal law, the Internet and various subsequent written and oral responses to requests for documents from AT&T Broadband and Comcast Cable. The LFAs' task in this process is to review the information provided regarding the Transaction and to approve or deny the Transaction. The LFAs have the express right to approve or disapprove this Transaction. The standard of review' is that the LFAs'' consent shall' not be unreasonably withheld. For the purpose of determining whether they,will consent' to the Transaction, the LFAs must'make 'inquiry into the legal, technical and financial qualifications and other appropriate factors regarding the party acquiring control of the Franchises, in this case AT&T Comcast. In analyzing the Transaction, the LFAs must consider whether AT&T Comcast meets all of the criteria originally considered in the;granting of the Franchises. Note,however,that this analysis AT&T Comcast Transfer Application Report May 30,2002 Creighton Bradley&Guzzetta,LLC Page 9 is not a comparison between AT&T or 'Comcast and the new AT&T Comcast: Rather, this analysis is an application of factors to determine``whether AT&T Comcast satisfies the applicable standards to the reasonable satisfaction of the LFAs, The LFAs should focus on the followingfactors in determining whether to approve or deny the Transaction: 1. Legal and character qualifications of AT&T 2. Technical ability of AT&T Comcast and its operational staff, 3. Financial stability and qualifications of AT&T Comcast, and the impact of the Transaction on services and rates; 4. Managerial qualifications of AT&T Comcast and its subsidiaries; 5. Impact'on cable service competition; and 6. Other appropriate factors,including those required'by local law. CBG has conducted an extensive review of all relevant materials on behalf of the LFAs. This Report is a "shorthand" synthesis of that review in an attempt to fully inform the LFAs without overwhelming the decision' making body with detail and minutia. Obviously, this review extended far beyond the summary of this'report, and CBG is available to further expand on this summary should the LFAs have any questions. V. DESCRIPTION OF TRANSACHON It is necessary to understand the corporate structuring;,of the 'Transaction to determine whether such a structure is lawful, but also to understand the financing (at what level'is the money adequate to meet existing and anticipated'franchise obligations), and to establish which'entity's technical qualifications should be reviewed. AT&T Comcast Corporation("AT&T Comcast"),Comcast Corporation("Comcast")and AT&T Corp. ("AT&T")have entered into an Agreement and Plan of Merger,dated December 19, 2001, and amended April 29, 2002,(the "Agreement")4 under which Comcast and AT&T have agreed to combine Comcast's and AT&T's broadband businesses. Under the Agreement, AT&T Broadband Corp., a holding company for AT&T's broadband division ("ATTB") will be spun- off to AT&T's:shareholders. Upon completion of the spin-ofl; both Comcast and ATTB will 4 Counsel for AT&T and Comcast has represented in writing that"in no respect has the structure of the transaction been altered nor have any parties to the transaction changed as a result of the changes"contained in the April 29, 2002,registration statement and the modifications made to the Agreement and Plan of Merger. CBCT,however, believes the changes made by AT&T and Comcast alter the structure of the transaction,since,among other things, AT&T Comcast's corporate governance structure was modified. AT&T Comeast Transfer Application Deport May 30,2002 Creighton Bradley&Guzzetta,LLC Page 10 merge with temporary holding :companies (AT&T Broadband Acquisition Company and Comcast AcquisitionCompany) and become separate, wholly-owned subsidiaries of AT&T Comcast. Upon completion'of these mergers, Comcast shareholders`will receive one share of the corresponding 'class of AT&T Comcast stock for each of their shares of Comcast stock, and AT&T shareholders will receive in the aggregate for their shares of'ATTB common stock 1.235 billion shares of AT&T Comcast Class A..stock,or approximately 0.34 shares of AT&T Comcast for each share of AT&T stock. The AT&T Comcast transaction will occur in several steps and will be subject to the receipt of the necessary governmental'approvals and the satisfaction or (to the extent permissible) waiver of other conditions specified in the Agreement, such as required shareholder approvals; AT&T will (i) assign and transfer'to ATTB all of the assets of AT&T's broadband cable and cable telephony business and (ii) cause ATTB to assume all of the liabilities of AT&T's broadband business (as reflected in the AT&T Broadband Group balance sheet dated as of December 31, 2000 or as otherwise specified in the Separation and Distribution Agreement between AT&T and ATTB)that are not at such time assets or liabilities of AT&T Broadband or an AT&T Broadband subsidiary. AT&T will then spin-off ATTB to the shareholders of AT&T. Immediately following this spin- off, Comcast and ATTR will each merge with different, wholly-owned subsidiaries of the newly- created 'AT&T Comcast Corporation. Specifically, Comcast will merge into Comcast Acquisition Corp., a newly formed, wholly-owned subsidiary''of AT&T Comcast,with Comcast surviving. ATTB will merge into AT&T Broadband Acquisition Corp., also a newly-formed, wholly-awned subsidiary of AT&T Comeast, with ATTB. In addition, at the option of AT&T Comcast, AT&T Broadband Holdings,LLC, which will be a wholly-owned subsidiary of AT&T Comcast, will become an intermediate holding company between AT&T Comcast and ATTB. Appendix A contains two charts that depict' the proposed ownership' structure of AT&T Comcast. Following these steps, AT&T Comcast will be the new public company.parent of ATTB and Comcast, both of which will be separate, wholly-owned subsidiaries of AT&T Comcast. As a result, AT&T Comcast will consist of both companies'"cable systems, both companies' interests in programming services, as well as other assets owned by the two companies. The company molding the cable franchise with the LFAs will not: change as a result of this Transaction. However, the ultimate controlling parent company of each franchise holder will become AT&T Comcast, VL LEGAL QUALIFICATIONS AT&T Comcast Transfer Application Report May 30,2002 Creighton Bradley&,Guzzetta,LLC Page l l The legal qualifications standard relates primarily to the analysis of whether AT&T Comcast and its affiliates are duly organized and authorized to own the cable systems and the Franchises via the Transaction. As"stated above,the ownership of the Franchises will indirectly rest in AT&T Comcast as the ultimate parent of the actual franchise holder in the LFA's respective franchise areas. We have reviewed this corporate structuring and the necessary transactions related thereto, All necessary corporate entities are or will be duly organized In this regard, AT&T Comcast itself has already been established and duly incorporated in Pennsylvania. We have also concluded that all of the entities necessary to be qualified to transact business in Minnesota, Tennessee, and Wisconsin are or will be so qualified As discussed above, those entities are not changing as a result of the Transaction. The legal analysis of the proposed merger also involves an analysis of whether the overall Transaction itself complies with federal, state and local law. We have reviewed the relevant agreements between AT&T Comcast, AT&T and Comcast, and comments that were filed with the FCC concerning the Transaction. Based upon our review, it is our opinion that the Transaction does not violate Federal, State or local law at this time, although issues concerning horizontal and vertical ownership restrictions may arise in the future. Therefore, the LFAs would not have a reasonable basis to withhold approval of the Transaction based on the above.. VU. T gflN CAL ABILITY While the technical ability'analysis of the Transaction should focus on the technical expertise and experience of AT&T 'Comcast, our review must focus on a best analysis of ATTR and Comcast (and their subsidiaries), in this case, as those preexisting companies will>manifest themselves operationally in the merged entity, since they will remain after the Transaction is consummated'and will likely be primarily responsible for day-to-day operations. Our focus on ATTR and Comcast (and their subsidiaries) is>,also necessitated by the fact that we have been able to obtain'little information on AT&T Comeast's technical qualifications, since both AT&T Broadband and Comcast Cable have refused to answer virtually any question related to the eventual operation of AT&T Comcast (proffering the argument that they are prohibited by law from doing so). Further,' since the answers of both AT&T Broadband and Comcast Cable concerning mer inquiry into AT&T Comcast's qualifications seem to imply that, at least for the time being, the local or regional technical'staffs with which the LFAs are familiar will stay relatively unchanged, conclusions regarding the technical performance of the systems affected by the Transaction can be drawn from experience with the current technical support systems. As opposed to the usual transfer ofownership,in which a different corporate culture will emerge with one company' selling its systems to a different company, this Transaction will retain significant elements of the previous owners, AT&T Broadband and Comcast. Some of the systems involved in this analysis were AT&T Broadband systems and some were Comcast systems. Although AT&T Comcast had reported in responses to inquiries that it plans' to ultimately consolidate corporate functions, AT&T Comcast was vague (to say the least) as to what such a consolidation would entail, and what effect it would have on the LFAs. Therefore, it AT&T Comeast Transfer Application Report May 30,2002 Creighton Bradley&Guzzetta,LLQ Page 12 is impossible at this time to determine which parts of the original corporate cultures of ATTB and Comcast will prevail in the new merged company, although it is clear that Mr. Brian L. Roberts (fromComcast) and Mr. C. Michael Armstrong (from AT&T) will have powerful and prominent roles in the merged company., Both AT&T Broadband and Comcast were able to operate cable ;systems prior to the Transaction. .Each of the LFAs served by both of the original companies has had issues with the performances cif both ATT3 and Comcast at the local'level. Such things as telephone answering response tunes and commitments for institutional networks are of concern. Additionally, significant concerns relative to the ongoing maintenance and technological development of the local networks remain, especially in light of A&S's financial analysis,'which follows in this Report. Although grave concerns exist as to AT&T Cotncast's ability to financially support adequate technical performance in the local Franchise territories should the Transaction take place, for the purpose solely of the technical analytical piece of this Report, and assuming adequate resources were available to AT&T Comeast and the local systems(which we do not), the overall technical ability of the predecessor'companies (which were already approved in the context of prior transfers of ownership and control), and the presumed technical ability of the successor merged entity (assuming keeping most of the existing technical support in place) requires an analytical conclusion that there would be no reasonable basis for the LFAs to withhold approval of the merger based solely on the technical qualifications of AT&T Comcast,'as speculative as that basis must be VIII. FINANCIAL STABILITY AND OTHER FINANCIAL ISSUES' A. Bac round Issues, and Problems. The financial'stability factor in this ease relates to whether AT&T Comcast has the financial resources available or committed,'now and in the future,to enable.ATTR and Comcast to operate their systems in accordance with applicable laws, standards, franchise 'ordinances and agreements. Financial stability also pertains to whether the Transaction, .as presented, is reasonable and economically viable. Other financial issues to be considered are the Transaction's impact on rates and services, including (but not limited"`to) the availability of programming;services, the quality of customer service and maintenance and repair practices.; In addition,the LFAs should consider whether AT&T Broadband and Comcast will have sufficient cash flow after the Transaction to meet Franchise obligations,including, by way of example and not limitation, franchise fee payments and PEG support payments: A&S has reviewed the financial data AT&T and Comcast submitted in their transfer applications and in response to written and oral data requests. In addition, A&S has analyzed publicly filed documents concerning the Transaction that were available from the websites of the Securities and Exchange Commission, the Federal Communications Commission, Comcast Corporation AT&T Comcast Transfer Application Report May 30,2002 Creighton Bradley&Guzzetta,LLC Page 13 and ATT Corporation as of May 13, 2002. A&S's findings concerning AT&T Comcast's financial fitness, and the problemsand risks posed by the Transaction are contained in-.a report dated May 24 2002 ;(the "A&S Report"). For your convenience,'we have attached the A&S Report as Appendix B to this Report and incorporated it herein. According to A&S, AT&T Comcast will inherit approximately $32.7 billion of debt once the Transaction is consummated--$12.2 billion of Comcast debt,';$19.3 billion of AT&T Broadband debt, plus additional debt associated with the merger.3 Over $16 billion of the foregoing debt will mature by the year 2006,which means that.it must be repaid or refinanced over the next few years. At the same time, A&S believes that AT&T Comcast will continue to make capital expenditures in excess of$4.0 billion per year, while suffering a cash flow deficit of over $3.5 billion a'year through;2006.' The need to fund maturing debt and capital expenditures, as well as cash flow for day-to-day operations, will increase AT&T Comcast's debt by at least $30 billion annually for three to:five years following the Transaction. A&S believes'this could result in a debt load. of$40.0 billion. As a result, revenue deficits could continue into the future for an indeterminate period of time. The exact amount and duration of the revenue deficits that will occur are unknown, since AT&T Comcast has not performed any future operating projections (i.e., cash flows, revenues and expenses) This is significant because it shows that AT&T Comcast, Coeast and AT&T do not truly know or understand all the ramifications of the Transaction. In this regard, AT&T Comcast carmot prove that: (i) the short-term cash flow deficits discussed above are insignificant in light of anticipated cash flows and debt loads; (ii) .long-term cash flow makes the Transaction economically viable, or (iii) the "synergies" and "efficiencies" cited in various documents are realistic.' Given the level of debt and revenue shortfalls predicted'by A&S, it is likely that.AT&T Comcast will need to increase revenues (through rate increases);, decrease expenses (e.g., by terminating customer service representatives and repair/maintenance technicians, eliminating programming services, fiurther consolidating customer service or implementing other cost-cutting measures) and/or reduce capital expenditures for facilities and equipment. Indeed, according to the A&S Report, AT&T'Comcast's Amended Form S-4 suggests that AT&T Broadband, Comcast and/or AT&T Comcast may make take such steps to address cash flow concerns.? A&S is also concerned that;AT&T Broadband is guaranteeing the debt of its subsidiaries and unconsolidated joint ventures.8' As of December 3=1, 2001,the amount of this debt is $1.463 billion. The risks associated with guaranteeing the debt of joint; ventures and subsidiaries are 'highlighted by 5 See A&S Report at 1. 6 See A&5 Report at 2-3. 7 Id.at 2`.'' 8' Id.at 6 AT&T Comcast Transfer Application Report May 30,2002 Creighton Bradley&.Guzzetta,LLC Page 14 Adelphia's financial problems, which are attributableto loan guarantees made to Rigas family partnerships. An additional;.problem noted in the A&S Report is that certain agreements between AT&T Broadband and ATT will survive the Transaction. A&S believes two of those agreements— the Master Facilities Agreement and the First Amended and Restated Local Network Connectivity Services Agreement<— may inhibit AT&T Comcast's ability to generate additional cash flow by hindering the company's ability to effectively compete against AT&T in various telecommunications service markets. This is because, under the foregoing contracts, AT&T Comcast, through its AT&T Broadband subsidiary,will have to: (i) lease certain network elements and management and operational services from AT&T for a specified period of time; (ii) allow AT&T to use its existing fiber facilities; and (iii) construct and lease?to AT&T new Fiber facilities in the'areas served by AT&T Broadband's cable systems. As a result,AT&T may be able to offer certain telecommunications services for less than AT&T Comcast, which means AT&T Comcast may lose existing''customers(and revenues),and future revenue opportunities.10 Finally,the A&S Report concludes that the six synergies and efficiencies relied upon by AT&T Comcast to support the Transaction are not reasonable. The bases for A&S conclusion. are: (i) there are no supporting analyses or documentation for the claimed synergies and efficiencies;(ii) the disclaimers made by AT&T Comcast's expert mean the synergies and efficiencies quantified are suspect; and(iii)the synergies and efficiencies identified are based on experiences from prior acquisitions, and not on the facts surrounding the Transaction.t t Thus, the fundamental rationales for the Transaction are in doubt. In light'of the problems and concerns identified:above,the A&S Report opines that: "[tire franchises served by Comcast will go from a company currently touted as being the strongest'financial position of any of the cable multiple"system operators . . . to a company, AT&T Comcast, with a large amount of debt and significant shortages in cash flow. Franchises currently served by AT&T Broadband will go from a company with significant debt and shortages in cash flow to a company with even more debt and greater shortages of cash flow.,02 Consequently, A&S does not believe that the Transaction will be beneficial to any of the LFAs, at least through 2006,and possibly beyond.' 9 See,e.g.,Ventura County Stat`{May 22,2002} (http://www.insideve.com/v,cs/business/article/0,1375,VCS_128_1 169695,00.htrn1). 10 Seethe A&S Report'at 6-7. 11 Id.at 7-8: 12 Id.at 34.` 13 Id.at 12. AT&T Comcast Transfer Application Report May 30,2002 Creighton Bradley&C`ruzzetta,LLC Page 15 B. Non-Benefic ai vs Detri ejotal Impacts of the Transaction. It is the opinion of CBG that the LFAs have a reasonable basis to withhold approval of the Transaction based on the conclusion of A&S that the Transaction would not be beneficial to any of the LFAs, at least through 2006, and possibly beyond. However, after reviewing the A&S Report,,CBG was concerned that its substance pointed to, even more serious ramifications of the Transaction. In particular,the A&S Report implies that not only is the Transaction not beneficial to the LFAs and by extension to subscribers, but the Transaction may even cause harm or detriment to the LFAs and subscribers. So as not to read into the A&$ Report a conclusion that was not there, and to allow A&S an opportunity to clearly and succinctly respond to specific areas of concern of CBG, we requested a fnther 'response from A&S as to whether the Transaction may also be detrimental to subscribers and the LFAs that represent them. Is this ;just saying the same thing a different, way? No. Simply stated, it is possible for something to be"not°beneficial"to an entity,but still not be"detrimental." In other words, if the Transaction would simply not do the subscribers any good, but would not harm therm either, a somewhat louver public policy threshold of concern is presented to the policy makers of the LFAs. Therefore, CBG presented A&S with a`list of specific concerns often expressed by our clients,the LFAs. CBG limited its specific concerns to important components of the delivery of cable services to constituents within the LFAs by the incumbent cable operator.:These concerns are all valid LFA considerations in the analysis of any proposed Transaction,such as in this case. CBG posed specific'questions to A&S regarding the Transaction's financial impact on such things as subscriber system maintenance, institutional network system maintenance, customer service, PBG ;support, franchise compliance, proposed or future system upgrades, and future technological improvement'. In each case, CBG asked A&S to respond using one of five (5) succinct levels of response as to whether the Transaction would have a detrimental' impact on a specific area of concern. Immediately following is the exact text of the inquiry to A&S with the'A&S response in bald type: We have received your report in the merger of AT&T and Comcast. I have reviewed the report and sincerely appreciate the quality of your work and the depth of your analysis. While we will include your entire,report as a part of our analysis,I'would,'appreciate your focusing your expertise and knowledge as a result of your analysis to advise my clients in response to specific questions which I know are of concern to them. Since the policy makers are not for the most part trained in the sophisticated financial analysis that you offer, if is helpful in their consideration to focus on specific questions answered by you based on your review, analysis and expertise. AT&T Comcast Transfer Application Report May 30,2002 Creighton Bradley&Guzzetta,LLC Page 16 Please<respond as specifically as possible ("Yes" or "No" are certainly acceptable responses--we can use your full report to further understandyour short responses to this inquiry). As a start,I would appreciate an attempt at limiting your responses to the following: Yes, and probably significantly' Yes,and possibly significantly Yes,but just moderately' Yes,but only slightly No Please' feel free to include, however; any explanatory 'information you believe is necessary for you to explain any answers you believe need explanation beyond your report we already have. However, at this point in the review, brevity is a virtue. Please feel free to respond within the text of this email,or simply list the number of the question and your response, and we can put it together upon receiving your response. I would appreciate your response as soon as possible so that we can meet the deadlines for our clients. Questions:; Will the merger of AT&T Broadband Corp. and Comcast Corporation have a detrimental impact on: 1. the availability of funds (capital and operating) for ongoing maintenance of the local subscriber networks; Response: Yes, and possibly significantly 2. the availability of funds=(capital and operating) for ongoing maintenance of the local'institutional networks;` Response: Yes, and possibly significantly 3. the availability of funds (capital and operating) for upgrades and future technical improvements of the local subscriber networks; Response:` Yes, and possibly significantly 4. the availability of capital funds for initial construction, upgrade, and future technical improvement of the local institutional networks; AT&T Comcast Transfer Application Report May 30,2002 Creighton.Bradley'&Gutta,LLC Page 17 Response: Yes,and possibly significantly 5. the availability of funds for capital support of public, educational and government access as required by the local franchiseagreements; Response: Yes, and possibly signiffeantly 6. the availability of funds for the hiring and training of customer service staff;' Response: Yes,and possibly significantly 7. the availability of funds for the upgrade and improvement of call centers and company telephone response;systems; Response: Yes,and possibly significantly 8. the availability of funds for implementation, maintenance and future technical improvement of Emergency Alert Systems; Response: Yes, and possibly significantly—to the extent supported by the cable''operator 9. the availability of operating funds to support and provide adequate personnel to test the subscriber network and institutional' networks for technical problems and'' compliance with applicable technical and performance'standards; and Response: Yes,and possibly significantly 10. the availability for funds to support increased and improved' service offerings on the local cable systems. Response: Yes,and possibly,'signifieantly 11. Would' the proposed merger likely result in the further consolidation'of customer service functions? Response: Yes, and probably significantly. In order to achieve the synergies claimed ;,by Comcast as associated with this transaction, these types of consolidations would need to occur. AT&T Comcast Transfer Application Report May 30,2002 Creighton Bradley&Guzzetta,LLC Page 18 12.Would the proposed transaction cause an upward pressure on rates Response: Yes, but just moderately. AT&T Comcast will be limited in the amount rates can increase due to competitive pressures and the subscriber's ability to pay. As discussed in the report, rates may be increased by revenue may not increase. The Franchise of the Metropolitan Government of Nashville and Davidson County, Tennessee includes a requirement that a determination be made as to: 13. Whether operation by the transferee or approval of the transfer would adversely affect subscribers, metropolitan Nashville's interest under this chapter(6.081,the franchise agreement,',other applicable law, or the public interest, or make it less 'likely that the future cable-related needs and interests of the community would be satisfied at a reasonable cost. Response: As discussed in the report, Comcast will be in a less favorable financial position from the merger. So the response to #13 would be Yes. Thank you again for your consideration of our concerns and questions. Tom Creighton C. Conclusion as to Financial Considerations. Never in the over 35 years of combined experienceof representing municipalities in cable communications issues have the principals of CBG been presented with such a negative financial report related to a proposed transfer of ownership'or control. At virtually every turn, the LFAs are confronted'with legitimate, significant concerns regarding the financial viability or reasonableness of the Transaction as it relates to local cable systems. It is the conclusion of CBC, based upon the financial analysis of A&S, that the Transaction is neither viable nor reasonable'. In addition, as indicated above, AT&T Comcast is not financially qualified'to own or operate the cable systems in the LFAs' communities, or to control ATTB and Comcast'(and their subsidiaries) and the Franchises. It is also evident that the Transaction will detrimentally affect services, system maintenance and repair, customer service, the integration of technical improvements, and the ability of Corneast Cable'and AT&T Broadband to meet Franchise commitments. Moreover, the Transaction would likely cause a moderate increase in rates. AT&T Comcast Transfer Application Report May 3i},2t)02 Creighton Bradley&Guzzetta,LLC Page 19 CBG is underno delusions regarding the significance of its findings. The Transaction, as described in the Forms 394 and other documents, would encompass over forty percent (40%) of the cable subscribers in the country. The sheer magnitude of the numbers involved in the Transaction could lead a lay person to the conclusion that there must surely be adequate resources available to meet any particular'obligation. however, the financial analysis conducted by A&S illustrates that as to virtually every issue that is a legitimate concern of the LFAs, the results of the Transaction would not only be 'detrimental to the 'LFAs'''and subscribers, but "possibly significantly"detrimental'. It is therefore CBG's conclusion that individual LFAs have numerous and significant bases on which to withhold approval of this Transaction. Accordingly, CBG recommends that the LFAs adopt a resolution or ordinance, as appropriate, withholding their consent to the Transaction IX. IMPACT OF THE PRfll'OSED TRANSACTIODI UN COMPETITION As indicated in Section III of this Report, Section 613(d) of the Federal Cable Act, 47 U.S.C. § 533(d) permits the LFAs to consider whether the Transaction "may eliminate or reduce competition in the delivery of cable service" in their'respective franchise area(s). If`a local franchising authority`` determines that the Transaction will, in fact, eliminate or reduce competition, it may withhold'approval of AT&T's and Comcast's transfer applications. CBG reviewed AT&T's and'Comcast's FCC Forms 394 (including the exhibits thereto),'AT&T Comcast's Forms S-4 AT&T's and Comcast's Applications and Public Interest Statement, and certain materials provided in response to our data requests, as well as publicly available information, to determine whether the Transaction would Have a negative impact on cable service competition in any of the LFAs' franchise areas. In the course of our review, we found that: ➢ With minor exceptions,unrelated to our analysis, Conicast Cable and AT&T Broadband do not presently own cable systems or otherwise provide 'cable service in the same franchise areas.14 Stated differently, AT&T Broadband and Comcast Cable are not currently competing head-to-head to provide cable service in the LFAs' franchise areas; ➢ AT&T Broadband and Comcast Cable did not have any pre-merger plans to provide cable service in the same market;15 and there are no non-compete or other agreements between Comcast Cable and AT&T Broadband "that will adversely affect subscribers or services in the LFAs' 14 See Applications and Public Interest Statement,:Description of Transactions,Public Interest Showing and Related Demonstrations,at pp.5(February 28,2002) 15>>See Applications and Public Interest Statement,Description of Transactions,Public Interest Showing and Related Demonstrations,at pp.66(February 28,2002). AT&T Comcast Transfer Application Report May 30,2002 Creighton Bradley&Guzzetta,LLC Page 20 communities."16 We interpret this to mean that AT&T Broadband and Comcast Cable have not entered into any agreement that ex?ressly prohibitsthem' from directly competing against each other in the same market.' Based on the foregoing, CBG does not believe that the Transaction,as described in AT&T's and Comeast's FCC Forms 394, will immediately reduce or eliminate competition in the delivery of cable service in the LFAs' franchise areas. In addition, we Have not uncovered any credible, concrete or compelling evidence that suggests the Transaction (in and of itself) would have the effect of reducing or eliminating cable service competition in the future. 