XIV. Comments on Draft Decision

The Administrative Law Judge's draft decision in this matter was mailed to the parties of record in accordance with § 311(g) and Rule 77.1. Comments were received from GTE and reply comments from AT&T. These comments were carefully reviewed and considered. However, the comments did not result in any changes to the draft decision.

Findings of Fact

1. This application is filed pursuant to §§ 851-854.

2. Applicants request that this application be categorized as a ratesetting proceeding.

3. The Commission preliminarily determined that this matter was a ratesetting proceeding and determined that no hearings were necessary.

4. Notice of this application appeared in the Commission's Daily Calendar of August 10, 1999.

5. Protestants did not address the categorization of this proceeding as required by Rule 6(a)(2).

6. Meteor was formed by AT&T solely for the purpose of effectuating the transaction now before us.

7. MediaOne Telecom is authorized to provide facilities-based local, intrastate intraLATA toll, and intrastate interLATA toll telecommunications services in California.

8. MediaOne TWE owns a 19% interest in TWT, which, in turn, wholly owns a subsidiary named TWT-California.

9. TWT-California is authorized to provide facilities-based telecommunications services within California.

10. Applicants' motion for authority to file financial and customer information under seal pursuant to Rule 45 is unopposed.

11. Applicants seek authority to transfer control of MediaOne Telecom from MediaOne Group to AT&T.

12. Applicants seek a determination that Commission approval is not necessary for AT&T to acquire indirectly MediaOne Group's minority interest in TWT, and in the alternative, seek an exemption from § 852.

13. Applicants entered into a May 6, 1999 Agreement for the transfer of control being requested by this application.

14. After the merger, Meteor will be the surviving company continuing to be wholly owned by AT&T and succeeding to all the assets, liabilities and businesses of MediaOne Group.

15. The authorizations and licenses held by MediaOne Group subsidiaries will continue to be held by those subsidiaries, and controlled indirectly by AT&T.

16. TURN and GTE filed protests to the application on the basis that any approval of the requested change in control could adversely impact competition in the broadband Internet market.

17. GTE also raised the issue of whether the proposed merger satisfies § 854(a), (b)(3), and (c).

18. Applicants filed a response to the protests on October 1, 1999.

19. The decision on whether an evidentiary hearing should be held is based on the content of the protest.

20. The transaction would provide for AT&T to acquire or hold indirectly part of the capital stock of TWT-California.

21. TWT-California is a small CLC with California operations limited to serving businesses in San Diego.

22. Section 853 provides us with authority to exempt any public utility or class of public utility from § 852 if we find that the application thereof with respect to the public utility is not necessary in the public interest.

23. We have previously granted an exemption from compliance with § 854(b) and (c) on a case-by-case basis, pursuant to §§ 853(b) and 854(a) if the three principles developed in D.97-05-092 are met.

24. AT&T and MediaOne Group subsidiaries operate in the local and long distance markets as CLECs and NDIECs.

25. Section 854 requires the Commission to equitably allocate, where the Commission has ratemaking authority, the total short-term and long-term forecasted economic benefits of the proposed merger between shareholders and ratepayers, with ratepayers receiving not less than 50% of those benefits.

26. AT&T and MediaOne are not subject to the same degree of rate regulation as are incumbent local exchange carriers.

27. The Internet services at issue in this application are offered in an arena unregulated by this Commission or any other State or Federal regulatory body.

28. Section 854(b)(1) and (2) require a finding of merger benefits and an allocation of benefits to ratepayers.

29. D.97-07-060 identified a number of factors that should be considered in determining whether a transaction is adverse to the public interest.

30. Antitrust considerations are relevant to our consideration of public interest.

31. This transaction does not involve the issuance of any new debt.

32. Customers will not face unexpected changes in charges, services provided, or quality of service.

33. The California utilities will continue to offer their local exchange service customers a choice of long distance carriers.

34. The proposed transfer of control will have no immediate impact on management of the California telephone utilities.

35. Applicants do not anticipate any overall employee reductions in the California public utility work force or any change in the union status of these employees.

36. The ultimate shareholders of the affected California telecommunications entities are the parent companies and Applicants.

