<PAGE>
<TABLE>
<S> <C>
[GRAPHIC] PUBLIC NOTICE News Media Information 202 / 418-0500
FEDERAL COMMUNICATIONS COMMISSION Fax-On-Demand 202 / 418-2830
445 12TH ST., S.W. TTY 202 / 418-2555
WASHINGTON, D.C. 20554 Internet: http://www.fcc.gov
ftp.fcc.gov
-----------------------------------------------------------------------------------------------
</TABLE>
FCC 01-11
January 11, 2001
SUBJECT TO CONDITIONS, COMMISSION APPROVES
MERGER BETWEEN AMERICA ONLINE, INC. AND TIME WARNER, INC.
The Commission today approved the joint application ("Application")(1)
filed by America Online, Inc. ("AOL") and Time Warner Inc. ("Time Warner")
(collectively the "Applicants") for approval to transfer control of certain
licenses and authorizations to AOL Time Warner, Inc., a newly created company,
subject to the conditions stated below.(2) A Memorandum Opinion and Order (the
"Order") explaining in further detail the Commission's reasoning and the
conditions will be issued shortly.
----------------
(1) Applications for Consent to the Transfer of Control of Licenses and Section
214 Licenses Time Warner, Inc., and America Online, Inc., Transferors, to AOL
Time Warner, Inc., Transferee, CS Docket No. 00-30 (filed Feb. 11, 1999)
("Application").
(2) The Commission approved the Application and imposed the conditions pursuant
to Sections 4(i) and (j), 214(a), 214(c), 303(r), 309, and 310(d) of the
Communications Act of 1934, as amended, 47 U.S.C. 'SS''SS'. 154(i), 154(j),
214(a), 214(c), 303(r), 309, 310(d).
The Commission's approval of the Application includes authority for AOL Time
Warner to acquire control of:
a) any authorization issued to Time Warner, its subsidiaries, or
its affiliates during the Commission's consideration of the
Application and the period required for consummation of the
merger transaction following approval;
b) construction permits held by licensees involved in this
transfer that matured into licenses during the Commission's
consideration of the Application or that mature into licenses
after closing of the merger transaction and that may have been
omitted from the transfer of control Application; and
c) applications filed by such licensees and that are pending at
the time of consummation of the proposed transfer of control.
<PAGE>
INTERNET SERVICES
Although the Commission found that the FTC consent decree with AOL Time
Warner would substantially ensure that unaffiliated ISPs are able to offer their
services over AOL Time Warner's cable system on non-discriminatory terms and
conditions, the Commission found that AOL Time Warner might have insufficient
incentives to enter contracts with local or regional ISPs that are unaffiliated
with AOL Time Warner. The Commission noted that the FTC consent decree requires
AOL Time Warner to negotiate in good faith with any unaffiliated ISP seeking
access to its cable systems and, thus, reiterated that AOL Time Warner must
engage with local and regional ISPs in a good faith, nondiscriminatory manner.
The conditions set forth below regarding choice of ISPs, first screen, billing,
technical performance, and disclosure of contracts are particularly relevant to
the ability of smaller ISPs to negotiate carriage arrangements on
non-discriminatory terms and we expect that AOL Time Warner will negotiate in
good faith to reach contract provisions that are consistent with the commercial
viability of these entities. The Internet access conditions that the Commission
adopted with regard to AOL Time Warner are as follows:(3)
A. Choice of ISPs: AOL Time Warner shall not restrict the ability of
any current or prospective ISP customers to select and initiate service from any
unaffiliated ISP which, pursuant to a contract with AOL Time Warner, has made
its service available over AOL Time Warner's cable facilities ("Participating
ISP"). AOL Time Warner must allow customers to select a Participating ISP by a
method that does not discriminate in favor of AOL Time Warner's affiliates on
the basis of affiliation. At a minimum, AOL Time Warner must allow customers to
obtain a list of Participating ISPs by calling their local AOL Time Warner cable
system and requesting such a list. Whenever a customer requests a listing of
Participating ISPs, AOL Time Warner shall provide the list in a reasonable and
timely manner. Such list shall not discriminate in favor of AOL Time Warner's
affiliates on the basis of affiliation. AOL Time Warner may not prohibit ISPs
from marketing their services to AOL Time Warner cable customers.(4)
B. First Screen: AOL Time Warner must permit each Participating ISP to
determine the contents of its subscribers' first screen and may not require a
Participating ISP to include any content as a condition of obtaining access to
AOL Time Warner cable systems; provided that AOL Time Warner and any
Participating ISP may agree that the ISP will include specified content or links
on its first screen. AOL Time Warner may not require any high-speed Internet
access cable customer to go through an affiliated ISP to reach any Participating
ISP from which the customer purchases service.