'Cable operators have historically not overbuilt each other's cable systems, and we have no reason to believe that this practice will ever change (regardless of whether the Transaction is approved or denied), since there is no major economic impetus to do so. In general, cable operators have been most interested in making investments that preserve and enhance the value of their existing systems (e.g., performing network upgrades), as opposed to incurring massive costs to compete against an entrenched cable service provider in anew market (where'a solid return on investment is not guaranteed,and highly speculative). Competitive overbuilders, such as WideOpenWest, currently face a number of hurdles when entering'a market already occupied by an incumbent cable operator.' Many of those hurdles are financial in nature and are attributable to the fined start-up costs associated with the construction of a state-of-the-art cable system.18 Other hurdles include obtaining, access to desirable programming(which is often owned by the competitor or its subsidiaries or affiliates),the ability to sell advertising on incomplete systems that may cover only a small geographic area and reach very few subscribers, and successfully convincing a competitor's subscribers to change service providers. While it is true that the aforementioned barriers to market entry Auld not be reduced or eliminated by the Transaction, we have not discovered, in the time available for this review, any unbiased data which definitively shows that the ATTR/Comcast merger would, in and of itself, significantly or materially worsen the present competitive environment. In this regard, the Transaction will not directly affect the large capital expenditures required to build a cable system from scratch or the need for competitors to effectively market and price their services. 'Further, AT&T Comeast would only have an attributable interest in twenty-four national and regional video programming networks, out of 374 programming services currently 16 See AT&T Broadband's April 12,2002,Response to Question;#7 in CBC's April 2,2002,Request for Information,and Comcast's ApnI 12,2002,Response to Question#5 in CBC's April 2,2002 Request for Information. 17' Under the terms of the proposed merger,AT&T Broadband and Comcast will remain separate entities. Thus,; they could,,in theory,each decide to provide cable service in the same franchise area. Such a scenario,however,is extremely unlikely. 18 See,e.g.,Duopolistic Competition in Cable Television,7 Yale J.on Reg.at 68 C'[i]n almost all cases,cable operators are unanimous in their assessment that overbuilds do not work as a result of the large capital requirements needed up front and the necessity of cornering at least 44 percent of the market once the system is built in order to obtain a return on that investment.") AT&T Comcast Transfer Application Report May 30,2042 Creighton Badley&Guzzetta,LLC Page 21 offered by a variety of sources.rg This means the Transaction should not appreciably contribute to content discrimination against competitive overbuilders and other cable service providers. Moreover, A&S has concluded that the Transaction would not increase the merged company's advertising leverage. As A&S points out in its report: we do not believe that AT&T Comcast would be able to commandmore revenue from advertisers simply because it has a higher number of subscribers. The rates for advertising are driven by the number'of viewers ofa particular program. The combined company's total number of viewers will not change because of the merger. It is conceivable that AT&T Comcast may be achieve some operating efficiencies in managing this side of its business, but it is not appropriate to attribute additional revenue to this specifically from the merger. A&S Report at 11-12 As importantly, the 'Transaction would not alter the fact that selling advertising on new or incomplete systems with few subscribers'will always be more difficult than selling advertising on a mature cable system with a large embedded customer'base. Likewise, the Transaction would not change the fact that AT&T Broadband and Comcast already participate in an advertising sales effort that is national in scope. More specifically, Comcast and AT&T Broadband are part of the consortium of cable operators that own National Cable Communications, Inc. ("NCC"), a company that sells national advertising on as many as 37 cable television networks.'°' Both AT&T Broadband and Comcast have pre-existing exclusive agreements with NCC for all national advertising. Given this arrangement, it is evident that the companies established a coordinated, national advertising network long before the Transaction.. It is also evident thatthe Transaction will not strengthen the existing network, since subscriber 21 viewership,which drives advertising,will not change as a result of the proposed merger. Based on the foregoing, we do not believe that 47 U.S.C. § 533(d) provides a rational basis for withholding approval of the Transaction. X. AT_&T COMCAST CURPQRATION'S MANAGERIAL,OUALMCATIONS Pursuant to the terms of the Transaction, AT&T Comcast will have an atypical governance arrangement. According to an amended Farm S-4 filed with the Securities and Exchange Commission on April 29, 2002: [t]he term of the AT&T Comcast Board upon completion of the AT&T Comcast transaction will not expire' until the 2004 annual meeting of AT&T Comcast 19 See Applications and Public Interest Statement,"Description of Transactions,Public Interest Showing and Related Demonstrations,at pp.70(February 28,2002). 20 See A&S Report at 11 21 Id. AT&T Conncast Transfer',Application Report May 311,2002 Creighton Bradley&Guzzetta,LLC Page 22 shareholders. Since AT&T Comcast shareholders will not have the right to call special meetings of shareholders or act..by written consent and AT&T Comcast directors will be able to be removed only for cause,AT&T Comcast shareholders will not be able to replace the initial AT&T Comcast Board members prior to that meeting. After the 2004 annual meeting of AT&T Comcastshareholders, AT&T Comcast directors will be elected annually.;Even then, however, it will be difficult for an AT&T Comcast shareholder, other than Sural LLC or a successor entity controlled by Brian L. Roberts, ;to elect a slate of'directors of its own choosing to the AT&T Comcast Board. Brian L. Roberts, through his control of Sural LLC or'a successor entity, will hold a 33 1/3%nondilutable'voting interest in AT&T Comcast stock. In addition, AT&T Comcast will adopt a shareholder rights plan upon completion of the AT&T Comcast transaction that will prevent any holder of AT&T Comcast stock, other than any holder of AT&T Comcast Class B common stock or any of such holder's affiliates, from acquiring AT&T Comcast stock representing more than 10% of AT&T Comcast"s'voting power without the approval of the AT&T Comcast Board. In addition to the governance arrangements'relating to the AT&T Comcast 'Board,' Comcast and AT&T have agreed to a number of governance arrangements which will make it difficult to replace the senior management of AT&T Comcast. Upon completion of the AT&T Comcast transaction, C. Michael' Armstrong, Chairman of the Board and CEO of AT&T,will be the Chairman of the Board of AT&T Comcast and Brian L. Roberts, President of Comcast, will be the CEG and 'President of AT&T Comcast. After the 2045 annual .meeting of AT&T Comcast shareholders, Brian L. Roberts will also be the Chairman of the Board of AT&T'Comcast. Prior to the sixth anniversary of the 2044 annual meeting'of AT&T Comcast shareholders, unless Brian L. Roberts ceases to be Chairman of the Board or CEO of AT&T. Comcast prior to such time, the Chairman of the Board and CEO of AT&T Comcast will be able to be removed only with the approval of at least 75%of the entire AT&T Comcast Board. This supermajority removal requirement will make it unlikely that C. Michael;Armstrong or Brian L. Roberts will be removed from their management positions. Amendment No. 2 to Form S-4, Chapt. I at pp. 31-32.' After the Transaction is consummated, AT&T''Comcast will have an Office of the Chairman comprised of the Chairman of the Board (C.; Michael Armstrong) and the CEO (Brian L. .Roberts) fromthe completion of the merger until the earlier to occur of(i) the 2445 annual meeting of AT&T Comcast!shareholders';(at which Mr. Armstrong will step down) and (ii) the date on which C. Michael Armstrong ceases to be the Chairman of the Berard. The Office of the Chairman will be AT&T Comeast's principal executive deliberative body with responsibility for corporate strategy,policy and direction,governmental affairs and other significant matters.22 22 See Amendment No.2 to Form S-4 at Ch.Viii,pp. 1-2(April 29,2042). AT&T Comcast Transfer Application Report May 30,2{02 Creighton Bradley&Guzzetta,LLC Page 23 Under AT&T Corneast's initial management structure, as described above, the Board of Directors, Chairman: of the Board and Chief ExecutiveOfficer will have little or no accountability for the decisions they make. This is significant because, as indicated above, the Board and the Office of the Chairman would be making important decisions concerning local cable systems.' In light of the economics of the Transaction, which are discussed in the A&S Report,and given the fact that the Board and Office of the Chairman may act with impunity, it is likely that those decisions may include reductions in capital expenditures, decreases in expenses and/or revenue increasing ',measures.23 Such reductions, decreases and revenue increasing measures may, among other things, result in higher service rates and detrimentally impact service quality, customer service and AT&T Broadband's and Comcast Cable's ability to ensure that local franchise commitments' are satisfied.. At this point, however, it is not possible to ascertain with certainty what types of decisions will be made at the ultimate parent company, since AT&T Broadband and Comcast have refused to provide such information.24 In addition, many AT&T Comcast Board members and officers have not yet', been 'selected, so it is not possible'to research their record, and to determine whether it is likely that they will take actions which are inconsistent with franchise obligations,subscriber interests and/or the public interest. AT&T Broadband and Comcast Cable have indicated that the Transaction will not immediately result in any operational or managerial changes at the local franchise level. At the same time, however, AT&T Broadband and Comeast Cable have admitted that they do not know if there will be any changes to existing management structures as a result of the Transaction. Assuming changes'in management are made, the impact of such changes is unknown at this time, since the companies-have not stated what types of decisions,if any, would be made at the local level after the Transaction is completed. We should also note that AT&T Broadband and Comcast Cable never furnished any information describing what decisions will be made at the regional or direct parent level (e.g., ATTB and Comcast, as opposed to AT&T Comcast), even though such information was requested by CBG. Thus, it is unclear how AT&T Comeast will function, froin a decision-making standpoint, after the Transaction, except for the fact that the Office of the Chairman will be primarily responsible for corporate strategy, policy and direction, governmental affairs and other significant matters. Within the Office of the Chairman, Brian Roberts will have day-to-day authority over the operations of AT&T Comcast 25 23 See A&S Report at 2. 24 According to A&S,budgets and major expenditures will be controlled by upper management,and revenues "collected locally[will be . . . `swept'into a central banking facility and managed'for the whole company.. ." See A&S Report at 1, We are not certain,however,what specific decisions will be made by upper management at AT&T Comcast,as opposed to upper management at ATTB and Comcast.' It is also possible that certain decisions could be made at a regional level,since"the resources or working'capital for day-to-day expenses and payroll"are maintained at that level. See A&S Report at 1. 25 See AT&T Broadband's April 12,2002,Response to Question#35 in CBG's April 2,2002,Request for Information,and Comcast's April 12,2002,Response to Question#27 in CBG's April 2,2002 Request for Information. AT&T Comeast Transfer Application Report May 30,2002 Creighton Bradley&Guzzetta,LLC Page 24 Given the uncertainties surrounding who will be making decisions about the LFAs' systems, and precisely what decisions will be made at local, regional, direct parent and indirect parent levels after the Transaction is completed, it would be appropriate to require AT&T Comcast and Comcast or AT&T Comcast and ATTR to affirmatively guarantee that they:: (i) will not interfere, directly or indirectly, with a franchise holder's ability to comply with its franchise obligations,and applicable laws and regulations;'or(ii)will cause the franchise holder to comply with its franchise commitments and applicable laws and regulations at all tithes. It would also be advisable to have the local' franchise holder re-affirm its understanding of and obligation to comply with franchise requirements. If such a guarantee and reaffirmation are obtained, we do not believe AT&T Comeast's management and governance scheme'provides a reasonable basis for withholding approval of the Transaction. XI. AT&T COMCAST CORPORATION'S CHARACTER OUALIFICATLONS As part of our review, we;evaluated whether AT&T Comcast, and its management, have the requisite character to control the -cable systems in the LFAs' franchise'areas. The 'primary purposes of evaluating a transfer applicant's character are to ascertain whether it is likely that the applicant, through its officers and directors, will defraud a local franchising authority or subscribers, or renege on its franchise obligations. To the best of our knowledge,neither AT&T Comcast nor its officers or directors have engaged in any activities that would call their character into question. This conclusion is based on the fact that: ➢ AT&T Comcast is a new entity,without any operational record; For the last ten years, none of the directors of AT&T or Comcast who maybecome directors or officers of AT&T Comcast have been convicted in a criminal proceeding of fraud, embezzlement, tax evasion, bribery, extortion, obstruction of justice, false/misleading advertising, perjury, antitrust violations, violations of FCC regulations or the Communications Act of 1934, or conspiracy to commit any of the foregoing offenses;and ➢ No current AT&T Comcast officer or director has ever been fined or otherwise sanctioned by a local franchising authority, the'FCC or a state agency or commission for failure to comply with the requirements of a cable television franchise.26 Based on our findings and the representations contained. in AT&T's and Comcast's application materials, CBG does not believe there are any character issues that provide a reasonable basis for withholding consent to the Transaction. XII. OTHER RELEVANT FACTORS 26 See AT&T Broadband's April'12,2002,Response to Question#11 and#12 in°CBG's April 2,',2002,Request for information,and Comcast's April 12,2002,Response to Question#9 and#10 in CBG's April 2,2002 Request for Information. AT&T Comcast Transfer Application Report May 3U,2002 Creighton Bradley&Guzzetta,LLC Page 25 Other relevant factors which have been reviewed and considered for the purpose of determining whether to approve or deny the proposed merger are: ➢ The Transaction would not cause any changes to the Franchises or any memoranda of understanding between specific LFAs and the local franchise holder; ➢ Local franchise holders would continue to be bound by the Franchises and any applicable memoranda of understanding after the Transaction is consummated;' ➢ The Transaction would not affect any licenses or authorizations necessary for local franchise holders to operate and maintain the cable systems in the LFAs' franchise areas; ➢ The Transaction would not violate any restrictions on cable system ownership; ➢ Auer the Transaction, individual franchise holders would remain obligated to comply with all federal, state and local -claws pertaining to discrimination, equal opportunity employment and affirmative action; and ➢ All use of the public rights-of-way in the LFAs' communities will continue to be subject to all lawful and applicable licensing and franchising requirements that may app 1Y.27 It is CBE's opinion that none of the foregoing factors provide a reasonable'basis for withholding consent to the Transaction. XIII=: CONCLUSION As a result of the above analysis, we have concluded that the LFAs should not approve the Transaction, even as modified in April 2002. AT&T Comcast is not financially qualified to control the Franchises or ATTR anis Comcast(and their subsidiaries). In addition, it is clear that the Transaction, if approved, would detrimentally impact (and possibly significantly) network repair and maintenance, future technical improvements, customer''service, the availability of funds to support increased and improved service offerings, and the ability of Comcast Cable and AT&T Broadband to meet their franchise obligations. At the same time,the Transaction would likely cause AT&T Broadband and Comcast Cable to raise rates. Accordingly, the Transaction would adversely affect subscribers,and the LFAs' interests under their Franchises'. 27 See generally AT&T Broadband's April 12,2002,Response to CBG's April 2 2002,Request for Information, and Comcast's April 12,2002,Response to CBG's April 2,2002 Request for Information, AT&T Comcast Transfer Application Report May 30,2002 Creighton Bradley&Guzzetta,LLC' Page 26 RX%JL2j lvVIEW OF THE PROPOSED MERGER CSF AT&T BROADBAND, INC* AND COMCAST CORPORATION TO FOS AT&T COMCAST CORPORATION Prepared by Ashpaugh & Sculco,CPAs,PLC 1133Louisiana Avenue,Suite 106' Winter Park,FL 32789 (407) 645-2020 ascpas@ascpascom May 24, 2002 REVIEW OF THE PROPOSED MERCER OF AT&T BROADBAND,INC.AND COMCAST CORPORATION TO FORM AT&T CO CAST CORPORATION Ashpaugh & Sculco, CPAs, PLC ("A&S") were engaged to perform a financial review, of the proposed merger of Comcast Corporation ("Comcast") and AT&T Broadband ("ATT-B"), a wholly owned>subsidiary of AT&T Corporation, to form AT&T Comcast. For this project, A&S has reviewed the publicly filed documents associated with this transaction available from the websites of the Securities and ExchangeCommission's ("SEC"), the Federal Communications Commission ("FCC") Comcast Corporation and AT&T Corporation as of May 13, 2002. In addition, we have reviewed responses to information requests submitted to Comcast and ATT-B. The requests for information submitted to Comcast and ATT-B for each of the local franchise authorities ("LFAs") requested information concerning the local impacts:' of the proposed merger. 'After discussion with representatives of Comcast,the focus of the review was changed to the effects of the transaction on the parent companies, and Comcast provided responses to the requests on that basis. The LFA's agreed to this approach because the companies explained that the financial management of Comcast, ATT-B and AT&T 'Comcast occurs or will occur at the upper levels of the companies. Cash collected locally is"swept"into a central banking facility and managed for the whole company, budgets and major expenditures are controlled'by upper management. The local franchises have no financial resources to draw upon. For example, the resources or working capital for day-to-day expenses and payroll is maintained at the regional level. Similarly, there is no debt at the local or regional level, because all debt and financing is done at the parent level. The financial°?decisions and resources of the companies are concentrated at upper management and, as such, the analysis of the financial aspects of the proposed merger should be at the parent level. This makes the financial position of and decisions made by the parent key to the financial ability of the local system to operate. While our analysis has thus been conducted at the parent level, the focus of the LEA's review continues to be on the financial implications of the proposed merger on the local systems, including capital expenditures, franchise commitments and moneys due the LFAs. As will be explained below, the anticipated shortages of cash and working capital may increase certain risks for LFA's. For example, these shortages could impact the local franchisee's ability to implement or complete construction and to initiate`and offer new and additional services in some or all LFAs. SUMMARY The merged company will start operation with approximately $32.7 billion of debt: $12.2 billion of Comcast and $19.3 billion of ATT-B,"plus additional debt associated with the transaction.' In excess of$16 billion of this debt will mature by 2006 1,3 For 2001,ATT-B and Comcast had a combined cash flaw deficit of over $4.0 billion. The;.capital expenditures of ATT-B and Comcast are budgeted in total to be $5.6 billion for 2002.4`Based on our review of Amended S-4,p.III-4,filed April 29 2002 with the Securities and Exchange Commission. 2 Amended S4,p.XII-101 for AT&T Broadband. 3 SEC Form 10-K of Comcast Cable Communications,Inc.for the fiscal year ended December 31,'2001,p.40. 4 Amended S-4,p.I-37< ASHPAUGH& SCULCO, CPAs,PLC May 24,2002 Page 2of12 REVIEW of THE PROPOSED MERGER OF AT&T BROADBAND;INC. AND COMCAST CORPORATION To FORM AT&T CO CAST CORPORATION historical information publicly available.',and on statements' of Comcast and ATT-B"regarding future operations, we believe that capital expenditures of AT&T Comcast will continue to exceed $4.0 billion per years We also believe the merged entity will have a cash flow deficit in excess of$35 billion annually for at least the first few years. The combination of the meed to fund maturing debt, fund capital expenditures and fund'cash flow will require the level of debt of AT&T Comcast to increase in excess of$3.0 billion annually for the first 3 to 5 years. This could result in a significant debt load in excess of$40.0 billion. These deficits may well continue into the future. We do not know, and Comcast and ATT-B have repeatedly told us in this process that they have not done projections of future operations (cash flows, revenues"and expenses). Assuming an annual interest rate of 6.0%, an additional $3.0 billion in debt would increase interest expense $1!80 million per year and decrease cash flow and net income in the same manner. Since Comcast and ATT-B claim that they are unable to provide projections, they are also unable to show that (a) the short-term deficits are insignificant in light of reasonably expected cash flows; (b) that the 'long term cash flows are likely to justify this transaction, or (c)that, as will be addressed below, the "synergies" and "efficiencies" associated with this transaction are reasonable: Operationally,AT&T Comcast may need to make decisions to reduce these impacts such as to increase revenues, decrease°expenses, or to reduce capital expenditures, or some combination. This creates a risk that the parent would be forced to reduce- capital support to the local franchisee resulting in a reduction'in the quality of existing services and customer service, and slowing or reducing the rollout of new services. There are statements in the Amended S-4 that it may make such reductions in order to address its cash flow concerns and lacy of funding for capital expenditures, and the company has not provided me with any data that contradicts these disclosures. Each of these' cost-cutting decisions has other impacts. Competitively, AT&T Comcast may not be able' to raise the price of its products and services without eroding revenues;.further, i.e.,'the revenues gained by an increase in price may be more than offset by the loss in sales and subscribers. Decreasing expenses may also impact the new company's operations, resulting in loss of revenues and subscribers, and reductions in certain expenses may be prevented by;contract or may themselves create additional expenses. One example of this would be the payment of termination costs arising from reductions in workforce. Reducing capital expenditures may impact future growth in revenue by preventing the offering of new services, such as digital and video-on-demand, or may impact future expenses by not allowing reductions achieved through increased efficiencies. Reducing capital expenditures would likely lengthen the amount of time needed to complete the rebuild'of the ATT-B systems and limit the build-out'of existing cable systems,thus impacting AT&T Comeast's ability to turn this around within 5 years or longer. 'Technologically, .AT&T Comcast will continue to need available funds to be able to add and upgrade equipment to provide new and enhanced services and to continue to expand its other lines of business, such as programming content.'' As stated in the S We have requested projected information for the first 5 years of operation of the merged entity,but neither ATT-B''nor Comcast would provide any such information. fine declaration of Robert S.Pick,Senior Vice President,Corporate Development,Comcast Corporation,filed with the Federal Communications Commission and dated February 27,2002 estimates savings of 5%to 7%on capital expenditures quantified as$200 to$300 million annually,which calculates to$4.0 billion of anticipated capital expenditures before the projected savings. ASHPAUGx&SCULCO,CPAs, PLC May 24, 2'002 Page 3 of 12 RENEW OF THE PROPOSED MERGER OF AT&T BROADBAND, INC. AND COMCAST CORPORATION To FORM AT&T COMCAST CORPORATION following excerpt from pages 25 and 26of Comcast`.Corporation's 10-K filed March 29, 2002 for the period ended December 31, 2001, only.