[Federal Register Volume 65, Number 120 (Wednesday, June 21, 2000)]
[Notices]
[Pages 38584-38593]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 00-15591]


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DEPARTMENT OF JUSTICE

Antitrust Division


Proposed Final Judgment and Competitive Impact Statement; United 
States v. AT&T Corp. and MediaOne Group, Inc.

    Notice is hereby given pursuant to the Antitrust Procedures and 
Penalties Act, 15 U.S.C. 16(b)-(h), that a proposed Final Judgment and 
Competitive Impact Statement have been filed with the U.S. District 
Court for the District of Columbia in United States v. AT&T Corp. and 
MediaOne Group, Inc., Civil No. 00CV01176 (RCL). The United States 
filed a civil antitrust Complaint on May 25, 2000 alleging that the 
proposed acquisition of MediaGroup, Inc. (``MediaOne'') by AT&T Corp. 
(``AT&T'') would violate Section 7 of the Clayton Act, 15 U.S.C. 18. 
The proposed Final Judgment requires AT&T to divest the 34% equity 
interest and significant management interest in ServiceCo., LLC 
(``ServiceCo''), the nation's second-largest provider of residential 
broadband services, which operates under the trade name ``Road Runner'' 
that it would acquire through its merger with MediaOne no later than 
December 31, 2001.
    Public comment is invited within the statutory sixty-day comment 
period. Such comments, and responses thereto, will be published in the 
Federal Register and filed with the court. Written comments should be 
directed to Donald J. Russell, Chief, Telecommunications Task Force, 
1401 H Street, NW, Washington, DC 20530 (telephone: (202) 514-5621).
    Copies of the Complaint, proposed Final Judgment, Competitive 
Impact Statement are available for inspection in Room 215 of the U.S. 
Department of Justice, Antitrust Division, 325 Seventh Street, NW, 
Washington, DC 20530 (telephone: (202) 514-2481) and at the office of 
the Clerk of the U.S. District Court for the District of Columbia, 333 
Constitution Avenue, NW, Washington, DC 20001. Copies of any of these 
materials may be obtained upon request and payment of a copying fee.

Constance K. Robinson,
Director of Operations, Antitrust Division.

United States District Court for the District of Columbia

    United States of America, Plaintiff, v. AT&T Corp. and MediaOne 
Group, Inc., Defendants; Civil No.: 00 1176.

Stipulated Order

    The Court hereby enters this Stipulated Order, ordering and 
adjudging as follows:
    (1) The Court has jurisdiction over the subject matter of this 
action and over each of the parties hereto, and venue of this action is 
proper in this Court.
    (2) A Final Judgment in the form hereto attached may be filed and 
entered by the Court, upon the motion of any party or upon the Court's 
own motion, at any time after compliance with the requirements of the 
Antitrust Procedures and Penalties Act, 15 U.S.C. 16, and without 
further notice to any party or other proceedings, provided that 
plaintiff has not withdrawn its consent, which it may do at any time 
before entry of the proposed Final Judgment by serving notice thereof 
on defendants and by filing that notice with the Court and provided 
that Defendants have not abandoned their proposed merger and withdrawn 
their filing under the Hart-Scott-Rodino Antitrust Improvements Act, 15 
U.S.C. 18a.
    (3) Defendants shall abide by and comply with the provisions of the 
proposed Final Judgment pending entry of the Final Judgment by the 
Court, or until expiration of time for all appeals of any Court ruling 
declining entry of the proposed Final Judgment, and shall, from the 
date of the signing of this Stipulation, comply with all the terms and 
provisions of the proposed Final Judgment as though the same were in 
full force and effect as an order of the Court.
    (4) This Stipulated Order shall apply with equal force and effect 
to any amended proposed Final Judgment agreed upon in writing by the 
parties and submitted to the Court.
    (5) In the event plaintiff withdraws its consent or Defendants 
abandon their proposed merger and withdraw their filing under the 
Antitrust Procedures and Penalties Act, as provided in paragraph (2) 
above, or in the event that the Court declines to enter the proposed 
Final Judgment pursuant to this

[[Page 38585]]

Stipulation, the time has expired for all appeals of any Court ruling 
declining entry of the proposed Final Judgment, and the Court has not 
otherwise ordered continued compliance with the terms and provisions of 
the proposed Final Judgment, then the parties are released from all 
further obligations under this Stipulation, and the making of this 
Stipulation shall be without prejudice to any party in this or any 
other proceeding.
    (6) Defendants, having represented that the divestiture ordered in 
the proposed Final Judgment can and will be made, will not raise claims 
of hardship or difficulty as grounds for asking the Court to modify any 
of the divestiture provisions contained therein.
    The undersigned parties hereby stipulate to the entry of this 
Stipulated Order.

    For Plaintiff United States of America: Joel I. Klein, Assistant 
Attorney General. A. Douglas Melamed, Principal Deputy Assistant 
Attorney General. Constance K. Robinson, Director of Operations and 
Merger Enforcement. Donald J. Russell, Chief, Telecommunications 
Task Force. Laury Bobbish, Assistant Chief, Telecommunications Task 
Force. Claude F. Scott, Jr., D.C. Bar No. 414960, Lawrence M. 
Frankel, D.C. Bar No. 441532, Attorneys, Telecommunications Task 
Force. U.S. Department of Justice, Antitrust Division, 1401 H 
Street, N.W., Suite 8000, Washington, D.C. 20530, (202) 514-5621.
    For Defendant AT&T Corp.: Mark C. Rosenblum, Larry J. Lafaro, 
AT&T Corp., 295 North Maple Avenue, Basking Ridge, NJ 07920, (908) 
221-2000. David W. Carpenter, D.C. Bar No. 306084, David L. Lawson, 
Sidley & Austin, Bank One Plaza, Chicago, IL 60603, (312) 853-7237. 
Ilene K. Gotts, Wachtell, Lipton, Rosen & Katz, 51 West 52nd Street, 
New York, New York 10019.
    For Defendant MediaOne Group, Inc.: Sean C. Lindsay, MediaOne 
Group, Inc., 188 Inverness Drive West, Suite 600, Englewood, CO 
80112, (303) 858-3507.
    Stipulated Order Approved for Filing.
Done this ___ day of May, 2000.---------------------------------------
United States District Judge

Final Judgment

    Whereas, plaintiff, United States of America, filed its Complaint 
on May 25, 2000;
    And Whereas, plaintiff and defendants, AT&T Corp. (``AT&T'') and 
MediaOne Group, Inc. (``MediaOne''), by their respective attorneys, 
have consented to the entry of this Final Judgment without trial or 
adjudication of any issue of fact or law, and without this Final 
Judgment constituting any evidence against or admission by any party 
regarding any issue of fact or law;
    And Whereas, AT&T and MediaOne agree to be bound by the provisions 
of this Final Judgment pending its approval by the Court;
    And Whereas, the essence of this Final Judgment is the 
reorganization of certain business relationships of AT&T and MediaOne 
to assure that competition is not substantially lessened;
    And Whereas, plaintiff requires AT&T and MediaOne to restructure 
certain of their business relationships for the purpose of remedying 
the loss of competition alleged in the Complaint;
    And Whereas, AT&T and MediaOne have represented that the 
restructuring required below can and will be made, that AT&T and 
MediaOne can assure compliance with the requirements of this Final 
Judgment, and that AT&T and MediaOne will later raise no claim of 
hardship or difficulty as grounds for asking the Court to modify any of 
the provisions relating to the required restructuring or the 
limitations on subsequent agreements contained below;
    Now Therefore, before any testimony is taken, without trial or 
adjudication of any issue of fact or law, and upon consent of the 
parties, it is Ordered, Adjudged and Decreed:

I. Jurisdiction

    This Court has jurisdiction over the subject matter of and each of 
the parties to this action. The Complaint states a claim upon which 
relief may be granted against defendants under Section 7 of the Clayton 
Act, as amended, 15 U.S.C. 18.

