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HomeMy WebLinkAboutJuly 18, 2002CITY OF COLUMBIA HEIGHTS 590 4Uth Avenue N.E.. Columbia Heights, MN 554213878 (763) 706-3600 TDD (763) 706-3692 Vi.eit Our Webs~ite al: Irlrw. ci.cnGtutbin-lleiglrt.r.nm.u.e MEETING OF THE TELECOMMUNICATIONS COMMISSION 7:00 PM, THURSDAY, JULY 18, 2002 CITY HALL CONFERENCE ROOM Please contact Jean at 706-3613 if you are unable to attend. AGENDA: 1. Call to Order 2. Roll Call 3. Approval of the Minutes of the Meeting of June 20, 2002 4. Old Business a. Channel Check b. Correspondence Log and Company Follow Up on Complaints- c. Status of Cease and Desist Order to AT & T d. AT & T's Current Reporting of Telephone Statistics e. Other Old Business 5. New Business a. Resolution Denying without Prejudice, the Application of AT & T Corp for Approval of the Transfer of Control of the Cable Franchise of AT & T Broadband b. Offering of Spanish Channel Package c. Other New Business Reports a. Report of Commissioners Assigned to Access Channels: Educational Access--Dennis Stroik; Library Access-Bob Buboltz; Government Access--Ken Henke; Public Access-- Reuben Ruen b. Report of AT & T Broadband- June 2002 Reports --Programs Produced --Installation and Service Activity Report --Current Channel Line Up and Service Charges c. Report of the Cable Attorney d. Report of the Assistant to the City Manager 8. Adjournment The City of Columbia Heights does not discriminate on the basis of disability in the admission or access tq or treatment or employment In, its services, programs, or activities. Upon request, accommodation will be provided to allow individuals with dlsabilitles to participate in all CIty of Columbia Heights' services, programs, and activities. Auxiliary aids for handicapped persons are evaliable upon request when the request Is made at least 96 hours in advance. Please call the Deputy City Clerk at 706-3611, [o make arrangements. (TDD 706-3692 for deaf or hearing Impaired only) THE Cll'Y OF COLUMBIA HEIGHTS DOES NOT DISCRIMINATE ON TIIE BASIS OF DISABILITY IN EMPLOY MCN'I' OR TI IE PROVISION OF SERVICES EQUAL OPPORTUNITY EMPLOYER THE MINUTES OF THE TELECOMMUNICATIONS COMMISSION FROM THURSDAY, JUNE 20, 2002 The meeting was called to order at 7:00 p.m. by Dennis Stroik, Chairperson. ROLL CALL: Commission Members: Council Representative: City Representative: Legal Counsel: AT & T Broadband Rep: APPROVAL OF MINUTES Dennis Stroik, Dave Mahoney, Bob Buboltz„ and Reuben Ruen Bruce Nawrocki (not in attendance-at League Conference) Linda Magee Stephen Guzzetta Kathi Donnelly-Cohen Motion by Bob Buboltz, second by Rerrberr Ruer:, to approve the minutes from the meeting ofApri118, 2002. All ayes. OLD BUSINESS A. Channel Check Everything was ok except for the wavy message bar on the educational access channel. B. Correspondence Log and Complaint Follow Up. There were no complaints received by the City since the last meeting C. Status of Cease and Desist Order to AT & T A copy of a letter from Dave Seykora dated June 5, 2002, was enclosed in the agenda packets regarding the arbitration provisions in the customer service agreement policies. Although, AT & T still believes the provisions are lawful, they have not invoked the arbitration clause in any dispute in the Minnesota/Wisconsin area since the provisions were added to the CSA. Mr. Seykora stated that another distribution of the CSA will be sent to customers this fall and revisions are being made to the arbitration provisions in the agreement. Mr. Seykora asked that all systems hold any enforcement activities pending the review of the revised arbitration provisions which will be provided to the attorneys prior to implementation. Steve Guzzetta reported that Ramsey/Washington has issued an order of non compliance which may change AT & T's position on this issue. At the joint meeting, AT & T had agreed to make changes to the CSA and thought that all the systems agreed with this. He will keep us informed of any new developments. TELECOMMUhlICATIONS MEETING June 20, 2002 Page 2 D.. Other Old Business There was no other new business. NEW BUSINESS A. Receipt of Franchise Fee Payment for 1S` Quarter A copy of the franchise fee payment for ls` quarter was received and included in the agenda packets. B. Resolution Denying without Prejudice, the Application of AT & T Corp for Approval of the Transfer of Control of the Cable Franchise of AT & T Broadband This issue was not discussed at this meeting. There has been an extension granted to review additional information that has been submitted by AT & T regarding this issue. It will be addressed at the July 18`h meeting. C. New AT & T Broadband Internet AT & T began offering a new option for high-speed internet service in May to certain areas. The