$225 million of the budgeted $1.5' billion of capital expenditures for 2002 relate to upgrading and rebuilding systems. Comcast has need for continuing capital expenditures within its current operations even after its own upgrade' and rebuild is complete. Cable We expect our 2002 cable'capital expenditures will include approximately $225 million for the upgrading and rebuilding of certain of our cable'communications systems, approximately $625 million: for the deployment of cable modems, digital converters and new service offerings, and approximately $450 million for recurring capital projects. The amount of our capital expenditures for years subsequent to 2002 will depend on numerous factors, some of which are beyond our control including: • competition, o cable system capacity'of newly acquired systems, and o the timing and rate of deployment of new services. Commerce During, 2002, we expect to incur approximately $175 million of capital expenditures for QVC, primarily for the upgrading of QVC's warehousing facilities, distribution facilities and information systems. Capital expenditures in QVC's international operations represent nearly 50% of QVC's total capital expenditures. Affiliation Agreements Certain of our content subsidiaries and QVC enter into multi-year` affiliation agreements with various cable and satellite system operators for carriage of their respective programming. In connection with these affiliation agreements,' we generally pay-a fee to the cable'or satellite operator based upon the number of subscribers. `During 2002, we expect to incur $200 million to $300 million related.to these affiliation agreements. Based on the limited information available, it is not possible to state that this merger will be beneficial to any of the existing franchises. For the period through 2006, AT&T Comcast will continue to have a shortage of cash and be annually increasing its level of debt. This will leave the merged company with a significant debt load that will impact its financial decisions for the following years. Since we have not been provided any projected data,,the length of impact of this debt'is unknown... Our firm also had the opportunity to,review certain information pursuant to confidentiality agreements that prevent us from revealing the data. We can say, however, that the data. was relevant to our analysis, and is consistent with our conclusion as to the financial problems presented by this transaction. The franchises currently served by Comcast will go from a'company currently touted as being in the strongest financial position of any of the cable multiple system operators C'MSOs") to a company, AT&T'Comcast, with a large ASHPAUGH& SCULCO,CPAs,PLC May 24, 2002 Page 4 of 12 REVIEW OF THE PROPOSED MERGER OF AT&T BROADBAND,INC. AND COMCAST CORPORATION To FoRm AT&T COMCAST CORPORATION amount of debt and significant shortages in cash flow. Franchises currently served by AT&T Broadband will go from acompany with significant debt and`shortages in cash flow to a company with even more debt and greater shortages in cash flow. DISCUSSIONLl We have relied'on information provided'by AT&T Broadband and Comcast. Our analysis has focused on the'°'actual results of operations for the years ended December 31, 1999, 2000 and 2001 as shown on the publicly available balance sheets, income'and cash flow statements of ATT-B and Comcast and the,pro forma balance sheet and income statement of AT&T Comcast: This';,financial information is attached to this report. An integral component of these financial statements are the notes that disclose the detail of debt, property and equipment and'other'matters. This information has been utilized to project the maturing of debt and estimate other financial components discussed above. Additionally, the details of this transaction as explained in the filings with the SEC and FCC>>have been reviewed. The financial information of Comcast for the years ended December 31 2001 shows increases in revenues with increases in expenses at a faster rate. This has resulted in increased income, although operating income before depreciation and 'amortization as a percentage of revenues has declined from 45.73% in 1999 to 40.04% in 2001. Comcast's cash flow statements show decreases in cash for 2000 and 2001, principally due to capital expenditures. During, this period, Comcast has increased its debt by approximately $2.0 billion. Statements in the Amended S-4 and other filings indicate'Comcast will have significant;'capital expenditures in 2002 and a shortfall in cash. Similarly, ATT-B has had a,significant shortage of cash in 1999,2000 and 2001. This has been funded by its parent company, AT&T. Statements in the S-4 show that it will continue in 2002. On a combined basis(Comcast and ATT-B),the S-4 identifies a cash shortfall of$4.452 billion for 2001. As stated in the S-4: Historically, AT&T Broadband-=Group's capital expenditures have significantly exceeded its net cash provided by operations. For the year ended December 31, 2001, AT&T.: Broadband Group's capital expenditures exceeded its net cash provided by operations by $3.5 billion. In addition, for the year ended December 31, 2001, Comeast's capital expenditures exceeded its net cash provided by operating activities by$952 million. After completion of the AT&T Comcast transaction, AT&T and Comeast expect that for some period of time AT&T Comcast's capital expenditures will exceed, perhaps''significantly, its net cash provided by operating activities. This may require AT&T Comcast to obtain additional financing. AT&T Comcast may not be able to obtain or to obtain on favorable terms the capital necessary to fund the substantial capital expenditures described above that are required by its strategy and business plan. A failure to obtain necessary capital or to >obtain necessary capital on favorable terms could have a material adverse effect on AT&T A HPAUGH& ScuLco, CPAs,PLC May 24, 2002 Page 5 of 12 REVIEW OF THE PROPOSED MERLE t OF AT&T BROADBAND, INC. AND COMCAST CORPORATION To FORM AT&T COMCAST CORPORATION Comcast and result in the delay, change or abandonment of AT&T Comcast's' development or expansion.plans Conicast's 10-K shows significant growth in high-speed Internet revenues. However, even with this growth, this only represents 5.74% of year 2001 total revenues. The major'portion of Comcast revenues is from:video services, 83.38%. While Comcast's financial information shows growth in video revenues over the prior year,this needs to be tempered with the fact that Comcast acquired large numbers of new subscribers in 2001 through the following transactions: acquisition of the Baltimore'system in June with 1.12,000 subscribers, 585,000 subscribers from systems acquired from ATT-B in April, and a system swap with Adelphia in January'that gained approximately 4,000 subscribers. In December 2000, Comcast exchanged systems with ATT-B gaining approximately 70,000 subscribers. Normally, we try to evaluate the growth in the number of subscribers and the growth in revenue per subscriber. However,this information was not available from public sources and not provided by Comcast. Since the growth figures of Comcast do not show clear year-to-year trends because of the changes from'«acquisitions,it is not possible to determine the growth rates for subscribers and revenue per subscriber. While it seems reasonable to assume that''Comeast will continue to experience growth in high-speed internet within the existing Comcast franchises, there is no data to support what the rate of growth will be. Concerning the ATT-B'franchises, Comcast's management clearly anticipates the requirement to spend additional capital to provide these types of services'over the ATT-B systems: Likewise, we do not have this information for ATT-B. ATT-B, formerly TCI, was purchased by AT&T Corporation and consolidated'into AT&T's financial information in March 1999 as a separately identified business segment. In June 2000, AT&T acquired' MediaOne, 'which..was rolled into the ATT-B operating results. As a result of these acquisitions plus; additional transactions involving individual systems over the 2 years, year-to-year comparisons at this high level do not yield information that can be used to project future growth. Announced operating results of Comcast and;ATT-B for the first quarter of 2002 reportedly shows mixed results.' Comcast has told the investment community that its first quarter results from video are its best ever, with increases in high-speed Internet revenues. However, ATT-B has reported a reduction of approximately 179,000 subscribers from the prior year and a margin of operating income before income taxes, depreciation and amortizations and interest expense of only 19% of revenues.8 This is significantly below the margin of the Comcast of 35% to 40%. Assuming average revenue per subscriber of$40 per month, this reduction in subscribers means an annual reduction in revenues of approximately $86 million. The first quarter results seem to indicate that the combined results of Comcast and ATT-B may mirror the 2001 results of a significant'shortfall in cash flow, since both Comcast and ATT-B seem committed to their announced levels of capital expenditures; and negative reported income: Amended S-4,p.1-38. 'Transcript of May 1,2002"First Quarter Earnings Release Conference Call"of Comcast Corporation Tiled with the SEC under Rule 425 on May 2,2002. s April 24,2002 News Release of AT&T. ASHPAVCsx& ScuLco, CPAs,PLC May 24,2002 Page 6of12 R.EviEW OF THE PROPOSED MERGER OF AT&T BROADIIAND, INC. AND COMCAST CORPORATIONTO FoRm AT&T COMCAST CORPORATION ADDITIONAL'CONCERNS This discussion addresses additional concerns noted during our review of the proposed merger. ATT-B Subsidiary Guarantees. First, as disclosed in its financials, ATT-B has guarantees of debt of subsidiaries and 'unconsolidated joint ventures''in the amount of $1.463 billion at December 31 2041.9 AT&T Comcast assumes responsibility for these guarantees with the merger. While ATT-B discounts its liability, the cable television market has had failures and financial troubles, such as the current problems with Adelphia.' Such an occurrence with these subsidiaries and unconsolidated joint ventures would add additional financial pressures to AT&T Comcast. Agreements between AT&T-B and AT&T; The following identifies agreements between ATT- B and affiliated companies of AT&T Corporation that survive the proposed merger. Master Carrier Agreement." This,agreement reflects the rates, terms and conditions on which AT&T's business services group will provide voice, data and Internet services to AT&T Broadband, including both wholesale services(those used as a component in AT&T Broadband's services to customers) and "administrative" services (for internal' AT&T Broadband usage). Pricing is market based,with provisions defining an ongoing' process to ensure that the prices remain competitive. First Amended and Restated'' Local Network Connectivity Services Agreement."' This agreement reflects the rates, terms and conditions on which AT&T's business services group will provide certain` local' network connectivity services to AT&T Broadband for use in providing local telephone services to AT&T Broadband'si subscribers. This agreement consists of two parts: - a capital lease from AT&T's business services group to AT&T Broadband of certain network switching and transport assets to be used exclusively by AT&T Broadband for a terns of up to ten years, commencing January 1, 2001 for initial assets leased under the agreement, and an operating agreement for the provision of local network connectivity, management and operational services in support of AT&T'''Broadband"s local:.cable telephone services, with a minimum term of five years commencing January 1, 2001. Master Facilities °Agreement" This agreement permits AT&T or any of its subsidiaries to use existing fiber facilities owned or leased by AT&T Broadband or its controlled affiliates, together with related services. In addition, AT&T Broadband will construct and lease to AT&T new 'fiber facilities in the areas served by AT&T Broadband's cable systems for use in providing telecommunications services. The term of the build-cut period will expire on January 8, '2012. Subject to certain termination rights specified in this agreement, the term of AT&T's right to use facilities leased under Amended S-4,p.XII-111. i0`Amended S-4,p.V-28. Ibid. 'z Ibid. ASHPAU+GH& SCULCO, CPAs, PLC May 24,2002 Page 7 of 12 REVIEW OF THE PROPOSED MERGER OF AT&T BROADBAND, INC.AND COMCAST CORPORATION TO FORM AT&T COMCAST CORPORATION this agreement will expire on :January 8, 2028, renewable at AT&T's option for successive 20-year terms in perpetuity. The merged company will be a competitor of AT&T Corporation and carrying these agreements forward into the new 'company may disadvantage AT&T Comcast in competitive situations. For example, the Local Network Connectivity Services Agreement ("LNS") allows ATT-B to use AT&T facilities in providing local telephone service, while AT&T maintains ownership and control of the facilities and equipment. However, AT&T will also be offering local telephone service. While we do not have the specific cost information of the LNS because it was deemed confidential, AT&T's rights under the LNS may put AT&T Comcast in a non-competitive situationwhere AT&T can offer services at less cost than AT&T Comcast. Since we have concluded that AT&T Comcast will have need of additional cash' flow, any limitation on the new company's`ability to enter new markets and offer new services raises concerns. We have similar concerns with the Master Facilities Agreement ("MFA"). The MFA allows AT&T unfettered access to the rights;-of-way under contract to and used by ATT-B "in perpetuity" or as long as AT&T so desires. Again, ATT''-B and AT&T will be competitors. Use of and access to rights-of-way is a major competitive advantage and a very valuable commodity. As with the LNS, we are concerned that the rights granted to AT&T under the MFA could reduce AT&T Comeast's ability to enter new markets and its ability to compete with AT&T. . In addition, in most cases, local franchising authorities ("LFAs") do not have franchise agreements with AT&T for use of the public right-of-way ("PROW"). It is conceivable that AT&T Comcast would'be in a position of compensating the LFAs for use of the PROW, while AT&T may be offering the same or similar service in the same location and not compensating the LFAs. Of course, this would be less of a concern from a strict financial standpoint if the cost of using the PROW was passed"on to AT&T on some reasonable basis. It is nonetheless of concern to local' franchising 'authorities, to the extent,that the MFA is being used to avoid franchisee fees, avoid franchising requirements, or to the extent it violates local franchise agreements. It has been highly publicized that a benefit of this merger will be the ability of AT&T Comcast to offer 'a competitive alternative to the local telephone provider and generate additional revenues from telephone service. however, fourteen MediaOne switches were transferred out of AT&T Broadband'Group in 2001 and are not part of the AT&T Broadband Group today.,3 As such,AT&T Comcast will only have access to this equipment if it falls under the LNS and, if so, at the rates and'charges of the LNS. Once more,we are concerned about the competitive impact this will have on AT&T Comcast, CONCERNING THE DECLARATION OF ROBERT S. PICK Mr. Pick is Senior Vice President, Corporate Development, at Comcast:Corporation. Mr. Pick' filed a declaration dated February 27, 2002 with the FCC setting forth: "the major categories of synergies and efficiencies that my staff and I'identified in the course of evaluating and negotiating the Merger. These benefits will stem t3 Amended S4,Schedule 6.27. AsHPAUGH& SOULCO, CPAs,PLC May 24, 2002 Page8of12 REVIEW OF THE PROPOSED MERGER.OF AT&T BROADBAND, INC. AND COMCAST CORPORATION TO 1'oRM AT&T CONICAST CORPORATION from a number of sources and include the following: (i) 'accelerated telephony roll-out, (ii) new productdevelopment and launch; (iii) programming cost savings;',(iv) capital expenditure efficiencies; (v) operating efficiencies; and (vi) national advertising sales."14 The following addresses each of the six so-called synergies and efficiencies identified and quantified by Mr. Pick in the order presented in his declaration. Before doing so,however, we note that Mr. Pick did not provide any supporting analyses or documentation for his declaration, repeatedly limited his analysis as "based on my experience in evaluating prior acquisitions"and provided the following disclaimers at the end of each section: As noted above, this projection depends'upon; the accuracy of the due diligence data Comcast has received, as well as the actual financial and operational performance of cable telephony in the marketplace.15 - This estimate depends, of course, upon the actual performance of various new products in ongoing trials and, if launched, in the marketplace, as well as broader economic trends.1- - Achieving these savings will depend upon;a number of factors, including:the actual terms of specific programming contracts, broader trends in programming ,prices, and the dynamics of individual' negotiations between AT&T Comcast and the 'sellers of video programming.17 Achieving'these savings will depend upon,.a number of factors, including broader trends in prices for ',capital items and the dynamics of individual negotiations 'between AT&T Comcast and the sellers of these products.18 - Achieving these savings will depend upon a number'of factors, including the cost and operational'structures at the cable division level' and the continued'competitive'impact of DBS'and other competitors.19 This estimate depends upon numerous factors, including trends in the broader economy and advertising sales.20 For these reasons, Mr. Pick's Declaration cannot be taken at face value, particularly given the failure of Comcast and ATT-B to provide supporting data and Comeast's insistence'that it has no data from which it can make projections of operations, Accelerated Telephony Roll-out As noted' above in the discussion of Additional Concerns, AT&T Comcast may not be in a competitive position regarding local telephone service. Mr.' Pick 'explains that "AT&T Broadband has devoted significant resources to developing, deploying and marketing cable telephony over the last several years", but it appears from the documents and information 14 'Declaration of Robert Pick,filed with the Federal Communications Commission dated February 2 2002,p.2. is Ibid,p.6. 16 Ibid,p.'7. 1' 'lbid,p.9. Es Ibid,p. 10. E9 Ibid,p.''11. Ibid,p.'13. AsxPAUGH& SCULCO, CPAs,PLC May 24, 2002 Page 9 of 12 REVIEW flF THE PROPOSED MERGER OF AT&T BROADBAND INC. AND COMCAST CORPORATION TO FORM AT&T COMCAST CORPORATION providedthe majority of telephone assets will continue to reside within AT&T and not be transferred to AT&T' Comcast. A&S does not have and was not provided information on personnel, so we do not know if"AT&T Broadband's extensive experience and expertise to accelerate the 'roll-out of cable telephony" will continue to reside within AT&T or be transferred to AT&T'Comeast. As such, the "churn-reduction" benefits and quantification of "an additional $600 to $800'million in EBITDA�l annually"are suspect.' New Product Development and Launch Mr. Pick estimates "the value to AT&T Comcast of developing these new products should be between`'$100 and $200 million in EBITDA a;year within three years."22 Comcast is an owner and a major participant in Cable Labs. In recent discussions over the last several months,Brian L.'Roberts, President, Comcast Corporation, has repeatedly referred to developments of Cable Labs in developing new services, such as digital, video-on-demand ("'SOY) and voice over Internet protocol ("VoIP").1 While the merger will provide a larger subscriber base to support this type'of research and development, it is difficult to specifically associate additional revenue generation with this merger. Obviously, Comcast is developing these sources of additional revenue now and would pursue them absent the merger. Accordingly, the basis for Mr. Pick's claim of additional EBITDA from these sources is unclear. Programming Cost Savings:. Mr. Pick estimates annual savings to AT&T Comcast of$250 to $450 million from reductions in programming costs for the combined entity. This quantification does not seem reasonable based on our experience. A&S has been reviewing cable television rate`filings of cable operators"since 1993.2The cost of programming for the Basic Services Tier and the second tier of service, labeled as the Cable Programming Service Tier by the FCC,s has been provided'as components of these rate filings. In some cases„,the costs of the individual channels have been identified. From these reviews, there has been little fluctuation in the per subscriber rates between cable providers and some of the difference has related to different timing of contracts. We agree that there exist volume discounts in some programming contracts, but it has been our experience that the increases in these discounts with increasing volume become very small as the 'number of'subscribers approaches 10 million. In addition, A&S has specifically examined the programming costs of Comcast and of AT&T Broadband; we do not agree that savings of the magnitude represented by Mr. Pick are possible under the existing agreements. Nor do we believe that AT&T Comcast will be in a position to negotiate better rates for programming as a result of the merger. Such an argument ignores two things. First, many of these contracts,are for multiple years and will survive the merger. AT&T Comcast's ability to negotiate better rates will not be known until the contracts are renewed. And second, our experience is that size has not mattered in the price of programming. We have reviewed rates of small cable systems that are consistent with rates of large systems. In some cases, the major 21 EBITDA is earnings(operating income)before interest,income taxes,depreciation and amortizations. zz Declaration of Robert:Pick,p.7. 13 More specifically,Mr.Ashpaugh has reviewed these'filings while he was with prior employers since A&S was only formed:December 1, 1999. Mr.Ashpaugh has been working in cable rate matters since 1993. AsHPAUGH& SCUL,Co, CPAs,PLC May 24, 2002 Page 10 of 12 REVIEW OF THE'PROPOSED MERGER OF AT&T BROADBAND,INC.AND COMCAST CORPORATION To FORM AT&T COMCAST CORPORATION difference related to a volume discount, which decreased markedly or disappeared as the number of subscribers'approached'10 million." It should' also be noted that Comcast owns programming content that it places on its own systems, such as E!, Outdoor Channel, Golf Channel, and QVC, and has stated that it anticipates adding this programming on the ATT-B systems. ATTB has ownership of programming content through its 25% interest in Time Warner Entertainment, commonly referred to as TWE. 'Obviously, any decrease in the cost of its own content to affiliates'will reflect negatively on the earnings of the content provider and ultimately the parent company or the owners. Capital Expenditure Efficiencies Mr. Pick'quantifies this savings as $200'to $300 million annually to AT&T Comcast. First, it appears that Mr. Pick'has quantified this component incorrectly. He states that there will be a 5% to 7% savings, resulting in the $200 to $300 million annually. A major component of the capital expenditures of Comcast and ATT-B relate to construction within their respective systems. A large component of the cost of construction, however, is labor, which is usually specific to the region and its local economy and not the size of the company. Thus, the single largest component of the new company's capital expenditures will be unaffected by the merger. In addition, as discussed above, A&S has reviewed cost information associated with cable rate filings since 1993. A cost component of these equipment rate filings is the cost of converters, analog and digital, referred to by Mr. Pick as set-top boxes. We have reviewed the costs of such equipment, and 'concluded that-Comcast and ATT-B have little, if any difference, in the costs of like equipment. Based on that,'I do not agree that any savings in capital expenditures could be;of this scale. In addition, the companies are already so large that any reductions in cost through volume purchases are unlikely to be substantial. Operating Efficiencies Mr. Pick estimates the impact of this to be $204 to$300 million annually on AT&T Comcast's EBITDA after one to three years. Mr. Fick states"AT&T'Comcast should be able to decrease the aggregate amount of overhead currently' spent' by AT&T 'Broadband and Comcast for corporate services, such as corporate management, corporate development, strategic development, treasury, accounting, tax, and in-house legal services. Currently all of these functions are performed separately by or for both companies." 6 ATT-13 is part of a larger company. As disclosed in the footnotes to the financial statements in the Amended S-4, AT&T 'allocates general corporate overhead.' expenses, including finance, legal, marketing, use of the AT&T brand,planning and strategy and human resources to AT&T Broadband Group, as well as costs for AT&T employees who directly support the activities of the AT&T Broadband Group. Charges for such services amounted to $146, $159 and $120 for the years ended December 31, 2001 and 24 It should be noted that specific cost information for programming has been requested to be confidential by several cable providers including Comcast and ATT-B. As such,we can only generally discuss this issue. 25 Declaration of Robert Pick,p,. 11. Zs Ibid,p. 11. ASHPAUGH& SCULCO, CPAs, PLC May 24,2002 Page 11 of 12 REVIEW OF THE PROPOSED MERGER of AT&T BROADBAND, INC. AND CoMCAST CORPORATION To FORM AT&T ComCAST CORPORATION 2000 and for the ten months ended December 31 1999, respectively. These amountsare included in selling, general and administrative expenses in the accompanying'combined statements of operations and were determined based on methodology described in note 1.27 (Amounts shown are in millions.) As such,we acknowledge that there would be a'reduction of$146 million in ATT-B's expenses for 2001. On the other hand, while Comcast's costs for these functions could be spread over a larger base, they will not be decreased. In,fact, arguments have been made by experts in the industry evaluating this merger that Comcast will have to add significant numbers of additional, staff including attorneys and other professionals?$ Additionally, as part of this merger, C. Michael Armstrong, Chairman and Chief Executive Officer, AT&T Corporation leaves AT&T to become Chairman of the Board of AT&T Comcast. Mr. Armstrong's compensation was in excess of'$10.6 million in 2001.2' This amount plus the costs of any other executive'personnel transferring from AT&T or hired 'would need to be offset against the reductions. For these reasons,we do not believe Mr. Pick's quantification of the impact of the operating efficiencies gained from the merger is reasonable. National Advertising Sales Mr. Pick estimates AT&T Comcast "will be able to achieve $100 to $200 million in increase EBITDA annually from the sale of national advertising within one to three years after'the Merger."30 I disagree with Mr. Pick. Comcast and ATT-B participate in national advertising and generate significant revenues from such advertising. Comcast and ATT-B are part of the consortium of cable owners of National Cable Communications, Inc., commonly referred to in the industry as NCC. 1 When Comcast records advertising on its books, it labels it "National Advertising NCC". ATT-B, formerly as TCI, has owned a portion of NCC for many years and was the first MSO (multiple system operator) owner, through its affiliate, AT&T Media Services.' While AT&T Media Services sells regional advertising for all of the ATT-B systems, NCC has an exclusive contract for all national advertising. It is our understanding that NCC also has such an exclusive contract with Comcast. NCC's purpose is to sell national advertising on cable networks. For example,according to it's website,NCC has the capability to insert ads directly onto a 'number of cable networks and lists links to 37 cable networks on its website. The cable industry has taken advantage of opportunities in national advertising for many years. Associating increases in national advertising revenues as a benefit of this merger does not seem appropriate. The November 19, 2001 article "NCC's New=-Business Push Pays Off' in the Multichannel News touts NCC's ability to capture national'advertising and its plans to expand its push in 2002. In addition, we do not believe that AT&T Comcast would be able to command more revenue from advertisers simply because' it has a higher ''number of »subscribers. The rates for advertising are driven by the number of viewers of a particular program. The:.combined 17 Amended S-4,p.XII-123. 28 May 6,2002 Broadcasting&Cable"More than it can swallow? Turning AT&T.Broadband around may be harder than Comcast expects"by John M.Higgins. zv Amended S-4,p.XIV-24. " Declaration of'Robert Pick,p. 12. 31 See"About NCC"at its website www.spotcable.com/asp/abo/default.asp. AsHPAUGH& SCULCO, CPAs,PLC May 24, 2002 Page 12 of 12 REVIEW OF THE PROPOSED MERGER OF AT&T BROADBAND,INC. AND COMCAST CORPORATION TO FORINT AT&T COMCAST CORPORATION company's total number of viewers will not change because of the merger. It is conceivable that AT&T Comcast may be achieve some operating efficiencies in managing this side of its business, but it is not appropriate'to attribute'additional revenue to this specifically from the merger. CONCLUSION The proposed merger will increase the pressures on local systems to control cash. Comcast and ATT-B centrally manage cash within their respective companies, "sweeping local deposits to individual locations that manage the cash within each company. The need to fund maturing debt, provide operating funds "(working capital) and fund capital expenditures will require AT&T Comcast to increase the amount of debt antually',through at least 2006. This could result in a significant debt load in excess of'$40.0'billion. Without substantial increases in revenues, this level of debt'will jeopardize the ability of the combined company to meet on- going franchise obligations. Even if AT&T Comcast is able to complete the required upgrade and rebuilding of systems in the short term, its'ability to properly maintain systems and conduct future upgrades is in question. Therefore, in evaluating this merger from a financial',perspective, we do not see this merger as beneficial to any of the existing franchises, at least for the period through 2006, and possibly beyond. The franchises currently'served by Comcast will go from a company currently touted as being in the strongest financial position of any of the cable multiple system operators ("MS©s") to a company, AT&T Comcast, with a large amount of debt and ;;significant shortages in cash flow. Franchises currently served by AT&T Broadband will ;go from a company with significant debt and shortages in cash flow to company with even more debt and greater shortages in cash flow. Comcast'has stated that, once the AT&T-B systems have been rebuilt or upgraded to the same level as its own systems, AT&T Comcast's capital needs will decrease,'revenues will increase, and cash flow will increase leading to a reduction in debt, We simply cannot evaluate that claim based on the information provided by the companies'. If they have done any quantitative analysis of this issue,they have not made it available, and thus any conclusions we could draw on that point would be purely speculative. Indeed, we can only conclude that any such claims are mere speculation'. Therefore,;although we have no basis for saying that the debt load of AT&T Comcast will increase after 2006,neither can we say when it will decrease. ASHPAUGH& SCULC7, CPAs,PLC May 24, 2002 ATTACHMENTS 1. Balance''Sheets of AT&T Broadband, Inc., Comcast Corporation & Pro Forma AT&T Comcast Corporation at December 31,2001. 