C. Billing: AOL Time Warner must permit each ISP to have a direct
billing arrangement with those high-speed Internet access subscribers to whom
the ISP sells service. AOL Time Warner may offer a billing service to any
Participating ISP, but may not require any ISP to purchase this service as a
condition of obtaining access.
D. Technical Performance: All contracts between AOL Time Warner and
unaffiliated ISPs for access to Time Warner's cable systems shall contain a
clause warranting that, to the extent AOL Time Warner provides any Quality of
Service mechanisms, caching services, technical support customer services,
multicasting capabilities, address management and other technical functions of
the cable system that affect
---------------
(3) The conditions that follow are not intended to require AOL Time Warner to
offer any ISP connection to its cable systems, but instead to ensure that if and
when the merged firm does agree to offer ISP connection, it do so in conformity
with the requirements we delineate herein.
(4) This provision ("Choice of ISPs") is not intended to restrict AOL Time
Warner's ability to market its own products to prospective or current ISP
customers.
2
<PAGE>
customers' experience with their ISP, AOL Time Warner must provide them in a
manner that does not discriminate in favor of AOL Time Warner's affiliated ISPs
on the basis of affiliation.
E. Rights to Disclose Contracts to the Commission: AOL Time Warner may
not enter into any contract with any ISP for connection with AOL Time Warner's
cable systems that prevents that ISP from disclosing the terms of the contract
to the Commission under the Commission's confidentiality procedures.
F. Enforcement: With respect to any dispute concerning AOL Time
Warner's compliance with these conditions, the following procedures shall apply.
These procedures are designed to resolve any disputes within sixty (60) days of
the filing of the Complaint and to have them resolved by the Chief, Cable
Services Bureau ("Chief").
1. No less than ten (10) business days before filing a
complaint with the Commission, the complainant shall
notify AOL Time Warner of its intention to file the
complaint. This is intended to afford the parties a
final opportunity to resolve their dispute without
resort to our processes.
2. Within twenty (20) days after public notice of the
filing of the complaint, any interested party shall
file an answer. Within ten (10) days after the filing
of the answer, the complainant may file its reply.
The complainant and AOL Time Warner shall each, with
its first filing, furnish a detailed report,
technical or otherwise, describing the conduct or
events that are the subject of the filing. All
filings shall be made with Commission Secretary and
shall be concurrently served on the Chief.
3. In resolving these filings, the Chief will apply the
following principles: (a) the general pleading rules
set forth in Parts 1 and 76 of our rules will apply
to the extent they are consistent with the specific
requirements of the proceedings provided for herein;
(b) complaints of misconduct by AOL shall be filed
within one year of the occurrence of the alleged
misconduct; (c) discovery shall be at the discretion
of the Chief and may be requested by a party in one
of its filings provided for above; and (d) the
complainant shall bear the burden of proof in the
proceeding it commences.
The Chief shall sustain or dismiss the complaint within sixty (60) days of the
filing of the complaint.
INSTANT MESSAGING
Given AOL Time Warner's likely domination of the potentially
competitive business of new, IM-based services, especially advanced, IM-based
high-speed services ("AIHS")(5) applications such as videoconferencing, the
Commission concluded that a condition to prevent that merger-specific harm was
merited. AOL Time Warner may not offer an AIHS application that includes the
transmission and reception, utilizing a names and presence directory ("NPD")(6)
over the Internet Protocol path of AOL Time Warner
---------------
(5) AIHS applications are defined in the order to be bandwidth-intensive and
therefore applications that work best with high-speed Internet access. AIHS
applications include time sensitive, "latency dependent" applications such as
talking, game playing, and video conferencing.