new faster service will provide speeds up to 3000 kbps downstream and 384 kbps upstream compared to the previously offered speeds of 1500 kbps downstream and 300 kbps upstream. The price for the new service is $89.95month with a leased modem and $79.95/month for those with their own modems. The upgrade can be made with just a phone call, and should be available in this area in July. D. MALTA Summer Seminar The MALTA Summer Seminar will be held July 22-23 at the Radisson Hotel in Duluth, MN. Anyone interested in attending contact Shelley or Jean by Monday, June 24, 2002 to register. A copy of the brochure was enclosed in the agenda packets indicating the topics being covered. E. Changes to Basic Cable Rates and New Packages Being Offered AT & T will implement a change in the monthly service rate for certain video offerings beginning July 1, 2002. We were previously notified that adjustments would be made to the Basic rate in the March filing of FCC Form 1240 and the equipment rates in the FCC Form 1205. While the basic rate is increasing, the rate for Standard Cable will not change. Additionally, AT & T will offer two new Digital Value Packages for its customers, adding more channels and revising the previous three tiers into two. Kathi explained some of the changes and additions being made. TELECOMMUNICATIONS COMMISSION MEETING June 20, 2002 Page 3 F. AT & T's Cun•ent Reporting of Telephone Statistics A copy of a letter sent to Mr. Seykora on behalf of Burnsville/Eagan and the South Washington County Telecommunications Commissions was enclosed in the agenda packets. This letter advised that current reporting of Telephone Statistics is unacceptable, and therefore, is a noncompliance issue that needs to be addressed. The letter requests that a written plan for remedying the above-referenced noncompliance issue must be provided by Wednesday, June 26, 2002. Kathi stated they are in the process of putting the requested information in writing and are also looking at changing procedures at the call centers and possibly splitting them somehow. She will report back on any changes that are implemented. G. Other New Business There was no other new business. REPORTS A. Report of Commissioners Education-We never received any videos from the grant money we gave the school district. Dennis will look into this and report back to the commission. Government- Nothing to report Library-Nothing to report Public-Nothing to report B. Report of AT & T Broadband- Kathi reviewed the reports and answered questions for April and May 2002. C. Report of the Cable Attorney Steve Guzzetta reported that comments had been filed with the FCC regarding the Cable Modem Proceeding on behalf of the local systems. It was argued this is part of the information system that should fall under the franchise and be controlled by the franchising authority, and that fees should be paid to these cities. Steve reported that the FCC issued a Proposed Rule Making Guideline that addressed several issues including rates for Digital Basic Service and commercial rates charged to businesses for various services. D. Report of the Assistant to the City Manager Linda had nothing further to report. Motion by Reuben Ruen ,second by Bob Barboltz , to adjourn the meeting at 7:30 prn. All ayes. Respectfully submitted, Shelley Hanson Secretary .1,_n .. _-- ,._4~ ._- -_~r. Shelley Hanson -Fwd FW: DCT Postcard Page 1. From: Linda Magee To: Shelley Hanson Date: 7/15/02 10:38AM Subject: Fwd: FW: DCT Postcard »> "Donnelly-Cohen, Kathi" <KDonnelly-Cohen@broadband.att.com> 07/12/02 08:23AM »> We have been notified by Motorola that some digital converters that have been shipped may have a potential fire risk. This affects converters that may have been installed from April 1 to June 7. All those in our inventory have been tested and replaced as necessary. Should any customer have a service call for any reason, we are replacing the digital converter. To make sure all digital converters installed during that time period are safe (please understand that no fires HAVE occurred) we are sending the attached postcard to any digital subscribers who have been connected (or had a converter replaced during that time frame) from April 1 to June 7 of this year. Service calls will be scheduled at their convenience to replace the converters. If you have any questions on this, please feel free to contact me. Kathi Donnelly-Cohen AT&T Law and Government Affairs 10 River Park Plaza St. Paul, MN 55107 Phone - 651-493-5281 Fax - 651 493-5288 Cell -651-261-7562 > «MotorolaMN Rev2.pdf» _. _ ~ ~ . _ , ,Shelley Hanson - MotorolaMN Rev2.pdf _ Page 1 '~ Mo[orola~ 9/11/02 II:22 AM Page l AT~T Broadband DearValuedAT&T Broadband Customer: Motorola has notified AT&T Broadband of a potential safety hazard