2. Income Statements of AT&T .Broadband, Inc., Comcast Corporation & Fro Forma AT&T Comcast Corporation for the Year Ended December 31, 2001. 3." income Statements of AT&T Broadband, Inc. 4. Statements of Cash Flow of AT&T Broadband, Inc: 5. Comparative Income Statements of Comcast Corporation for the Years Ended December 31,''1999,:2000 and 2001. 6. Statement of Cash Flow of Comcast 'Corporation for the Year Ended December 31, 2001. 7.` Comcast Corporation Summary of Results of Operations for the Years Ended December 31, 1939,2000 and 2001. ASHPAUGH& SCULCO CPAs,PLC May 24, 2002 IE OF THE PROPOSED MERGER OF AT&T BROADBAND, INC. AND COMCAST CORPORATION TO FARM AT&T COMCAST CORPORATION , Prepared by, Ashpaugh & Scuico,CPAs,PLC 1133 Louisiana Avenue,Suite 106 Winter Park,FL 32789'' (407)Er45-2020 ascpas@,ascpas.com May 24, 2002 REVIEW OF THE PROPOSED MERGER OF AT&T BROADBAND,INC. AND COMCAST CORPORATION Td FORM AT&T CoMCAST CORPORATION Ashpaugh & Sculco, CPAs, PLC ("A&S") were engaged to perform a financial review of the proposed merger of Comcast Corporation ("Comcast") and AT&T Broadband ("ATT-B"), a wholly owned subsidiary of AT&T Corporation, to`form AT&T Comcast. For this project, A&S has reviewed the publicly filed documents associated with this transaction available from the websites of the Securities and Exchange Commission's ("SEC"), the Federal Communications Commission ("FCC"), Comcast Corporation and AT&T Corporation as of May 13, 2002. In addition,we have reviewed responses to information requests submitted to Comcast and ATT-B. The requests for information submitted to Comcast and ATT-B for each of the local franchise authorities ("LFAs") ;requested information concerning the local impacts of the; proposed merger. After discussion with representatives of Comcast,the focus of the review was changed to the effects of the transaction on the parent companies, rind Comcast'provided responses to the requests on that basis. The LFA's agreed to this approach because the compannies explained that the financial management of'Conica.st, ATT-B and AT&T Comcast occurs or will occur at the upper levels of the companies. Cash collected locally is"swept"into a central banking facility and managed for the whole company, budgets and major expenditures are controlled by upper management. The local'franchises have no financial resources to draw upon. For example, the resources or working capital for clay-today expenses and payroll is (maintained at the regional level. Similarly, there is no debt at the local or regional level, because all debt and financing is clone at the parent level. The financial decisions and resources of the companies are concentrated at upper management and, as such, the analysis of the financial aspects of the proposed merger should be at the parent level. This makes the financial position of and decisions made by the parent key to the financial ability of the local system to operate. While our analysis has thus been conducted at the parent level, the focus of the LEA's review continues to be on the financial implications of the proposed merger on the local systems, including;capital expenditures, franchise commitments and moneys due the LFAs. As will be explained'below, the anticipated shortages of cash and working -.capital may''increase certain risks for LFAs! For example, these shortages could impact the,local franchisee's ability to implement or complete construction and to initiate and offer new and additional services in some or all LFAs. SUMMARY The merged company will start operation with approximately $32.7 billion of debt: $12.2 billion of Comcast and $13.3 billion of ATT-B, plus additional debt associated' with the transaction.I In excess of$16 billion of this debt will mature by 2006.'3 For 2001,ATT-B and Comcast had a combined cash flaw deficit of over $4.0 billion. The capital expenditures of ATT-B and Comcast are budgeted in total to be$5.6billion for 2002.` Based on our review of Amended S-4,p.III-4,filed April 29,2002 with the Securities and Exchange Commission. Z Amended S-4,p XII-101 for AT&T Broadband. 3 SEC Form 10-K:of Comcast Cable Communications,Inc.for the fiscal year ended December 31,2001,p.40. 4 Amended S-4,p.1-37. ASHPAUGx& ScuLco,CPAs,PLC' May 24, 2002 Page2of12 REviEw OF THE PROPOSED MERGER OF AT&T BROADBAND,;INC. AND COMCAST CORPORATION To FoRm AT&T COMCAST'CORPORATION historical'information publicly available and on statements of Comcast and ,ATT-B'regarding future operations, we believe that capital expenditures of AT&T Comcast will continue to exceed $ .0 billion per years We also believe the merged entity will have a cash flow deficit in excess of$3.5 billion annually for at least the first few years. The combination of the need to Fund maturing debt, fund capital expenditures and fund cash flaw will require the level of debt of AT&T Comcast to increase in excess of$3.0 billion annually for the first 3 to 5 years. This could result in a significant debt load in excess of$40.0 billion. These deficits may well continue into the future. We do not know, and Comcast and ATT`B have repeatedly;;told us in this process that they have not done projections of future operations (cash flows, revenues and expenses) Assuming an annual interest rate of 6.0% an additional $3.0 billion In debt would increase interest expense $1$0 million per year and decrease cash flow'and net income in the same manner. Since Comcast and ATT=B claim that they are unable to provide projections, they are also unable to show that (a) the short-tern deficits are insignificant in light of reasonably expected cash flows; (b) that the long term cash flaws are likely to justify this transaction, or (c) that, as will be addressed below, the "synergies" and "efficiencies" associated with this transaction are reasonable. Operationally, AT&T Comcast may need to mare decisions;to reduce these impacts, such as to increase revenues, decrease expenses, or to reduce capital expenditures, or some combination. This creates a risk that the parent would be forced to reduce capital support to the local franchisee resulting in a reduction in the quality of existing services and customer service, and slowing or reducing the roll-out of new services. There are statements in the Amended S-4 that it may make such redactions in order to address its cash flow concerns and lack of funding for capital expenditures, and the:company has not provided me with any data that contradicts these disclosures. Each of these cost-cutting decisions has other impacts. Competitively, AT&T Comcast may not be able to raise the 'price of its products and services without eroding revenues further, i.e., the revenuesgained by an increase in price may be more than offset by the 'loss in sales and subscribers. ''Decreasing expenses may also impact the new company's operations, resulting in loss'of revenues'and subscribers, and reductions in certain;expenses may be prevented by contract or may themselves create additional expenses. One example of this would be the payment of termination costs arising from reductions in workforce. Reducing capital expenditures may impact future growth in revenue by preventing the offering of new services, such as digital and video-on-demand, or may impact future expenses by not allowing reductions achieved through increased efficiencies. Reducing capital expenditures would likely lengthen the amount of time needed to complete the rebuild of the ATT-B systems and limit the build-out of existing cable systems,''thus impacting AT&T Corncast's ability-to turn this around within 5 years or longer. Technologically, AT&T Comcast will continue to need available funds to be able to add and upgrade equipment to provide new and enhanced'services and to continue to expand its other lines of business, such as programming content. As stated in the S e have requested projected information for the first 5 years of operation of the merged entity,but neither ATT-B nor Comcast would provide any such information. The declaration of Robert S.Pick,Senior Vice President,Corporate Development,Comcast Corporation,filed with the Federal Communications Commission and dated February 27,2002 estimates savings of 5%to 7%on capital expenditures quantified as$200 to$300 million annually;which calculates to$4.0 billion of anticipated capital expenditures before the projected savings. ASHPAUGH& SCULCO, CPAs,PLC May 24,2002 . Page 3 of 12 REVIEW OF THE PROPOSED MERGER OF AT&T BROADBAND,INC. AND COMCAST CORPORATION To FORM AT&T CoMCAST CORPORATION following excerpt from pages 25 and 26 of Comcast',Corporation's 10-K filed March 29, 2002 for the period ended December 31, 2001, only $225 million of the budgeted $1.5billion of capital expenditures for 2002 relate to upgrading and rebuilding systems.' Comcast has need for continuing capital expenditures within its current operations even after its own upgrade and rebuild is complete. Cable We expect our 2002 cable capital expenditures will include approximately $225 million for the upgrading and rebuilding of certain of our cable communications systems, approximately $625 million for the deployment of 'cable 'modems, digital converters and new service offerings, and approximately$450 million for recurring capital projects. The amount of our capital expenditures for years subsequent to 2002 will depend on numerous factors, some of which are beyond our control including: o competition, o: cable system capacity of newly acquired systems,and o,' the timing and rate of deployment of new services. Commerce During '2002, we expect to incur approximately $175 million of capital expenditures for QVC, primarily for the upgrading of QVC's warehousing facilities, distribution facilities and information systems. Capital expenditures in QVC's international operations represent nearly 50% of QVC's total capital expenditures. Affiliation Agreements Certain of our content subsidiaries and. QVC enter into multi-year affiliation agreements with various cable and satellite system operators for carriage of their respective programming. In connection with these affiliation agreements, we generally pay a fee to the cable or satellite operator based upon the number of subscribers. During' 2002, we expect to incur $200 million to $300 million related to these affiliation agreements. Based on the limited information available, it is not possible to state that this merger will be beneficial to any of the existing franchises. For the period through 2006, AT&T Comcast will continue to have a shortage of cash and be annually increasing its level of debt.' This will leave the merged company with a significant debt lead that will impact its financial decisions for the following;years. Since we have not been provided any projected data., the length of impact o this debt is unknown. Our firm also had the opportunity to review certain information pursuant to confidentiality agreements that prevent us from revealing the data. We cann say, however, that the data was relevant to our analysis, and is consistent with our conclusion as to the financial problems presented by this transaction. The franchises currently served by Comcast will go from a company currently touted as being in the strongest financial position of any of the cable multiple system operators ("MSOs")' to a company, AT&T Comcast, with a large AsHPAUGH& SCULCO,CPAs,PLC'' May 24,2002 Page 4 of 12 REVIEW OF THE PROPOSED MERCER OF AT&T BROADBAND,INC. AND COMCAST CORPORATION TO FORM AT&T CoMCAS'T CORPORATION amount of debtand significant shortages in cash flow. Franchises currently served by AT&T Broadband will go from a``company with significant debt and 'shortages in cash' flow to a company with even more debt and greater shortages in cash flaw. We have relied'on information provided'by AT&T Broadband. and Comcast. Our analysis has focused on the actual'results of operations for the years ended December 31 1999, 2000 and 2001 as shown on the publicly available balance sheets, income'and cash flow statements of ATT-B and Comcast and the pro forma balance sheet and income statement of AT&T Comcast. This financial information is attached to this report. An integral component of these financial statements are the notes that disclose the detail of debt, property and equipment and other matters. This information has been utilized to project the maturing of debt and estimate other'financial components discussed above. Additionally, the details of this transaction as explained in the filings with the SEC and FCC have been reviewed. The financial information of Comcast for the years ended December 31, 2001: shows increases in revenues with increases in expenses at a faster rate. This has resulted in increased income, although'operating income before depreciation and 'amortization' as a percentage of revenues has declined from 45.73% in 1999 to 40.04%in 2001. CoMca,st's cash flow'Statements show decreases in cash for 2000 and 2001, principally due to capital expenditures. During' this period, Comcast has increased its debt by approximately $2.0 billion. Statements in the Amended S-4 and ether filings indicate'Comcast will have significant 'capital expenditures in 2002 and a shortfall in cash. Similarly,ATT-13 has had a,'significant shortage of cash in 1999,2.000 and 2001. This has been funded by its parent company, AT&T. Statements in the S-4 show that it will continue in 2002. On a combined basis(Comcast and ATT-B), the S-4 identifies a cash shortfall of$4.452 billion for 2001. As stated in the S-4: Historically, AT&T Broadband Group's capital expenditures have significantly exceeded its net cash provided by operations For the year ended December 31, 2001, AT&T Broadband Group's capital expenditures exceeded its net cash provided by operations by$3.5 billion.` In addition,'for the year ended December 31, 2001, Comcast's capital expenditures exceeded its net cash provided by operating activities by $952 million. After completion of the AT&T Comcast transaction, AT&T and Comcast expect that for some period of time AT&T Comcast's capital expenditures will exceed, perhaps'significantly, its net cash provided by operating activities. This may require AT&T Comcast to obtain additional financing. AT&T Comcast may not be able to obtain or to obtain on favorable terms the capital necessary to fund the substantial capital expenditures described above that are required by its strategy and business plan. A failure to obtain necessary capital or to obtain' necessary capital on favorable terms could have a material adverse effect on AT&T ASHPAUGH&SCULCO, CPAs, PLC May 24,2'002 Page 5 of 12 REVIEW of THE PROPOSED MERGER OF AT&T BROADBAND INC. AND COMCAST CORPORATION To FORINT AT&T COMCAST CORPORATION Comcast and result in the delay, change or abandonment of AT&T Comcast's development or expansion plans: Comcast's 10-K shows significant growth in high-speed Internet revenues. However, even with this;growth, this only represents 5.740/c,of year 2041 total revenues. The major portion of Comcastrevenues is from`video'services, 83.38%.' While Comcast's financial information shows growth in video revenues over the prior year,this needs to be tempered with the fact that Comcast acquired large numbers of new subscribers in 2001 through the following transactions: acquisition of the Baltimore'system in June with 112,000 subscribers, 585,000 subscribers from systems acquired from ATT-B in April, and a system swap with Adelphia in January'that gained approximately'4,000 subscribers.' In December 2000,Comcast exchanged systems with ATT-B gaining',approximately 70,004 subscribers. Normally, we try to evaluate the growth in the number of subscribers and the growth in revenue per subscriber. However,this information was not available from public sources and not provided by Comcast. Since the growth figures of Comcast do not show clear year-to-year trends because of the changes from acquisitions,it is not possible to determine the growth rates for subscribers and revenue per subscriber. 'While it seems reasonable to assume that'Comcast will continue to experience growth in high-speed internet within the existing Comcast franchises, there is no data to support what the rate of growth will be. Concerning the ATT-B'franchises, Comeast's management clearly anticipates the requirement to spend additional capital to provide these types of services'over the ATT-B systems.:. Likewise, we de not have this information for ATT B. ATT-B, formerly TCI, was purchased by AT&T Corporation and consolidated into AT&T's financial information in March 1999'as a separately identified business segment. In June 2000, AT&T acquired MediaOne, which was rolled into the ATT-B operating', results. As a result of these acquisitions plus additional transactions involving individual systems over the 2 years, year-to-year comparisons at this high level do not yield information that can be used to project future growth. Announced operating results of Comcast and"ATT-B for the first quarter of 2002;reportedly shows mixed results. Comcast has told the investment community that its first quarter results from video are its best ever,',with increases in high-speed Internet..revenues.7 However, ATT-B has reported a reduction of approximately 179,000 subscribers from the prior year and a margin of operating income before income taxes, depreciation and amortizations and interest expense of only 19% of revenues.$ >>This is significantly below the margin of the Conicast'of 35% to 40%,D. Assuming average revenue per subscriber of$40 per month, this reduction in subscribers means an annual reduction in revenues of approximately $86 million. The Burst quarter results seem to indicate that the combined results of Comcast and ATT-13 may mirror the 2041 results of a significant'shortfall in cash flaw, since both Comcast and ATT-B seem committed to their announced levels of capital expenditures, and negative reported income. Amended S-4,p.I-38. Transcript of May 1,2002"First Quarter Earnings Release Conference Call"of Comcast Corporation filed with the SEC under Rule 425 on May 2,2002. a April 24,2002 News Release of AT&T. ASHPAUGH& SCULCO,CPAs, PLC May 24,2402 Page b of 12 REVIEW OF THE PROPOSED MERGER OF AT&T BROADBAND,INC. AND COMCAST CORPORATION To FORM AT&T Co14ICAST CORPORATION ADDITIONAL CONCERNS This discussion addresses additional concerns noted during our review of the proposed merger. ATT-B Subsidiary Guarantees. First, as disclosed in its financials, ATT-B has guarantees of debt of subsidiaries and unconsolidated joint ventures in the amount of $1.463 billion at December 31, 2001.9 AT&T Comcastassumes responsibility for these guarantees with the merger. ''While ATT-B discounts its liability, the cable television market has had failures' and financial`troubles, such as the current problems with Adelphia. Such an occurrence with these subsidiaries and unconsolidated joint ventures would add additional' financial pressures to AT&T Comcast. Agreements between AT&T-13 and.AT&T. The following identifies agreements between.ATT- B and affiliated companies of AT&T Corporation that survive the proposed merger. Master Carrier Agreement.'° This agreement reflects the rates, terms and conditions on which AT&T's business services group will provide voice, data and Internet services to AT&T Broadband, including both wholesale services (those used as a component in AT&T Broadband's services to its customers)'and "administrative" services (for internal .AT&T Broadband usage). Pricing is market based, with provisions defining an ongoing process to ensure that the prices remain'competitive First Amended and Restated Local Network Connectivity Services Agreement.11 This agreement reflects the rates, terms and conditions' on which AT&T's business services group will provide certain local network connectivity services to AT&T Broadband for use in providing local telephone services to AT&T Broadband's subscribers. This agreement consists of two parts: a capital lease from AT&T's business services group to AT&T Broadband of certain network'switching and transport'assets to be used exclusively by AT&T Broadband for a term'of up to ten years, commencing January 1, 2001`` for initial assets leased under the agreement; and an operating agreement for the provision of local 'network connectivity, management and operational services in support of AT&T Broadband's local cable telephone services, with a minimum term of five years commencing January 1, 2001. Master' Facilities Agreement.12 This agreement permits AT&T or any of its subsidiaries to use existing fiber'facilities owned or leased by AT&T Broadband or its controlled affiliates, together with related. services. In addition, AT&T Broadband will construct and lease to AT&T new fiber facilities in the areas served by AT&T Broadband's cable systems'for use in providing telecommunications services. The term of the build-out period will expire on January 8, 2012. Subject to certain termination rights specified in this agreement,the term.of AT&T's right to use facilities leased under 9 Amended S-4,p.XII-111. 'o Amended S-4,p.028. " Ibid. '2 Ibid. ASHPAUGH& SCULCO, CPAs,PLC May 24,2002 ............ ............. ......................... ........... ........... Page 7 of 12 REVIEW OF THE PROPOSED MERGER OF AT&T BROADBAND, INC. AND COMCAST CORPORATION To FoRm AT&T ComCAST CORPORATION this agreement will expire on January 8, 2029, renewable at AT&T's option for successive 20-year terms in perpetuity. The merged company will be a competitor of AT&T Corporation and carrying these agreements forward into the new company may disadvantage AT&T Conicast in competitive situations. For example, the Local Network Connectivity Services Agreement ("LNS') allows ATT-B to use AT&T facilities in providing local telephone service, while AT&T maintains ownership and control of the facilities and equipment. How er, AT&T will also be offering However, local telephone service. While we do not have the specific cost information of the LNS because it was deemed confidential,I AT&T's rights under the LNS may put AT&T Comeast in a non-competitive situation where AT&T can offer services at less cost than AT&T Comcast. Since we have concluded that AT&T Comcast will have need of additional cash flow, any limitation on the new company's ability to enter new markets and offer new services raises concerns. We have similar concerns with the Master Facilities Agreement CMFN'). The MFA allows AT&T unfettered access to the rights-of-way under contract to and used by ATT-B "in perpetuity", or as long as AT&T so desires. Again, ATT-B and AT&T will be competitors. Use of and access to rights-of-way is a major competitive advantage and a very valuable commodity. As with the LNS, we are concerned that the rights granted to AT&T under the MFA could reduce AT&T Comcast's ability to enter new markets and its ability to compete with AT&T. In addition, in most cases, local franchising authorities ("LFAs") do not have franchise agreements with AT&T for use of the public right-of-way ("PROW"). It is conceivable that AT&T Conicast would be in a position of compensating the LFAs for use of the PROW, while AT&T may be offering the same or similar service in the same location and not compensating the LFAs. Of course, this would be less of a concern from astrict financial standpoint if the cost of using the PROW was passed on to AT&T on some reasonable basis. It is nonetheless of concern to local franchising authorities, to the extent that the:MFA is being used to avoid franchisee fees, avoid franchising requirements, or to the extent it violates local franchise agreements. It has been highly publicized that a benefit of this merger will be the ability of AT&T Comcast to offer a competitive alternative to the local telephone provider and generate additional revenues from telephone service.e. However, fourteen MediaOne switches were transferred out of AT&T Broadband Group in 2001 and are not part of the AT&T Broadband Group today.13 As such, AT&T'Comcast will only have access to this equipment if it falls under the LNS and, if so, at the rates and charges of the LNS. Once more, we are concerned about the competitive impact this will have on AT&T Conicast. CONCERNING THE DECLARATION OF ROBERT S. PICK Mr. Pick is Senior Vice President, Corporate Development, at Comeast Corporation. Mr. Pick filed a declaration dated February 27,2002 with the FCC setting forth: "the major categories of synergies and efficiencies that my staff and I identified in the course of evaluating and negotiating the Merger. These benefits will stem as Amended S4,Schedule 6.27. ASHPAUGH& SCULCO,CPAs, PLC May 24,2002 Page 8of12 REvIEw OF THE PROPOSED MERGER OF AT&T BROADBAND, INC. AND COMCAST CORPORATION To FORM AT&T C©MCAST CORPORATION from a number of sources and includethe fallowing: (i) accelerated telephony rill-out;' (ii) new product development and launch; (iii) programming cost savings;(iv) capital expenditure efficiencies; '(v) operating efficiencies; and (vi) national'advertising sales."14 The following addresses each of the six so-called synergies and efficiencies identified'and quantified by Mr. Pick in the order presented in his declaration.. Before doing so, however, we note that. Mr. Pick 'did not provide any supporting analyses or documentation for his declaration, repeatedly limited his analysis as "based on my experience in evaluating prior acquisitions"and provided the following disclaimers at the end of each section: - As noted above, this projection depends upon'the accuracy of the due diligence data Comcast has received, as well as the actual financial and operational performance of cable telephony in the marketplace.is This estimate depends, of course, upon the actual performance of various new products in ongoing trials and,if launched, in the marketplace, as well as broader economic trends.r - Achieving these savings will depend upon a number of factors, including the actual terms of specific' programming contracts, broader trends 'm programming prices; and the dynamics of individual' negotiations between AT&T 'Comcast and the -<sellers of video programming.17 - Achieving these savings will depend';upon a number of factors,including broader trends in prices for capital items and the dynamics ofindividual negotiations between AT&T Comcast and the sellers of these products.'a - Achieving these savings will depend upon a number of factors, including the cost and operational structures at the cable division level and the continued competitive impact of DBS'and other competitors.19 - This'estimate depends upon numerous factors, including treads in the broader economy and advertising sales. ° For these reasons, Mr. Pick's Declaration cannot be taken at face value, particularly'given''the failure of Comcast and ATT-B to provide supporting data and Comcast's insistence that it has no data from which it can make projections of operations. Accelerated Telephony Roll-out As noted above' in the discussion of Additional Concerns, AT&T Comcast may not be in a competitive position regarding local telephone service. Mr. Pick explains that "AT&T Broadband has devoted significant resources to developing, deploying and marketing cable telephony over the last several years", but it 'appears from the documents and information 14 Declaration of Robert Pick,,filed with the Federal Communications Commission dated February 2,2002,p.2. is Ibid,p.6. ib Ibid,p. 7. 17 Ibid,p.9. 18 Ibid,p. 10. 1� lbid,p. 11. 20 lbid,p. 13. ASHPAUGH& SCULCO,'CPAs, PLC May 24,2002 Page 9 of 12 R> vIEW OF THE PROPOSED MERGER OF AT&T BROADBAND, INC. AND COMCAST CORPORATION To FORM AT&T CoMCAST CORPORATION provided the majority of telephone assets will continue to reside within AT&T and not be transferred to AT&TComcast. A&S does not have and was not provided information on personnel, so we do not know if"AT&T Broadband's extensive experience'and expertise to accelerate the roll-out of cable telephony" ;will continue to reside' within AT&T or be transferred to AT&T Comcast. As such, the "churn-reduction" benefits andquantification of "an additional $600 to$800 million in EBITDA�l annually''are suspect. New Product Development and Launch Mr. Pick estimates "the value to AT&T Comcast of developing these new products'should be between $100 and $200 million in'EBITDA a year within three years."22 Cotrteast is an owner and a major participant in Cable Labs. In recent discussions over the last several months, Brian L. Roberts, President,'Comcast Corporation,has repeatedly referred to developments of Cable Labs in developing new services, such as digital, video-ori-demand ("VOY) and voice over Internet protocol C V'oIP"). While the merger'will provide a larger subscriber base to support this type of research and development, it is difficult to specifically associate additional revenue generation with this merger. Obviously, Comcast is developing these sources of additional revenue now and would pursue them absent the merger. Accordingly,the basis for Mr. Pick's claim of additional EBITDA'from these sources is unclear. Programming Cost Savings Mr. Pick estimates annual savings to AT&T Comcast of$250 to $450 million'from reductions in programming costs for the combined 'entity. This quantification does not seem reasonable based on our experience. A&.S has been reviewing cable television rate filings;of cable operators since 1993.23 The cost of programming for the Basic Services Tier and the second tier of service, labeled as the Cable Programming Service Tier by the FCC, has been provided as components of these rate filings. In some cases, the costs of the individual channels have been identified. From these reviews, there has been little fluctuation in the per,subscriber rates between cable'providers and some of the difference has related to different timing of contracts. We agree that there exist volume discounts in some programming contracts, but it has been our experience that the increases in these discounts with increasing volume become very small as the number of subscribers approaches 10 million. In addition, A&S has specifically examined the programming costs of Comcast and of AT&T Broadband, we do not agree that savings of the magnitude represented by Mr. Pick are possible under the existing agreements. Nor do we believe that AT&T Comcast will be in a position to negotiate'better rates for programming as a result of the merger. Such an argument ignores two things.. First, many of these contracts are for multiple years and will survive the merger.' AT&T Comeast's ability to negotiate (better rates will not be known until' the contracts are 'renewed. And second, our experience is that size has not mattered in the price of programming. We have reviewed rates of small cable systems'that are consistent with rates of large systems. In some cases,the major 21 EBITDA.is earnings(operating income)before interest,income taxes,depreciation and amortizations. 