(6) An essential input to an IM service is the service provider's NPD. The names
and presence indication, as displayed on the sender's and recipient's buddy
lists and screens, enable each to know the other's IM name and when he or she is
online or available for communication or interaction. The actual NPD consists,
first, of a database of the users' unique IM names and addresses and, second, of
a "presence detection" function, which is the IM provider's knowledge, and its
3
<PAGE>
broadband facilities, of one- or two-way streaming video communication using NPD
protocols - including live images or tape - that are new features, functions,
and enhancements beyond those offered in current offerings such as AIM 4.1 or
ICQ 2000b,(7) unless and until AOL Time Warner has successfully demonstrated it
has complied with one of the following grounds for relief.
Grounds for Relief. Option One. AOL Time Warner may file a petition
demonstrating that it has implemented a standard for server-to-server
interoperability of NPD-based services(8) that has been promulgated by the IETF
or a widely recognized standard-setting body that is recognized as complying
with National Institute of Standard Testing or Industry Standard Organization
requirements for a standard setting body. At a minimum, AOL Time Warner must
demonstrate that the adopted protocol makes available to another provider of
NPD-based services such data in AOL Time Warner's NPD(s) as will enable the
other provider's users to know the addresses of AOL Time Warner users and detect
their presence online, to the same extent that AOL Time Warner's users know each
others' addresses and detect each others' presence online. AOL Time Warner must
also demonstrate that the protocol makes available to other IM providers any
other information used by AOL Time Warner to implement and process transaction
of AIHS services, to the extent allowed by law. The adopted standard shall also
ensure that AOL Time Warner shall afford the same quality and speed in
processing transactions to and from the other provider as it affords to its own
transactions of the same type.(9) Other than specifying server-to-server
interoperability as described above, we do not set any technical criteria for
interoperability.
Option Two. AOL may file a petition demonstrating that it has entered
into written contracts providing for server-to-server interoperability with
significant, unaffiliated, actual or potential competing providers of NPD-based
services offered to the public.(10) AOL must execute the first such contract
prior to offering the video AIHS service described above. After AOL Time Warner
executes the first contract, an
--------------------------------------------------------------------------------
ability to inform others, that a certain user is online and therefore available
to engage in instant messaging. Third, the NPD is more than simply a customer
list. It is a working part of an electronic communications network for persons
who have requested participation in the network and actually use the network to
exchange communications in real time with other users.
Each IM provider has its own NPD database, which constitutes the total universe
of persons with whom that provider's users can engage in instant messaging.
(7) We explicitly exclude upgrades to AOL's current IM products that are not
otherwise included in AIHS. We do not intend to include within AIHS streaming
video communications not utilizing NPD protocols or applications that contain or
are packaged with current IM.
(8) "Server to server" interoperability is interoperability in which a client
interacts with other NPD-based services through its own server. Each server
establishes communication with other servers, including those controlled by
other providers of NPD-based services, to exchange presence information and
names.
(9) We do not require the AOL Time Warner software to read and interpret all
the data it receives or to make that data comprehensible to its users.
(10) A potential competitor is "an aggressive, well equipped and well financed
company that is engaged in the same or related lines of commerce." United States
v. Falstaff Brewing Corp., 410 U.S. 526, 532 (1973). See also United States v.
Penn-Olin Chem. Co., 378 U.S. 158, 174 (1964). In this case, we expect that the
potential provider would be a company that is capable of entering into an
arms-length, commercially reasonable and mutually beneficial contract with AOL
and is likely to become a significant competitor in the near term in providing
NPD services.
4
<PAGE>
officer of AOL Time Warner shall certify to the Commission that it is prepared
to promptly negotiate in good faith, with any other requesting provider of
NPD-based services.(11)
Within 180 days of executing the first contract, AOL must demonstrate
that it has entered into two additional contracts with significant,
unaffiliated, actual or potential competing providers. The interoperability
achieved under these contracts shall be identical to that described under Option
1 above with identical terms and conditions for technical interoperability. All
parties to a contract shall agree not to alter the technical protocol without
the consent of all parties providing interoperable IM services under these
agreements. The contracts may contain different provisions for business
considerations. AOL Time Warner must submit copies of these agreements for
server-to-server interoperability into the record of this proceeding within 10
days of execution of such agreement. AOL Time Warner may redact any proprietary
information or terms not related to technical interoperability.