II. Definitions

    As used in this Final Judgment:
    A. ``Affiliate'' means any person, corporation, partnership, or 
joint venture that (directly or indirectly) owns or controls, is owned 
or controlled by, or is under common ownership or control with, another 
person, corporation, partnership, or joint venture. For purposes of 
this definition, the term ``own'' means to own an equity interest (or 
the equivalent thereof) of 50 percent or more.
    B. ``AT&T'' means AT&T Corp., a New York corporation with its 
headquarters in New York, New York, its successors and assigns, and its 
parents, majority-owned subsidiaries, divisions, groups, and their 
officers, managers, agents, and employees. For purposes of Section IV 
of this Final Judgment, ``AT&T'' or its Affiliates shall not include 
Liberty Media or any entity which would be included within the 
definitions of ``AT&T''' or ``AT&T's'' Affiliates solely because of 
Liberty Media's ownership interests.
    C. ``Cable Modem Service'' means any Residential Broadband Service 
provided over cable facilities.
    D. ``MediaOne'' means MediaOne Group, Inc., a Delaware corporation 
with its headquarters in Englewood, Colorado, its successors and 
assigns, and its parents, majority-owned subsidiaries, divisions, 
groups, and their officers, managers, agents, and employees.
    E. ``Operating Agreement'' means the agreement entitled Amended and 
Restated Operating Agreement of ServiceCo LLC, dated June 12, 1998, 
among Cable HoldCo LLC, Microsoft BOV, Inc., and CPQ Holdings, Inc.
    F. ``Residential Broadband Service'' means any service offered to 
residential customers in the United States of America that permits 
users to transmit and receive information using Internet protocols at 
speeds which may exceed 128 kilobits per second.
    G. ``ServiceCo'' means ServiceCo LLC, a Delaware limited liability 
company.
    H. ``ServiceCo Interest'' means any direct or indirect financial 
ownership interest in, and any direct or indirect role in management or 
participation in control of, ServiceCo LLC to be held by AT&T pursuant 
to AT&T's acquisition of MediaOne. However, any ServiceCo Interest held 
as of May 8, 2000 by AT&T or MediaOne solely by virtue of ownership of 
a limited partnership interest in Time Warner Entertainment Company, 
L.P. shall not be considered a ServiceCo Interest for the purposes of 
this Judgment.
    H. ``Time Warner'' means Time Warner, Inc., a Delaware corporation 
with its headquarters in New York, New York, Time Warner Entertainment 
Co., L.P., and ServiceCo, their successors and assigns, and their 
parents, divisions, groups, and majority-owned subsidiaries; and any 
legal entity that is subject to a merger or other agreement with Time 
Warner, Inc. and that would be included within this definition when 
such agreement is consummated.

III. Applicability

    This Final Judgment applies to AT&T and MediaOne, as defined above, 
and all other persons in active concert or participation with any of 
them who receive actual notice of this Final Judgment by personal 
service or otherwise.

IV. Restructuring

    A. AT&T or MediaOne shall divest the ServiceCo Interest on or 
before December 31, 2000; provided, however, that this divestiture 
obligation shall not

[[Page 38586]]

prohibit AT&T's or MediaOne's retention or acquisition of assets 
dedicated solely to the provision of service to MediaOne customers or 
any regional data centers that are used predominantly for the provision 
of service to MediaOne customers as defined in section 6.3(b) of the 
Operating Agreement (``Assets'').
    B. AT&T and MediaOne must satisfy the requirements of Section IV(A) 
of this Final Judgment through one of the methods described in this 
Section IV(B)(1)-(3):
    (1) AT&T and MediaOne shall take all necessary steps to implement 
(a) the dissolution of ServiceCo pursuant to the terms of sections 6.1 
and 6.2 of the Operating Agreement; and (b) the distribution of the 
ServiceCo assets pursuant to the terms of section 6.3 of the Operating 
Agreement; provided, however, that notwithstanding any other 
contractual rights of AT&T or MediaOne, AT&T and MediaOne shall consent 
to the acquisition by Time Warner of any or all of ServiceCo's 
remaining assets (i.e. those assets remaining after AT&T or MediaOne 
retain or acquire Assets) at the fair market value of those assets 
(determined by a third party appraisal if the parties do not agree on 
valuation) so long as AT&T or MediaOne are permitted to lease capacity 
on those assets and transitional support services at fair market value 
until June 30, 2002 in order to maintain the quality of Cable Modem 
Services that AT&T and MediaOne offer to their customers; or
    (2) AT&T and MediaOne shall take all necessary steps to divest the 
ServiceCo Interest pursuant to section 9.3 of the Operating Agreement; 
or
    (3) AT&T and MediaOne shall implement an alternative plan for 
divestiture of the ServiceCo Interest that has been agreed to by AT&T 
and MediaOne and approved in writing by Plaintiff in its sole 
discretion.
    C. If the remaining parties to the Operating Agreement whose 
consent is required offer to allow AT&T and MediaOne to terminate their 
affiliation agreement and divest the ServiceCo Interest pursuant to 
either of the methods specified in Section IV(B)(1) or (2) above after 
the closing of the merger between AT&T and MediaOne and prior to 
December 31, 2001, AT&T and MediaOne shall accept that offer and divest 
the ServiceCo interest on the date proposed by the other parties; 
provided that AT&T or MediaOne are permitted to lease capacity on those 
assets and transitional support services at fair market value until 
June 30, 2002, in order to maintain the quality of Cable Modem Services 
that AT&T and MediaOne offer to their customers.

V. Limitations on Subsequent Agreements

    A. Prior to the earlier of December 31, 2003 or two years after 
AT&T's and MediaOne's divestiture of the ServiceCo Interest, unless 
they obtain the prior consent of Plantiff, AT&T, MediaOne, and their 
Affiliates shall not (1) enter into any contractual or other 
arrangement with Time Warner to jointly offer or provide any wholesale 
or retail Residential Broadband Service; (2) enter into any contractual 
or other arrangement with Time Warner that has the purpose or effect of 
preventing AT&T, MediaOne, their Affiliates or Time Warner from 
offering or providing a wholesale or retail Residential Broadband 
Service in any geographic region or to any group of customers; or (3) 
enter into any contractual or other arrangement with Time Warner that 
has the purpose or effect of preventing (a) AT&T, MediaOne, their 
Affiliates or Time Warner from including any content, services, 
capabilities, or features in any wholesale or retail Cable Modem 
Service offered by AT&T, MediaOne, their Affiliates, or Time Warner, or 
(b) AT&T, MediaOne or their Affiliates from granting preferential 
treatment in any wholesale or retail Cable Modem Service offered by 
AT&T, MediaOne or their Affilates to content, services, capabilities, 
or features offered by any person other than Time Warner, or Time 
Warner from granting preferential treatment in any wholesale or retail 
Cable Modem Service offered by Time Warner to content, services, 
capabilities, or features offered by any person other than AT&T, 
MediaOne or their Affiliates.
    B. Plaintiff shall consent to a proposed contractual or other 
arrangement if it determines in its sole discretion that such 
arrangement will not substantially lessen competition between AT&T and 
its Affiliates, and Time Warner in any market. Plaintiff shall be 
deemed to have consented to the proposed arrangement if Plaintiff has 
not provided written objection within 30 days of the submission of a 
request for Plaintiff's consent. If Plaintiff provides a written 
objection to a request within the 30 day period, Plaintiff's 
determination shall be final and binding unless, on application by AT&T 
or MediaOne, the Court concludes that Plaintiff abused its discretion 
in refusing to consent to an agreement.
    C. AT&T's and MediaOne's participation in the management and 
governance of ServiceCo prior to completion of the restructuring 
required by Section IV in accordance with the requirements of Section 
VI. and its agreement to receive transitional services in accord with 
Section IV shall not violate the restrictions of Section V.