37. MediaOne Group's shareholders will receive 0.95 shares of AT&T Common Stock and $30.85 in cash for each share of MediaOne Group.

38. The cash portion of this transaction is subject to an upward adjustment to offset any decline of up to 10 percent from AT&T's closing price.

39. Each of the California utilities subject to this application are currently under our jurisdiction and will continue to be under our jurisdiction upon completion of the proposed transaction.

40. Applicants only seek approval for a change in control of MediaOne Telecom and, if found necessary, a minority interest in TWT.

41. There is no request before us to approve any change in control of broadband, cable or Internet services.

42. The Cable Act prohibits the regulation of a cable system as a common carrier or utility.

43. No part of the Cable Act authorizes us to dictate who the providers of Internet services should be over cable systems.

44. D.98-10-058 concluded that we should not impose an obligation to provide access to telecommunications carriers upon the cable companies because cable companies are not public utilities as defined in § 216(a), and our jurisdiction is limited to the regulation of public utilities.

45. D.98-08-068 and D.99-03-019 concluded that Internet services are offered in an arena unregulated by this Commission or any other State or Federal regulatory body.

46. Considering all the relevant public interest factors, this transaction is in the public interest.

Conclusions of Law

1. This proceeding is a ratesetting proceeding.

2. Applicant's motion to place financial and customer information under seal should be granted.

3. The proposed transaction is subject to scrutiny under § 854(a).

4. The application and issues raised by Protestants can be adequately addressed without the holding of an evidentiary hearing.

5. The indirect acquisition of TWT-California through the acquisition of a minority interest in TWT is subject to § 852.

6. The indirect ownership change in MediaOne TWE's minority interest in TWT, whose subsidiary TWT-California provides facilities-based telecommunications services in California, should be exempted from § 852 pursuant to § 853.

7. Applicants are not traditionally regulated local exchange carriers.

8. The Commission does not exercise the ratemaking authority referenced in § 854(b) to jurisdictionally permit the Commission to allocate benefits from the proposed merger to ratepayers.

9. Applicants do not have a captive ratepayer base or monopoly franchise to buffer risk and reward.

10. The unique facts and circumstances of this application meet the Commission's criteria for an exemption from the requirements of § 854(b) and (c) pursuant to §§ 853(b) and 854(a).

11. We have no authority to address a change in control of broadband, cable, or Internet services.

12. We decline to impose and exercise on entities our jurisdiction on the basis that we may soon be given authority to regulate Internet access provided over cable networks.

13. The proposed transaction does not have any antitrust or anticompetitive issues which require our intervention.

14. The proposed transaction is in the public interest.

15. Because the proposed transaction involves only a change in the underlying ownership of facilities, it can be seen with certainty that the merger between AT&T and MediaOne Group will not have a significant effect upon the environment.

16. The approval set forth herein is not a determination of the value of the rights and property to be transferred.

17. To permit prompt consummation of the proposed change of control, this decision should be effective immediately.

18. The application should be granted to the extent provided in the following order.

ORDER

IT IS ORDERED that:

1. On or after the effective date of this order, AT&T Corp. (AT&T), Meteor Acquisition Inc., and MediaOne Group, Inc. (MediaOne Group) are authorized to transfer control of MediaOne Telecommunications of California, Inc. from MediaOne Group to AT&T. The transfer of control shall be in accordance with the terms set forth in Application (A.) 99-08-013.

2. The indirect ownership change in MediaOne TWE Holdings, Inc.'s minority interest in Time Warner Telecom Inc., whose subsidiary Time Warner Telecom of California L.P. provides facilities-based telecommunications services in California, from MediaOne Group to AT&T is exempted from Pub. Util. Code § 852 pursuant to Pub. Util. Code § 853.

3. The financial and customer information placed under seal shall remain under seal for a period of one year from the date of this order. The sealed information shall not be accessible or disclosed to anyone other than Commission staff during the one year time period. However, the sealed information may be disclosed upon the execution of a mutually accepted nondisclosure agreement or on further order or ruling of the Commission, the Administrative Law Judge (ALJ) then designated as the Law and Motion Judge, the assigned ALJ, or the assigned Commissioner.