in a limited number of DCT-2000 digital cable set-top boxes installed from April 1, 2002 to Jane 7, 2002. This potential hazard was discovered by their factory quality control tests, and Motorola indicates that no incidents of injury or dame have been reported to them relating to this condition. Nevertheless, Motorola and AT&T Broadband are acting to address even the potential for such problems. AT&T Digital Cable service was installed in your home during this timeframe, so we would like to schedule a service call with you to install a new set-top box. Motorola assures us that you may continue to watch digital cable service normally. If you need to move their digital cable set top box, Motorola informs us that you must unplug the box from the electrical outlet before moving it or changing cable connections. The hazard is confined to the area where the power cord plugs into the set-top box. Customer and employee safety is the number one priority at AT&T Broadband, and we will continue to share information on this issue with you as quickly and completely as we can. If you hale any questions, please contact us at 651-222-3333 (MN) or 1-800-255-4640 (W I). 9ncerely, Jm Commers Vice President of Minnesota AT&T Broadband -Midwest Market 10 River Park Plaza &. Paul, Minneaota 55107 M Equal Oppafunily Finpbycr Shelley Hanson - Legler.doc Page 1 SUBSCRIBER COMPLAINT FORM COMPLAIN'f~_ INQUIRY_(_j_ _Constrnction _ Xestorntiorr _Cnstoruer Service Billing X Rates Erjuipnrerrt -Competition Line Extension _ Progranrnring Technical Service _ Lrterr:et Service -Other Submitted by Jean Kuelui City of Columbia Heights, MN 55421 On behalf of: Name: Ardra Leeler Address: 3839 Hart Blvd. #318 City: Columbial-Ieights, MN 55421 Home Telephone 763 788 6311 Work Telephone: NA Description of Complaint: Ms Legler stated she had requested cancellation of cable service on June 24, 2002, and has now received a bill for $3E> 00 Does not understand, feels if an. hinp she should have a credit. Other Comments:. Resolution requested (if applicable): Check billing and cancellation status. Contact customer and explain findin¢s. Please resolve no later than 4;30 p.m. on: Monday July 15, 2002 Information given to; Date; Time; How complaint resolved: Customer bas a credit balance not charges. Will get a refund check for $36.30._ Sue~est that she call and just not push any buttons System will assume she has a rotary_phoue and cormect her to a live operator. Company Representative who processed the complaint/inquiry: KDC 7/12/02 ~~~~- c~~ 3 ` 3v 3' ~~ ~~ ~l ~ 2 low _~liL~~~ .si +~„ J RESOLUTION NO. 2002-42 A RESOLUTION DENYING, WITHOUT PREJUDICE, THE APPLICATION OF AT&T CORP. FOR APPROVAL OF THE TRANSFER OF CONTROL OF THE CABLE FRANCHISE OF AT&T BROADBAND WHEREAS, the City of Columbia Heights, Minnesota ("Franchising Authority") has granted a nonexclusive cable television franchise ("Franchise") to AT&T Broadband (the "Franchisee"), a subsidiary of AT&T Corp. ("AT&T"), to provide cable television service; and WHEREAS, AT&T, AT&T Broadband Corp., Comcast Corporation, AT&T Broadband Acquisition Corp., Comcast Acquisition Corp. and AT&T Comcast Corporation have entered into an Agreement and Plan of Merger (the "Merger Agreement") dated as of December 19, 2001; and WHEREAS, under the Merger Agreement, AT&T Broadband Corp.'s and Comcast Corporation's respective cable television systems will be combined into a new company incorporated in Pennsylvania as AT&T Comcast Corporation (the "Proposed Transaction"); and WHEREAS, under the Proposed Transaction, the Franchisee will continue to hold the Franchise, but Franchisee's ultimate parent company will be different and, consequently, the ultimate ownership and control of the Franchise will change as well; and WHEREAS, the Franchising Authority has concluded the Proposed Transaction will result in a change of control of the Franchisee and the Franchise; and WHEREAS, the Proposed Transaction requires the prior written approval of the Franchising Authority; and WHEREAS, AT&T and AT&T Comcast Corporation filed a copy of Federal Communications Commission Form 394, together with certain attached materials, with the Franchising Authority on March 5, 2002, which materials more fully describe the Proposed Transaction and which form, with its attachments, contains certain promises, representations and warranties by AT&T, AT&T Broadband Corp., Comcast Corporation and AT&T Comcast Corporation (the "Transfer Application"); and WHEREAS, Franchisee and Comcast Corporation, through its subsidiaries, provided written responses to some of the data requests issued by the Franchising Authority, including directing the representatives of the Franchising Authority to publicly filed and available information, and information