VI. AT&T's and MediaOne's Interim Participation in the Management 
and Governance of ServiceCo

    Until the divestiture required by this Final Judgment has been 
accomplished, AT&T and MediaOne shall conduct their relationship with 
ServiceCo in accordance with all of the requirements specified below, 
except as Plaintiff may otherwise consent in writing.
    A. Except as necessary to comply with this Final Judgment, AT&T and 
MediaOne shall take all necessary steps to ensure that the management 
of the ServiceCo Interest will be kept separate and apart from, and not 
influenced by, the operation of AT&T and its Affiliates, and all books, 
records, and competitively-sensitive sales, marketing, and pricing 
information associated with ServiceCo will be kept separate and apart 
from the books, records, and competitively-sensitive sales, marketing, 
and pricing information associated with AT&T's and its Affiliates' 
other businesses.
    B. AT&T and MediaOne are prohibited (1) from participating in or 
attempting to influence any decision by ServiceCo regarding ServiceCo's 
offering of wholesale or retail residential broadband services to any 
customer other than AT&T's, MediaOne's and Time Warner's cable systems; 
(2) from participating in or attempting to influence any decision by 
ServiceCo relating to the content or services provided by any person 
other than Time Warner to ServiceCo subscribers; and (3) from impeding 
ServiceCo's ability to obtain additional capital from other direct or 
indirect holders of equity in ServiceCo.
    C. Upon closing of the merger of AT&T and MediaOne, AT&T shall 
appoint a person or persons (the ``Appointee'') to oversee the 
ServiceCo Interest, who will also be responsible for AT&T's and 
MediaOne's compliance with this section. The Appointee shall have 
complete managerial responsibility for the ServiceCo Interest, subject 
to the provisions of this Final Judgment and subject to review and 
direction by AT&T's Chairman of the Board, its Chief Financial Officer, 
its Chief Operating Officer, General Counsel, and its Board of 
Directors. In the event that the Appointee is unable to perform his or 
her duties, AT&T shall appoint a replacement within ten (10) working 
days. The Appointee shall have the authority to act on AT&T's and

[[Page 38587]]

MediaOne's behalf in exercising the rights under the Operating 
Agreement and the Affiliation Agreement that AT&T and MediaOne are 
permitted to exercise under the terms of this Final Judgment.
    1. The Appointee shall be permitted to consult with individuals 
whose responsibilities pertain to the MediaOne cable systems only when 
necessary to exercise rights under the Operating Agreement and the 
Affiliation Agreement that AT&T and MediaOne are permitted to exercise 
under the terms of this Final Judgment. The Appointee may disclose non-
public information regarding ServiceCo's operations to personnel whose 
responsibilities pertain to the MediaOne cable systems only when 
necessary to exercise AT&T's and MediaOne management rights, and no 
such information regarding ServiceCo's operations may be disclosed by 
the Appointee or by personnel whose responsibilities pertain to the 
MediaOne cable systems to other personnel of AT&T or its Affiliates.
    2. The Appointee shall not communicate with any individuals 
employed by AT&T, MediaOne or their Affiliates with responsibilities 
relating to the operations of Excite@Home or AT&T cable systems other 
than those acquired from MediaOne. The Appointee shall not be given 
access to any nonpublic information regarding the operations of 
Excite@Home or AT&T cable systems other than those acquired from 
MediaOne.
    3. Except for those circumstances provided for in this Section or 
as may otherwise be required by law, in no event shall any employee of 
AT&T, MediaOne or their Affiliates, other than the Appointee, have 
access to any nonpublic information regarding the operations and 
management of ServiceCo.

VII. Compliance Inspection

    For the purposes of determining or securing compliance of 
defendants with this Final Judgment, and subject to any legally 
recognized privilege, from time to time:
    A. Duly authorized representatives of the United States Department 
of Justice, upon written request of a duly authorized representative of 
the Assistant Attorney General in charge of the Antitrust Division, and 
on reasonable notice to AT&T or MediaOne made to its principal office, 
shall be permitted without restraint or interference from AT&T and 
MediaOne:
    1. To have access during office hours of AT&T or MediaOne to 
inspect and copy or, at plaintiff's option to, request AT&T or MediaOne 
to provide copies of all books, ledgers, accounts, correspondence, 
memoranda, and other records and documents in the possession or under 
the control of AT&T or MediaOne, who may have counsel present, relating 
to any matters contained in this Final Judgment; and
    2. To interview, either informally or on the record, and to take 
sworn testimony from the officers, directors, employees, or agents of 
AT&T and MediaOne, who may have their individual counsel present, 
relating to any matters contained in this Final Judgment.
    B. Upon the written request of a duly authorized representative of 
the Assistant Attorney General in charge of the Antitrust Division, 
made to AT&T or MediaOne, AT&T or MediaOne shall submit written 
reports, under oath if requested, relating to any of the matters 
contained in this Final Judgment.
    C. No information or documents obtained by the means provided in 
this section shall be divulged by plaintiff to any person other than a 
duly authorized representative of the Executive Branch of the United 
States, or to the FCC (pursuant to a customary protective order or a 
waiver of confidentiality by AT&T or MediaOne), except in the course of 
legal proceedings to which the United States is a party (including 
grand jury proceedings), or for the purpose of securing compliance with 
this Final Judgment, or as otherwise required by law.
    D. If, at the time information or documents are furnished by AT&T 
or MediaOne to plaintiff, AT&T or MediaOne represent and identify in 
writing the material in any such information or documents as to which a 
claim of protection may be asserted under Rule 26(c)(7) of the Federal 
Rules of Civil Procedure, and mark each pertinent page of such 
material, ``Subject to claim of protection under Rule 26(c)(7) of the 
Federal Rules of Civil Procedure,'' then ten (10) calendar days' notice 
shall be given by Plaintiff to AT&T or MediaOne prior to divulging such 
material in any legal proceeding (other than a grand jury proceeding) 
to which AT&T or MediaOne is not a party.

VIII. Retention of Jurisdiction

    Jurisdiction is retained by this Court for the purposes of enabling 
any of the parties to this Final Judgment to apply to this Court at any 
time for such further orders or directions as may be necessary or 
appropriate for the construction or carrying out of this Final 
Judgment, for the modification of any of the provisions hereof, for the 
enforcement of compliance herewith, and for the punishment of any 
violations hereof.

IX. Further Provisions and Termination

    A. The entry of this judgment is in the public interest.
    B. Unless this Court grants an extension, this Final Judgement 
shall expire on the tenth anniversary of the date of its entry.

Date:------------------------------------------------------------------
----------------------------------------------------------------------
Judge, United States District Court

Certificate of Service

    I hereby certify that copies of the foregoing Plaintiff United 
States' Stipulated Order and proposed Final Judgment, were served via 
U.S. Mail, first class postage prepaid, on this 25th day of May 2000 
upon each of the parties listed below:

Attorneys for AT&T Corp: Mark Rosenblum, AT&T Corp., Basking Ridge, 
New Jersey 07920. David Carpenter, Sidley & Austin, Bank One Plaza, 
Chicago, IL 60603.
Attorney for Media One Group, Inc.: Sean Lindsay, MediaOne Group, 
Inc., 188 Inverness Drive, West, Suite 600, Englewood, CO 80112.
Claude F. Scott, Jr.,
Counsel for the United States.

Competitive Impact Statement

    The United States, pursuant to Section 2(b) of the Antitrust 
Procedures and Penalties Act, 15 U.S.C Sec. 16(b)-(h) (``APPA''), files 
this Competitive Impact Statement relating to the proposed Final 
Judgment submitted for entry in this civil antitrust proceeding.