22 Declaration of Robert Pick,p.7 23 More specifically,Mr.Ashpaugh has reviewed these filings while he was with prior employers since A&S was only formed December 1, 1999. Mr.Ashpaugh has been working in cable rate matters since 1993. AsHpAUGH& SCULC),'CPAs, PLC May 24, 2002 Page 10 of 12 REviEw OF THE PROPOSED MERCER OF AT&T BROADBAND,INC. AND COMCAST CORPORATION To FORM AT&T C©MCAST CORPORATION difference related to a volume discount, which decreased markedly or disappeared as the number of subscribers approached10 million.24 It should also be noted that Comcast awns programming content that it places on its `own systems, 'such as E! Outdoor Channel, Golf Channel, and QVC, and has stated that it anticipates adding this programming on the ATT'-B systems. ATT-B has ownership of programming content through its 25%'' interest in Time Varner Entertainment, 'commonly referred to as TWE. 'Obviously, any decrease in the cost of its own content' to affiliates will reflect negatively on the earnings of the content provider and ultimately the parent company or the owners. Capital Expenditure Efficiencies Mr. Pick quantifies this savings as $200 to $300 million annually to AT&T Comcast. First, it appears that Mr. Pick has quantified this component'incorrectly. He states that there will be a 5% to 7%ti savings, resulting in the $200' to $300 million annually. A major component of the capital expenditures of Comcast and ATT-B relate to construction within their respective systems. A large component of the cost of construction, however, is labor, which is usually specific to the region and its local'economy and not the size of the company. Thus,the single largest component of the new company's capital expenditures will be unaffected by the merger. In addition, as discussed above, A&S has reviewed cost information associated with cable rate filings since 1993. A'cost component of these equipment rate filings is the cost of converters, analog and digital, referred to by Mr. Pick as set-top boxes. We have reviewed the costs of such equipment, and concluded that Comcast and ATT-B have little, if any difference, in the casts of like equipment. Based on that,;I do not agree that any savings in capital expenditures could be of this scale. In addition, the companies are already so large that any reductions in cost through volume purchases are unlikely to be substantial. Operating Efficiencies Mr. Pick estimates the impact of this to be$200 to$300 million annually on AT&T'Comeast's EBITDA'after one to three years." Mr. Fick states"AT&T'Comcast should be able to decrease the aggregate amount of overhead currently spent by AT&T Broadband and Comcast for corporate services, such as corporate management, corporate development; strategic development, treasury, accounting, tax,' and in-house legal services. Currently all of these functions are performed separately by or for both companies."2b ATT-B is part of a larger company. As disclosed in the footnotes to the financial statements in the Amended S-4, AT&T allocates general corporate overhead expenses, including finance, legal, marketing, use of the AT&T brand,planning and strategy and human resources to AT&T Broadband Group, as well as costs for AT&T employees who directly support the activities of the AT&T Broadband Group. Charges for such services amounted to $146, $159 and $120 for the years ended December 31 2001' and 24 It should be noted that specific'cost information for programming has been requested to be confidential by several cable providers including Comcast and ATT-B. As such,we can only generally discuss this issue. ' Declaration of Robert Pick,p. 11. Ibid,p,;11. ASHPAUGH& SC UCO, CPAs,PLC May 24,2002 ......................... ...... .. .... Page 11 of 12 REVIEW OF THE PROPOSED MERGER OF AT&T BROADBAND,INC.AND COMCAST CORPORATION To FORM AT&T COMCAST CORPORATION 2000 and for the ten months ended December 31, 1999, respectively. These amounts are included in selling, general and administrative expenses in the accompanying combined statements of operations and were determined based on methodology described in note 1.27 (Amounts shown are in millions.) As such,we acknowledge that there would be a reduction of$146 million.in ATT-B's expenses for 2001. On the other hand,while Comeast's costs for these functions could be spread over a larger base, they will not he decreased. In fact, argurnentS.Iave been made by experts in the industry evaluating this merger that Comcast will have to add significant numbers of additional staff including attorneys and other professionals.21 Additionally, as part of this merger, C. Michael Armstrong, Chairman and Chief Executive Officer, AT&T Corporation leaves AT&T to become Chairman of the Board of AT&T Comeast. Mr. Armstrong's compensation was in excess of$10.6 million in 2001.29 This amount plus the costs of any other executive personnel transferring from AT&T or hired would need to be offset against the reductions. For these reasons, we do not believe Mr. Pick's quantification of the impact of the operating efficiencies gained from the merger is reasonable. National Advertising Sales Mr. Pick estimates AT&T Comcast "will be able to achieve $100 to $200 million in increase EBITDA annually from the sale of national advertising within one to three years after the Merger.730' I disagree with Mr. Pick. Comeast and ATT-B participate in national advertising and generate significant revenues from such advertising. Comcast and ATT-B are part of the consortium of cable owners of National Cable Communications, Inc., commonly referred to in the industry as NCC.31 When Coincast records advertising:on its books, it labels it "National Advertising NCC". ATT-B, formerly as TCL has owned a portion of NCC fbrmany years and was the first MSO (multiple system operator) owner, through its affiliate, AT&T Media Services. While AT&T Media Services sells regional advertising for all of the ATT-B systems, NCC has an exclusive contract for all national advertising. It is our understanding that NCC also has suchan exclusive contract with Comcast. NCC's purpose is to sell national advertising on cable networks. For example,according to it's website,NCC has the capability to insert ads directly onto a number of cable networks and lists links to 37 cable networks on its website. The cable industry has taken advantage of opportunities in national advertisingfor many years. Associating increases in national advertising revenues as a benefit of this merger does not seem appropriate. The November 19, 2001 article' "NCC's New—Business Push Pays Off' in the Multicharmel News touts NCC's ability to capture national advertising and its plans to expand its push in 2002. In addition, we do not believe that AT&T Comcast would be able to command more revenue from advertisers simply because it has a higher number of subscribers. The rates for advertising are driven by the number of viewers of a particular program. The combined 27 Amended S-4,p.X11-123. 2a May 6,2002.Broadcastin9&Cable"More than it can swallow? Turning AT&T Broadband:around may be harder than Comcast expects!'by John M.Higgins. 29 Amended S-4.p,XIV-24. 30 Declaration of Robert Pick,p. 12. 31 See"About NCC"at its website www.spotcable.com/asp/abo/default.asp. ASHPAUGH&SCULCO, CPAs,PLC May 24,2002 Page 12 of 12 REVIEW OF THE PROPOSED MERGER OF AT&T BROADBAND, INC. AND COMCAST CORPORATION To F4RV1 AT&T Co CAST CORPORATION company's total number of viewers will not change because of the merger. It is conceivable that AT&T Comcast may be achieve some operating efficiencies in managing this side of its business, but it is not appropriate' to attribute additional revenue to this specifically from the merger. CONCLUSION The proposed merger will increase the pressures on local systems to control cash. Comcast and ATT-B centrally manage cash within their respective companies,'"sweeping"''local deposits to individual locations that manage the cash within each company.' The need to fund maturing debt, provide operating funds (working capital) and fund capital expenditures will require AT&T Comcast to increase the amount of debt annually;through at least 2006. This could result in 'a significant debt 'load in excess of$40.0 billion, Without substantial increases in revenues; this level of debt'will jeopardize the ability of the combined company to meet on- going franchise obligations.' Even if AT&T Comcast is able to complete the required upgrade and rebuilding of systems in the short term, its ability to properly maintain systems and conduct future upgrades is in question. Therefore, in evaluating this merger from a financial'perspective,lwe do not see this merger as beneficial to any of the existing franchises, at least for the period through 2006, and possibly beyond. The franchises currently'served by Comcast will go from a company currently touted as being' in the strongest financial position of any of the cable multiple system operators ("MSOs") to a company, AT&T Comcast, with a large amount of debt and significant shortages in cash flow. Franchises currently served by AT&T Broadband will go from a company with significant debt and shortages in cash flow to company with even more debt and greater shortages in cash flow. Comcast has stated that, once the AT&T-B systems have been rebuilt or upgraded to the same level as its own systems, AT&T Comcast's capital needs will decrease, revenues will increase, and cash' flow will increase leading to a reduction in debt. We simply cannot evaluate that claim based on the information provided by the companies. If they have done ,any quantitative analysis of this issue,they have not made it available, and thus any conclusions we could draw on that paint would be purely speculative. Indeed, we can only conclude that any such claims are mere'speculation.' Therefore,'although we have no basis for saying that the debt load of AT&T Comcast will increase after 2006,''neither can we say when it will decrease. ASHPAUGH&SCULCO, CPAs,PLC May 24,2002 ATTACHMENTS 1. BalanceSheets of AT&T Broadband, Inc., Comcast Corporation & Pro Forma AT&T Comcast Corporation at December 31, 2041. 2. Income'Statements of AT&T Broadband, Inc., Comcast Corporation & Pro Forma AT&T Comcast Corporation for the Year Ended December 31,2001. 3. Income Statements ofAT&T Broadband,Inc.! 4. Statements of Cash Flow of ATT Broadband,Inc. 5. Comparative Income Statements of Comcast Corporation for the Years Ended December 31, 1999, 2000 and 2001. 6. Statement of Cash Flow of Comcast Corporation for the Year Ended December 31, 2€101. 7. Comcast Corporation Summary of Results of Operations for the Years Ended December 31, 1999, 2000 and 2001. ASHPAUcx& Scuico CPAs,PLC May 24,2002 Review of Proposed Merger of Comeast&AT&T i;ac band Balance Sheet of AT&T Broadband,Comcast Corporation&Pro Forma AT&T Comcast at December 31,2001 (Dollars in Millions) HISTORICAL PRO FORMA HISTORICAL AT&T ADJUSTMENTS PROFORMA COMCAST(A) BROADBAND(A) PER S-4 AT&T COMCAST ASSETS CURRENT ASSETS Cash and cash equivalents 350.00 350.00 Investments 2,623.20 668.00 3,291.20 Accounts receivable,net 967.40 584.00 1,551.40 Inventories;net 454.50 454.50 Other current assets 153.70 398.00 57.50 " 609.20 Total current assets 4,548.80 1,650.00 57.50 6,256.30 INVESTMENTS 1679.20 21,913.00 1,801.60 23,692.80 (1,701.00) PROPERTY AND EQUIPMENT,net 7,011.10 14,519.00 21,530.10 INTANGIBLE ASSETS Goodwill 7,547.30 <<20,102.00 (1,500.50) 26,108.80 Cable franchise operating rights 20,167.80 45,320.40 (2,501.00) 62,986.80 Other intangible assets 2,833.40 2,833.40 30,508.50 65,422.00 (4,001.50) 91,929.04 Accumulated amortization (5,999.20) (3,242,00) 3,242.00 (5,999.20) 24,509.30 62,180.00 (759.50) 85,929.80 OTHER NON-CURRENT.ASSETS,net 383.40 2,925.00 57.50 3,365.90 TOTAL,ASSETS 38,131.80 103,187.00 (543.90) 140,774.90 LIABILITIES AND STOCKHOLDERS'EQUITY CURRENT LIABILITIES Accounts payable 698.20 678.00 1,376.20 Accrued expenses and other current liabilities 1,695.50 2,169.00 1,024.60 4,889.10 Deferred income taxes 275.40 275.40 Short-term debt 3,959.00 57.50 3,091.70 (924.80) Current portion of long-term debt 460.20 2,824.00 (2,109.40) 1,174.80 Total current liabilities 3,129.30 9,630.00 (1,952.10) 10,807.20 LONG--TERM DEBT,less current portion 11,741.60 16,502.00 357.50 31,528.60 (106.70) 3,034.20 DEFERRED INCOME TAXES 6,375.70 25,810.00 291.50 32,298.20 (179.00) OTHER NON-CURRENT LIABILITIES 1,532.00 1,059.00 (274.10) 2,316.94 MINORITY INTEREST 880.20 3,302.00 (2,100.00) 2,082.20 Company-Obligated Convertible Quarterly Income Preferred Securities of Subsidiary Trust Holding Solely Subordinated Debt Securities of AT&T 4,720.00 (4,720.00) 0.00 STOCKHOLDERS"EQUITY Gammon stock 945.10 1,346.00 2,243.80 (47.30) Additional capital 11,752.00 (1,653.70) 57,722.10 47,623.80 Retained earnings 1,631.50 ;1,631.50 Accumulated other comprehensive income 144.40 144AO Combined attributed net assets 42,164.00 (42,164.00) 0.00 Total stockholders'equity; 14,473.00 ;42,164=00 51104.80 61,74 L80 TOTAL LIABILITIES&EQUITY 38,131.80 103,187.00 (543.90) 140,774.90 Ashpaugh Sculco,CPAs,PLC May 24,2002 PHYSICAL PLANT INSPECTION OF AT&T BROADBAND IN THE CITYOF RICHMOND, CALIFORNIA Physical Plant Inspection of: AT&T Broadband In the City of Richmond , California May, 2002 KRAMER.FIRM INCORPORATED TELECOMMUNICATIONS' TECHNOLOGY COUNSEL FOR GOVERNMENTS AND PRIVATE INSTITUTIONS" SINCE 1984 TEL+1 (310)473 9900 FAX+1(310)473 5900 TOLL FREE(866)JKRAMER KRAMER@KRAMERF€RM.Com www.KRAmFRFiftm.com WWW.CELLULARPCS.COM 2001 S 8ARRINGTON STE 30€ LOS ANGELES;CALIFORNIA 90025`-5379 PHYSICAL LEANT INSPECTION OF AT&T BROADBAND IN THE CITY OF RICHMOND, CALIFORNIA Physical Plant Inspection of AT&T Broadband 4 in The City of Richmond, California TABLE OF CONTENT SECTION DESCRIPTION PAGE A INTRODUCTION AND EXECUTIVE OVERVIEW A-1 $ METHOD B-1 C OBSERVATIONS AND SUMMARY C-1 D CONCLUSIONS AND RECOMMENDATIONS D-1 ATTACHMENT A1: INSPECTION REPORT AND PHOTOGRAPHS ATTACHMENT A2: ABOUT THE AUTHOR AND FIRM <BALANCE OF PAGE INTENTIONALLY LEFT BLANK PHYSICAL PLANT INSPECTION OF AT&T BROADBAND 1N THE CITY OF RICHMOND, CALIFORNIA Physical Plant Inspection of AT&T Broadband in The City of Richmond, California Introduction and Executive Overview At the direction of the City of Richmond, California, Kramer.Firm, Inc. has conducted an inspection of the cable television physical plant system in the City operated by AT&T Broadband("AT&T"). Three members of the professional staff of KRAMER.FIRM ("KF") 'conducted the entire inspection of AT&T's City of Richmond system on May 1, 2, & 3, 2002. Jonathan Kramer, KF's principal, established. the '.test plan and has reviewed, annotated and approved this report. The purpose of this inspection is to permit us to;opine on whether AT&T's outside plant system complies with CPUC General Order 95, CPUC General Order 128, and the City's Municipal Code adopting the National Electrical Code. The inspection data and site photographs may be found in Attachment Al of this report. The qualifications of KF to conduct this inspection and report on its findings are provided as Attachment A2 of this report. For the reasons set out in the following sections, and documented at Attachment Al, we conclude that AT&T's' system grossly fails to meet the requirements' of the City's Municipal Code, and also fails to meet the safety code requirements of the CPUC General Order 95 and 128 requirements. We conservatively estimate the number of individual safety code violations to exceed 15,000.1 The City should direct AT&T to address the causes, provide a comprehensive corrective'action plan, and correct the cable 3 It is not unusual for a single address to have several safety code violations. 'PAGE Al PHYSICAL PLANT INSPECTION OF AT&T BROADBAND IN THE CITY OF RICHMOND, CALIFORNIA television system safety code violations on a City wide basis. By correcting these and all other cable violations that exist in the City of Richmond, AT&T's outside dant will comply with the required CPUC and City Municipal Cade safety code requirements, and upgrade the public safety of its plant to the minimum acceptable level. We believe that the code violations can be identified and corrected by AT&T within eighteen to twenty-four (24) months. Given the magnitude'of the number of code violations, and the clearly historical contest which has permitted these violation to either go undetected or detected by not cured, we believe that AT&T cannot identify and cure the code violations solely using its own local staff. A note about the inspection photographs attached to this report...- The inspection photographs included with this report represent only a 'fraction of the hundreds of photographs taken during our inspection of this system. The additional photographs not included here simply provide more—but not necessarily more meaningful---documentation of the safety faults of this system. All of the photographs will be provided to the City on multiple CDROM disks via a separate transmittal. <BALANCE OF PAGE INTENTIONALLY LEFTBLANK> Of course,its correcting the code violations on a City wide basis,the specific representative locations cited here should also be corrected. PAGE A2 PHYSICAL PLAINT INSPECTION OF AT&T BROADBAND IN THE CITY OF RICHMOND, CALIFORNIA Method To collect the data reported here and to permit us to offer opinions regarding the overall system, KF staff has conducted this inspection of AT&T's City of Richmond system in the major operating areas of this franchise area. Our code authorities for this inspection are: 1. California Public Utilities Commission General,Order 95 2. California Public Utilities Commission General Order 128 3. National Electrical Cade/California Electrical Code. During this inspection, we drove approximately 112 road miles in this system. The areas that we inspected, and the street segments observed, are, shown on the next page•3 The representative log of our observations is contained on Attachment-=Al of this report: <BALANCE'OF PAGE INTENTIONALLY LEFT BLANK> 3 The routes were generated by using the automated tracking function of a Garmin III Plus Global Positioning System(GPS)satellite receiver(Serial numbers 92198764,96421694,96429894)connected to an external amplified roof-mounted antenna. The recorded position data was then download and displayed on DeLorme Road Atlas Road Warrior version 9.0 software,which created the basic snap output. Note that due to the accuracy of the position data provided by civilian GPS receivers such as the Garmin listed'above, the track plotted is approximate only,and the actual track may vary by upwards of 10 meters,although the error is typically about 5 meters or less: M AP PAGE B I BA pA© ©Fp11F0WIP, C v Of RtC"001.11D �s 01,111 7 ll Y!i t . f AS 3� .8 !# �y Arts Pago VIM Z4 A �M z i�`5'E +�� '��'� F #kr 15s �,„-'�,r `�. rt' k. lCov t}�- 'SSS �n � �4,..� • `�ly ORI be line°n lent ' awn as�iea� � nail w W to sh aLtelY Y `C BL app�ox�rn � �speetio�r�u ��© PHYSICAL PLAINT INSPECTION OF AT&T BROADBAND IN THE CITY OF RICHMOND, CALIFORNIA Observations and Summary The illustration on the following page will be instructive as we discuss our findings. The illustration'highlights the most common physical plant violations of California Public Utilities Commission General Order 95 and General Circler 128 as well as the National Electrical Code (adopted by the City as its electrical cede.) Note that not every violation illustrated on the following page was observed in AT&T's system. The drawing is a general teaching tool we have developed to visually explain cable system construction and maintenance problems: As you read the discussion that follows the illustration and Attachment A1, you may wish to refer bale to the following illustration to understand better the discussion and points cited. <BALANCE OF PAGE INTENTIONALLY LEFT BLANK> �,� PAGE C1 PHYSICAL PLANT INSPECTION OF AT&T BROADBAND IN THE CITY OF RICHMOND, CALIFORNIA Its g 000 w m � fit 00 ITS c ., Ant 0 t a Aw �, � , M •� �� G {1 36Y fats w� ffi a x a N O ;PAGE C2 PHYSICAL PLANT INSPECTION OF AT&T BROADBAND IN THE CITY"OF RICHMOND, CALIFORNIA SYSTEM DESCRIPTION& DISCUSSION This system employs a "Hybrid Fiber/Coaxial (Cable)'(HFC}—HFC is a;broadband bi- directional shared media transmission system using fiber trunks between the headend and the fiber nodes, and coaxial distribution from the fiber nodes to the customer locations. The typical HFC architecture consists of fiber optic nodes feeding what appears to be an average of 500 to'1000 residences per node. From each node, a single distribution coaxial cable'is used to provide service(via subscriber signal taps)to each subscriber. The upgrade to the HFC system appears to be completed. However, in Attachment Al, we have made notations regarding the location of incomplete construction aspects as if they were code infractions to ensure that they may be followed up on and cleaned up to comply with local code provisions. We estimate that about 80% of the plant is constructed on poles, and the remaining 20% of the plant is underground, constructed utilizing pedestals and flush-mount vaults. The physical condition of the underground plant at the pedestals is fair. However, we estimate that £011/o or more of the pedestals are not secured in a manner to prevent tampering and unauthorized entry. The overhead plant appeared to be in only fair condition; however, numerous pole line safety infractions were noted. The physical installation of the standby power supplies we observed was fair to good. Most of the ground-mounted power supplies were installed located so as to minimize intrusion into the right of way or visibility.; The subscriber drops (the thin cables connecting the signals from the distribution line taps to the individual homes) are in fair to poor condition. Disconnected aerial subscriber cable drops and 'devices (traps) appear to be routinely left hanging loose or cut off (abandoned) over or interfering with telephone 'cables rather than secured to the cable drop or strand or removed, <BALANCE OF PAGE INTENTIONALLY LEFT BLANK 4 The description here is based solely on our external observations of the system,thus it is to only to rovide guidance to the reader. A fiber optic node,is the device that converts the incoming light waves,carried from AT&T's headend via fiber optic cables,to radio frequency energy that can be transmitted to subscribers using coaxial cables. Fiber optic cable are not used to directly serve subscribers since virtually no subscribers have television sets that can convert light directly into video,nor does AT&T offer fiber-input set-top cable converters to its subscribers. PAGE C3 PHYSICAL PLANT INSPECTION OF AT&T BROADBAND IN THE CITY OF RICHMOND, CALIFORNIA Subscriber drop grounding, as required by the National Electrical 'Code and the City's Municipal Code, was in generally poor condition. Our inspection disclosed that AT&T did riot consistently use.the structure's common electrical ground as;its grounding point. This is contrary to the requirements of the NEC.6 Rather, we observed that AT&T was variously using independent ground rods, ground connections of questionable quality, or no grounding at all at many current and former subscriber,locations. Also, we observed numerous locations with multiple drops attached to the residence. It appears that drops have been replaced with RG-6 type cable; however, the RG-59 non-messenger''original drops installed have not removed. Workmanship issues and maintenance of drop 'systems also appear to be an:area of concern. In many areas of the community, wiring was observed to be falling off the homes or no longer secured in a workmanlike manner. While this may occur because of homeowner or satellite company activities, in many instances, there was evidence of recent wiring changes or additions by the cable operator. In these instances, the new wiring was generally secured in a workmanlike manner, but existing wiring was ignored or allowed to remain abandoned and unsecured and hanging on the premises. Installers, including contractors and technicians, should make additional effort to ensure that the cable installation'remains in a:usable and workmanlike condition before completing their work. There are numerous pole change out37 pending: cable attachments have not yet been transferred to new poles; down guys are missing, or not pulled and/or have been left in a temporary condition. On the plus side,there are signs that some newer drops are being replaced and properly grounded to a common bond as rewired by the NEC, yet this appears to be only in a minority of the community. As first mentioned above,Attachment A l of this report lists the locations we examined during this inspection, and Attachment A2 consists of representative photographs< illustrating selected violations observed during our inspection of the AT&T system.. 'NEC 820-40 7 A pole change out occurs when the pole owner(often the power utility)determines that the old pole must be removed and replaced. Sometimes change outs occur to enhance climber safety;sometimes they occur to support additional power and communications circuits on the poles. $ PAGE C4 PHYSICAL PLANT INSPECTION OF AT&T BROADBAND IN THE CITY OF RICHMOND, CALIFORNIA Conclusions and Recommendations Based on more than 24 years of outside plant cable engineering expertise, nearly 18 of which have been directly related to inspection of cable television systems on behalf of government agencies such as the City, and including other cable systems in California subject to CPUCG095 and G0128, the National Electrical Code, and other AT&T systems within California, we offer the following conclusions and recommendations based on the system observations reported Here: 1. The physical plant condition of the aerial'and underground system at and between'poles,and at and between pedestals and flush-mount vaults (collectively, the mainline portions of the system) is in fair to good condition. 2. We estimate that 60% of the pedestals are not secured. Unsecured' pedestals encourage tampering of cable facilities and unauthorized'cable use. 3. We estimate that the number of NEC and G095 violations& connected with subscriber'drops not being properly constructed and/or grounded exceeds 15,000. We observed that AT&T has replaced some of the underground and aerial service drops in several areas of the community.': Even after such upgrade work,we observed incidents of improper grounding or no grounds. 4. We recommend that the City direct AT&T to at a minimum do the following: A. Determine why the system has;failed to demonstrate compliance with the NEC and CPUC General 95 safety codes; and B. To develop and notify the City of a comprehensive corrective action plan to promptly detect and subsequently repair all code violations on a City-wide basis; and 8 Rather than the nuraber of drops. PAGE D1 PHYSICAL PLANT INSPECTION OF AT&T BROADBAND IN THE CITY C)F RICHMOND, CALIFORNIA ncluszans and .recommendations Based on more than 24 years of outside plant cable engineering expertise, nearly 18 of which have been directly related to inspection of cable television systems on behalf of government agencies such as the City, and including other'cable systems in California subject to CPUC G095 and G0128, the National Electrical Code, and other AT&T systems within California, we offer the following conclusions and recommendations based on the system observations reported here: 1. The physical plant condition of the aerial and underground system at and between poles; and at and between pedestals and flush-mount vaults (collectively,the mainline portions of the system) is in fair to good condition. 2. We estimate that 60% of the pedestals are not secured. Unsecured pedestals encourage tampering of cable facilities and unauthorized cable use. 3. We estimate that the number of NEC and G095 violations&'connected with subscriber drops not being properly constructed'and/or grounded exceeds 15,000. We observed that AT&T has replaced some of the underground and aerial service drops in several areas of the community. Even after such upgrade work, we observed incidents of improper grounding or no grounds. 