Option Three. AOL Time Warner may seek relief from the condition on
offering AIHS video services by filing a petition demonstrating that imposition
of the condition no longer serves the public interest, convenience and necessity
because there has been a material change in circumstance, including new evidence
that renders the condition on offering AIHS video services no longer necessary
in the public interest, convenience, and necessity. If AOL Time Warner proffers
market share information as evidence that the condition no longer is necessary
in the public interest, convenience, and necessity, AOL Time Warner must
demonstrate that it has not been a dominant provider of NPD services for at
least four (4) consecutive months.
Procedure for Submission of Petition to the Commission. To receive
authorization to offer AIHS video services pursuant to Options 1-3 above, AOL
Time Warner shall submit a Petition to the Commission. The Petition shall be
filed with the Secretary's office and shall contain the factual and legal bases
demonstrating satisfaction of one of the three options set forth above. The
Commission shall put the Petition out for Notice and Comment with a maximum of
30 days for receipt of such comments. Petitioner may submit a reply not more
than 15 days after the closure of the comment period. Upon the timely filing of
Petitioner's reply, the Petition, comments and reply shall be submitted to the
Commission for disposition. The Commission shall issue its findings and
conclusions not more than 60 days after receipt of the matter. This timeline may
be altered at the discretion of the Commission upon a timely submitted request
of the Petitioner. The findings of the Commission shall be made upon clear and
convincing evidence, and in the
--------------
(11) By "negotiate in good faith," we mean that AOL Time Warner: (1) may not
refuse to negotiate with another IM provider regarding interoperability; (2)
must appoint a negotiating representative with authority to bargain and conclude
an agreement on interoperability; (3) must agree to meet at reasonable times and
locations and may not act in a manner that would unduly delay the course of
negotiations; (4) may not put forth a single, unilateral proposal that is not
subject to negotiation; (5) in responding to an offer proposed by another IM
provider, must provide considered reasons for rejecting any aspects of the other
provider's offer or proposal; (6) may not enter into an agreement that requires
the other IM provider to interoperate exclusively with AOL Time Warner or
authorizes AOL Time Warner to deny interoperability to any other IM provider;
and (7) must agree to execute a written agreement that sets forth the full
agreement between AOL Time Warner and the other IM provider. We add the seventh
requirement to ensure that there are no misunderstandings as to the obligations
of the parties to the agreement. In addition, because good faith determinations
must be grounded on particular facts, we will also examine whether, based on the
totality of the circumstances, AOL Time Warner has bargained in good faith. If
we find that AOL Time Warner has not bargained in good faith, we will instruct
AOL Time Warner to restart negotiations with the aggrieved IM provider, but will
not mandate that the parties reach agreement or enter into a contract on
specific terms or conditions. Cf. Implementation of the Satellite Home Viewer
Improvement Act of 1999, Retransmission Consent Issues: Good Faith Negotiation
and Exclusivity, CS Docket No. 99-363, First Report and Order, 15 FCC Rcd 5445
(2000).
5
<PAGE>
absence of such an evidentiary showing, the condition shall not be eliminated.
Reporting Requirement. The Commission shall require AOL Time Warner to
file a progress report with the Commission, 180 days after the release of the
Order and every 180 days thereafter, describing in technical depth, the actions
it has taken to achieve interoperability of its IM offerings(12) and others' IM
offerings. Such reports will be placed on public notice for comment. Any
confidential or proprietary information contained in the reports may be
submitted to the Commission pursuant to the terms of the protective order in
this proceeding.
Enforcement. The Commission shall retain jurisdiction over the
licensees or their successors for the purpose of enforcing the terms of this
condition, for a period not to exceed five years. The terms of this condition
shall be enforced pursuant to the Commission's powers under the Communication
Act. Any party to the Order, or their successor in interest, may petition this
Commission at any time for relief from the condition on offering AIHS video
services imposed pursuant to the Order.