I. Nature and Purpose of the Proceeding

    The United States filed a civil antitrust Complaint on May 25, 2000 
alleging that the proposed acquisition of MediaOne Group, Inc. 
(``MediaOne'') by a AT&T Corp. (``AT&T'') would violate Section 7 of 
the Clayton Act, 15 U.S.C. 18, by lessening competition in the 
nationwide market for the aggregation, promotion, and distribution of 
residential broadband content.
    AT&T, through its ownership of TCI related companies, hold a 
majority of the voting securities in Excite@Home Corp. 
(``Excite@Home''), the nation's largest residential broadband services 
provider. Through its proposed acquisition of MediaOne, AT&T will 
acquire roughly a 34% equity interest and a significant management 
interest in ServiceCo, LLC (``ServiceCo''), the nation's second-largest 
provider of residential broadband services, which operates under the 
trade name ``Road Runner.''
    By combining AT&T's controlling interest in Excite@Home with 
MediaOne's equity and management interest in Road Runner, the proposed

[[Page 38588]]

transaction threatens to substantially lessen competition by increasing 
concentration in the market for aggregation, promotion, and 
distribution of residential broadband content. Competition between 
Excite@Home and Road Runner in the provision of these services may be 
substantially lessened or even eliminated. Through its control of 
Excite@Home and its substantial influence or control of Road Runner, 
AT&T would substantially increase its leverage in dealing with 
broadband content providers, enabling it to extract more favorable 
terms for such services. AT&T's ability to affect the success of 
individual content providers could be used to confer market power on 
individual content providers favored by AT&T. By exploiting its 
``gatekeeper'' position in the residential broadband content market 
AT&T could make it less profitable for disfavored content providers to 
invest in the creation of attraction broadband content, and reduce 
competition and restrict output in that market.
    Shortly before the Complaint was filed, the United States and 
defendants reached agreement on the terms of a proposed Final Judgment. 
The proposed Final Judgment requires AT&T to divest the interest in 
ServiceCo that it would acquire through its merger with MediaOne no 
later than December 31, 2001. The proposed Final Judgment also contains 
provisions limiting AT&T's participation in the management and 
governance of ServiceCo, designed to minimize any risk of competitive 
harm that otherwise might arise pending completion of divestiture. It 
also contains provisions requiring AT&T to obtain the prior consent of 
the Justice Department before entering into certain types of agreements 
with the other principal partner in ServiceCo, Time Warner, that could 
have many of the same anticompetitive effects as the proposed merger 
would have. The proposed Final Judgment and a proposed Stipulated Order 
by which defendants consent to the entry of the proposed Final Judgment 
were filed simultaneously with the Complaint.
    The United States and defendants have stipulated that the proposed 
Final Judgment may be entered after compliance with the Antitrust 
Procedures and Penalties Act, 15 U.S.C. Sec. 16 (``APPA''). Entry of 
the proposed Final Judgment would terminate this action, except that 
the Court would retain jurisdiction to construe, modify, or enforce the 
provision of the proposed Final Judgment and to punish violations 
thereof. The United States and defendants have also stipulated that 
defendants will comply with the terms of the proposed Final Judgment 
from the date of signing of the Stipulation, pending entry of the Final 
Judgment by the Court. Should the Court decline to enter the Final 
Judgment, defendants have also committed to continue to abide by its 
requirements until the expiration of time for any appeals of such 
ruling.

II. Description of the Events Giving Rise to the Alleged Violation

A. The Defendants and the Proposed Transaction

    AT&T, headquartered in New York, New York, is the nation's largest 
long-distance telephone company, one of the nation's largest wireless 
telephony providers, a growing local telephony provider with nationwide 
ambitions, one of the top ten narrowband Internet service provider via 
AT&T WorldNet, and the nation's second-largest cable multiple system 
operator (``MSO''). AT&T's 1999 revenues totaled approximately $62.4 
billion.
    AT&T also controls Excite@Home Corp. (``Excite@Home''), the largest 
provider of residential broadband service. Excite@Home provides 
residential broadband service over cable systems to over 1.5 million 
end user subscribers and is growing rapidly. AT&T currently holds 
approximately a 26% equity interest in Excite@Home and a majority of 
its voting stock. AT&T recently entered into an agreement which, if 
implemented, will significantly increase its control over Excite@Home. 
Excite@Home has exclusive contract rights to provide residential 
broadband service over the cable facilities of its three principal 
equity holders, AT&T, Comcast Corporation, and Cox Communications, 
Inc., which collectively account for over 35% of the nation's cable 
subscribers. Excite@Home also provides residential broadband service 
over the cable facilities of a significant number of other cable system 
operators nationwide.
    MediaOne Group, formerly US WEST/MediaOne, is the nation's seventh 
largest cable MSO and is headquartered in Englewood, Colorado. MediaOne 
owns cable systems in major metropolitan areas in several states 
including California, Georgia, and Florida. MediaOne also holds a 
25.51% equity interest in Time Warner Entertainment (``TWE''). TWE owns 
and operates numerous cable systems, and holds interests in a number of 
cable programming networks. MediaOne's 1999 revenues totaled 
approximately $2.7 billion.
    ServiceCo, LLC, a limited liability company owned by several Time 
Warner related entities, MediaOne, and subsidiaries of Microsoft 
Corporation and Compaq Computer Corporation, is the second largest 
provider of residential broadband in the United States, using the trade 
name ``Road Runner.'' Road Runner provides residential broadband 
service over cable systems to more than 730,000 end user subscribers, 
and its subscriber base is growing rapidly. MediaOne owns approximately 
34% of Road Runner. MediaOne owns approximately 25% of Road Runner 
through a direct ownership interest in the holding company that owns 
Road Runner and has additional indirect ownership through MediaOne's 
interest in TWE. Many important Road Runner decisions require only the 
concurrence of MediaOne and Time Warner. Road Runner has exclusive 
contract rights through December, 2001 to provide residential broadband 
service over the cable facilities of its two principal cable parents, 
MediaOne and Time Warner, which collectively account for more than 25% 
of the nation's cable subscribers. Road Runner also provides 
residential broadband service over the cable facilities of several 
other cable system operators.
    On May 6, 1999, AT&T and MediaOne agreed to merge in a transaction 
valued at roughly $56 billion. As a result of this transaction, AT&T 
will have substantial equity and management rights in both Excite@Home 
and Road Runner--two firms that, combined, serve a significant majority 
of the nation's residential broadband users.

B. Market To Be Harmed By the Proposed Merger

    The explosive growth of the Internet over the past several years 
has transformed the American economy as well as the lifestyles of 
millions of Americans. From a basic network that served primarily the 
military and academic institutions, the Internet has expanded into a 
network of networks which millions of individuals access daily for both 
personal and professional purposes. Increasing numbers of individuals 
have begun to access the Internet via ``broadband'' means--technology 
which allows the transmission of data at dramatically higher speeds and 
thereby enables new types of content and services to be delivered to 
consumers.
    The vast majority of residential users of the Internet today access 
it via ``dial-up'' modems: their computer uses a standard telephone 
line to connect to an Internet Service Provider (``ISP'') which in turn 
connects the user to the Internet and any proprietary or exclusive 
content