posted to Comcast Corporation and AT&T websites (the "Data Request Response"); and WHEREAS, the Franchising Authority has reviewed the Transfer Application, the Data Request Response, and the May 30, 2002, Report of Creighton, Bradley & Guzzetta, LLC Relating to the FCC Forms 394 and Related Materials Filed by AT&T Corp. and Comcast Corporation, including the appendices thereto (the "Transfer Report"), and has considered all relevant factors, including (but not limited to) AT&T Comcast Corporation's financial, technical, legal, managerial and character qualifications, and the Proposed Transaction's impact on services and rates; and WHEREAS, the Franchising Authority has concluded that, for the reasons specified in the Transfer Report, which is incorporated herein by reference: (i) AT&T Comcast Corporation is not financially qualified to control the Franchisee; and (ii) the Proposed Transaction will adversely affect services and rates and Franchisee's ability to comply with its Franchise commitments; and WHEREAS, under the circumstances, the Franchising Authority has determined that it would not be in the best interests of the Franchising Authority and subscribers to approve the Proposed Transaction. NOW, THEREFORE, BE IT RESOLVED BY THE CITY OF COLUMBIA HEIGHTS, MINNESOTA: For the reasons set forth above, the Transfer Application is denied, without prejudice to any party to refile for approval of this Proposed Transaction or a similar transaction. 2. This Resolution is a final decision on the Transfer Application within the meaning of 47 U.S.C. § 537. 3. This Resolution shall be effective immediately upon its adoption by the Franchising Authority. Passed this _ day of , 2002. Offered by: Seconded by: Roll Call: Gary L. Peterson, Mayor Patricia Muscovitz, Deputy City Clerk/Council Secretary 2 a-> Supplemental Report of Creighton, Bradley &Guzzetta, LLC Relating to the FCC Forms 394 and Related Materials Filed by AT&T Corp. and Comcast Corporation Thomas D. Creighton Michael R. Bradley Stephen J. Guzzetta 5402 Parkdale Drive, Suite 102 Minneapolis, MN 55416 (952) 543-1400 (Voice) (952) 543-8866 (Fax) June 28, 2002 CONTEXT Minneapolis Star Tribune Editorial, June 27, 2002, discussing the WorldCom financial collapse: ... There is a common thread in much of this: unbridled corporate growth. Tyco, WorldCom, Global Crossing, Enron and Qwest are all examples of this. All were relatively small companies that became giants by gobbling up other firms, going deeply in debt at the sauce time. Then most used illicit accounting practices to disguise debt, inflate earnings and drive up stock prices.' Their accountants let them do it, and regulators were asleep at the switch. Investors, especially large institutional investors, have some culpability in this as well. Few asked essential, hard questions about how these companies really made their money. (Emphasis added.) BACKGROUND Creighton Bradley & Guzzetta LLC ("CBG"), in consultation with Ashpaugh & Sculco, CPAs, PLC ("AS"),have been retained by numerous local franchising authorities ("LF'As") to evaluate the FCC Form 394s submitted to the LFAs relative to the proposed merger ("merger") of AT&T Broadband and Comcast Corporation (the "companies"). A report was issued by CBG on May 30, 2002, the conclusion of which was a recommendation to the LFAs that they deny the companies' request for approval of the merger. The original deadline alleged by the companies for conclusion of all consideration by the LFAs was early July, 2002? As a result, the LFAs scheduled the meetings necessary to consider the report of CBG. The companies requested the opportunity to respond to the CBG report in more detail than the time allowed and extended the deadlines (ultimately) for consideration by the LFAs generally until July 31, 2002.' "FEW ASKED ESSENTIAL, HARD QUESTIONS ABOUT HOW THESE COMPANIES REALLY MADE THEIR MONEY" MINNEAPOLIS STAR TRIBUNE EDITORIAL, June 27, 2002 Not CBG and AS; CBG and AS started asking the hard questions even before receipt of the FCC Form 394s. In anticipation of the rumored merger, CBG and AS submitted preliminary questions to the companies. From the inception of our analysis, we were concerned with focusing on the ' No illicit accounting has been identified in our analysis. z The LFAs assert that due to the incompleteness of the applications, the 120-day review period has no[ commenced. 