In the event that any person wishes to bring to us a dispute about
AOL's compliance with this condition, the Commission shall require that the
following procedures be followed. These procedures are designed to resolve any
disputes within sixty (60) days of the first filing. Within twenty (20) days
after public notice is given of either the filing of a complaint or a showing by
AOL Time Warner, any interested party shall file a response (AOL Time Warner's
answer to the complaint, another person's response to AOL Time Warner's alleged
showing). Within ten (10) days after the filing of the responses, the party that
made the first filing may file its reply.(13) The complainant and AOL Time
Warner shall each, with its first filing, furnish a detailed report, technical
or otherwise, describing the conduct or events that are the subject of the
filing. All these filings shall be made with the Commission Secretary and shall
be concurrently served on the Chief, Cable Service Bureau. The complaint or
showing, as the case may be, shall be dismissed or sustained within sixty (60)
days of its filing.
Sunset. Five (5) years after the date of release of the Order, the
condition set forth in the preceding paragraphs shall expire and shall not
restrain AOL Time Warner from offering video AIHS.
INTERACTIVE TELEVISION SERVICES
The Commission announced that it will initiate a proceeding to seek
comment on interactive television services.
OWNERSHIP INTEREST IN GENERAL MOTORS AND HUGHES ELECTRONICS
In response to arguments that AOL Time Warner's indirect ownership
interest in DirecTV, Inc. might raise anticompetitive concerns by permitting a
cable operator to own part of a DBS provider, the Commission ordered that the
Applicants shall notify the Chiefs of the Commission's Cable Services Bureau and
International Bureau, in writing, of any transactions that increase the
Applicants' ownership interest in
---------------
(12) Within "its IM offerings," we include the IM offered as part of AOL's basic
proprietary Internet access service, AIM, ICQ, any IM that is sponsored by AOL
Time Warner and is included in Road Runner, and any new IM-based service that
uses the NPD that AOL uses for its IM.
(13) Cf. 47 C.F.R.'SS'76.7
6
<PAGE>
General Motors Corporation and/or Hughes Electronics Corporation (the parent
companies of DirecTV), no later than 30 days after the transaction.
CONTRACTUAL RELATIONSHIPS WITH AT&T
To mitigate the adverse effects of potential coordination, as a result
of the merger, between AT&T and AOL Time Warner, the Commission imposed the
following additional conditions:
AOL Time Warner shall be prohibited from entering into any agreement
with AT&T, tacit or otherwise, that gives any AOL Time Warner ISP exclusive
access to any AT&T cable system for the purpose of offering high-speed Internet
access service.
AOL Time Warner shall be prohibited from entering into any agreement
with AT&T, tacit or otherwise, that affects AT&T's ability to offer any rates,
terms or conditions of access to ISPs that are not affiliated with AOL Time
Warner.
AOL Time Warner, by its General Counsel, shall certify to the
Commission upon the merger's closing and annually thereafter that it is in
compliance with the foregoing two conditions.
MISCELLANEOUS PROVISIONS
The Commission ordered that compliance with all conditions imposed in
the Order is a non-severable condition of the grant of the Application.
All references to AOL and Time Warner in the order shall also refer to
their respective officers, directors, and employees, as well as to any
affiliated companies, and their officers, directors, and employees, except as
otherwise noted.
The Commission denied the Petition to Deny filed by the Consumers
Union, Consumer Federation of America, and Media Access Project, the Petition to
Deny of Thomas Lewis Bonge, the Petitions to Condition filed by RCN Telecom
Services and Gemstar, and all similar petitions except as otherwise discussed in
this public notice.(14)
The Commission denied the motion to consolidate this proceeding with
the AT&T-MediaOne license transfer proceeding, which was filed by the Consumers
Union, Consumer Federation of America, and Media Access Project.
EFFECTIVE DATE OF THE MERGER APPROVAL
The Commission ordered that the grant of the approval of the
Application with conditions is effective today, January 11, 2001.
Action by the Commission on January 11, 2001, Commissioners
Furchtgott-Roth and Powell, concurring in part and dissenting in part.
Media Contacts: Linda Paris (202) 418-7121
Michelle Russo (202) 418-2358
-------------------
(14) The Commission acted pursuant to Sections 4(i) and (j), 214(a), 214(c),
309, and 310(d) of the Communications Act of 1934, as amended, 47 U.S.C.
'SS''SS' 154(i), 154(j), 214(a), 214(c), 309, 310(d),
7