[[Page 38589]]

offered by the ISP as a part of its service. This service generally 
allows users to send and receive data at rates of up to 56 kilobits per 
second or less and is referred to as ``narrowband'' access. A rapidly 
growing number of residential users are accessing the Internet through 
``broadband'' networks and technologies. Broadband users may receive 
data at rates up to 25 times greater than the data transmission rate 
currently provided by narrowband access using standard dial-up modems.
    In order to provide residential broadband service, an ISP must have 
access to transmission facilities capable of carrying data at a high 
rate between the facilities of the ISP and individual homes. The two 
principal types of transmission facilities used today to provide this 
access to residential customers are the networks owned by cable 
companies and local telephone companies.
    Cable companies originally designed their networks to provide video 
programming to customers' homes, but in recent years many cable 
companies have upgraded their networks to provide the capability of 
two-way data transmission needed for residential broadband Internet 
service. Subscribers access the Internet over computers connected to a 
cable modem or, in some cases, over their televisions connected to a 
cable set-top box containing a cable modem. The cable modem sends and 
receives data over the cable company's transmission facilities to the 
facilities of the residential broadband service provider. Cable modem 
service generally permits the transmission of data from the ISP to the 
residence at rates of up to 1.5 Mbps-2 Mpbs, 25 times faster than the 
fastest dial-up connections now available.
    Digital subscriber line (``DSL'') technology is used to enhance the 
transmission capabilities of existing copper telephone wires. DSL, 
which requires users to have a DSL modem attached to their personal 
computer, typically delivers downstream data transmission at rates 
between 256 Kbps and 1.5 Mbps. DSL service may be provided by local 
telephone companies or by other firms which contract with the local 
telephone company for the use of its copper wires. Because of technical 
limitations, and because upgrades of telephone networks which are 
needed to provide DSL service have not been completed in many areas, 
DSL service is available only to a portion of residences which have 
local telephone service.
    Broadband transmission to residences is also provided through 
satellite technology, which uses a radio relay station in orbit above 
the earth to receive, amplify, and redirect signals. Satellite 
broadband services are provided by direct broadcast satellite (``DBS'') 
providers such as DIRECTV and may be provided within the next several 
years by low earth orbit (``LEO'') satellites deployed by firms such as 
Teledesic. At present, this technology provides only one-way broadband 
transmission; the satellite provider transmits data downstream to the 
consumer's home, but the consumer must use telephone lines for the 
upstream transmission of data from the home. Although satellite 
providers are working to address this deficiency, two-way satellite 
broadband service to the home may not be available for several years.
    Broadband transmission may also be provided through ``fixed 
wireless'' technologies, including local multipoint distribution 
systems (``LMDS'') and multichannel multipoint distribution systems 
(``MMDS''). Fixed wireless technology uses microwave transmission 
facilities to transmit data to and from residential consumers. Although 
firms are investing significant sums of money to develop fixed wireless 
technology, residential broadband service using such technology is not 
yet available on a large scale to consumers, and likely will not be 
commercially deployed on a large scale in the immediate future.
    As of early 2000, approximately 70% of the subscribers to 
residential broadband service use a cable modem service in which data 
is transmitted over the facilities of a cable company. DSL services are 
the second most frequently used, but though the number of DSL users is 
growing rapidly, DSL still lags substantially behind cable modem 
service in market penetration and acceptance. Satellite and fixed 
wireless service have only a very small portion of residential 
broadband subscribers.
    Of the seven largest cable MSOs, five have contracted with 
Excite@Home or Road Runner to provide residential broadband service 
over their cable facilities. Excite@Home and Road Runner together serve 
the vast majority of subscribers who receive residential broadband 
Internet service over cable facilities, and a significant majority of 
all residential broadband subscribers.
    Because of the rapid growth in the number of residential broadband 
subscribers, and the expectation that there will soon be very large 
numbers of such subscribers, many firms are developing content that 
will be particularly attractive to residential broadband consumers. The 
transmission capacity of residential broadband service allows customers 
to access content that contains much larger quantities of data, such as 
high quality ``streaming'' video and various forms of interactive 
entertainment. Much of this broadband content will not be readily 
accessible or attractive to narrowband users, because of the much 
longer times that are needed to transmit the data through narrowband 
facilities.
    Content providers may earn revenue in a variety of ways--from the 
sale of advertising, from charging end users for access to the content, 
from the sale of products or services marketed through the Internet--
and most of the revenue opportunities are substantially enhanced in 
proportion to increased numbers of consumers who access the content or 
services. Content providers produce most broadband content with 
national distribution in mind, largely in order to maximize the 
potential number of consumers they will reach, thereby maximizing 
advertising and other revenues. AT&T and Time Warner (a co-owner of 
Road Runner) are substantial providers of content and services which 
are or could be delivered to end users through residential broadband 
Internet facilities.
    A relevant product market affected by this transaction is the 
market for aggregation, promotion, and distribution of broadband 
content and services. The success or failure of content providers 
depends greatly on their ability to attract large numbers of consumers. 
Excite@Home, Road Runner, and other residential broadband service 
providers and ``portals'' can substantially enhance or detract from a 
content provider's ability to reach large numbers of customers. A 
portal generally is an Internet site containing a ``first page'' as 
well as several subsequent pages, that users see with a high degree of 
frequency. These pages aggregate links to a variety of types of content 
and services, and facilitate users' efforts to find content and 
services by providing search engines, ``tree and branch'' indexes, and 
prominent links to Internet content and services, as well as 
proprietary content and services. Most ISPs, including Excite@Home and 
Road Runner, include the first page of their portal as the default 
``start page'' (i.e., the first screen a user seek upon access). There 
are also portals, such as Yahoo and Lycos, that are not affiliated with 
major ISPs. Many customers access content and service providers through 
portals and therefore content providers seek prominent links by which 
to promote their content and draw users to their sites. The more 
favorable the placement of a link (e.g., ``first page'' rather than 
subsequent pages, a link that

[[Page 38590]]

includes a larger share of the screen, etc.), the greater the content 
provider's likely audience, advertising revenues, and profitability.
    For providers of broadband content, i.e., content that either 
requires broadband speeds or is much superior when viewed at broadband 
speeds, links that will attract more broadband customers, and only 
broadband customers, are more valuable than links that will be seen 
predominantly by narrowband users who will not access broadband 
content. Therefore, links that will be viewed by the general mass of 
Internet users--a substantial majority of which are narrowband users--
are not a good substitute for links that will be widely and exclusively 
viewed by broadband users.
    In addition, content providers seek network services such as 
caching that will facilitate the distribution of their data so as to 
enhance to quality and accessibility of their content. Caching stores a 
content provider's content at various locations throughout the country, 
closer to end users, thereby improving speed and performance. This is a 
particularly important service for broadband content providers who must 
rely on the rapid delivery of large quantities of data in order to 
provide the most attractive content. Broadband content providers 
therefore seek favorable data distribution arrangements, as well as 
favorable terms for aggregation and promotion of their content, in 
order to attract more customers.
    The aggregation and promotion of content, and the efficient 
physical distribution of content, are valuable services to content 
providers that heavily influence their success or failure in the 
content market. Content providers typically contract on a nationwide 
basis with forms that provide such services.
    Excite@Home and Road Runner are positioned to become two of the 
most important providers of aggregation, promotion, and distribution of 
residential broadband content. By virtue of the large number of 
subscribers to their residential broadband services, both firms will be 
able to significantly assist or retard the competitive efforts of 
broadband content providers, by granting or withholding aggregation, 
promotion, and distribution services, or through the prices, terms, and 
conditions by which such services are provided. Moreover, because of 
their ownership affiliations and exclusive contracts with many of the 
largest cable MSOs, it is unlikely that other providers of residential 
broadband services will be able to enter and attract comparable numbers 
of subscribers in the near term.