4. Within 30 days after the change of control authorized herein has taken place, AT&T shall file with the Commission's Docket Office, for inclusion in the formal file of A.99-08-013, written notice that said change of control has taken place.

5. In the event that the books of the Applicants, or any affiliates thereof, are required for inspection by the Commission or its staff, Applicants shall either produce such records at the Commission's offices, or reimburse the Commission for the reasonable costs incurred in having Commission staff travel to any of Applicants' offices.

6. The application is granted as set forth above and the authority granted shall expire if not exercised within one year of the effective date of this order.

7. A.99-08-013 is closed.

This order is effective today.

Dated May 4, 2000, at San Francisco, California.

LORETTA M. LYNCH

President

HENRY M. DUQUE

JOSIAH L. NEEPER

RICHARD A. BILAS

CARL W. WOOD

Commissioners

I will file a concurrence.

/s/ LORETTA M. LYNCH

Commissioner

APPENDIX A

TABLE OF ACRONYMS AND ABBREVIATIONS

(END OF APPENDIX A)

TABLE OF CONTENTS

TITLE Page

OPINION 2

I. Summary 2

II. Jurisdiction 2

III. Categorization 3

IV. The Parties 3

A. AT&T 3

B. Meteor 5

C. MediaOne Group 5

1. MediaOne-Delaware 5

a) MediaOne-Telecom 6

2. MediaOne-Colorado 6

a) TWT-California 6

V. Pending Motion 7

VI. Request 8

VII. The Transaction 8

VIII. Protests 10

A. TURN's Protest 10

B. GTE's Protest 11

C. Applicant's Reply to Protests 12

D. Protests Discussion 12

IX. Discussion of § 852 13

X. Discusion of § 854(b)(3) and (c) 16

XI. Discussion of § 854(a) 18

A. Assessment of Public Interest Factors 20

1. Maintain or Improve the Financial Condition 21

2. Maintain or Improve the Quality of Service 21

3. Maintain or Improve the Quality of Management of the
Resulting Utility Doing Business in California 22

4. Fair & Reasonable to the Affected Utility Employees 22

5. Fair & Reasonable to a Majority of Utility Stockholders 23

6. Beneficial on an Overall Basis 23

7. Preserve the Jurisdiction of the Commission 24

8. Antitrust Considerations 25

XII. Environmental Assessment Discussion 29

XIII. Comments on Draft Decision 29

TITLE Page

Findings of Fact 29

Conclusions of Law 33

ORDER 35

APPENDIX A

Partial Concurrence of Commissioner Lynch:

I generally support this decision. I take this opportunity to clarify that I do not consider the resolution of two specific issues to be precedential.

First, I agree with the concerns articulated by Commissioner Wood today about what seems to be a growing trend of authorizing exceptions to the application of Public Utilities Code § 854(b) and (c) (§ 854(b)) in corporate mergers or transfers. In this decision, we have concluded we do not exercise the ratemaking authority referenced in § 854(b). That conclusion should not be read as establishing a precedent that such authority does not exist, or that we would not exercise it in the future. Indeed, the Commission has taken pains not to set precedent when it has exempted some mergers from § 854(b) and (c) review.

The second area of concern relates to the Internet. I believe that the Commission may have some jurisdiction to determine whether a merger will have adverse effects on the Internet backbone market. The Internet is at the very least of mixed jurisdictional status and portions of it may, according to two recent federal appeals court decisions, be subject solely to the jurisdiction of state commissions. Furthermore, regulatory jurisdiction questions aside, the Commission has the responsibility to consider adverse effects on California consumers as a result of consolidation in the Internet backbone market. Finally, to the extent that Internet operations in California avail themselves of telephone services or otherwise make use of the public switched network, I believe we must consider the ancillary effects of a merger on the citizens and businesses that depend upon that network.

I intend to closely examine these issues in future proceedings. I concur with this decision.

Dated May 4, 2000, at San Francisco, California.

/s/____LORETTA M. LYNCH_

LORETTA M. LYNCH

President