'The final date for consideration by The Metropolitan Government of Nashville and Davidson County ("Metropolitan Government") was extended until August 7, 2002, although, as indicated in footnote 2, the Metropolitan Government maintains that the federal 120-day review period has not commenced. ATScT Comcast Transfer Application Supplemental Report Page 1 Creighton Bradley &Guzzetta, LLC June 28, 2002 financial ramifications of the merger. A proposed merger of the magnitude of $60 billion dollars, in our opinion, required an in-depth financial analysis. Also from the inception of our inquiry, the companies have refused to provide us with AT&T/Comcast-prepared financial projections for the new merged entity in such essential areas as projected revenues and the assumptions underlying those projections, projected expenses and the assumptions underlying those projections, and cash flow projections. We determined from the outset that a debt load of the magnitude we anticipated would necessitate a careful analysis of the financial operations of the proposed merged company on a going forward basis. As of today, we have still root been supplied with projections generated by Corncast orAT&T. Instead, we have been provided only Wall SU•eet analysts' presumptions as to how said analysts guess the merged company might operate from a financial perspective. In addition to the initial questions to the companies, CBG submitted two other full sets of inquiries dated March 15, 2002 and Apri12, 2002. Both inquiries are available for review, but suffice it to say that CBG and AS were insistent that AT&T and/or Comcast has an obligation to provide the LFAs with some form of a demonstrated analysis of the financial operations of the systems on a going forward basis, and, even more importantly, to provide the LFAs with assumptions upon which AT&T/Comcast had based their multilevel assertions that the merged company would experience financial good health. Although, then and now, extensive information has been provided regarding debt loads and sources of debt, AT&T and Comcast have still ,failed to provide any company-generated financial information that would allow CBG and AS to test the AT&T Comcast business model for a reasonable period after the effective date of the proposed merger, test the assumptions supporting that model, and analyze the impact of the business model (revenues and expenses) on the LFAs and the subscribers they represent. SERIOUS BUSINESS This is serious business; CBG and AS both took their analysis very seriously. Both CBG and AS read and reviewed every document supplied by both parties to this proposed merger. Further, both parties, as well as numerous other individuals, participated in countless face-to-face and telephone conferences and e-mail exchanges of insight and information. Wall Street analysts whose reports are oft sited by the companies even waded in with opinions and oral insights. The LFAs can be assured that no stone was left unturned, if the companies would agree to provide the stone. Even when not provided, numerous other information sources at our disposal were consulted in an effort to understand how AT&T and Corncast might make this merged company work. The record exists. It is impossible and far beyond the scope of your responsibility to review every page yourself. That is why you have retained us. AT&T Corncast Transfer Application Supplemental Report Page 2 * Creighton Bradley & Guzzetta, LLC Sune 28, 2002 THI5 SiTPPLENIENTAL ANALYSIS WILL NOT LIST' EVERY PIECE OF PAPER SUPPORTING EVERY INSIGHT Neither CBG nor AS feels the need at this point to impress the reader with just how well we read each piece of paper. We have no intention of listing, line byline, every piece of paper which might support every insight we might have. A list of every document that compiles a record of our review exists. We have no need to paper the record further, delineating everything here that we have learned. There is no need here to make an attempt to show how much smarter or how much more correct we are than the companies' representatives. The LFAs will have ample time to hear the details of our alleged insanity laid out for them by the companies. In addition to the material which was well prepared and presented by local company representatives since the issuance of our May 30, 2002 Report, the companies chose to shower upon CBG and AS copies of a small collection of other consultant reports from across the country that we presume the company assumed supported their position. A careful review of those reports, however, demonstrates that they did not delve as deeply into the financial issues as did the CBG/AS analysis, and virtually all expressed significant concern regarding many of the same financial problems as we have attempted to flush out. In essence, the reports tended to support our financial concerns. We have also been deluged with reports from major financial analysts in the private sector°. The company has provided an 81-page report prepared by Morgan Stanley dated May 3, 2002, and titled "Analyzing the AT&T Broadband/Comcast Merger." In addition, we have been