C. Anticompetitive Consequences of the Merger

    Upon consummation, the proposed acquisition would give AT&T 
complete ownership and control of the assets and holdings of MediaOne, 
including MediaOne's ownership interest in Road Runner and significant 
influence over Road Runner's operations and management. AT&T's post-
merger ownership interest in Road Runner will entitle it to participate 
in the governance of Road Runner, to have effective veto power over 
Road Runner management decisions, to be present at meetings of Road 
Runner's Members' Committee, and to obtain all information available to 
members of the Board of Directors, including competitively sensitive 
information.
    AT&T's control over Road Runner and access to sensitive competitive 
Road Runner information combined with its control over Excite@Home and 
access to confidential Excite@Home information could facilitate 
collusion and coordination between Excite@Home and Road Runner in ways 
that would result in a substantial lessening of competition in the 
market for aggregation, promotion, and distribution of residential 
broadband content. Financial benefits derived from collusion that 
accrued to either Excite@Home or Road Runner would accrue in part to 
AT&T.
    If the proposed merger were consummated, concentration in the 
market for aggregation, promotion, and distribution of residential 
broadband content and services would be substantially increased, and 
competition between Excite@Home and Road Runner in the provision of 
such services may be substantially lessened or even eliminated. Through 
its control of Excite@Home and substantial influence or control of Road 
Runner, AT&T would have substantially increased leverage in dealing 
with broadband content providers, which it could use to extract more 
favorable terms for such services.
    The increased leverage that AT&T and its affiliates would acquire 
in this market could also be used to promote or retard the success of 
individual content providers. AT&T's ability to promote or retard the 
success of individual content providers could be used to confer market 
power on individual content providers favored by AT&T. AT&T could 
profit from the creation and exercise of such market power either 
through direct ownership of a favored content provider, or by obtaining 
payments from favored content providers in exchange for favorable 
treatment by Excite@Home and Road Runner. By exploiting its 
``gatekeeper'' position in the residential broadband content market, 
AT&T could make it less profitable for unaffiliated content providers 
to invest in the creation of attractive broadband content, and reduce 
competition and restrict output in that market.
    For these reasons, the United States concluded that the AT&T/
MediaOne merger as proposed may substantially lessen competition, in 
violation of Section 7 of the Clayton Act, in the market for the 
aggregation, promotion, and distribution of residential broadband 
content.
    Naturally, in emerging markets such as these, predictions about the 
way the market may develop in the future are far from certain. 
Nevertheless, the predictions and assumptions required to conclude that 
the proposed merger would present serious anticompetitive problems in 
the future are very reasonable ones. Moreover, the risks to the 
development of broadband industry posed by this merger are sufficiently 
grace that appropriate relief is warranted.

III. Explanation of the Proposed Final Judgment

A. The Divestiture Requirement

    The proposed Final Judgment will preserve competition in the market 
for the aggregation, promotion, and distribution of broadband content 
by requiring defendants to divest their interest in ServiceCo no later 
than December 31, 2001. This divestiture is intended to ensure that 
Excite@Home and Road Runner (or any successor residential broadband 
service offered by Time Warner) will continue to be separate and 
independent of one another, thereby preventing the reduction or 
elimination of competition between them that otherwise would have 
resulted from AT&T's acquisition of MediaOne.
    The divestiture requirements of the proposed Final Judgment direct 
defendants to divest their interest in ServiceCo, including their 
direct financial ownership interest and their role in ServiceCo's 
management, through one of three methods specified in Section IV.B. The 
first two methods specified in Section IV.B contemplate the defendants' 
exiting the ServiceCo partnership pursuant to the terms of the 
ServiceCo Operating Agreement entered into by the various ServiceCo 
partners. Should the defendants opt for a different means of divesting 
the ServiceCo interest, the third option in Section IV.B provides that 
the defendants may utilize this method only

[[Page 38591]]

if the United States provides its written consent.
    Consistent with other antitrust cases involving mergers in which 
the United States seeks a divestiture remedy, this Final Judgment 
requires completion of the divestiture within the shortest time period 
reasonable under the circumstances. The United States normally requires 
the divestiture of physical assets within six months or less. The 
circumstances here are highly unusual in that under the ServiceCo 
Operating Agreement, other ServiceCo owners have contractual rights 
that may limit the drfendants' ability to divest the ServiceCo interest 
prior to December 31, 2001. Accordingly, the defendants are permitted 
until that date to complete the divestiture. However, if the other 
relevant ServiceCo owner(s) request the defendants to divest the 
ServiceCo interest before December 31, 2001, through one of the methods 
provided for in the Operating Agreement (and enumerated in Sections 
IV.B(1) and IV.B(2) of the proposed Final Judgment), the defendants are 
required to complete the divestiture at such earlier date. The proposed 
Final Judgment thereby effectively requires the defendants to divest 
their ServiceCo interest as soon as reasonably practicable. During the 
time that the defendants continue to hold the interest in ServiceCo, 
their ability to participate in the management and governance of 
ServiceCo will be restricted, pursuant to detailed requirements 
contained in Section VI of the Final Judgment which are discussed 
further below, in order to minimize the risk of interim harm to 
competition.
    In requiring the divestiture specified in Section IV, the Final 
Judgment strives to prevent current Road Runner customers from having 
any loss of, or impairment of, cable modem service by ensuring that 
both the principal ServiceCo partners can continue to offer cable modem 
service. Accordingly, Section IV.A permits the defendants to retain 
assets used solely or predominantly to provide service to MediaOne 
cable customers and Section IV.B(1) requires the defendants to consent 
to Time Warner purchasing the remaining assets (e.g., assets that do 
not automatically revert to the control of either the defendants or 
Time Warner, such as, potentially, ``national'' assets) at fair market 
value. The defendants are also permitted to lease capacity on those 
assets and transitional support services at fair market value until 
June 30, 2002. The proposed Final Judgment thereby should realize its 
competitive objectives without any unnecessary adverse interim effects 
on end users.

B. Limitations on Subsequent Agreements

    The divestiture requirements of the proposed Final Judgment are 
intended to ensure that Excite@Home and ServiceCo continue to operate 
separately and independently from one another. The ServiceCo joint 
venture affected actual or potential competition between MediaOne and 
Time Warner in a variety of ways. That joint venture is a mechanism 
through which MediaOne and Time Warner jointly provide residential 
broadband service, rather than providing such service separately and 
potentially in competition with one another. Similarly, the ServiceCo 
venture is a mechanism through which MediaOne and Time Warner jointly 
control negotiations with content providers over the terms under which 
ServiceCo will provide aggregation, promotion, and distribution of 
broadband content. AT&T's entry into this type of partnership with Time 
Warner (through its acquisition of MediaOne's ServiceCo interests) 
would pose substantial risks to competition because of AT&T's 
significant position (through Excite@Home) in the provision of 
residential broadband service and the aggregation, promotion, and 
distribution of broadband content.
    Even if AT&T divests its interest in the ServiceCo joint venture, 
however, those risks to competition could be re-created through 
contractual arrangements between AT&T and Time Warner that would have 
competitive effects imilar to the effects of the ServiceCo joint 
venture. In order to prevent this, and to ensure that the divestiture 
remedy achieves its purpose, the proposed Final Judgment restricts 
AT&T's ability to enter into certain types of contractual or other 
arrangements with Time Warner for a period of two years after the 
divestiture of the ServiceCo interest.\1\ The defendants are required 
to obtain the prior written consent of the Department of Justice before 
entering into three categories of agreements defined in Section V. 
First, prior approval is required for agreements through which 
defendants and Time Warner would jointly offer or provide a residential 
broadband service. Second, prior approval is required for agreements 
that would have the purpose or effect of preventing either the 
defendants or Time Warner from offering or providing a residential 
broadband service. Third, prior approval is required for agreements 
that would have the purpose or effect of (a) preventing defendants or 
Time Warner from including any content, services, capabilities, or 
features in any cable modem services offered by either the defendants 
or Time Warner, or (b) preventing the defendants from granting 
preferential treatment in any of their cable modem services to content, 
services, capabilities, or features offered by others.
---------------------------------------------------------------------------