4. We recommend that the City direct AT&T to at a minimum do the following: A Determine why the.,system has failed to demonstrate compliance with the NEC and CPUC General 95 safety codes; and B. To develop and notify the City of a comprehensive corrective action plan to promptly detect and subsequently repair all code violations on a City-wide basis;and s Rather than the number of chaps. �ir PAGE D1 PHYSICAL PLANT INSPECTION OF AT&T BROADBAND IN THE CITY OF RICHMOND, CALIFORNIA C. To implement the corrective action plan on an expedite schedule agreeable to the City; and D. To train its staff as necessary to understand and follow the safety codes; and E To permit its staff the time necessary during service calls(including installation and disconnect visits)to inspect and, as necessary,to make repairs to bring its system into code compliance; and F. To keep the City fully and accurately informed,on no less often than a monthly basis,of the status of the inspections and repair work until the City determines that AT&T has reached a satisfactory level of compliance with the safety codes. <End of Report; Attachments Follow> PACE D2 PHYSICAL PLAINT INSPECTION OF AT&T BROADBAND IN THE CITY OF RICHMOND, CALIFORNIA Al Attachment.I: Inspection Report and Photographs Inspection of AT&TBroadband In The Incorporated area of Richmond, California This list does not purport to depict every violation in the subject'inspection area, but rather is intended to provide representative categories of violations still observed in this system. May 1, 2002-GPS set. GPS No. 92198764,'96421694 and 96429894' Address Description of Infraction Code 520 McLaughlin St. 1) CATV not grounded at house NEC 820-40 2 CATV wires hangi4g hangingon house NEC 820-6 458 McLaughlin St. CATV>aerial drop is separating.from messen"er G.O. 95 464 McLaughlin St CATV 4A. kEound rod, non-common bond NEC 82040 531 Key St. I)CATV drop cut,banging, and abandoned NEC 820-6 2 CATV grounded'to a ground rod NEC 820-40' 582 Key St. CATV'4 ft. g2rod,non-common bond NEC 820-40' 676 Yuba St. CATV not properly grounded at house NEC 820-40 734 Yuba St. CATV'drop 'cut, hanging, abandoned, hanging G.O. 95 on tel hone 895 Yuba St.' CATV' rounded to ound rod at house NEC 820-40 920 Yuba St.' CATV'drops' at the tap cut, laying on top of G.O. G.O. 95 tele bone,disconnected and not bonded 921 Yuba St.:. CATV not ro erl rounded NEC 820-40 976 Yuba St. CATV aerial mid-span drop cut,hanging, and G.O. 95 abandoned Kern&McBryde Ave. CATV slack down "guy with no ' guard G.O. G.O. 95 92€1 Kern St. CATV drop wra ed around pole G.O. G.O. 95 821 Kern St. CATV not rounded. NEC 820-40 717 Dern St. —t-�CATV grounded to ound rod at house I NEC 820-40 �+► ATTACHMENT PAGE I PHYSICAL PLANT INSPECTION OF AT&T BROADBAND IN THE CITY OF RICHMOND, CALIFORNIA Address Descri tion o In raction Code 716 Kern St. CATV not grounded NEC 820-40 688 Dern St.' CATV not grounded NEC 820-40 689.Kern St CATV rounded to ground rod' NEC 820-40 5401 Amador St. Apts. CATV not properly grounded NEC 820-40 Each a artment un' ounded with se agate drops 724 Aador Ave CATV not properly grounded at A ts.' NEC 820-40 760 Aad.or'Ave. CATV mainline over telphonespan 5 5440 Esmond Ave CATV ff2unded toground rod NEC 820-40 982 Ventura'St. CATV no apparent ground NEC 8201-40 5137 Garvin Ave. CATV no a agent ESjund NEC 820-40 721 Lassen St. CATV drops at the tap' cut, laying on top of G.O. 95 telephone 827 Lassen St. CATV grounded to water pipe non-common NEC 820-40 919 Lassen St. CATV aerial mid-:span drop cut, hanging, and G.O. 95 abandoned 966 McLaughlin St. CATV not grounded NEC 82040 758 McLaughlin St. 1) CATV drops(2)attached to the house: one NEC 820-6 drop is RG 6 other is RG 59. RG 59 is no longer being used, abandoned but still attached to house 2 CATV not gTounded NEC 820-40 340 43rd St. CATV aerial''dro s hqpging on telephone G.O. 95 45443 rSt. CATV drop cut,hanging,'&wrapped around ole G.G. 95 524 43` St. CATV''drop abandoned&han_ging from strand G.Q. 95 550 43 St. CATV 4U abandoned&'han in g from strand G.O. 95 605 43' St. CATV' drops at the tap cut, laying on top of G.O. 95 telephone 641 43`d St. CATV drop abandoned&'han ig from strand G.O. 95 42-'U St. & Filson CATV no down guy guard G.O. 95 Ave. 658 41"St. A ts. CATV not ZLounded atapartments NEC 820-40' 456 41'"St.Apts. CATV not grounded atapartments NEC 820-40' 424 41 st St.Apts. CATV' grounded to ground rod at apartments, NEC 820-40 non-common'bond 42 40'h St' Apts. CATV'no apparent ground NEC 820-40! 50540 thSt. Apts. CATV'notro erl ' rounded NEC 820-40 63740 En St. CATV dro sban aa on telephone G.Q. 95 745 40` t.Apts. CATV not properly grounded NEC 820-40 760 Wilson Ave CATV not grounded NEC 820-40' 772 371 St. CATV no ggy guard G.Q. 95 a AM ATTACHMENT PAGE 2' PHYSICAL PLANT INSPECTION OF AT&T BROADBAND IN THE CITY OF RICHMOND, CALIFORNIA Address Description of Infraction Code 756 39# St.' CATV drop wrapped around telephone G.O.95 670 39 St. CATV fiber is lopping down on top of telephone G.© 95 610 39 St. CATV not ounded NEC 820-40 450 WSt CATV drop abandoned&h_mging from strand G.O. 95 3900 Nevin Ave. 1) CATV not grounded' NEC 824-40 2 CATV hanging on tele hone G.O. 95 331}39 St: CATV dro abandoned&h in from strand G.O. 95 3,16 39 St CATV drop abandoned&hon' ' from strand jG.G 95 46138.. St. CATV ounded to gound roti NEC 820-40 3803'Roosevelt Ave CATV grounded to ff2und rod NEC 82.0-40 645 37St 1) CATV not grounded' NEC 820-40 2 CATV drop is hanging,at Douse NEC 820-6 709 38 St CATV not grounded NEC 820-40 3800'Solano Ave CATV not rounded NEC 820-40 828 38` St, CATV drops at the tap cut,hang.ing on telephone G.0 95 3634!Garvin Ave` CATV not rounded NEC 824-40 757 31"' St. 1) CATV not grounded` NEC 820-40 2 CATV Idose wires at house NEC 820-6 756 37tSt CATV ground wire laying on the ground.to NEC 820-6 water pipe 634 OR St. CATV not grounded NEC 820-40 608 37 St CATV not:grounded NEC 420-40 509 37 St CATV drophonZing at tap G.O. 95 35537 iSt. CATV tiros hanginggat tap G.O. 95 345 3r St. 1)CATV aerial drop cut G.U. 95 2 CATV wires idose at house NEC 820- 333 37h St. CATV drops at the tap cut, laying on top of G.G.: 95 telephone 336 37` St CATV drops abandoned and hanging on G.O. 95 telephone .329 37 St" 1) CATV drop cut&hanging,at house NEC 824-6 2 CATV not tiunded NEC 824-40 337 36'h St. Apts. CATV wires hanging on apartment unit NEC 820-6 418 36th St CATV drops han in on telephone_ G.O. 95 466 3e St Apts. CATV drops un ounded 6 of 8 NEC 820-40 465 36 St CATV not ounded NEC 820-40 560 37 St CATV wires running over roof NEC 820- 648 Wh St CATV drops layink on top of tele brine G.O. 95 665 36` St CATV drop cut, hanging below tele 'hone G.0. 95 i ATTACHMENT PACE 3 PHYSICAL PLANT INSPECTION OF AT&T BROADBAND IN THE CITY OF RICHMOND, CALIFORNIA Address Deseri tial! of Infraction Code 757 36 St.' CATV drop la ' g on top of tele horse G.O.95 94336 In St. CATV not pE2pSrly grmded NEC 820-40 93736 ISt. CATV no apparent Eound NEC 820,40 981 36 St, CATV to_p out,hanging below telephone G.O. 95 3527'Rheex AveCATV dro cut&han9 G.O. 95 3526'R eem Ave. CATV not grounded properly,`non-common NEC 820-40 bond' 3519 Rheem Ave. CATV drops 1ayi!!S on top of telephone G.O. 95 3434';R.heern Ave. CATV drop cut&han `ng at mid span G.0 95 3400`Rheem Ave. CATV not gEounded NEC 820-40 3511 Lowell Ave CATV drops s hanging at G.O.95 3435'Lowell Ave'. CATV broken rnessen er drowire C'r.C3 95 3401 Lowell Ave CATV drop cut &hanging at mid span G.O. 95 948 35h St. CATV drop cut&ban ing at raids an G.O. 95 770 35` St.. CATV 4 U cut&hanging at rnid span G.O. 95 710 35` $t.. CATV dro` cut at to G.O. 95 3501 Bissell Ave. CATV cut drops,''appear to be abandoned RG-59 G.10.95 tvve cable NEC 820-6 3521 Chanslor Ave. CATV drop cu dro in below tele one'' G.O. 95 332 34 St. CATV drop(s)abandoned&hanging From strand G.O. 95 454 34` St CATV drops cut, 419pping droppingbelow telephone G.O. 95 513 341h St CATV drop(s)abandoned &hanging from: strand G.O. 95 636 34" St CAT'S"drop(s)abandoned& hanging from strand G.O. 95 654 34 St: CATV drocut&hanin below telephone G.O. 95 662 34` St, CATV dna` cut at tap G.O. 95 940 33` St. CATV drops!Eing,on t2p of te12 hone G.4: 95 3300'Roosevelt Ave. CATV not Eonnded NEC 820-40 530 33" St. CATV wires not roperly roperattached to the house NEC 820-6 450 33m St: CATV dro" s la in on to of tele hone G.O. 95 433 32 St: CATV dros la ing on top of tel hone G.O. 95 512 32fSt. CATV not ounded� to erl NEC 820-40 87942 nd.St. CATV drop hanSing,from strand G.O. 95 959 42"a St. CATV drops laying on top of telephone G.O. G.O. 95 32" 9t. &McBr de 1) CATV drops hanging on telephone G.O. 95 Ave 2 CATV drop is running over roof NEC 820-6 14 ATTAcHlsrENT PAGE PHYSICAL PLANT INSPECTION OF AT&T BROADBAND IN THE CITY OF RICHMOND, CALIFORNIA Address 1)ese!j tion of Infraction Code 3109 Nlaricopa Ave. CATV groundedto ground rod, non-common NEC 820-40 bond' 820 29 St: CATV drop disconnected,hangi.ng on telephone G.O. 95 81.4 H9-'E St.` CATV drops la "n on top of telephone G.O. 95 744 30 St. CATV drops la ' onto of tele hone G.O. 95 728 30" St. CATV drop(s) abandoned & hanging from strand G.O. 95 618 29 St. CATV drops disconnected, laying' on top of G.O. 95 telephone 330 3F St.' CATV drop ch in below tel hone G.O. 95 329 29n St. CATV drops disconnected, laying' on top of G.O. 95 telephone 2819 Downer Ave. CATV drwdroppiiig below telephone G.O.95 743 26` St.' CATV drops disconnected, laying' on top of G.O. 95 tel hone 533 2e St. CATV drops disconnected, laying', on top of G.O. 95 telephone 604.Civic Center Dr. CATV drops disconnected, laying' on top of G.O. 95 telephone 616 Civic Center Dr. CATV drop droppingdroppipg below telephone G.O. 95 714 25 St..' CATV dUq .!ko2ping below tele hone G.O. 95 3501 Bissell CATV drops.cut,appear to be RG-59 cable G.O.95 114 35th St CATV cut drop -- pale is restrained by rope,' G.O.95 may need' to be pulled out & set up old' replacement 3521'Chanslor Ave. CATV mid-span drop is below telephone G.O.95 33234 tSt CATV several cut mid-span drops G.0.95 454 34 St CATV dro s cut at tap overInping telephone G.O. 95 513 34` St! CATV drops cut at to G.O. 95 618 3&ft St. CATV drop has been cut at mid-s an G.O. 95 636 34` St CATV drop cut at mid- an G.O. 95 654 34` St. CATV drop' cut and law aver tele hone G.O.95 662 34M St CATV drop cut at tag G.O. 95 940 33r St CATV drop disconnected at tap and hanging G.O. 95 over''telephone 782 31rd St CATV drops disconnected and hanging over G.O. 95 tele hone 758 33` St CATV(kqp cut at mi&s an G.O. 95 300 Roosevelt Ave. CATV is not ended NEC 820-40 530 33r St' CATV wires not T_1y attached to house NEC 820- ATTACHMENT PAGE 5 PHYSICAL PLANT INSPECTION OF AT&T BROADBAND IN THE CITY OF RICHMOND, CALIFORNIA Address Description of Inf action Cade 450 33 St. CATV dr s h2jiZing at ap G.Q.95 336 33r4 St CATV exam le of looped cable over telephone G.O. 433 32'� St CATV drops disconnected overlapping G.Q. 95 telephone 51232 n St CATV not grounded pr9perly NEC 82040 627 42�' St CATV house drop touching power drop: ',NEC'820-6 improper clearance between conductors; drop attached to chimney.with some type of band 737 32 nd St. CATV several disconnects at tap, banging on G.O. 95 telephone 879 42" St CATV drops cut at to G.Q. 95 959 42" St. CATV drops cut at Lap 0.0, 95 975 42 63 St. CATV cut drops at mid-span G.O. 95 32 St.& McEryde 1) CATV drops overlapping telephone at tap; G.O. 95 Ave. 2 CATV drop running over root` NEC 820-6 423St.& Andrade CATV pole change out required, cut in half and G.O. 95 Ave. hanging by the strand on tele hone and cable. 3109 Maricopa Ave. l) CATV not grounded properly NEC 820-40 2 CATV loose wires on house' NEC 820-6 29t St. & Humphrey CATV power supply covered with graffiti. Deed Q0. 95 Ave. Schedule 80 for the riser. 2900 Andrade Ave. CATV g2unding at electrical mass on roof NEC 82040 920 29 St CATV oro sare hanging over tel bane at to G.O. 95 820 29h St CATV disconnect at to overlapping telephone G.O. 95 81429 iSt CATV disconnected at tap overlapping G.O. 95 telephone 744 30f St. CATV disconnected drops overlapping G.O. 95 telhone 728 29t e St CATV drop cut at mid-Tan G.O. 95 618 29` St CATV'drops cut at tap overlaaiog telephone G.Q. 95 Roosevelt Ave. &30 CATV'pole change out still pending; cut into 4' G.Q. 95 St. pieces hanging, cable is off so no:issue there,but telephone is not, which is common throughout this system. 330 30t St. CATV drops at mid-spans dropping below G.O. 95 tele hone 329 Wh St. CATV drops disconnected and.overlapping G.O. 95 tele hone at to 428 29t St CATV'disconnects at to ;,Ioose cables'' G.Q. 95 2819 Downer Ave. CATV disconnects at to2 are overly ` in other G.O. 95 ATTAC14MENT'PAdE 6 PHYSICAL PLANT INSPECTION OF AT&T BR©ADBANb IN THE CITY OF RICHMOND, CALIFORNIA Address Description of Infraction Cone strands 1107 28` St. CATV drops are cut aind are overlapping C.U. 95 telephone at to 74326 St."` CATV cables are hanging and cut at: tap, G.O. 95 overlappingtelephone 67426 St. CATV wires loose at tap G.O. 95 629 26 St. CATV loose cable at house NEC 820-6 605 and 607 26th St CATV cables unattached on a artment complex NEC 820-6 533 26` St. CATV cables at tap are disconnected and G.O. 95 overlapping telephone 604 Civic Center Dr. CATV drops cut and'overlapping.telephone G.O. 95 616 Civic Center Dr CATV span drqis below telephone G.O. 95 714 2S St CATV span drois dropping below tele hone G.O. 95 724 Garvin.Ave. CATV drops at tap are overIMping telephone G.O. 95 2434 Esmond Ave. CATV drops hon in on telephone G.O. 95 Finished at Esmond CATV drops hanging on telephone G.O. 95 and San Pablo Ave. 206 Marine St. Cable wires run across the roof'; G.O. 95 Marine St. & CATV drop abandoned,cut and hanging G.O. 95 Tewksbury St. 508 Tewksbu St.: 1 CATV drops too low over road, 16 1/2 fit' G.O. 95 428 Tewksbury St. 2 CATV drops too close to power at house NEC 820-6 422 Tewksbury St.. CATV drop too close to power at house NEC 820-6 327 Tewksbur y St. CATV not grounded NEC 820-40 333 Tewksb St.'' CATV drop too close to -'ower at house NEC 820-6 121 Tewksbury St. CATV Those wining on apartment NEC 820-6 A. t. 301 McDonald Ave. l) CATV unsecured apartment lockbox NEC 820-6 301 McDonald Ave. 2) CATV not grounded NEC 820-40 3 CATV pedestal lid missing G.O. 128 312 McDonald Ave. CATV not sounded NEC 820-40 308 McDonald Ave. CATV'not grounded NEC 820-40 310 McDonald Ave. CATV'not Eounded NEC 82040' 220 McDonald Ave. CATV not gTun4ed NEC 820-40 110 McDonald Ave. CATV'not groppded NEC 820-40' [246 First St. CATV'dro too close to power at house NEC 820-6 :242 First St. CATV'drop too tow across road; 16 1/2 ft. G.Q.95 ATTACH ENT PAGE 7 PHYSICAL PLANT INSPECTION OF'AT&T BROADBAND IN THE CITY OF RICHMOND, CALIFORNIA Address D ori tics of Infraction Code 228 First StyCATV drop too low over road, 16 ft. G.1b.'95 222 /209 First St. CATV dr22 too close to power.at house NEC$20-6 111 Bissell Ave. CATV drop too low over road; l6 1/2 ft. G.O. 95 100 Bissell Ave. CATV*9p hits the power mast NEC 820-6 120 Bissell Ave. CATV riot Funded NEC 82040 Comer of 2" & Bissell CATV drops abandoned,'cut&hanging from the G.O. 95 poles 2€19 Bissell Ave. CATV attached too close to tele hone NEC 820-0 218 Bissell.Ave. CATV drop too close to power at house NEC 520-6 229 Bissell.Ave. CATV ro too low over the rand 16''ft. G.O. 95 Across from 160 Third CATV drop too close to power at house NEC 820-6'' 150 Third St. CATV drop is too low over road 14 1/2 ft. G.O. 95 139 Third St. CATV not Eounded NEC 820-40 125 Third St. 1) CATV wire run across the roof NEC 820-6 2 CATV grounded to poWer most NEC 820-40 123 Third St. CATV grounded to the power mast NEC 820-40 305 Chanslor Ave. CATV drop too close to ower at house NEC 820-6 313 Chanslor Ave.' CATV drop too close to power at house NEC 820-6 320 Chanslor Ave. CATV drop too close to power at house NEC 820-6 319 Chanslor Ave.,, CATV droptoo close to ower at house NEC 820-6 117 S. Fourth St. CATV 4qp hangigg on telephone; G.O. 95 141 S. Fourth St. CATV drop too close to power at house NEC 820-6 162S. Fourth St. CATV!kop 'passes over the roof, NEC 820-6 411 Florida Ave. CATV drop is too low, 16 ft. G.Q. 95 417 Florida Ave. CATV drop,is too close to power,8 in G.O. 95 421 Florida Ave. CATV drotannin' over roof NEC 820-6 431 Florida Ave. CATV drop too close to powSr at house ITEC 820-6 434 Florida Ave. CATV drop too close to '.ower at house NEC 820-6 509 Florida Ave. 1) CATV drop is too low'over the road G.E . 95 2 CATV too close to tele hone at house NEC 820-6 510 Florida Ave. 1) CATV drop attached to power mast G.O. 95 2 CATV grounded.at the power.mast' NEC 820-44' 527 Florida Ave. CATV'drop is tangled up in telephone drops,too G.0. 95 low, 15 1/2 ft 601 Florida Ave. 1)CATV drop too close to power at house NEC 820-6 CATV dro too law across road G.Q. 95 611 Florida Ave. CATV drop too low across road, 15 '/a' G.O. 95 617 Flrop too low across road, 15 '/2'' G.O. 95 +AM ATTACHMENT PAGE 8 PHYSICAL PLANT INSPECTION OF AT&T BROADBAND IN THE CITY OF RICHMOND, CALIFORNIA Address Description of Infraefiall Code St. Luke Missionary CATV not grounded NEC'820-40 Baptist Church, Florida Ave;. Florida& S 8'h St CATV top abandoned and cut' G.O.95 245 S. 8 St. CATV dLo too love, 12 ft. Q.0. 95 244 S. $ St. CATV not gounded NEC 820-40 245 S. 8 St 1) CATV(2)drops grounded to the power mast NEC 820-40 2 CATV wire running across the roof NEC 820-6 250 S 8 th St. CATV drop abandoned,cut,&honVng G.0-95 255 S 8 St CATV not grounded NEC 820-40 Across from 263 §77— CATV drops abandoned, cut&`banging on G.O. 95 St. telephone 300 8ft St. CATV not grounded NEC 820-40 355 8# St. CATV drop too close to power at house NEC 820-6'. 130 S. 6` St CATV drop too loin over road G.O. 95 28& 30 S. 6 St. ;1) CATV wiring hanging on house NEC 820-6 2 CATV not goynded NEC 820-40 34 S. 6f St. CATV drop too low over road G.O. 95 38 S. 6= St. CATV dro too low over road G.Q. 95 116 S.6t St CATV drop too close to power at house NEC 820-6 127 S. 6 St. CATV drops hangi4g hangingon telephone G.O. 95 132 S. 6 St. CATV drop too low over road G.O. 95 8` St.&Male Ave. CATV no down gqy guard G.O. 95 525 Harbour'Way CATV no dawn guyand G.Q. 95 :529 Harbour AaX CATV drop too close to 'ower at house NEC 820-6 616 Harbour'Way CATV drop too low over road G.O. 95 64€1 Harbour'Way CATVdro too low over road, 15 1/2 ft. G.O. 95, 652 Harbour'Way CATV _49p too low over road, 6 ft. G.O. 95 753 Harbour Way CATV low distribution span sagging down G.O. 95 below telephone 812 10 St. CATV whinrunnin on'roof NEC 820-6 835 101St. CATV gound wire not secured NEC 820-6 830 10` St. CATV'drop too low over road, 16 ft. G.O. 95 86710 St. CATV'drop cut G.O. 95 861 10t St. CATV'drop too close to power at house NEC 820-6 886 I0 St. CATV drop too low over read, 15 1/2 fl. G.O. 95 CATV'no down guy guard G.O. 95 901 Lincoln.Ave. I CATV'not grounded NEC 820-40' 903 Lincoln Ave. I CATV not grounded NEC 820-40' ATTACHMENT'PAGE 9 PHYSICAL.PLANT INSPECTION OF AT&T BROADBAND IN THE CITY OF RICHMOND, CALIFORNIA Address Ilescri tion of Infraction Cede' 905 I incoln Ave. CATV not' rounded NEC 82040 907 Lincoln Ave. CATV not` rounded NEC 820-40 911 Lincoln Ave. CATV notgrounded NEC 820-40 913 Lincoln Ave. CATV not grounded NEC 820-40 915 Lincoln Ave. 1) CATV not grounded at house NEC 82€1-40 2) CATV drop running out of cement vault, NEC 820-6 running across the gEou4d,drop not buried 917,Lincoln Ave. CATV not grounded NEC 820-40 919 Lincoln.Ave. CATV not grounded NEC 820-40 921 Lincoln Ave. CATV not grounded NEC 820-40 918 Lincoln Ave. CATV wiring running across roof NEC 820-6 CATV not grounded NEC-820-40 9� & Lincoln Ave. CATV down guy is missing,pale being pulled G.O.''95 over here rather severely. The cable strand has been tied off to tele hone strand for tension'. 931 Lincoln Ave. CATV not gounded NEC820-40 933 Lincoln Ave. CATV not_grounded NEC'820-40 935 Lincoln Ave. CATV not grounded NEC'820- 0 937 Lincoln Ave. CATV not grounded NEC'820-40 939 Lincoln Ave. CATV not grounded NEC'820-40 938 Lincoln Ave. CATV not ounded NEC'82040 932 Lincoln Ave. CATV not ` ounded NEC'820-40 928 Lincoln Ave. CATV not 'grounded NEC,',820-40 926 Lincoln Ave. CATV not grounded NEC'820-40 811 Lincoln Ave. CATV grounded to ound rod at house NEC 820-40 807 Lincoln Ave. CATV not Sjoutided NEC 820-40 805 Lincoln Ave. CATV not grounded NEC 820-40 815 Lincoln Ave. CATV not Eounded NEC 820-40 817 Lincoln Ave. CATV not `grounded NEC 820-40 928 Lincoln Ave. CATV not grouq§ed NEC 820-40 930 Lincoln Ave. CATV not gpunded NEC 820-40 932 Lincoln Ave. CATV not ,''rounded NEC 820-40 934 Lincoln'Ave. CATV not grounded NEC 820-40 936 Lincoln Ave. CATV not grounded NEC 820-40 938 Lincoln Ave. CATV not yZounded NEC 820-40 919 Lncoln'Ave. CATV not grounded NEC 820-40 952 Lincoln'Ave. CATV not grounded NEC 820-40 454 Lincoln Ave. CATV not gyounded NEC`.820-40 956 Lincoln Ave. CATV not grounded NEC 1820-40 W� ATTACHMENT PAGE 10 PHYSICAL PLANT INSPECTION OF AT&T BROADBAND IN THE CITY OF RICHMOND, CALIFORNIA Address Description of Infraction Code 939 Lincoln Ave. CATV notLoynded NEC 820-40 937 Lincoln Ave. CATV not grounded NEC 820-40 935 Lincoln Ave. CATV not grounded NEC 820-40 951 Lincoln Ave. CATV not V.ounded NEC820-40 953 Lincoln Ave., CATV not grounded NEC 820-40 955 Lincoln Ave. CATV not ounded NEC 820-40 95'7 Lincoln Ave.` CATV not 'rounded NEC 820-40 959 Lincoln Ave. CATV not rounded NEC''820-45-- 986 Lincoln Ave: CATV not rounded NEC'820-40 982 Lincoln Ave. CATV not grounded NEC''820-40 978 Lincoln Ave. CATV not grounded NEC 820-40, 880 9'h St. CATV drops abandoned,cut&hanging over the G-0. 915 road from strand 859 8 St. CATV drop too close to power at house NEC 820-6 In front of 854 8` St. CATV drops cut,,,,&han in G.O. 95 835 8 St. CATV dro too low over road,' 16 ft* G.O. 95 797 8` Si. CATV drop too low over road,''17 ft, G.C.;!. 95 765 8 t. CATV drop too low over road G.O. 95 770 8t St. CATV drop too close to' ower at house NEC 820-6 747 9" Si. CATV dro ' too low over road, 17 ft.' G.Q. 95 873 7` St. CATV drop is booked over chimney passing NEC'820-6 over the roof 1315 Filbert St. CATV broken lashing wire sygortillg cable G.C).'95 Across from 1328` CATV drops abandoned, cut& hanging over the G.O. 95 Filbert St. road from strand 1360 Filbert St. CATV drop too low over road, 15 ft. G.O. 95 1540 Filbert St. CATV dM is wrapped up in ---ower mast G.O. 95 3'd--&Grove Ave. CATV drop cut G-0.I 95 1628 Filbert St. CATV drop hits the power mast G.O. 95 Market&Filbert St. CATV drop cut G.O. 95 1822 Filbert St. CATV broken lashing wire supporting cable G.O. 95 510 Alamo Ave. CATV not rounded NEC 820-40 424 Alamo Ave. CATV too close to telephone,passes'underneath G.O. 95 the tele hone drop holdiEg it 256 Alamo Ave. CATV not grounded NEC; 820-40 260 Alamo'Ave. - 1) CATV drop too close to poorer at house NEC 820-6 2 CATV ound wire,unsecured: NEC 820-40 226 Alamo Ave. CATV not' rounded 'NEC 820-40 Across 210 A larno CATV no down guy gumd G.O. 95 ATTACHMENT PAGE 1 I PHYSICAL PLANT INSPECTION OF AT&T BROADBAND IN THE CITY OF RICHMOND, CALIFORNIA Address Description Of Infraction Cade Ave. 45 Alamo Ave. CATV drops cut and hnging G.O.95 45 Alamo Ave. CATV drop cut NEC 820-6 14 Alamo Ave. CATV not ' ggnded NEC 820-46 218 York St. CATV drop too low over road, 1.6 ft. G.O. 95 2.51 'York St. CATV wires too close to telephone at house NEC 820-6 251 'York St. CATV drop too close to. ewer at Douse NEC 820-6 259 York St. CATV drop cut G.©.'95 314 York St. CATV drop too low, 16 ft. G.O. 95 319 York St. CATV drocut&i''han in G.U. 95 324& 334 'York St. CATV drops too low over road, 17 ft. G.O. 95 412 York St. CATV drop too low over road G.O. 95 Across from 436 York CATV broken lashing wire supporting cable G.O. 95 St. Hensley St in front of CATV splicing closure sagging 'down into ' G.O. 95 the SF Chronicle' telephone cable and rubbing against the Distribution Center telephone cable. 'Splicing closures out too far, rubbin u &.down on telephone 457 A St. CATV drop_too low over road G,O.'95 441 A St. CATV drop too low too close'tap ower G.O.95 433 A St. 1) CATV wiring running on the roof NEC 820-6 2 CATV not rounded NEC'820-40 417 A St. CATV drop hits the power mast G.O. 95 448 2" St. CATV drop-cut G.O.95 4712' St. CATV drop too close to` ower at house NEC 820-6 516 2ftd St. CATV drop too low over road G.O. 95 528 2"3 St. CATV 4r op too low over road` G.O. 95 5402 Ilt. CATV droj2 too low over road G.O. 95 551 2" St. CATV too close to power, 1 foot clearance from G.O. 95 secondary power 560 Yd-St. ` 1) CATV drop too low, pulled out of the house' NEC 820-6 2 CATV drop wrapped in tele hone 8z power G.O. 95 566 2" St. CATV drop too close to power at house NEC 820-6 542 4 St. CATV not- rounded NEC 820-417 533 4 St. CATV drop' too low over road, 14 ft. G.O 95 4294 St. CATV drop,wire cut G.O. 95 4t Barrett Ave: CATV drop wrapped around the telephone pqle G.O. 95 466 4x t. CATV not rounded; Satellite Co.removed? NEC 821-40 428 4" St. CATV drop too close to power at house NEC 8211- ATTACHMENT PAGE 12 PHYSICAL PLANT INSPECTION OF AT&T BROADBAND IN THE CITY OF RICHMOND, CALIFORNIA Address Descri #ion ©f Infraction Code 219 7 St. CATV not grounded NEC 820-40 307` St CATV not gj2unded externally NEC 820-40 313 71h St CATV not grounded NEC 820-40 611A'Barrett Terrace 1) CATV pedestal unsecured; not set to grade G. O. 128 2 CATV broken concrete vault; lid broken 438 ABarrett Terrace CATV broken pedestal lid G. O.'128 606 Ripley Ave. CATV drop too close to power ' NEC 820_6'` CATV tan led in the drop next door 608 Ripley Ave. CATV too close to power NEC 820-6 6t'h SU Ripley Ave. CATV span'is sagged too low'and too close to 'G.O. 95 telephone 530 ftley Ave. CATV .500"distribution coiled up on' ole G.O. 95 626 5 St CATV too close to' ower NEC 820-6 624 5": St CATV attached to the power mast G.O. 95 642 5" St CATV too close to' ower 8" NEC 820-6 6565 1St CATV old drop still attached to house, uncut at NEC 820-6 p-hook; new drop attached, but old drop abandoned; loose wiring, ground block not secured 651 5` St. 1)CATV drop abandoned still attached to house; NEC 820-6 new drop on other side of house 2) CATV ground not straight, looped ground NEC 820-40' wire and wire is loose 647 5"St 1) CATV loose wiring on side of house NEC 820-6 2) CATV not grounded NEC 820-40 3) Clearance violation from telephone'patches G.O. 95 to another drop, rubbing on tele 'hone drop. 653 5 St CATV'not rounded NEC 820-40'' 655 5 St CATV'grounded but ground wire is not secured NEC 820-40 in an manner, leaning against house 670 5" St CATV drqp hits the power mast' G.O. 95 679 5"'St CATV drop is too close to power. G.O. 95 660 5"St CATV drop hanging over telephone droG.O. 95 689 5"'St CATV distribution' is sagging ',about l 3' below G-0. 95 telephone 690 5"'St. CATV drop is wrapped in telephone drop no G.O. 95 clearance from telephone 1246 Pennsylvania CATV drop is tangled in phone drop and passes G.O. 95 over the roof,'attached to power.toast 716 5t St CATV draP is cut, strand hanging G.O. 95 * ATTACHMENT PACE 13 s PHYSICAL PLATT INSPECTION OF AT&T BROADBAND 14 THE CITY OF RICHMOND, CALIFORNIA Address Description of Infraction Cade ' 720 5! St CATV not rounded NEC 820-40 740 51h St. CATV drop cut, hanging from strand G.O. 95 770 5` St 1) CATV not grounded' NEC'820-403 2 CATV loose wiring at house NEC 820-6 Pole 7708,:intersection CATV down guy is missing and never installed G.U. 95 Lucas& 5`h St 801 6 St CATV not grounded NEC 820-40 501 Enterprise Ave. CATV wiring running over root' of apartmentNEC 820-6 complex. 792 6� St CATV no ground rod NEC 820-40 774 6t St. CATV too close to power NEC 820-6 766 6` St. CATV too close to power NEC 820-6 762 e St. CATV no ground.rod NEC 820-40 756 Ob St. 1) CATV old drop left'remaining, cut at house ' NEC 820-6 2 CATV not grounded NEC 820-40 749 6` St. CATV drop cut,strand hag in G.U. 95 738 5 St. CATV drop is rubbing on powSrdropNEC 820-6 732 6` St CATV drop is tori close to power NEC'820-6 7216"' St CATV dro too close to power NEC 820-6 –e—&Pennsylvania CATV 2 abandoned RG-59 drops still attached' NEC 820--6 to apartment corn' lex,new drop resent 686 6h St CATV drop too close to' ower NEC 820- 665 6 St 1) CATV wiring off house;wiring trio close to NEC 820-6 power; wires tangled in telephone drops. 2 CATV not gjounded' NEC 820-40 6586 1h St. CATV drop cut at top G.U. 95 653 6 St CATV not rounded. NEC 820-40 657 6` St. CATV not grounded NEC 820-40 652 On St. CATV dro s too low mid-Man G.U. 95 648 6f St. CATV too close to power; attached to power' NEC 820-6 mast 635 b St. CATV drop is tangled in power at House;';direct' NEC 820-6 contact 621 e Si CATV drop too close to power NEC 820-6 731 Ripley CATV drop too close to power NEC 820-6 Ground wire not secured 733 Rile CATV not rounded NEC 820-40 1.218 Potrero CATV not grounded NEC 820-40 Across road from CATV down guy missing, no guard G.O. 95 525 S. 12'h St Not ounded NEC 820-40 ATTACHMENT PAGE 14 PHYSICAL PLANT INSPECTION dF AT&T BROADBAND IN THE CITY OF RICHMOND, CALIFORNIA Address Descrj t1o!! of Infraction Cade Cuttn 1'1` St CATV cut dro at p9le G.O. 95 Cutting Blvd & CATV no down guy guard G.O.95 Harbour a 9 St.