3. The Corporate Entities and
The Financial Transaction

The primary corporate entities involved in this financial transaction are AT&T Broadband Phone, CBC , and AT&T Comcast. The financial transaction is one that places AT&T Broadband Phone and CBC under the newly formed AT&T Comcast.

AT&T Broadband Phone, a California non-dominant interexchange carrier (NDIEC) and non-dominant competitive local exchange carrier (CLC), is the end result of the approved acquisition of TCI Telephony Services of California, Inc., dba People Link (TCI),6 and MediaOne Group, Inc. (MediaOne)7 by AT&T Corp and subsequent corporate name changes following each acquisition.8

AT&T Broadband Phone provides CLC service to approximately 145,000 customers in California. AT&T Broadband Phone operates in California as part of the AT&T Broadband Division of AT&T Corp., which is the parent of AT&T's cable TV services and separate from the traditional AT&T Consumer Services division and AT&T Business Services division.9 AT&T Broadband will continue to be headquartered in Englewood, Colorado following the completion of this transaction.

AT&T Broadband Division is an operating division of AT&T Corp. (AT&T). AT&T is a New York Corporation, publicly traded on the New York Stock Exchange, with headquarters at 32 Avenue of the Americas (Sixth Avenue), New York, New York. AT&T, on its own or through a number of subsidiaries, is authorized to provide domestic and international telecommunications services throughout the United States.

CBC is a Pennsylvania corporation headquartered in Moorestown, New Jersey, and is a wholly-owned subsidiary of Comcast Business Communications Holdings, Inc. (Holdings), which, in turn, is a wholly-owned, indirect subsidiary of Comcast.10 CBC is authorized to provide domestic and interstate international service by the Federal Communications Commission (FCC). CBC also is authorized to provide intrastate interexchange services in California and throughout the continental United States.11 CBC currently serves approximately 4,000 primarily business customers nationwide. CBC does not actively market its services in California at this time and has fewer than 75 interexchange toll customers in California. Holdings, a Delaware corporation headquartered at 1500 Market Street, Philadelphia, Pennsylvania, is a holding company that is not actively engaged in business.

Comcast is a publicly traded (NASDAQ) Pennsylvania corporation also located at 1500 Market Street, Philadelphia, Pennsylvania. Comcast is principally engaged in the development, management and operation of broadband cable networks. It is one of the country's largest cable operators with systems in 26 states serving 8.5 million customers. In California, Comcast provides cable services to approximately 41,450 customers, primarily in the Santa Maria/Lompoc area. Although Comcast is a publicly traded corporation, approximately 86.7% of the voting power of Comcast is held by Sural LLC, which is controlled by Brian Roberts, President of Comcast. Sural LLC holds approximately 2.86% of the total equity of Comcast, but its shares have enhanced voting rights.

AT&T Comcast Corporation is a Pennsylvania corporation that will be headquartered at 1500 Market Street, Philadelphia, Pennsylvania. AT&T Comcast is currently a shell company owned equally by AT&T Corp. and Comcast and, upon completion of the contemplated transaction, will be the publicly traded holding company for the businesses of Comcast and AT&T Broadband Corporation, a newly-formed Delaware corporation, to which AT&T will spin off its broadband business.

Comcast and AT&T Corp. plan to place their broadband businesses under a new common ultimate parent company by taking the following steps:

1. AT&T Corp. will contribute the assets of its AT&T Broadband division, including AT&T Broadband Phone, to a new, wholly owned holding company, AT&T Broadband Corporation.

2. AT&T Corp. will then spin off AT&T Broadband Corp. to the shareholders of AT&T Corp.

3. Immediately following this spin off, Comcast and AT&T Broadband Corp. will merge into different, wholly-owned subsidiaries of AT&T Comcast Corporation. (Comcast will merge with Comcast Acquisition Corporation, a newly formed wholly-owned "shell" subsidiary of AT&T Comcast, with Comcast as the surviving entity.)

4. Following these steps, AT&T Comcast will be the corporate parent of AT&T Broadband Corp. and Comcast, which then will be wholly-owned "brother/sister" subsidiaries of AT&T Comcast.