    \1\ The Final Judgment defines Time Warner to include any 
``legal entity that is subject to a merger agreement with Time 
Warner, Inc., and that would be included within this definition when 
such agreement is consummated''. Therefore, the restrictions in 
Section V will apply to agreements involving the defendants and AOL, 
as well as the entity resulting from the merger of America Online 
and Time Warner if that proposed merger closes.
---------------------------------------------------------------------------

    The Department will have thirty days to review agreements submitted 
pursuant to Section V and will consent to proposed agreements if it 
determines, in its sole discretion, that the arrangement will not 
substantially lessen competition between AT&T and its Affiliates and 
Time Warner in any market. The Department's determination regarding any 
agreement submitted for review will be final unless the Court, based on 
an application by the defendants, concludes that the Department abused 
its discretion in refusing to consent to an agreement.
    The requirements of Section V reflect a conclusion that certain 
categories of agreements could have anticompetitive effects, but not a 
conclusion that such agreements necessarily would have competitive 
effects. By virtue of their respective businesses in the operation of 
cable systems, the provision of residential broadband service, the 
provision of broadband content, and the provision of aggregation, 
promotion, and distribution of broadband content, AT&T and Time Warner 
may enter into a variety of commercial arrangements that pose no 
significant risk to competition, even though such arrangements are 
subject to the prior approval requirements of Section V. It is also 
possible that certain agreements between AT&T and Time Warner that are 
not subject to the prior approval requirements might have 
anticompetitive effects. The provisions of Section V reflect a 
balancing of the need to provide an effective means of preventing 
anticompetitive agreements while minimizing interference with 
legitimate and procompetitive commercial arrangements. The prior 
approval requirements do not limit in any way the ability of the United 
States to initiate enforcement actions under the antitrust laws to 
challenge agreements, whether or not such agreements are subject to the 
prior approval requirements, and whether or not the United States has 
granted its approval under the terms of the Final Judgment.

[[Page 38592]]

C. Other Provisions of the Decree

    Section VI contains important requirements concerning the operation 
of Road Runner prior to divestiture of the interest in ServiceCo. The 
purpose is to prevent any coordination or collusion between Road Runner 
and Excite@Home during the limited period of time that AT&T has equity 
and management interests in both. Section VI.A lays out the basic rule 
that the defendants shall take all necessary steps to ensure that the 
management of the ServiceCo interest will be kept separate and apart 
from the operation of other AT&T businesses, including Excite@Home, and 
that all competitively sensitive information of the ServiceCo and 
AT&T's other businesses are also kept separate.
    Although there are certain decisions of ServiceCo which the 
defendants need to be able to participate in during the period prior to 
divestiture in order to protect their legitimate interests, in 
particular that of providing service to their end user cable customers, 
there are certain categories of decisions for which there is no strong 
reason the defendants need to be involved and, indeed, ones in which 
their involvement could create anticompetitive consequences. 
Accordingly, Section VI.B delineates three specific categories of 
ServiceCo decisions which defendants are prohibited from participating 
in or influencing. The first of these involves decisions regarding 
ServiceCo offering service to customers other than defendants' or Time 
Warner's cable systems. It is possible that Road Runner may want to 
expand service to other cable systems or over other means of broadband 
access such as DSL. Because Excite@Home could protentially be a 
competitor to Road Runner for these customers, AT&T might have an 
incentive to hinder Road Runner's efforts to serve these customers. The 
Final Judgment bars AT&T from being able to hinder any such efforts by 
Road Runner. The second category of decisions in which AT&T is barred 
from participating are those regarding content or services provided to 
ServiceCo subscribers. A major competitive concern outlined in the 
Complaint is that AT&T would be able to coordinate the actions of 
Excite@Home and Road Runner in dealing with content providers; by 
preventing AT&T from participating in any Road Runner content 
decisions, this risk is minmized. Because Time Warner might have 
incentives, and in the absence of AT&T being able to exercise its 
management rights the ability, to strike deals between ServiceCo and 
Time Warner that would be extremely favorable to Time Warner and its 
content, there is an exception in this provision that allows AT&T to 
participate in content decisions involving Time Warner content. The 
final prohibition in this Section prevents defendants from impeding 
ServiceCo's ability to obtain capital from other ServiceCo equity 
holders. This is to prevent AT&T from being able to undermine ServiceCo 
as a competitive force by blocking its access to capital.
    Section VI.C specifies the manner in which AT&T must manage its 
ServiceCo interest. It requires the appointment of a person or persons 
(``the Appointee'') who will manage AT&T's interest in ServiceCo and be 
responsible for compliance with the separation requirements of Section 
VI subject only to review and direction by four senior AT&T officers 
and its Board of Directors. It also contains a number of specific 
provisions regarding communications and the sharing of non-public 
information that will help to prevent sensitive ServiceCo competitive 
information from being provided to the rest of AT&T.
    In order to ensure compliance with the Final Judgment, Section VII 
gives the United States various rights, including the ability to 
inspect defendants' records, to conduct interviews and take sworn 
testimony of defendants' officers, directors, employees and agents, and 
to require defendants to submit written reports. These rights are 
subject to legally recognized privileges, and any information the 
United States obtains using these powers is protected by specified 
confidentiality obligations which permit sharing of information with 
the FCC under customary protective order issued by that agency or a 
waiver of confidentiality.
    The Court retains jurisdiction under Section VIII, and Section IX 
provides that the proposed Final Judgment will expire on the tenth 
anniversary of the date of its entry, unless extended by the Court.

IV. Remedies Available to Potential Private Litigants

    Section 4 of the Clayton Act, 15 U.S.C. 15, provides that any 
person who has been injured as a result of conduct prohibited by the 
antitrust laws may bring suit in federal court to recover three times 
the damages that the person has suffered, as well as costs and 
reasonable attorneys' fees. Entry of the proposed Final Judgment will 
neither impair nor assist the bringing of any private antitrust damage 
action. Under the provisions of Section 5(a) of the Clayton Act, 15 
U.S.C. 16(a), the proposed Final Judgment has no prima facie effect in 
any subsequent private lawsuit that may be brought against defendants.

V. Procedures Available for Modification of the Proposed Final 
Judgment

    Plaintiff and defendants have stipulated that the proposed Final 
Judgment may be entered by the Court after compliance with the 
provisions of the APPA, provided that the United States has not 
withdrawn its consent. The APPA conditions entry upon the Court's 
determination that the proposed Final Judgment is in the public 
interest.
    The APPA provides a period of at least sixty (60) days preceding 
the effective date of the proposed Final Judgment within which any 
person may submit to the United States written comments regarding the 
proposed Final Judgment. Any person who wishes to comment should do so 
within sixty (60) days of the date of publication of this Competitive 
Impact Statement in the Federal Register. The United States will 
evaluate and respond to the comments. All comments will be given due 
consideration by the United States, which remains free to withdraw its 
consent to the proposed Final Judgment at any time to entry. The 
comments and the responses of the United States will be filed with the 
Court and published in the Federal Register.
    Written comments should be submitted to: Donald J. Russell, Chief, 
Telecommunications Task Force, Antitrust Division, United States 
Department of Justice, 1401 H Street, NW., Suite 8000, Washington, DC 
20530.
    The proposed Final Judgment provides, in Section VIII, that the 
Court retains jurisdiction over this action, and the parties may apply 
to the Court for any order necessary or appropriate to carry out or 
construe the Final Judgment, to modify any of its provisions, to 
enforce compliance, and to punish any violations of its provisions.