& Cutting CATV no down guy guard G.G. 95 Blvd. 449 s. 9t St. CATV cut drop&dro s tcao close to ower G.O. 95 430 South 9' St CATV not rounded NEC 820-40 405 S. 9m St. CATV not grounded NEC 820-40 407 s. §"'—§t- CATV not grounded NEC 820-40 Loose wirin NEC 820-6 401 TT--St., across CATV drops cut, hanging from strand G.O. 95 road 253 S. 9" St CATV drop hits the power mast NEC 820-40 341 S. 9` St CATV drop is wrapped in telephone ' (1.O.'95 345 s. 9 St. 1) CATV old RG-59 drops abandoned NEC 820-6 2 Not Eounded NEC 8211-40 334 S. 9' St. CATV" climbing violations; drops into telephone G.O. 95 and below 300 S. 9" St. CATV not' ounded NEC 820-40 307 S. 9t St. l) CATV loose wiring NEC 820-6 2 CATV not grounded NEC 820-40 245 &W St CATV drop too low across read, 15.5 . G.O. 95 221 S. 9# St. CATV drop bits power mast; too close to power G.O.95 Florida& S.Vn St. CATV pole,transfer• stra ed to new ole G.O.95 135 S. 9` St. CATV too' close to power, resting on top of ITEC 820- tele bone 149 S. 9h St. CATV not grounded NEC 820-40 135 S. 9` t. CATV too close to power NEC 820- 126 s. 9 St. CATV no down '-u guard G.O. 95 Across from 126 S. 9` CATV attached to power mastNEC 820-6 St. S. 8h St. -Ohio & CATV slack down guy;no tension, no support G.O. 95 Chanslor Ave. 7�&Chanslor Ave. CATV rubs ole; no strand attachment G.O 95 Bissell& 8` St. CATV no down guy guard G.Q 95 1769 St. CATV not grounded NEC 8211=40 174 9h St. CATV not grounded NEC 820-40 170 9 St 1) CATV not grounded NEC 820-40 2 CATV loose wiring" NEC 820-6 166 9 St 1 CATV cut drop and abandoned NEC 820-6 ATTACHMENT PAGE 15 PHYSICAL PLANT INSPECTION OF AT&T BROADBAND IN THE CITYQF RICHNICEND, CALIFORNIA Address Description of Infraction Cede 2 CATV loose wires across the roof NEC 820-6 150 9 St CATV drophits power mast; grounded to power NEC 820-6 -.mast 132 } St. 1) CATV does not appear to be grounded NEC-<820-40 2) CATV wiring is loose and draped all over the NEC 820-6 house 3) CATV workmanship issues may be owner induced 124 9'h St CATV!kop too close to ower at house NEC 820-6' Chanslor & Harbour CATV cut strops hanging down' G.O. 95 Wa 9` &Chanslor Ave. CATV broken lashing wire, 1' from power G.O. 95 1F&Chanslor Ave. CATV dro s cut and hanging G.O. 95 1215 Chanslor Ave. CATV not arounded NEC 820-40 1315 Chanslor Ave. CATV drop too low over road, 16' G.U. 95 1510 Ohio St CATV drop passes over roof less than 8',' hits G.U. 95 back of house 118 S. 13 St. CATV drop hits power mast, grounded to power ''NEC 820-40 mast 156S. 13 St. CATV drop too low mid-span G.O. 95 Florida& S.'13` St. CATV too close to! ower NEC 820-6 1828 Florida CATV drop abandoned G.U. 95 1825 Florida 1) CATV wires running over roof NEC 820-6 2)- CATV not grounded NEC 82€1-40 Across from 139 S. CATV pole transfer required G.0. 95 14`x' St. Harbour Wa`° &Ohio CATV down guy slack; no ga guard G.O. 95 —§—. -971 St.& Ohio Ave. CATV broken/no dawn guy guard G.O. 95 531 Ohio St CATV not grounded NEC 820-40 408 Ohio St. CATV drop hits power mast NEC 820-6 225 Main St.'' CATV drops cut, han 'n down; dro too low C.Q.O. 95 226 Main St. CATV ground too close to power NEC 820-6 423 Main St.' CATV'drop resting on top of power drop NEC 820-6 427 Main St; CATV too close to ower; resting,on telephone NEC 820-6 S. 5 St& Main St. CATV ole transfer required G.O. 95 234 S. 3` St. CATV'not grounded NEC 820-40' Florida& 2" St. CATV pole chap e-out incotplete G.O. 95 318 W Bissell Ave. CATV notrounded NEC 820-40' 326 W Bissell Ave'. CATV'drops abandoned,attached to roof NEC 820-6 328 W. Bissell Ave'. CATV unsecured wirin NEC 820-0 AP6 ATTACHMENT PAGE 16 PHYSICAL PLANT INSPECTION OF AT&T BROADBAND IN THE CITY OF RICHMOND, CALIFORNIA Address Des+ed tion of linfraction Code 320 W. Bissell Ave. CATV whin across roof NBC 820-6 236 W. Bissell Ave. CATV ground rod not secured; loose wiring on NEC 820-6 side of house 232 W. Bissell Ave. CATV not ' erunded NEC 820-40 523 W.Bissell Ave. CATV(tops abandoned G.O.95 317 W. Bissell Ave. CATV not grounded NEC 820-40 25 Chanslor Cir., CATV not grounded NEC 820-40 Bld .25 144 Chanslor CirCATV OLops abandoned G.O. 95 148 Chanslor Cir., CATV not grounded NEC 820-40 Bld l6 158 Chanslor Cir. 1) CATV drop hitting furnace vent on front of NEC 820-6 house&tied off 2 Not grounded NEC 820.40 Chanslor Cir., rear of CATV drop cut;wiry;on house abandoned NEC 8201-6 Bldg. 20 Chanslor Bldg. 17 CATV drop too close to power; mobbing on NEC 820-6 ower mast 149 Chanslor Cir., 1) CATV drop is attached to pourer mast; too NEC 820-6 Bldg'13 close to power 2 CATV Not grounded NEC 820-40 Chanslor Cir.,Bldg. CATV wires run across roof NEC 820-6 32 Chanslor Cir.,Bldg. CATV wi hanging building 10 NEC 820-6 Atchison.Village CATV wiring loose NEC 820-6 Subdivision. Bldg 7,behind Bldg. CATV no down "u guard G.O. 95 259 W. C li nslor' CATV not rounded NEC 820-40 3015'Carlson CATV dro' abandoned at mid'-s an G.O. 95 3019'Carlson CATV oro abandoned nt mid'-s an G.O. 95 3031'Carlson CATV wires abandoned G.O. 95 3223'-.Carlson CATV drqp loose at house NEC 820-6 3229'Carlson CATV mainline at mid s an tc o low' G.O. 95 3019 Carlson CATV is too close topower; in ` over roof NEC 820-6 34011 Carlson CATV 2 drops hon i mid-span, G.O. 95 3421 Carlson CATV oro'' hanging G.C.; 95 3529 Carlson CATV drop abandoned' G.O. 95 3621'Carlson CATV no clownguyand G.O. 95 126 s, 45 t. CATV !Lro-p abandoned' 0.0. 95 .3319 Center Ave. CATV not' rounded properly NEC 820-40 4C ATTACHMENT PAGE 17 PHYSICAL PLANT INSPECTION OF AT&T BROADBAND IN THE CITY OF RICHMOND, CALIFORNIA Address Description of Infi4etion Code 'Center i 33r'Ave. CATV drop abandoned at house: NEG-6 3203:Center Ave. CATV loose hardware G.O. 95 3119 Center Aver CATV drop abandoned G.O.95 3026 Center Ave. CATV drop abandoned G.O. 95 2719 Florida Ave. CATV pole,transfer required G.O. 95 2811,Florida Ave. CATV less than 30"climbing sRace G.O. 95 2909 Florida Ave. CATV!ko2s haMing 'G.O. 95 2929 Florida Ave. CATV drops loose at house NEC 820-6 3015 Florida Ave. CATV drop abandoned NEC 820-6 2112 Florida Ave. CATV drop hanging at mid spLn G.O. 95 Carlson& S. Potrero CATV overhead,guy incoLnpleto G.O. 95 4100 S. St. CATV drops too low G.O. 95 4314 South 33"St CATV wires loose NEC 820-6 398 34 St' CATV d�rocut at house NEC 920-6 378 4 h§t- CATV wires loose NEC 820-6 260 S. 359t CA-TV wires hnamg NEC 820-6 3501 S. 33 St CATV wires banging NEC 820-6 212 S. 33rdSt CATV drop too close to ower at house NEC 820-6 1405 San JoNuin St CATV no down g4y_guard G.O. 95 1445 San Joaquin St 1) CATV not grounded NEC 8I0-40 2) CATV loose wires on house NEC 820-6 3) CATV loose wires at pole G.O. 95 5201 Imperial.Ave. CATV no overhead guy G.O. 95 1495 Monterey St. CATV danglina drop G.O. 95 1513 Monterey St. CATV wires hanain NEC 820-6 1573 Monterey St. CATV loose hardware G.O.,95 CATV climbing Tace violation 1622 Monterey St. CATV wires hanSing mid-span 0.0. 95 Burlingame& CATV no head guy G.10. 95 Monterey Tehama St. CATV loose hardware mid-span G.O.95 1521 Tehama St , CATV dro too low G.O. 95 391 39b St-W. CATV 4Lop,abandoned G.O. 95 401 39'h W CATV wire de-lashed. G.O. 95 220 313'St. CATV drop hon in at mid-sklkp GD. 95 150 313'St CATV wires hnging NEC 820-6 111 4F Kt-. S. CATV wires hang ng NEC 1820-6 131 S. 42no St. CATV drop hanG,O. 95 143 5. 42" St CATV dropp hanginat mid-span G.O. 95 ATTACHMENT PAGE 18 PHYSICAL PLANT INSPECTION OF AT&T BROADBAND IN THE CITY OF RICHMOND, CALIFORNIA Address Desertion ► Inftaction Code 222 S. 42" St CATV drop abandoned at mid-tan GO. 95 4112Wall CATV pole change re aired G.O. 95 4503'Wall CATV no down py gugd G.O.'95 4619'Wall CATV pole chn e re uired G.O.95 220 47 St. CATV main line too low G.U. 95 236 S. 45" St CATV dro> abandoned mid-pan G.O. 95 258 S.45 t CATV tiro' hqngijjg hangingG.0.95 4733'Wal 11 St CATV strand attached to tele hone G.O. 95 363 0 St.'S. CATV drog haggilil G.O. 95 365 42nSt South CATV 4r4 hn&g G.O. 95 4627 Fall Ave. CATV loose hap ng wire NEC 820-6 4710'Arno St. CATV drop abandoned G.O< 95 4747!Arno St. CATV wires loose NEC 820-6 912 S. 4F St. CATV dro abandoned G,O. 95 415 Rosewood CATV wires loose at pole G.O. 95 <BALANCE of PAGE INTENTIONALLY LEFT BLANK> ATTACHMENT PAGE 19 PHYSICAL PLANT INSPECTION OF AT&T WADBAND IN THE CITE`OF RICHMOND, CALIFORNIA PHOTOGRAPH L€ cA'' ioN I ISCREPANCY CODE ISSUE CATV drops ar€lwa re(r pg loose at pole GO-95 PHOTO 000246, ' ' ArrACliMEN`t PAGE 20 PHYSICAL PLANT INSPECTION oI AT&T BROADBAND; CN THE CITY OF PICHMCJND, CALIFORNIA PHOTOGWH LOCATION DiscimPANCY CODE Issuig $ $845 St. GAT' mid spin drop rnes�ger broken G.095 PHoTQ 000!47 +� AT rACH ENT PAGE 21 PHYSICAL PLANT INSPECTION OF AT&T BROADBAND IN THE CITE'OF RtCHMO D, CALM flRNIA LaCA 1 I()lY is CU>3 I SITE 854 . 45 CATS strap l gi tg a 6d 4 4M000249 AT'tAC14MENT PGF,22 PHYSICAL PLANT INSPECTION OF AT&T BROADBAND IN THE CITY OF RICHMOND, CALIFORNIA PHOT©GRAP LOCATION DOMPAN Y CODE ISSUE 866 5. 45 St. cured 820-6 Abandoned RG-59 drop and around wire NEC 820-40 PHOTa 000249 ATTActiMENT PAGE 23' PHYSICAL PLANT 1NSPECtION OF AT&T BROADBAND IN THE CITY OF RICHMOND, CALIFORNIA PHOTOGRAPH:- I CATI<4N l�1 REPANCY CODl.Issue 870 S.45 Vit. CA 1" v��'vires loose on house IAC 820- CATV ground wire not run straight NEC 820-4 Abandoned RG-59 drop and ground wire PHOTO 000250% MAP .I ATT c mENT PAGE 24 PHYSICAL PLANT INSPECTION OF AT&T BROADBAND IN THE CITY OF RICH M�31`J©, CALIFORNIA PHOToGRAPx 8713 t AZd one, A c t us (Notice Gild un-removed ground black attached to abandoned RO-59 drop and NEC820 6'. larder RG.6 wire crossix 8 aver the top of NEC:82040 the two cablesj PHOTO Q 25 l ;, ATT," clidv EN PAGP-25 THYS1CAL PANT W PELT ON QF AW BftADBAN iN THE CITY of RiCHMOND,CALIFORNIA nHOTOGRAP I LOCATION Disc RiA ,C'Y CODE ISSUE 970 .45` St. A ise 0 i CATS not grounded NEC 820-40 PHOTO 000252 ATxACHMLN r PAoE 2 PHYSICAL PLAINT INSPECTION OF AT&T BROADBAND IN THE CITY OF Rictim ND, CALIFORNIA A PROTON I•Y 13 1 CODE:ISSIOE El 910 S.45 St. ��res ldbse o lbuse' SEC 8 t�-6 CATV grounded to cold water'—non-common NEC 820-40 bond PHOT©000253 + ATTACHMENT PAGE 27 PHYSICAL PLANT IN5PEC E'I OF ATU libADBANa IN THE CITY of RICHMOND, CALIFORNIA PKOTQGRAPH I.t3,CAt t)N 1)ts�x>uFAtvc� Ct}I�I✓I �1E 15 .45 fit. A dr6p§hanging— n-banded G.0.. 4 PHOT0:000254 AT'T`ACHMENT PAGE 28 PHYSICAL PLANT INSPECTION OF AT&T BROADBAND IN THE CITY DCALINFORNIA PHOT€G AP3 x I at) A I Ila DIBCI AN, C+�nE IsstrE 5. t. AlCS=t t clime to tele.. 2" CATV aat ground; ,,tl l�C 820- PHQT0t 00255 ATTACHMENT PAGE 2q PHYSICAL PLANT INSPECTION 0F'A78tT ROADBAN© IN THE CITY,©F RICHiMONDy CALIFORNIA b PHOTOGRAPH' .(3GA I I(31Y DISCREPANCY C©iJE ISSUE Y. ._ai. K.w ea E i§ 928 S. thfit, rwAt ��not properly att ch:.:.d to house CATV grounded to cold water pipe--u non NEC 820-40 common gond PHOTO 000256 + ATTACHMENT PAGE 30 PHYSICAL PLANT INSPECTION OF AT&T BROADBAND IN THE : ity OF RICHMOND, CALIFORNIA La A I€�rr �sC PAr C Cca t i� Mom 934 . 45 Vit. CA1" notr€apcarl atacled toottet 8 - CAT ground not attached to house, ran. NEC 820-40 straight,and attached f6lcold water ATTACI HENT PAGE 31 PHYSICAL PLANT INSPECTIC3N ©F AT&T R(jAbBANq (N THE CITY aF RICHMOND, CALIF©RIVIA pl�OTPG�RA> L T[fJN' I PAN COP ISSUI- i °r a 6P" t- i ry. E E. E, 4 , f' j 'PU 957 S.OSx St. CATV'�rires loose h e } NEC:$ 0-� CATV not garcuided NEC 820-4p PHOTO W0258 +� ATTACHmENT PAGE32' PHYSICAL PLANT INSPECTION OF'AT&T$ 0ADBAN1) IN THE CITY OP RICHMnND, CALIFOf Nt PHOTOGRAPH L4WATION : CODE IS E Gr i 1 x 957 Sw45 St. CATV drop abandoned it*w to house G.O95 CATV not gr runded NEC 820-6 PHOT 000259 NEC 82Q40 �� ATTAcHMENT PAGE 33 .................................................. PHYSICAL PLANT:INSPECTION 0F -T IN THE AMT BROADBANU �CITY OURICHMOND., CALIFOkNIA Lc T-10N OS JDC_REt*Ncv CODE S 45 fit. CA wires laasean aarin P oto 000260 RAE ATTACHMENT PAGE 34: ............... . ............ PHYSICAL PLANT INSPECTION OF ATT&T EROAt BAN© IN THE CITY OF RICHMON,Di CALIFORNIA PHOTOGRAPII LQC r10—N D>Is+ > AN 100DI✓�u 95� St. C V wire rurming i i d w NEC 82c3-6 Pit Td fl02 ATTACHMENT PAGE 35 PHYSICAL ►NSFECIC3N pv AT&T tRt AaRNIA C? CAO CITY �c� VkA + s� ON : Elmo -t on PROTO 001 1�,TTAC ENT` Pa+ 6 ........... PHYSICAL PLANT INSPEC to BR -O l &-TIO i IN HE T OP�ATAN- ITY OF:R,iCil OND, CALIFORNIA PROTOCRAP LOCATION :77......... 945 S.:45' St. G.O.95 PHOTO 6002��6 ATTAC14MENT PAGE 37 PHYSICAL PLANT INSPECTION OF AT&T::BROADBAND. IN THE CITY of RICHMOND, CALIFORNIA P140TOG>tAPx' ATI/3N T ISCR PAN 11 CQI3E IC 3E X39 .45 St. CATS loose moires house tE 82b-6 CATV grounded to 4 ft.ground rod ' NEC 820-40 PHOTO 0002d4 �+ ATTACHMENT PAGE 38 PHYSICAL PLANT INSPECTION OF AT&T BROADBAND IN THE CITY OF RICHMOND CALIFORNIA OTOGRAPH , +CATI(3N Tltsctrx �tati1 ISSUIE 945 . 0'St.Apts. CATV wires loose and i ecuredNSC 820-6 apartment lack b9x PHOTO 0002665 ATTAC14MEENT PAGE 39 PHYSICAL PLANT INSP ECTIt3N OF AMBROADBAND IN THE CITY OF RICHMaNp, CALIFORNIA PH,0T0GRAPH' WCArI ON 1 IBf i P� CoJI)Iui k� 475 922 S. I. Apes, CA V irs ming oyer roof QFC I £I-6 CATV no apparent groundl >~C 82040 PHOTO 000260 +► ATTACHMENT PAGE 40 ...... ... ... ............ .......... .......... ........... .................... PfiYsIcAL.PLANT INSPECTION OF AT&T BkOADBAND IN THE CITY OF.RIC HMOND.j CALIFORNIA PROTOGRAPRZ Lt 9 012�� ISSO ICY tj: -i CAW- 914� bo e TQC 820: PHOTO 000267 ATTAC14MENT PAGE 41 . ........... .......... ............. F'HY5CAL PLANT INSPECTI ?N 00 AUT BROAD Nt 1 HE CtT�r � R�cHr�� a# CA.lF©RUI fto r€ Px' LaCATION Z1IS�REP TL"S Co + i' i s. ¢ . .9 cubing space o p(7e PHOTOL .68 ArrACHMrTL PAGE 42 ............... .... ............... ....... ...... ......... ......... P YSlit L PLANT INSOECTION OF AT&TOADBAND. IN THE &T8 CITY 6F RitkmoNl) CALIFORNIA 30N cobE 015, ICA Nte:0'6 46 comm OR Q PHOTODOON 9 ATTACHMENT PAGE 43 ............ .................... ........ PHYSICAL PLANT INS'ECTICIN OF AT&T BROADBAN'C? IN THE CITY O AICHMOND CALIMMIA P ROTOPRAP ' L©CA I€ N �I� EPANC43DE IS:UE 3 9(31 S«45St. CATS down,guy u�gu rded G.O. 95 PHOTO 000279 ATTAC14MENT PArit 44 ........................... ...... ................. ............ PHYSICAL PLANTINSPEcn0k, , OFAUT 8ROADOAN6 IN THE CITY 6F.RICHMOND,.:CALIFQJlN' �A PHOTOGRAPH L WIN 9Ql ,45 S CATV ed not gr d PHOT6000! :1 ATTACHMENT PAGE 45 ............... PHYSICAL PLANT INSPECTION OF AT&T BROADBAND IN THE CITY OF RIcHIVIOND, CALIFORNIA } PHO TcIRAPx lco- 9r)1 St. CATV drip hanging l un btnec� r. . 5 PHOT0000t ATtACHMENT° PAGE 46 ...... ....... ...... ............ ................................ .................. ................ ... PHYSICAL PLANT INSPECTION OF AUTE, AQBAN I 4) N THE RO CITY 01`�.R.CHM4Nd, CAUFORNIA PHCITC GRAPH COD EEE gjn ore Ave. 0 4410 0 �plass 0.poOp at e �20-6 (Notioe new dr6p and grq d lamp on, c on NEC 820-40, power:mast—examplp of ii.aining,issue.) MOTG 000 '7 ATTACHMENT PAGE 47 ........... ......................-....... .....................-...-... PHYSICAL PLANT INSPECTION OF AT&T BROADBAND IN THE CITY OF RICHMOND, CALIFORNIA PHOTOGRAPH LOCATION DISCREPANCY CODE ISSUE 4". Y x �r 's „ t r a 432f3 Sycamore Ave. CATV drop within'30„Climbing space at G.O. 95 Dole PHOTO 000274 +� ATTACHMENT PAGE 48 PHYSICAL PLANT INSPECTION OF AT&T BROADBAND IN'THE CITY OF RICHMOND, CALIFORNIA PHOTOGRAPH LOCATION "DiscREPANCY CODE ISSUE pil � 4 `c 9� y 4320 Sycamore St. CATV loose wires running over roof NEC 820-6 CATV not grounded&loose wire NEC 820-40 PHOTO 000275 ATTACHMENT PAGE 49 PHYSICAL PLANT INSPECTION OF AT&T BROADBAND IN THE CITY OF RICHMOND, CALIFORNIA PHOTOGRAPH L(J�ATICiN,; DISCREPANCY C©Dt+ ISSUE 000s 43 St. CATV down guy guard more than 8 ft G.O. 95 from ground level PHOTO 000276 ATTACHMENT PAGE 50 PHYSICAL PLANT INSPECTION OF AT&T BROADBAND IN THE CITY OF RICHMOND, CALIFORNIA PHOTOGRAPH L,OGATION l:?ISCREPANCY CODE ISSUE b 5 by 4319 Sycamore Ave. CATV wires loose on house NEC 820-6 CATV ground connection preventing NEC 820-40 Entry into electric access parcel PHOTO 000277 +► ATTACHMENTPAGE 51 PHYSICAL PLANT INSPECTION OF AT&T BROADBAND IN THE CITY OF RICHMOND, CALIFORNIA PHOTOGRAPH LOCATION DISCREPANCY Cf)I!E ISSUE o I =a 855 Sycamore Ave. CATV box un-secure on apartment NEC 8201-6 PHOTO 000278 w ATTACHMENT PAGE 52 PHYSICAL PLANT INSPECTION OF AT&T BROADBAND IN THE CITY OF RICHMOND, CALIFORNIA PHOTOGRAPH LOCATION DISCREPAN4' ' CODE ISSUE 855 Sycamore Ave. CATV ground wire loose on Apt. NEC 820-6 CATV grounded to cold water,non- NEC 820-40 common bond PHOTO 00027 ` ATTACHMENT PAGE 53 PHYSICAL PLANT INSPECTION OF AT&T BROADBAND IN THE CITY OF RICHMOND, CALIFORNIA PHOTOGRAPH Lf9CATI€iN3i5C*REPANC Y CODE ISSUE Ell 867 S.45m St. 20-40' PHC)Tt3 00080 * ATTACHMENT PAGE 54 PHYSICAL PLANT INSPECTION OF AT&T BROADBAND IN THE CITY OF RICHMOND, CALIFORNIA PHOTOGRAPH LOCATION DISCREPANCY CODE ISSUE 845 s. 4511 St. Apts. CATV Lockbox,unsecured NEC 820-6 CATVnot grounded(entire Apt.;complex) NEC 820-40 PHOTO 000281 �i ATTACHMENT :MAGE 55 PHYSICAL PLANT INSPECTION OF AT&T BROADBAND IN THE CITY OF RICHMOND, CALIFORNIA PHOTOGRAPH' LOCATION DISCREPANCY CODE ISSUE O s d t aL r�+r u= � k s 3{u 5200 S. Gordon Ave. CATV drop grounded to ground rod° NEC 82:040 PHOTO 000282 + ATTACHMENT PAGE 56 PHYSICAL PLANT INSPECTION OF AT&T BROADBAND IN THE CITY OF RICHMOND, CALIFORNIA PHOTOGRAPH LOCATION DISCREPANCY CallE ISSUE s Will 777 S. 52" St CATWV drop hanging on free NEC 820-6 CATV drop not grounded NEC 820-40 PHOTO 000.283 �i ATTACHMENT PAGE 57 PHYSICAL PLANT INSPECTION 4F AT&T BROADBAND IN THE CITY OF RICHMOND, CALIFORNIA PHOTOGRAPH LOCATION" DISCREPANCY CODE ISSUE £ Y � w S r5 765 S. 52 CATV 4''ft. ground rod,non-common NEC 820-40 bond PHOTO 000284 +r ' ATTACHMENT PAGE 58 PHYSICAL PLANT INSPECTION OF AT&T BROADBAND IN THE CITY OF RICHMOND, CALIFORNIA PHOTOGRAPH' LOCATION UISCI2EPANCY CODE ISSUIE 5210 Gordon Aire. CATV pedestals unsecured G.O. 128 PHOTO 000.285 �a ATTACHMENT PAGE 59 PHYSICAL PLANT INSPECTION OF AT&T BROADBAND IN THE CITY OF RICHMOND, CALIFORNIA PHOTOGRAPH L,CICAmN DISCREPANCY CODE ISSUEI i 4 5218 Gordon Ave. CATV pedestals unsecured G.O. 128 PHOTO 000286 4 ATTACHMENT PAGE 60 PHYSICAL PLANT INSPECTION OF AT&T BROADBAND IN THE CITY OF RICHMOND, CALIFORNIA PHOTOGRAPH, LOCATION DISCREPANCY CODE ISSUE CEM 10 PtAr ,�• �"' xs"� sw3yw„ wJr"+�s n'�"':i � � n. ;u '3 ai S 3 f k g> k y Ft 5218 Gordan Ave. CATV no apparent ground NEC 820-44 PHOTO 404287 ATTACHMENT PAGE 6'1 s r # # a w a •# �: i t .w ! t ' `tea � x .�' ' �, r a;`^'^r♦. wx r � s ull!I 52 Q W W V# '�G1 1 PHYSICAL PLANT INSPECTION OF AT&T BROADBAND IN THE CITY OF RICHMOND, CALIFORNIA PHOTOGRAPH' LOCATION DISCREPANCY C©DE IsSitE w 5234 Gordan Ave. CATV pedestals unsecured G.O. 128 PHOTO 000289 ATTACHMENT'PAGE 63 PHYSICAL PLANT INSPECTION OF AT&T BROADBAND IN THE CITY OF RICHMOND, CALIFORNIA PHOTOGTtAPH L,i ,ATTON DTSCIEI'ANCY COTE ISSUE IN I'll i 11 Ili 5234 Gordon Ave. CATV'not grouu d NEC 820-40 PHO' 000290 ATTACHMENT PAGE 64 PHYSICAL PLANT INSPECTION OF AT&T BROADBAND IN THE CITY OF RICHMOND, CALIFORNIA PHOTOGRAPH LOCATION I31SCIt PANG ' CGDE ISSUE s� r' Y r { -sn 5231 Goidbn.Ave. CATS'i o apparent ground NEC 820-40 PHOTO 000291 $ ATTACHMENT PACE 65 PHYSICAL PLANT INSPECTION OF AT&T BROADBAND IN THE CITY OF RICHMOND, CALIFORNIA PHOTOGRAPH I CATION'; ITIS FANCY CODE ISSUE 5223 Gordan Ave. CATV not apparently grounded NEC 820-40 PHOTO 000292 ATTACHMENT PAGE 66 PHYSICAL PLAINT INSPECTION OF AT&T"BROADBAND IN THE CITY OF RICHMOND, CALIFORNIA PHOTOGRAPH LOCATION,. DISCREPANCY CODE;ISSUL' 5265 Gordon Ave. CATV no apparent ground NEC 820-40 PHOTO 000293 AT TACHmENT PAGE 67 PHYSICAL PLANT INSPECTION OF AT&T BROADBAND IN THE CITY OF RICHMOND, CALIFORNIA PHOTOGRAPH-'. OCATION DISCREPANcy, CODE ISSUE;', T. 3' �a ;e 5055 Reid Ct. CATV grounded to cola water,non NEC 82040 common bond PHOTO 000294 + ATTACHMENT PAGE 68 PHYSICAL PLANT INSPECTION OF AT&T BROADBAND IN THE CITY OF RICHMOND, CALIFORNIA PHOTOGRAPH LOCATION DisCREPANGX CODE ISSUE' 50371Zeid Ct: CATV pedestals unsecured&not set to G.O. 128 grade at ground level PHOTO 000295 MAP ATTACHmpNT PAGE 69 PHYSICAL PLANT INSPECTION OF AT&T BROADBAND IN THE CITY OF RICHMOND, CALIFORNIA PHOTOGRAPH' LOCATION DISCREPANCY CODE ISSUE r � � a: ark- # .. : 1 il16, k � 4 501$ Reid Ct. CATV 4 it, ground rod;non-common NEC 820-40 bond PHOTO 000296 �a► ATTACHMENT PAGE 70 PHYSICAL PLANT INSPECTION OF AT&T BROADBAND IN THE CITY OF RICHMOND, CAUFORNIA PHOTOGRAPH' LOCATION DISCREPANCY CODE;ISStTE 757 S. 5 2 nd St. CATV'fIush mount lid cracked G.O. 128 PHOTO 000298 + ATTACHMENT PAGE 71 PHYSICAL PLANT INSPECTION OF AT&T BROADBAND IN THE CITY OF RICHMOND, CALIFORNIA PHOTOGRAPH WcATIOIN I)ISCREPANGY CODE-ISSUE S: �x SIX S�i .-e7fi+i✓rt{ �k3 q`+e3.�l S. lkl i q�is 777 S. 52 St CATV ungrounded NEC $20-40 (Notice 2'd drop to the right, correctly grounded 10 ft away) PHOTO 000299 Fit ATTACHMENT PAGE 72 x f � k R 3 k ' £ # hs 3 Ag 044 t -74 ¢; 4 ..,a�ip '�`� �•e �,'a� � ' ax _.� 2r„� eS`"�e�: �g3H�,�� "�.:�«s e�'t y,� � �� ; � �� a5e''�. �'�. `�,� °q�� R 9 s. s ! PHOTO 300 e , PHYSICAL PLANT INSPECTION OF AT&T BROADBAND IN THE CITY OF RICHMOND, CALIFORNIA PHOTOGRAPH LOCATION DISCREPANCY CODE ISSUE 709S. 52 St. CATV ground wire hanging offhouse NEC 820-6 PHOTO 000301 ATTACHMENT PAGE 74 PHYSICAL PLANT INSPECTION OF AT&T BROADBAND IN THE CITY OF RICHMOND, CALIFORNIA PHOTOGRAPH' LOCATION DISCREPANCY >—CODE ISSUE 727 S. 52 St. CATV wire r«g over roof NEC 820-6 PHOTO 000302 ATTACHMENT PACE 75 PHYSICAL PLANT INSPECTION OF AT&T BROADBAND IN THE CITY OF RICHMOND, CALIFORNIA PHOTOGRAPH LOCATION DiscREPANev CODE ISSUE T� 5209 Victor Ave. CATV wires loose NEC 820-5 Properly grounded inside garage without tag PHOTO 000303 + ATTACHMENT''PAGE 76 PHYSICAL PLANT INSPECTION OF AT&T BROADBAND IN THE CITY OF RICHMOND, CALIFORNIA PHOTOGRAPH WCATION DISCREPANCY CQDE ISSUE h R -�tk R T 5223 Victor Ave. CATV pedestals unsecured G.O. 128 PHOTO 00304 ATTACHMENT PAGE 77 PHYSICAL PLANT INSPECTION OF AT&TBROADBAND IN THE CITY OF RICHMOND, CALIFORNIA PHOTOGRAPH C)CA rION I)ISCREPANCX C©llI ISSUE Y � i. 5235 Victor Ave. CATV broken flush mount lid G.O. 128 CATV unsecured pedestal G.O. 128 PHOTO 00305 Jr ATTACHMENT° PAGE 78 PHYSICAL PLANT INSPECTION OF AT&T BROADBAND IN THE CITY OF RICHMOND, CALIFORNIA PHOTOGRAPH LOCATION DTSCREPAN Y CODE Issul✓ NEC 820-4Q 5231 Victor Ave. CATV not gro d PHOTO 00346 MAP #itATTACHMENT'PAGE 79 ! ! !-- $10 Mall a 4tx se�2u x a,7•i3`,� a°M1'}�5 " � b '1y sem' Y'^� �`- :,_ �.,u � � `« "�� p�;� ��. F} � y, .¢ p Zf,,{�°� ��' 41, tl 71, IT a4, ;✓ �,, # ,� _ r pp, �`�� 3 .� .yx..w��js ,� z�'�- g � �'Ps �p�"&"3S. .��'•, a A s� PHYSICAL PLANT INSPECTION OF AT&TBROADBAND IN THE CITY OF RICHMOND, CALIFORNIA PHMOGRAPif LC1CA TIUN 1ISCPANCY C©DE ISSUE IN 5226 Victor Ave. CATV pedestals unsecured G.O. 128 PHOTO 000318 �a ATTACHMENT PAGE 81 PHYSICAL PLANT INSPECTION OF AT&T BROADBAND IN THE CITY OF RiCHMON'D, CALIFORNIA PHOTOGRAPH' LocATION T11SG'REPANCk' CODE IISSUE l s �V d n;p d= 7k`, ra mt �� 5210 Victor Ave. CATV wires loose NEC 820-6 CATV no apparent ground NEC 820-40 PHOTO 00309 �► ATTACHMENT PAGE 82 PHYSICAL PLANT INSPECTION OF AT&T BROADBAND IN THE CITY OF RICHMOND, CALIFORNIA PHOTOGRAPH! LUCATIOI+1 DISCREPANCY CC�1)E ISSUE h F M F ssK4 �y� Y a � 5031 State Ave. CATV not grcru : d NEC $2040 PHOTO 00310 ATTACHMENT .PAGE 83 PHYSICAL PLANT INSPECTION OF AT&T BROADBAND IN THE CITY OF RICHMOND, CALIFORNIA PHOTOGRAPH Lc�cATION IDISCREPAN y CODE ISSUE #yam z � 4908 State Ave. CATV grounded to ground rod NEC 820.40 PHOTO 00311 ATTACHMENT PAGE 84: PHYSICAL. PLANT INSPECTION OF AT&T BROADBAND IN THE CITY OF RICHMOND, CALIFORNIA PHOTOGRAPH' LOCATION REPANCY CODE Issue � 3 E V r IRA 3 b £ w n a � fi� .gi 5 .ids t•:l�^'b!�'"'� �N'!a�.k a 4924 State Ave. CATV wires hanging offhouse NEC:820-b CATV no apparent ground NEC 820-40 PHOTO 00312 a ATTACHMENT PAGE 85 PHYSICAL PLANT INSPECTION OF AT&T BROADBAND IN THE CITY OF RICHMOND, CALIFORNIA PHOTOGRAPH LOCATION Dis REPANC"Y CODE'ISSUE' Ws Wz y 4934 Mate Ave. CATV ground not straight NEC 820.40 (notice'ground wire oiled up) PHOTO 000313 ATTACHMENT PAGE 86 PHYSICAL PLANT INSPECTION OF AT&T BROADBAND IN THE CITY OF RICHMOND, CALIFORNIA J PHOTOGRAPH LOCATION DISCREPANCY CODE ISSUE `��+r�*Fw-# 5 � x 3 u � 61 �a. 5010 State Ave, CATV ground removed;CATV ground wire not NEC 820-40 insulated,CATV ground wire not run straight as practicable;It appears that the' 14 ground wire insulation was melted off from a high current surge, Also,it appears the ground was removed from the PG&E gas line where there are signs of heat; damn e corrosion.PHOTO 000314 .ATTACHMENT PAGE 87' PHYSICAL PLANT INSPECTION OF AT&T BROADBAND IN THE CITY OF RICHMOND, CALIFORNIA PHOTOGRAPH LOCAmoN 131SCREPAiNCY CODE'I SSUE ago 5020 State Ave. CATV wires hanging€off douse NEC 820-6 PHOTO 000315 +► ATTACHMENT PAGE 88' PHYSICAL PLANT INSPECTION OF AT&T BROADBAND IN THE CITY OF RICHMOND, CALIFORNIA PHOTOcPAPx 5622 State Ave. CATV Peclest l a secured G.O. 128 PHOTO 000316 o� ATTACHMENT PAGE 89 PHYSICAL PLANT INSPECTION OF AT&TBROADBAND IN THE CITY OF RICHMOND, CALIFORNIA PHOTOGRAPH �ATTt � DscPANCI' CODE ISSUE r xV t aarA t s y 4 a i r i& 608 S. 49"'St. ` CATV grounded to 4 ft.ground rod NEC 820-40 CATV wires loose at house NEC 820-6 PHOTO 000317 9i ATTACHMENT PAGE 90 PHYSICAL PLANT INSPECTION OF AT&T BROADBAND IN THE CITY OF RICHMOND, CALIFORNIA PHOTOGRAPH LOCATIONIIISCT PAI�IGY C�T»IIssu F. 3 3 f: F: E x OEM um,IN 603 S.49 St. CATV wires'loose house NEC 820-6 CATV not grounded NEC 820-44 PHOTO 000318 ATTACHMENT PAGE 91 PHYSICAL PLANT INSPECTION OF AT&T BROADBAND IN THE CITY OF RICHMOND, CALIFORNIA PHOTOGRAPH LLCATit31v 1 iSCiPANCYtIC1E IsStJE k 3,. Ya. p� A'fz F: r P x"q {{ 5 SSCP S. 49 St. CATV pedestals unsecured&set above G.O. 128 grade PHOTO 000319 ��► ATTACHmENT PAGE 92 PHYSICAL PLAINT INSPECTION OF AT&T BROADBAND IN THE CITY OF RICHMOND, CALIFORNIA PHOTOGRAPH LOCATION DISCREPANCY CODE YSBE 3 a 530S.4§t St. CA'T`IV ci NEC 82040 PHOTO 000320 �` ATTACHMENT PAGE 93 PHYSICAL PLANT INSPECTION OF AT&T BROADBAND IN THE CITY OF RICHMOND, CALIFORNIA PHOTOGRAPH LacATnNtcA Coni I E c +g x. wpb' �s 5:330 F Cir. CATV pedestals unsecur6d&set above G-0. 128 grade PHOTO 000321 tit Ap +r ! .ATTACHMENT PAGE 94 PHYSICAL PLANT INSPECTION OF AT&T BROADBAND IN THE CITY OF RICHMOND, CALIFORNIA PHOTOGRAPH LOBATION I A REPANC_ 3' C 1)E JI SIT w ' fir, � u fi y nt 5030 plaza Cir. CATV wires loose 'NEC 820-6 CATV grounded to 4 ft.ground rod NEC 82040 PHOTO 000322 ATTACHMENT PAGE 95 .......... ........... PHYSICAL PLANT INSPECTION OF AT&T BROADBAND IN THE CITY OF RICHMOND, CALIFORNIA PHOTOGRAPH Lc�cATION -CY COO> ISSUE NECf i3 5035"-'aza Cir. CATV not grounded Nb926-46 PHOTO 000323 ATTACHMENT PAGE 96 ..................... PHYSICAL PLANT INSPECTION OF AT&T BROADBAND IN THE CITY OF RICHMOND, CALIFORNIA PHOTOGRAPH : IC,CAfiItN I1ISPANCYQI?E ISSUE s Bks " z Sn 1 PI a fir.' CATV loose wires on ground NEC 820-6 PHOTO 000324 ATTACHMENT PAGE 97 PHYSICAL PLANT INSPECTION OF AT&T BROADBAND IN THE CITY OF RICHMOND, CALIFORNIA PHOTOGRAPH L€ ► iscREpAN Com s r t � N ti x` 96 .p.a.•..k Cir' CATV no apparent:.ground NEC$20-40 PHOTO 000325 aY ATTACHMENT PAGE 98 PHYSICAL PLANT INSPECTION OF AT&T BROADBAND IN THE CITY OF RICHMOND, CALIFORNIA PHOTOGRAPH '' Ist�cATi©N EJ 'r. �f is � + Y ?�. 1aa i ir. CATV drag erring over gide walk G.C . 128 under gate NEC 824-6 PHOTO 400326 ATTACHMENT PAGE 99 PHYSICAL PLANT INSPECTION OF AT&T BROADBAND IN THE CITY OF RICHMOND, CALIFORNIA PHOTOGRAPH C L"ATICtN ISCR PANCY CODt ISSUE { i i } 1 X= ICA r 4' s PHOTO 000327 ATTACHMENT PAGE 100 PHYSICAL PLANT INSPECTION OF AT&T BROADBAND IN THE CITY OF RICHMOND, CALIFORNIA PHOTOGRAPH �( CATIaN DISp PAN I' CODE ISSUE. A,y�� y � k� Si iq eta 5E124 S. r ` 5t.' CATV grow -e4 ft grOMd €�d 1 C 820-40 PHOTO 080328 ATTACHMENT PAGE 10 1 PHYSICAL PLANT INSPECTION OF AT&T BROADBAND IN THE CITY OF RICHMOND, CALIFORNIA PHOTOGP.APH LocA TCN I81 PA t Y CODE ISSUE t!' n� * Y n +#i * dt{M F c �; CtTS wire ha frig c fence NEC 820-6 PHOTO 00039 �AN ATTACHMENT PAGE 102 PHYSICAL PLANT INSPECTION OF AT&T BROADBAND IN THE CITY OF RICHMOND, CALIFORNIA P OTOG rtAPH' .©cATrQiv DISCRI.PANC'I! CUBE jMUIE k € 4 d }t; � r { �4 A k ql r ink, S � UtWk 5102 Pct: CATV RG-59 drop of t at tap G.O.95 PHOTO 000330 MAP 603 ATTAcHMENT P of 103 PHYSICAL PLANT" INSPECTION OF AT&T BROADBAND IN THE CITYOE RICHIVIOND, CALIFORNIA PHgTOGRAP14 Iib ATS 1►t"+�' �ISCTtEPANC, COD ISSUE �a r> .4 r� }y ief is Y 4a'x f� 5239 , 'f kse iA,k.c-. CATV&ops h-ahgljftg loose G.O. 95 PHOT0 000199 VVE ATTACHMENT PACE 104 PHYSICAL PLANT" INSPECTION OF AT&T 13ROADBAND IN THE CITY OF RICHMOND, CALIFORNIA PHOTOGRAPH L13CATUN I�IISCREPANY 011))4�SU gyp, ATV drop h ing on telephone G0. 95 PHOTO 000200 J + Al TACHMENe''PA4 3E 105 PHYSICAL PLANT INSPECTION OF ATU BROA©BANd IN THE CITY OF RICHMOND, CALIFORNIA i ATN PHOTOGRAPH 0 ISSUEIO is rx" 0. � 1 G ry h r! r .`4 F' r a s� dyh� 3 �i Y g h t a CATV wires hanging NEC 820- 6 CATV grounded to 4 ft.ground rod NEC 820-40 PHOTO 00020 ATTACHMENT PAGE 106 PHYSICAL PLANT INSPECTION OF AT&T BROADBAND IN THE CITY OF RICHMOND, CALIFORNIA PffCQTQGRAE'x' LOCATION D!SCREPANGY CaI�z1IISSUF,' R t E �k andoned distribution dropT.too C 820-40 to power and ungrounded G.O. 9S PH©T( pt 0203 ATTACHMENT PAGE 107 PHYSICAL PLANT INSPECTION OF IAT&T BROADBAND IN THE CITY OF RICHMOND, CALIFORNIA PHOTOGRAPH ; -Wc PANGCUAP �JSSUF F , Fy 5135'Columbia Av-1. CAW hm s ontelephone G.O. 95 PH( ATTACHMENT PACE 108 PHYSICAL PLANT INSPECTION OF AT&T BROADBAND IN THE CITY OF RICHMOND, CALIFORNIA fiOTOGRAPH LCATtt?N ArsM>�Al�rcY CODE ISSUE II i IA11� �w �$ +£ yEp�4 � 3 ;u F v 3 u e. 41 v T y 5136 Columbia Ave. CATV wires running ager roof ITEC 820-6 CATV not grounded NEC 820-40 (Customer commented,"cele installed two month's ago") PHOTO 00€1205 AE'TACiimEN C PAGE 109 . ....... .... .......... ....... ............... .......... PHYSICAL PLANT INSPECTION OF AT&T BROADBAND IN THE CITY OF RICHMOND, CALIFORNIA PROTOGIRAPH D L QN� cy- -ATJI� CODKISSUE M"cli robing space GA 95 5234 SacT-n,-,rento.A,,,,e. CATV les than W PHOTO 000206 ATTACHMENT PAGE 110 PHYSICAL PLANT INSPECTION OF AT&T BROADBAND IN THE CITY OF RICHMOND, CALIFORNIA PHo'Y`UGRA.FH LOCATION pANrv. C+aDE;ISSUE ' 5301 Sacra eritb Ave. CATV'noi grounded at house NEC 820-40 PHOTO 000207 lWf ATTACHMENT PAGE 111 PHYSICAL PLANT INSPECTION OF AT&T BROADBAND IN THE CITY OF RICHMOND, CALIFORNIA PHOTOGRAPH LOCATION pTSCREPANCY coo�''ISSVE' is 6` 5 l2 Sacramento Ave. CATV mainline cable l angi g on G.O. 95 telephone PHOTO 000208 ' ATTACHmENT PAGE 112' ................ PHYSICAL HYSICAL PLANT INSPECTION OF AT&T BROADBAND IN THE CITY OF RICHMOND, CAUFORNIA ?!kQTOGRAPH LOCATION DISCREPANCY ----T- CODF-ISSUE ,mp F, 0 920-6 PHOTO 000209 ATTACHmENr PAGE 113 ........... ...... PHYSICAL PLANT INSPECTION OF AT&T BROADBAND IN THE CITY OF RiCHMOND, CALIFORNIA PHOTOGRAPH LOCATION COPEWUE -0 b, BOO Panama Ave. CATV drop hangimg on telephone G.O.95 PHOTO 0002:10 ATTACHMENT PAGE 114 .. ... .......... ............................... .................. PHYSICAL PLANT INSPECTION OF AT&T BROADBAND IN THE CITY OF RICHMOND, CALIFORNIA PHOTOGRAPH LOCATION lana ria CATV too close to PG&E powor 0. 9 5 PHOTO:000201 ATTACHMENT PAGE 115 .......... ................. ... .......... PHYSICAL PLANT INSPECTION OF AT&T BROADBAND IN THE CITY OF. RICHMOND, CALIFORNIA PH6TOGRAPH , LOCATION DISCREPANCY, CODE ISSUE xt 511, gj,91� 7i"P b. rp 5231 Coh!,inbia A,-c,, �.guy Ioped at pole G.O. 95 PHOTO 000212 ATTACHMENT PAGE 116 ................. PHYSICAL PLANT INSPECTION OF AT&T BROADBAND IN THE CITY OF RICHMOND, CALIFORNIA PHOTOGRAPH . LQ _Q DISCREPANCY CODE ISSUE IN Mi, 10 Vf CATV Pedestal usecure .O. 128 PHOTO 000331 1,s i g t1. ast page of full size photographs; the balance of the representative -'J r" ai- --tentionally reduced in size to, save approximately 30 sheet pages. --13 ALANCE OF PAGE INTENTIONALLY LEFT BLANK> M AN I ATTACHMENT PAGE 117 .......... ......... PHYSICAL PLANT INSPECTION OF AT&T BROADBAND IN THE CITY OF RICHMOND, CALIFORNIA PHOTOGRAPH LOCATION Dlsl:'�-RCODE ISSUE 02 S. St, CATV grounded to 4 ft,:�:ground rod NEC 820-40 PHOTO 000332 PHOTOGRAPH LOCATION DiscREPANCY CODE ISSUE 1:11, g 814 S. 49"' S CATV loose wire at house NEC 820-6 CATV grounded to cold water NEC 820-40 PHOTO 000333 ff Ap Solt ATTACHMENT PAGE 118 PHYSICAL PLANT INSPECTION OF AT&TBROADBAND IN THE CITY OF RICHMOND, CALIFORNIA PHOTOGRAPH LOCATION DISCREPANCY CODE ISSUE r: 8'10 S. 49� St.` CATV drop contacting PCIiE head guy G.O. 95 PHOTO 000334 PHOTOGRAPH LOCATION DISCREPANCY CODE ISSUE aj i, 818 S. 49t St. CATV drop abandoned,cut and'hanging 0.0.95 PHOTO 000335 e► ATTACHMEW PAGE 119 PHYSICAL PLANT INSPECTION OF AT&T BROADBAND IN THE CITY OF RICHMOND, CALIFORNIA PHOTOGRAPH LocAnoN DiscREPANCY CODE ISSUE 826 S. 49h St. CATV wires loose at--house AC 820-6 CATV not grounded,loose wires NSC 820-40 PHOTO 00036 827 St. CATV ground unattached and hanging NEC 820-40 Photo 000337 SAE ATTACHMENT PAGE 120 PHYSICAL PLAINT INSPECTION OF AT&T BROADBAND IN THE CITY OF RICHMOND, CALIFORNIA PHOTOGRAPH LOCATION DIlSCRPANCY CODE ISSUE 830 S.49'' St. CATV drrrps' ranging,un btu coed }axle G.O. 95 PHOTO 000338 _ PHOTOGRAPH _ . .. LOCAnc, P)SMPANCI' CODE ISSUE x _ � a 1 y;# F% k ti 4;. 4903 Cypres,1 i CATV drop tied off -to pt�wer mast NEC 820-6 PHOTO 000339 AfiTA04MENT PAGE 121 PHYSICAL PLANT INSPECTION OF AT&T BROADBAND} IN THE CITY OF RICHMOND, CALIFORNIA PROTOGRAPH LOCATION DISCREPANCY �QUE ISSUE'' i nt* 845 S. 0 Sl- CATV loosewires do house NEC 820-6 PHOTO 000340 _ HOTOGRAPH LOCATIGN - — DiscREPANCY COIDE,ISSUE S g 3ur: F iV 761 S,4 CATV Pedestal unsecured,not set to grade G.0.128 PHOTO 000341 w' ATTACHMENT PAGE 122 ................. PHYSICAL PLANT INSPECTION OF AT&T BROADBAND IN THE CITY OF RICHMOND, CALIFORNIA PHOTOGRAPH LocAnoN DiscR.".ANCY C4i39 ISSUE 4 732 S. CATV wires haniing NEC 820-6 CATV grounded to cold water NEC 820-40 PHOT0,900342 701 S.49"'St. CATV wires running through vent hale NEC 820-6 CATV grounded to 4 ft. ground rod NEC 820-40 PHOTO 000344 ATTACHMENT PAGE 123 .......... PHYSICAL PLANT INSPECTION OF AT&T BROADBAND IN THE CITY OF RICHMOND, CALIFORNIA PHOTOGRAPH LOCATION, ISCREPANC-Y..,. CODE ISSUE ——-------- 4900 Fray Ave CATV no apparent NEC 820-40 PHOTO 000346 HQTQGPLAPH LOCATION PIS: CODE ISSUE 5007 Fray Ave. CATV pedestal un.-secure and.not set to G.O. 128 grade;PHOTO 000347 ATTACHMENT PAGE 124 ........... PHYSICAL PLANT INSPECTION OF AT&T BROADBAND IN THE CITY OF RICHMOND, CALIFORNIA PHOTOGRAPH PA Cv ISSUE 4209 Potrero Ave. CATV unsecured pedestal G.O. 128 PHOTO 000342 4209 Potrero Ave. CATV:wires loose running on ground CATV 820-6 CATV no apparent ground CATV 820-40 PHOTO 000350 ATTACHMENT PAGE 125 ............. PHYSICAL PLANT INSPECTION OF AT&T'13ROADBAND IN THE CITY OF RICHMOND, CALIFORNIA HOTOGRAPH LOCAT.10N DISCREPANCY CODE ISSUE 4201 Potrero Ave. CATV not grounded NEC 82.0-40 PHOTO 000351 PHOTOGRAPH LOCAT10N DISCREPANCY CODE ISSUE 4130 Po6cro Ave. CATV wires hanging,un bonded G.O. 95 PHOTO 000352 ATTACHMENT PAGE 126 PHYSICAL PANT INSPECTION OF AT&T BROADBAND IN THE CITY OF RICHMOND, CALIFORNIA PHOTOGRAPH LE ATION 11SCREPANCI' CODE ISSUE 4115 Potrero Ave. CATV wires hanging loci on douse NEC 82076 CATV no apparent ground;PHOTO 000353 NEC 820-40 PHOTOGRAPH LQCATION DISCREPANCI' CODE ISSUE x F4 3 xS,J 4228 Berk Ave. CATV abandoned wires loose-not NEC 820-6 removed;PHOTO 000355 ATTACHMENT PAGE 127 p�.{�1CR 1N TNS of Hdd, �1 �R�1A 'Ic , c CODIV 9 '10G' ,mac 97.10 44 cx loose des to Be CN qA333� to � g � GE IT$ PHYSICAL PLANT INSPECTION OF AT&T BROADBAND IN THE CITY OF RICHMOND, CALIFORNIA PHOTOGRAPH LOCATION. ! DISCREPANCY CODE ISSUE WWIF- 4a � �4a Fwr r r r _ 4338 Berle Ave. CATV wires lc vse NEC 820-5 CATV not grounded NEC 820-40 PHOTO 0€10358 HOTOGRAPH LOCATION DISCREPANCY CODE ISSUE l r t 4614 Berle Ave. CATV Pedestal unsecured G.O. 128 PHOTO 004359 ar ATTACHMENT PAGE 129 PHYSICAL.PLANT INSPECTION OF AT&T BROADBAND IN THE CITY OF RICHMOND, CALIFORNIA PHOTOGRAPH LocAnoN I ISCREPANCY: CODE ISSUE 507 Erlandson St.(est) CATV no down guy guard G.O. 95 PHOTO 000360 PHOTOGRAPH LOCATION DISCREPANCY,, CODE ISSUE 605 S. 32n"St. CATV no down guy guard G.O. 95 PHOTO 000361 ATTACHMENT PAGE 130 ....................... PHYSICAL PLANT INSPECTION OF AT&T BROADBAND IN THE CITY OF RICHMOND, CALIFORNIA PHOTOGRAPH LOCATION Disc PAN+ Y Cf3i?E'ISSUE' 673 Erlandson St. CATV drop hangings un-bonded G.O.'95 PHOTO 010362 PHOTOGRAPH LQCAmN DISCRE.- CODE ISSUE' 701 Erlandson St. CATV no down guy guard G.O.'95 PHOTO 000363 ATTAc HmENT PAGE 131 PHYSICAL PLANT INSPECTION OF AT&T BROADBAND IN THE CITY OF RICHMOND, CALIFORNIA PFIOTOGRAPH LOCATION IISCREPANCY DISCREPANCYCODE ISSUE 155 S. 33r"St. CATV no dawn�guy G.O. 95 PHOTO 000364 PHQTOGx H LOCATION Di.sCREPANC... CODE ISSUE 623 3jrd St.Apts. CATV loose wires on-.,I am artment NEC 820-6 PHOTO 000365 ATTACHMENT PAGE 132 ........... ................ ............. PHYSICAL PLANT INSPECTION OFAT&T IN THE CITY OF RICHMOND, CALIFORNIA PHOTOGRAPH L€ICAmN DISCREPANCY CODE ISSUE IN 623 S. 33" St. CATV drop abandon d,!cut,hanging' NEC 820- PHOTO 000366 PHOTOGRAPH L+t7CA ICIN .DISCREPANCY CQDE ISSUE -1 1� 690 8.133St. CATV no down guy G.O.95 PHOTO 000367 ATTACHMENT PAGE 133 PHYSICAL PLANT INSPECTION OF AT&TBROADBAND IN THE CITY OF RICHMOND, CALIFORNIA PHOTOGRAPH LOCATION DISCREPANCY CODE ISSUE 511 Spring St (approx.) CATV mainline wrapped in tel pAon6 G.0-95 PHOTO 000369 PHOTOGRAPH DISCREPANCY, CODE ISSUE 621S .23 1 St. CATV drop abandon�6d and cut G.O. 95 PHOTO 000371 E 134 ATTACHMENT PAr ................. .................. PHYSICAL PLANT INSPECTION OF AT&T BROADBAND IN THE CITY OF RICHMOND, CALIFORNIA PHOTOGRAPH L ocATION I )ISCR PANC1' COBE ISSUE „«4,V 621 Si 31"St.' CATV wires loose NEC 820-6 CATV not grounded NEC 820-40 PHOTO 000372. PHOTOGRAPH LOCAT[ON DISCREPANCY CODE ISSUE 551S. 3 i1�St. CATV drop abandoned,loose,un-banded C.O. 95 PHOTO 000368 ATTACHMENT PAGE 135 ........... . ............. .................... PHYSICAL PLANT INSPECTION OF AT&T BROADBAND IN THE CITY OF RICHMOND, CALIFORNIA PHOTOGRAPH LOCATION DIsC4 CODE ISSUE 462 Spring St. CATV Idown:gUyl ose G.O. 95 Example of uncompleted construction PHOTO 000375 HOTOGRAPH LOCATION DISCREPANCY CODE ISSUE 526-S., ATV stand cut,n vyigg, G.O.95 ATTACHMENT PAGE 136 .......... ....... PHYSICAL PLANT INSPECTION OF AT&T BROADBANDIN THE CITY OF RICHMOND, CALIFORNIA HOTOGRAPH LOCATION DISCREPANCY CODE ISSUE PHOTO 000376 526 S. 12 th St. CATV conduit broke,conduit schedule too G.O. 95 thin PHOTO 000377 PHOTOGRAPH LOCA`I'ION .DISCREPANCY CODE ISSUE �w s iR 540 S. I `'' St. CATV mainline hanging;&de-lashedt G.O. 95 ATTACHMENT PAGE 137 PHYSICAL PLANT INSPECTION OF AT&T BROADBANDIN THE CITY OF RICHMOND, CALIFORNIA PHOTOGRAPH LOCATION DISCREPANCY CODE ISSUE PHOTO 000378 111 510 S. 12`n St. " CATV wires hanging NEC 8206 PHOTO 000379 PHOTOGRAPH LOCATION DISCREPANCY CODE ISSUE N 1200 Cutting Ave. CATV wires loose on apartment NEC 820-6 (4r-ax. PHOTO 000380 �e ATTACHMENT PACE 138 PHYSICAL PLAINT INSPECTION OF AT&TBROADBAND IN THE CITY OF RICHMOND, CALIFORNIA PH©T€GRAM LOCATION DISCREPANC ' CODE ISSUE., 11 &Potrero Ave. CATV head guy conflict with.telephone G.O. 95 PHOTO 000381 PHOTOGRAPH LOCATION DISCREPANcy CODE ISSUE 1813 S. 10'%'h St. CATV pole change incomplete G.O. 95 PHOTO 000382 ATTACHMENT PAGE 139 PHYSICAL PLANT INSPECTION OF AT&T BROADBAND IN THE CITY OF RICHMOND, CALIFORNIA PHOTOGRAPH ` LOCATION I?ISCREPANCY COBE ISSUE 1813S. 13 lSt. CATV drop wrapped into PG&E drop G.O. 95 PHOTO 000383 PHOTOGRAPH LOCATION DISCREPANCY, COBE ISSUE 2112 Ohio St- CATV wires abandoned on groundNEC 820-6 PHOTO 000384 ATTACHMENT PAGE 140 PHYSICAL PLANT INSPECTION OF AT&TBROADBAND IN THE CITY OF RICHMOND, CALIFORNIA PHOTOGRAPH LOCATION DISCREPANCY CODE ISSUE 2214 Florida ACTe. CATV drop abandoned,loose wire,un- G.O.'95 bonded PHOTO 000385 END OF REPRESENTATIVE INSPECTON PHOTOS <Balance of page intentionally left blank> ATTACHMENT PAGE 141 PHYSICAL.PLANT INSPECTION OF AT&T BROADBAND IN THE CITY OF RICHMOND, CALIFORNIA A2 Attachment About the Author and Firm STATEMENT OF QUALIFICATIONS ANT► EXPERIENCE Jonathan L. Kramer, JIl► FSCTE FIAE ■ Licensed by the Federal Communications Commission (General Radiotelephone Operator License PG-11-35289, with Ship Radar Endorsement)(Previously licensed as a Second Class Radio Telephone Operator,September 1975;First Class Radio Telephone Operator,November 1977;General Radiotelephone Operator License,June 1987) ■ Licensed by the Federal Communications Commission as an amateur radio operator since November 1970;' currently licensed as an Advanced Class operator(KDoMR) ■ Licensed by the State of California(CSLB C7 433113;licensed since December 1982) ■ Former National Board of Directors member,National Association of Telecommunications Officers and Advisors (NATOA),an affiliate of the National League of Cities(terms: 1997-2000; 1992-1994) ■ Former Co-chair of National Technical Standards Committee,appointed by NATOA,National League of Cities, And US Conference of Mayors to develop the national technical standards for cable television systems adopted by the FCC'in February 1992 ■ NATOA's 1997 Member of the Year(honored for information delivery to NATOA members) ■ NATOA's 1991 Member of the Year(honored for achievements in developing and negotiating national cable television technical standards) ATTACHMENT PAGE 142 PHYSICAL PLANT INSPECTION OF AT&TBROADBAND IN THE CITY OF RICHMOND, CALIFORNIA •' "Former Co-chair of National Technical Standards committee appointed by NATOA,National League of Cities, and US Conference of Mayors`to develop the national technical standardized testing manual to determine compliance with the FCC rules ■ Senior Member of Society of Cable Telecommunications Engineers(Senior Member since April 1993;Member since 1981) ■ Fellow,`.Institute for the Advancement of Engineering(FIAE)(Nominated by Institute of Electrical and Electronics Engineers)s ■ Member,International'Right of Way Association ■ Witness before the FCC in Cable TV re-regulation hearings,March 1990,representing NATOA,et al ■ Right-of-Way engineering and management expertise related to telecommunications networks and radio communications siting' ■ Testifying expert witness in federal and state court cases ■ Technology speaker at every NATOA National Conference since 1988;Technology'speaker at many regional and local NATOA meetings ■ Communications technology speaker at Society of Cable Telecommunications Engineers conferences and cable industry conferences ■ Published author of book and magazine articles on communications technology,plant safety,construction,and administration' ■ Cable system engineering and technical management'experience six years before forming firm;Chief Technician, Technical Manager,Regional Engineer. ■ Former Field Engineering Representative for Motorola Communications and Electronics,Area F Program Management team—Areas of experience include microwave radio;baseband RF and audio;digital signaling; UHF and VHF'?two-way radio(including high stability Simulcastg radio operations);telephony;and command and control communications. ■ Graduate education:Juris Doctor degree cumlaude from Abraham Lincoln University School of Law(2©O1); Undergraduate education at CSUN,UCLA,LATTC,and'WLAC;AS.Degree in Radio Communications(with honors),Los Angeles Trade Technical College; The following is a partial list of the communities and agencies Mr.Kramer is serving,or has served,since 1984. Federal Agencies National Associations States Federal Communications Commission U.S.Department of Justice National Association of Telecommunications Officers and Advisors Society of Cable Telecommunications Engineers United States Attorney;Los Angeles United States Army;Ft.Irwin,CA U.S.Marine Corps;Twentynne Palms,CA ATTACHMENT PAoE 143 PHYSICAL PLANT INSPECTION OF AT&TBROADBAND IN THE CITY OF RICHMOND, CALIFORNIA U.S.Navy;Postgraduate School,Monterey,CA United States Conference of Mayors National Association of Counties National League of Cities State of Michigan Public Utilities Commission State of Connecticut Department of Public Utility Control Communities Aiken County,South Carolina Greenville,Illinois Redondo Beach,CA Alcoa,Tennessee Hermosa Beach,CA Rialto,CA Anaheim,CA Hidden Hills,CA Richmond,CA Avon,Ohio Highland Park,Illinois Contra Costa,CA Austin,Texas Hoffman Estates,Illinois Rochester,Minnesota Azusa,CA Homewood,Alabama' Rolling Meadows,Illinois Bellbrook,Ohio Homewood,Illinois Roseville,Minnesota' Berkeley,CA Indian Wells,CA Contra Costa County,CA Beverly Hills,CA Irvine,CA San Clemente,CA Big Bear Lake,CA Kettering,Ohio San Diego County,CA Blount County;Tennessee Lake County,Illinois San Francisca,CA Bronxville,New York' Lake County,Indiana San Juan Capistrano,'CA Buffalo Grove,Illinois La Mesa,CA San Luis Obispo,CA Calabasas,CA: La Quinta,CA San Luis Obispo County,CA Canton,Michigan Laguna Beach,CA San Marcos,CA Capitola,CA Lompoc,CA Santa Ana,CA Centerville,Ohio Los Alamos,CA Santa Barbara County,CA Chelan,Washington Los Angeles,CA Santa Clara,CA Richmond,CA Contra Costa County,CA Santa Cruz County,CA Chula Vista,CA Lynchburg,Virginia Santa Monica,CA Cleveland Heights,Ohio Malibu,CA Sistersville,West Virginia Colton,CA Maryville,Tennessee' Solon,Ohio Cypress,CA Merrillville,Indiana Spokane,Washington Darien,'Illinois Monterey County,CA Springboro,Ohio City/County of Denver,Colorado Miamisburg,Ohio St.Louis,Missouri Deerfield Beach,Florida Munster,Indiana Stevens Point,WI. Diamond Bar,CA New Martinsville,WV Thousand Oaks,CA' Downers Grove,Illinois New Orleans,Louisiana Tipp City,Ohio Duarte,CA Newton Falls,Ohio Troy,Ohio Eagan,Minnesota Oakwood,Ohio Tuckahoe,New York Eastchester,New York Ojai,CA Tucson,Arizona Escondido,CA Olean,New York Victoria,Texas Flora,Illinois Opelika,Alabama West Allis,Wisconsin Fort Wayne,Indiana Orange County,CA West Carrollton,Ohio Franklin,Kentucky Oxnard,CA West Covina,CA Fremont,CA Paris,;Illinois West Frankfort,Illinois Fullerton,CA. Park Forest,Illinois West Milton,Ohio Garden Grove,CA Peoria'County,Illinois West'Hollywood,CA Gardena,CA Piqua,Ohio Wheaton,Illinois Germantown,Ohio Plymouth,Michigan White Plains,New York Glendale,CA Portland,Oregon Willette,Illinois Glen Ellyn,Illinois Port Townsend,WA: Yorba Linda,CA got ATTACHMENT PACE 144 PHYSICAL PLANT INSPECTION OF AT&T BROADBAND IN THE CITY OF RICHMOND, CALIFORNIA llnaversates.Catleze�School�}t triols: University ofAlabama Pepperdine University Orange Coast College Rancho Santiago College Centralia School District Oxnard Union School District Litigation: Adelphia v.City of Thousand Oaks[and countersuit](Expert witness for City) AT&T Wireless v.City of San Diego(Expert witness for City) GTE Mobileet v.City and County of San Francisco(Expert witness for City and County) Playboy Enterprises v.US(Expert witness for US DOJ and FCC) US Cellular v.Peoria County(Expert Witness for Peoria County) Jones Intercable v.Chula Vista(Expert Witness for City of Chula Vista)' West Covina v.Charter Communications(Expert Witness for City of West Covina) Sierra Fast Television v.Westar Cable(Expert witness for Sierra East Television) Booth American v.US(Expert witness for US DOJ) D.H.Cable v.Kalma Busk(Expert witness for Ifal ma Busk) Selected Lectures Law Seminars International International Right of Way Association Washington Association.of Cities NATOA National Conference(Every conference since 2988) NATOA Southern California and Nevada Chapter(Multiple Presentations) NATOA Illinois Chapter(Multiple presentations) NATOA Minnesota Chapter NATOA Texas Chapter Society of Cable Telecommunications Engineers National Engineering Conference Society of Cable Telecommunications Engineers(Multiple Chapters) ArrAcHMENT" PAGE 145 PHYSICAL PLANT INSPECTION OF AT&T BROADBAND IN THE CITY OF RICHMOND, CALIFORNIA STATEMENT OF QUALIFICATIONS AND EXPERIENCE STEVEN C. ALLEN, BCE 7/01 to present Kramer.Firm,Inc. Senior Broadband Technologist Broadband and cable system inspection specialist;RF technology. Reports'directly to and under the supervision of Jonathan L.Kramer,lramer.Firm's Principal. 5/00 to 7/01 Cisco Systems,Inc` Consulting System Engineer(CSE)Cable and Wireless Business Provided technical expertise and industry knowledge to the development and sale of broadband cable modems,Cable Modem Termination Systems(CMTS),video products,and wireless Internet products. Prepared and delivered focused product training and presentations to internal work groups and Cisco customers. Assisted in the development of specifications and features of next generation Cisco products and worked with customer account teams on product evaluations or deployments. Worked with local Account Managers and System Engineers to resolve specific operational problems at customer locations.Providing feedback to manufacturing or product development on requirements or improvements to products.Provided training to customer staff on Cisco products. Provided RF/HFC experience and industry knowledge to Cisco sales and marketing departments to better acquaint them with the broadband cable industry.(Industry point of view). Leveraged extensive vendor contacts to provide information and possible solutions to specific product development requirements. 11/98 to 5/2000 TVC Communications,Inc Western Regional Sales Engineer: Responsible for technical sales and training support to major Broadband providers including CATV,Telco, Manufacturing,Broadcast and Satellite networks in California and Nevada. Sales Engineer for 2nd largest broadband distributor in USA. Specializing in complex headend and outside plant products. Primary product lines include Tektronix analog and digital test equipment,Motorola Optical and HFC Distribution equipment,fiber optic splicing and termination systems,including enclosures,fusion splicers,and fiber management systems. Work closely with regional account managers to assist in product specifications, RFPs;training related needs and hands-on training for customer staff.Assist in identification of system needs,and design solutions based on offered products and services. + ATTACHMENT PACE 146 PHYSICAL PLANT INSPECTION OF AT&T BROADBAND IN THE CITY OF RICHMOND, CALIFORNIA 12/95 to 11/98 Roseville Telephone Company Broadband Systems Engineer: Working in a combined Broadband/Telco environment,helped implement one of the fust experiments in Fiber to the Curb(FTTC)architecture in Del Webb's Sun City development in Roseville,California. Responsible for design and implementation of new centralized network powering system,HFC design review,network monitoring system for system power,new product and technology"evaluations,staff training,and Broadband overviews for management.; Directly involved in chappingand conducting signal surveys in the Sacramento area for wireless PCS coverage. I worked with several right-of-way contractors and Lucent,to secure cellular and co-locate sites for network build-out. 12/86-12/95 .Tones Intercable,Inc. System Engineering Manager: Responsible for all aspects of inside and outside plant for cable television system serving Roseville, California. Supervised staff of 15 installers,technicians and construction personnel.Designed and implemented new office building telecommunications services and placement. Designed and implemented new CATV headend encompassing towers,satellite receiving dishes,central grounding network,and data services.Coordinated'cutover from old headend and services to all new facilities. Designed and installed first fiber optic CATV network in the Sacramento area employing a'Cable Area Network design devised by Jones Intercable. Worked with other departments to insure that system goals and business plans were met. Administered'OSHA/CALO HA Haz nat/Hazcom program. Provided temporary engineering support and management supervision to related Jones Intercable business units in other areas of Northern California. 1/85 to 12/86 Viacom Cablevision Headquarters Corporate Staff Engineer: Responsible for technical support for home terminal;products and converter repair facilities at Viacom systems in USA. Provided staff assistance at system level to resolve technical difficulties beyond scope of local personnel. Worked with product vendors to develop solutions to technical problems. Assisted corporate purchasing department in developing cost effective alternatives to vendor provided services or materials. 14/82 to 1/85 Viacom Cablevision-North Bay Region Regional Systems Engineer: Responsible for all headends,microwave systems,and FCC liaison for systems in North Bay region including San Rafael,Petaluma,Napa,Pinole,Crockett,and Rodeo. Supervised and supported a crew of headend technicians in maintaining headend equipment including off-air processors,FM,AML microwave, FM terrestrial microwave,Satellite TVRO and Fiber optic links. Also responsible for overseeing Viacom plant training program and coordinating activities of regional plant trainer.' Additional responsibilities included Regional Engineer for the Bay Area Interconnect,a microwave trunk system delivering advertiser supported satellite programming to 500 thousand cable subscribers in the greater San Francisco Bay area. 6/79 to 10/82 Viacom Cablevision Chief Technician: Responsible for operation of>system;.plant in Oroville,Paradise,Colusa,Gridley and Biggs,California. Supervise a crew of 4 system technicians. Maintain 6 headends with AML microwave transmitters and receivers,satellite TYRO,FM Microwave,processors,antennas and associated equipment. M AP ATTACHMENT PAGE 147 PHYSICAL PLANT INSPECTION OF AT&T BROADBAND IN THE CITY OF RICHMOND, CALIFORNIA 1/79-6/79 Nor-Cal Cablevision System Technician: Responsible for system maintenance on distribution and house drop level. Perform routine service calls in response to customer requests. 2/78 to 12/78 Cal-Com Systems Sales.Engineer: Design and market mobile'communications systems for RCA Mobile Communications Division in the San Francisco Bay Area. 1/76 to 1/78 Concord TV Cable (A unit of Western Communications) Construction Technician: Duties involved construction and proof of new overhead and underground cable plant. Construction leader during complete rebuild of Concord system in 1977. Promoted to Field Technical Supervisor for rebuild. Also involved in production work for local origination department. 6/75 to 1/76 United States Air Force Reserve Basic Training 6/73 to 6/75 State TV Cable(A unit of Western Communications) Construction Lineman: Duties involved construction of new overhead and underground plant. Construction lineman for complete electronics change out for CATV franchises in Willows,Corning and Orland,California 6/70 to 6/73 Concord TV Cable(A unit of Western Communications) Installer. Duties included installation of customer premises'and other duties as assigned. Education: 9/73'-5/75 California State University Chico,Chico,California BA degree,Telecommunications 9/71 -5/72 San Diego State University,San Diego,California Undergraduate work,Broadcasting 9/69'-6/71 Diablo Walley College,Pleasant Hill,'California Associate of Arts Degree,:.General Education emphasis on Broadcasting Professional-Associations: Society of Cable Telecommunications Engineers(SCTE) 1979 to Present 1991 National Member of the Year Elevated to Senior Member in 1991 SCTE Offices held: SCTE Region I National Director(CA,NV,HI) 1999 to Present SCTE Western Vice Chairman 2001 to 2002 SCTE.Executive Committee member 2001 to 2002 Vice President,Sierra Chapter,SCTE serving Sacramento 1989 to Present Member,SCTE National Planning Committee 1993 to Present Member,SCTE$CT/E Industry Certification Committee. 1993 to Present Chairman,SCTE Northern California Vendors Day 1991 To Present MAE ATTACHMENT PAGE 148 PHYSICAL PLANT INSPECTION OF.AT&T BROADBAND IN THE CITY OF RICHMOND, CALIFORNIA National Cable Television Association Member,Cable Pioneers Club,Class of 93 Credentials. FCC General Class:Radiotelephone License;Prior licensed as a Second Class General Radiotelephone License(continuously licensed since 1980) SCTE Broadband Certified Engineer(BCP);continually certified since 1988 FCC Amateur Radio Licensee(Call sign.KC6V'CC;continuously licensed since 1991) Military Service: 1975-1981 USAF Reserve Law Enforeement Specialist.Chico,California Honor Graduate USAF Police Academy USN Reserve Avionics Technician. Alameda,California Honorably discharged May 1981 ATTACHMENT PAGE 149 PHYSICAL PLANT INSPECTION OF ATU BROADBAND IN THE CITY OF RICHMOND, CALIFORNIA b STATEMENT OF QUALIFICATIONS AND EXPERIENCE JUAN J. CA 'TRO 18 years of progressive experiencein broadband hybrid fiber coax {HFC} cable communications networks in the areas of technical operations, engineering, management, sales and application engineering support. Thorough understanding of cable TV systems, two way cable equipment and operation.and Hybrid Fiber Coax Cable Network including equipment operations, optical and FF testing equipment and methods, signal transmission, RF and optical engineering and system design as well as electrical plant powering systems. EXPERIENCE 10/00 to 2102 ' Actexna Cvrpomdon Cable-.Networks DivYsron 6620 Network Wray,Indsanapolrs, IN 46278 SALES SuPPt?RT APPLICATION ENGINEER • I am responsible for supporting Western and Central Midwest regional direct and indirect sales forces through presales product demonstrations and past sales training and application engineering support. • I contribute to the successful integration of Baur product 'lines into our customers' organizations by effectively demonstrating the value of our products„ services and support through product presentations,training„and field demonstrations. ATTACHMENT'PAGE 1'50 PHYSICAL PLANT INSPECTION OF AT&T BROADBAND IN THE CITY OF RICHMOND, CALIFORNIA 1198 to 10100 Charrtet Communications-Los.Angeles Divzsion 2219 West Mission Road,ALbambra, CA 91802 TECHNICAL OPERATIONS MANAGER « Managed the daily operation of plant repair, maintenance as well as manage staff to include installation, dispatch and servicefor the Los Angeles and Contra Costa Offices. + Established, implemented., evaluated and supervised plant repair 'projects, preventative maintenance programs and emergency restoration procedures with the HFC network. • Managed, hired, promoted, trained, motivated and evaluated Senior Plant Maintenance Technicians, Fiber Splicer Q/C' Technicians, and Plant Maintenance;;Supervisor. * Planned budgets, allocated resources and purchased fiber and RF test equipment and tools. • Formulated,implemented and enforced new policies and procedures. • Assisted with the launching of new products, high-speed moderns, advanced analog and digital networks. 4184 to 1198 TCI. Teleconununrcations-Los Angeles Division 132.5.5 Salt':Lake .Avenue, City of Industry, CA 91744 TECHNICAL OPERATIONS MANAGER + Managed the daily` operation of plant repair, maintenance and construction projects. + Responsible for the training and overseeing of video,audio,satellite,PrimeStar, DMX commercial and residential,as well as system.transmissions., • Responsible for maintaining reliable operation of the cable plant through proper repair as well as diagnostic'and preventative methods'and performing activation testing and splicing of fiber optic'cable,;related closures and transmission systems. + ATTACHMENT PAGE 151 PHYSICAL PLANT INSPECTION OF AT&T BROADBAND IN THE CITY OF RICHMOND, CALIFORNIA +� Duties included testing,trouble shooting repairing outages and other problems related to HFC plant operation,to include two-way cable plant,using Wavetek diagnostic equipment as well as analyzers,optical test equipment and other specialized test equipment. r ,6179 to 6/82 United States Martdne Co p& E73ucATI4N • Attended various seminars,Alpha, Catel,Comsonics,Earthlink.,Hewlett ;Packard,Jerrold,Wavetek,Worldgate,Management,etc. • Certified on Acterna cable products • SCTE Train the Trainer • Certified Technical Trainer by TCI • Certified Digital Technical Trainer by General Instruments • NCTI Fiber Optics • Electronic Technical Institute,Digital Computer Tech • NCTI System Technician'Course • Mt, San Antonio- Electronic , Real Estate • USMC - Electrical,Electronic&'Hydraulic Maintenance COMMITTEES AND SPEAKING ENGAGEMENTS • Chairman of Communications Committee for SCTE. Duty is to maintain communication with Local Managers and Technical.Managers • Guest'Speaker on several occasions for SCTE'. <End of Attachment A2> <Balaain:ce of page intentionally left blank> K* ATTACHMENT PAGE 152