At the time of the closing, Comcast and AT&T Corp. shareholders will exchange their shares in the respective companies for shares in AT&T Comcast, which will become a publicly traded company.12

More specifically, upon consummation of the merger, each Comcast stockholder will receive one share of the corresponding class of AT&T Comcast stock for each share of Comcast stock. Each AT&T Broadband Corp. stockholder will receive approximately 0.34 shares of AT&T Comcast stock for each AT&T Broadband Corp. share, subject to adjustment as provided in the Agreement. Current AT&T Corp. stockholders will own approximately 53% of AT&T Comcast's economic interest and, depending on which of two alternative capital structures is implemented according to the terms of the Agreement, either 58% or 54% of AT&T Comcast's voting power. Comcast stockholders will own approximately 41% of AT&T Comcast's economic interest and, depending on which of the alternative capital structures is implemented, either 3.4% or 7.4% of AT&T Comcast's voting power.13 Sural LLC will hold approximately a 33% voting interest that is non-dilutable and a 1% economic interest in AT&T Comcast.

The proposed transaction will result in a change in the ultimate owner of AT&T Broadband Phone, but will not involve a change in the manner in which AT&T Broadband Phone currently provides service to its California customers. The services currently provided by AT&T Broadband Phone will continue to be offered immediately following the merger pursuant to tariffs currently on file with the Commission. Moreover, following the change, the applicants anticipate that AT&T Broadband Phone will continue to be led by a team of qualified managers that includes existing AT&T Broadband Phone personnel.

As mentioned above, upon completion of the transaction, CBC will also be a wholly-owned indirect subsidiary of Comcast. Once again, the change in CBC's ultimate control does not involve a change of its operating authority and therefore will not affect the identity of the certified subsidiary providing services in California, CBC, or the rates, terms and conditions under which services are currently being provided in California.

6 The Commission approved the acquisition of TCI in Decision (D.) 99-03-019 on March 4, 1999. Previously, TCI was authorized to provide CLC facilities-based and resale services by D.96-10-064 and interexchange (IXC) service by D.97-11-039. 7 The Commission approved the acquisition of MediaOne in D.00-05-023 on May 4, 2000. Previously, MediaOne was granted facilities-based CLC authority as Continental Telecommunications of California by D.95-12-057 and CLC resale authority by D.96-02-072 and IXC resale service by D.98-04-020. 8 On February 1, 2001, AT&T filed with the California Secretary of State to change the TCI name to AT&T Broadband Phone of California, LLC and on April 8, 2001, AT&T filed Advice Letter (AL) 8 to change the name of TCI to AT&T Broadband Phone of California LLC. Similarly, on October 2, 2001, AT&T filed AL 86 to change the name of MediaOne to AT&T Broadband Phone of California, LLC. On February 7, 2002, AT&T filed AL 88 to revoke the MediaOne certificate of public convenience and necessity in recognition of the fact that MediaOne had been fully integrated into AT&T Broadband Phone. 9 AT&T Consumer Services and AT&T Business Services also provide local exchange, Telephone service within a local access and transport area (intraLATA) toll and interLATA toll services within California through an AT&T wholly-owned subsidiary, AT&T Communications of California, Inc. This other company is not part of this financial transaction. The applicants state that it did not "provide any financial basis for the transaction and AT&T Communications of California, Inc. will continue to operate under the ownership of AT&T." (AT&T Broadband Phone, Application, p. 4, footnote 3). 10 On August 24, 2001, Comcast and its subsidiaries notified the Commission of the pro forma transfer of control of CBC from Comcast Telephony Communications, Inc. (CTC) to Holdings. Prior to this restructuring of CBC's ownership, CBC's direct parent was CTC, and CTC's direct parent was Comcast. After the restructuring, CBC's direct parent became Holdings, and Holdings' direct parent remained Comcast. The ultimate owner of CBC has remained Comcast. 11 Comcast Business Communications, Inc. (U-5830-C) acquired GlobalCom Telecommunications, Inc. pursuant to authority granted in D.97-12-070. Previously, the Commission granted a CPCN to GlobalCom to provide inter and intraLATA resale service in D.97-08-035. 12 The applicants presently contemplate that AT&T Comcast may form a wholly-owned limited liability company to hold the stork of AT&T Broadband Corp. This step, which the applicants believe may be "needed to facilitate financing," (Application of AT&T, p. 8, footnote 7.) would follow the closing of the financial transaction. The applicants seek Commission seek approval of this possible intracorporate change, which they describe as "pro forma" (Application of AT&T, p. 8, footnote 7.), 13 The applicants note that AT&T Comcast will have one of two capital structures upon completion of the transaction: a "Preferred Structure" that will be implemented if the holders of the Comcast Class A common stock, voting as a single class, approve the Preferred Structure, or an "Alternative Structure" that will be implemented if they do not. If the Preferred Structure is implemented, current AT&T Corp. stockholders will own 58% of AT&T Comcast's voting power. If the Alternative Structure is implemented, AT&T Corp. stockholders will own 54% of AT&T Comcast's voting power.

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