VI. Alternatives to the Proposed Final Judgment

    The United States considered, as an alternative to the proposed 
Final Judgment, seeking an injunction to block consummation of the 
AT&T/MediaOne Merger and a full trial on the merits. The United States 
is satisfied, however, that the divestiture of the interest in 
ServiceCo and other relief contained in the proposed Final Judgment 
will preserve competition in the market for aggregation, promotion,

[[Page 38593]]

and distribution of residential broadband content. This proposed Final 
Judgment will also avoid the substantial costs and uncertainty of a 
full trial on the merits on the violations alleged in the compliant. 
Therefore, the United States believes that there is no reason under the 
antitrust laws to proceed with further litigation if divestiture of the 
interest in ServiceCo is carried out in the manner required by the 
proposed Final Judgment.

VII. Standard of Review Under the APPA for Proposed Final Judgment

    The APPA requires that proposed consent judgments in antitrust 
cases brought by the United States by subject to a sixty (60) day 
comment period, after which the court shall determine whether entry of 
the proposed Final Judgment ``is in the public interest.'' In making 
that determination, the court may consider:

    (1) The competitive impact of such judgment, including 
termination of alleged violations, provisions for enforcement and 
modification, duration or relief sought, anticipated effects of 
alternative remedies actually considered, and any other 
considerations bearing upon the adequacy of such judgment;
    (2) The impact of entry of such judgment upon the public 
generally and individuals alleging specific injury from the 
violations set forth in the complaint including consideration of the 
public benefit, if any, to be derived from a determination of the 
issues at trial.

15 U.S.C. Sec. 16(e) (emphasis added). As the United States Court of 
Appeals for the D.C. Circuit held, this statute permits a court to 
consider, among other things, the relationship between the remedy 
secured and the specific allegations set forth in the government's 
complaint, whether the decree is sufficiently clear, whether 
enforcement mechanisms are sufficient, and whether the decree may 
positively harm third parties. See United States v. Microsoft, 56 F.3d 
1448, 1461-62 (D.C. Cir. 1995).
    In conducting this inquiry, ``[t]he Court is nowhere compelled to 
go to trial or to engage in extended proceedings which might have the 
effect of vitiating the benefits of prompt and less costly settlement 
through the consent decree process.'' \2\ Rather,
---------------------------------------------------------------------------

    \2\ 119 Cong. Rec. 24598 (1973). See United States v. Gillette 
Co., 406 F. Supp. 713, 715 (D. Mass. 1975). A ``public interest'' 
determination can be made properly on the basis of the Competitive 
Impact Statement and Response to Comments filed pursuant to the 
APPA. Although the APPA authorizes the use of additional procedures, 
15 U.S.C. Sec. 16(f), those procedures are discretionary. A court 
need not invoke any of them unless it believes that the comments 
have raised significant issues and that further proceedings would 
aid the court in resolving those issues. See H.R. Rep. 93-1463, 93d 
Cong. 2d Sess. 8-9 (1974), reprinted in U.S.C.C.A.N. 6535, 6538.

[a]bsent a showing of corrupt failure of the government to discharge 
its duty, the Court, in making its public interest finding, should * 
* * carefully consider the explanations of the government in the 
competitive impact statement and its responses to comments in order 
to determine whether those explanations are reasonable under the 
---------------------------------------------------------------------------
circumstances.

United States v. Mid-America Dairymen, Inc., 1977-1 Trade Cas. (CCH) 
para. 61,508, at 71,980 (W.D. Mo. 1977).
    Accordingly, with respect to the adequacy of the relief secured by 
the decree, a court may not ``engage in an unrestricted evaluation of 
what relief would best serve the public.'' United States v. BNS, Inc., 
858 F.2d 456, 462 (9th Cir. 1988) (citing United States v. Bechtel 
Corp., 648 F.2d 660, 666 (9th Cir. 1981); see also Microsoft, 56 F.3d 
at 1460-62. Precedent requires that

the balancing of competing social and political interests affected 
by a proposed antitrust consent decree must be left, in the first 
instance, to the discretion of the Attorney General. The court's 
role in protecting the public interest is one of insuring that the 
government has not breached its duty to the public in consenting to 
the decree. The court is required to determine not whether a 
particular decree is the one that will best serve society, but 
whether the settlement is ``within the reaches of the public 
interest.'' More elaborate requirements might undermine the 
effectiveness of antitrust enforcement by consent decree.\3\
---------------------------------------------------------------------------

    \3\ Bechtel, 648 F.2d at 666 (emphasis added); see BNS, 858 F.2d 
at 463; United States v. National Broadcasting Co., 449 F. Supp. 
1127, 1143 (C.D. Cal. 1978); Gillette, 406 F. Supp. at 716. See also 
Microsoft, 56 F.3d at 1461 (whether ``the remedies [obtained in the 
decree are] so inconsonant with the allegations charged as to fall 
outside of the `reaches of the public interest''').

    The proposed Final Judgment, therefore, should not be reviewed 
under a standard of whether it is certain to eliminate every 
anticompetitive effect of a particular practice or whether it mandates 
certainty of free competition in the future. Court approval of a final 
judgment requires a standard more flexible and less strict than the 
standard required for a finding of liability. ``[A] proposed decree 
must be approved even if it falls short of the remedy the court would 
impose on its own, as long as it falls within the range of 
acceptability or is `within the reaches of public interest.''' United 
States v. American Tel. & Tel Co., 552 F. Supp. 131, 151 (D.D.C. 1982), 
aff'd sub nom., Maryland v. United States, 460 U.S. 1001 (1983) 
(quoting Gillette Co., 406 F. Supp. at 716); United States v. Alcan 
Aluminum, Ltd., 605 F. Supp. 619, 622 (W.D. Ky. 1985).
    Moreover, the court's role under the Tunney Act is limited to 
reviewing the remedy in relationship to the violations that the United 
States has alleged in its complaint, and does not authorize the court 
to ``construct [its] own hypothetical case and then evaluate the decree 
against that case.'' Microsoft, 56 F.3d at 1459. Since ``[t]he court's 
authority to review the decree depends entirely on the government's 
exercising its prosecutorial discretion by bringing a case in the first 
place,'' it follows that court ``is only authorized to review the 
decree itself,'' and not to ``effectively redraft the complaint'' to 
inquire into other matters that the United States might have but did 
not pursue. Id.

VIII. Determinative Documents

    There are no determinative materials or documents within the 
meaning of the APPA that were considered by the United States in 
formulating the proposal Final Judgment. Consequently, the United 
States has not attached any such materials to the proposed Final 
Judgment.

Respectfully submitted,
Joel I. Klein, Assistant Attorney General. Donna E. Patterson, 
Deputy Assistant Attorney General. Constance K. Robinson, Director 
of Operations. Donald J. Russell, Telecommunications Task 
Force.Claude F. Scott, Jr. (DC Bar No. 414960). Lauren Fishbein. 
Lawrence M. Frankel. Peter A. Gray. Juanita Harris. Yvette F. 
Tarlov. Trial Attorneys, U.S. Department of Justice, Antitrust 
Division, Telecommunications Task Force, 1401 H Street, N.W., Suite 
8000, Washington, D.C. 20530, (202) 514-5621.
    Dated: May 25, 2000.

Certificate of Service

    I hereby certify that copies of the foregoing Plaintiff United 
States' Competitive Impact Statement, were served via U.S. Mail, first 
class postage prepaid, on this 25th day of May 2000 upon each of the 
parties listed below:
    Attorney for AT&T Corp: Mark Rosenblum, AT&T Corp., 295 North Maple 
Avenue, Basking Ridge, New Jersey 07920; David Carpenter, Sidley & 
Austin, Bank One Plaza, Chicago, IL 60603.
    Attorney for MediaOne Group, Inc.: Sean Lindsay, MediaOne Group, 
Inc., 188 Inverness Drive, West, Suite 600, Englewood, CO 80112.

Claude F. Scott, Jr.,
Counsel for the United States.
[FR Doc. 00-15591 Filed 6-20-00; 8:45 am]
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