provided or have obtained copies of the review of the proposed merger by Sanford Bernstein and reviews of the cable television industry in general by Bear Sterns, Merrill Lynch and Sanford Bernstein. Suffice it to say, in conclusory terms for the purpose of this supplement to our May 30, 2002 Report, that although some minor details or• concerns from our initial review have been cleared up (the details of the Bresnan transfer, for example) and some other details as to anticipated debt have been offered by the companies fiom another perspective, none of that additional information or the accompanying explanation has changed our conclusion in our Report of May 30, 2002. The fatal flaw in the support of the application from AT&T and Comcast remains -- Comcast's and AT&T's steadfast refusal to produce a business plan from which the LFAs can extrapolate a picture of the potential for harm to subscribers and the LFAs as a result of this transaction. Our initial conclusion (see page 18 of CBG initial report) remains -- as a result of the assumptions we u~e forced to make or due to the lack of any operating assumptions presented by the companies, this transaction has the highest possibility of causing detr~irnent to subscribers of any we have reviewed, arzd certainly a high enough possibility of detrirnerzt so as to support a decision of an LFA to deny this application for approval of this proposed merger. AT&T Comcast Transfer Application Supplemental Report Page 3 Creighton Bradley 3c Guzzetta, LLC June 28, 2002 DOWN-1-TOME, LAY-PERSON-iJNDERSTANDABLE TALK Frankly, after conducting the most extensive analysis undertaken in our careers, if we were to present the picture offered by AT&T and Comcast of this merger in a down-home, lay-person- understandable way as it relates directly to the issues of serious concern to the local franchising authorities, what follows would be that picture: The merged company will be saddled with $32 billion dollars of debt. The companies, even accepting abest-case scenario, have explained that they might be able to pay down that debt by selling AT&T's interest in Time Warner Entertainment, by dumping already monetized ownership interests in securities, by selling other systems, and by conducting a few minor other revenue generating sales. As for ongoing system operations (directly affecting the local subscribers), they (and Wall Street) would ask you to rely upon the simple fact that the merged company will be led by Mr. Brian Roberts (head of Comcast) who is a very talented man. They (and Wall Street) assert that the companies are in a great business where people buy stuff they sell and probably will buy more of it at higher prices. Further, the companies think they can combine some existing duplicative operations and save some money which is currently being spent by each of the AT&T and Comcast operations functioning separately. The companies explain that there will be enough revenue counter-balancing expenses so that the whole thing works. In response to our inquiry for details as to how they will pull this off, the companies make clear that any such questions are either none of our business, beyond our legal scope to even ask such things or beyond their legal obligation to answer the questions. To further clarify the simple statements above, we might even add narrative (in parentheses) below: The merged company will be saddled with $32 billiozz dollars of debt. (Various estimates, depending on who is considering what, range around $31 to $33 billion, but what's a billion dollars here or there?) The companies, even accepting abest-case scenario, have explained that they might be able to pay down that debt by selling AT&T's interest in Time Warner Entertainment, (Much attention has been paid to the Time Warner Entertainment ("TWE") piece. Considerable additional information has been offered by company representatives regarding the monies to be realized by such a sale. Estimates of income from such a sale (after tax) range around $6 to $6.5 billion dollars. It is now speculated on Wall Street that the TWE investment may not be monetized as originally set forth in the Fortn 394 and the S-4. Instead, it is believed Chat the TWE investment will be traded for subscribers/cable television franchises. This impact would be that AT&T Comcast's amount of long-term debt would not be reduced by the after-tax proceeds of the sale of TWE and AT&T Comcast would have additional systems to include under its umbrella. Since this is only speculation, as was the discussion of AT&T Comcast monetizing the TWE investment, we are unable to provide any information on the impact to AT&T Comcast operations by such an asset transfer. In addition, we do not know how exchanging the TWE investment for subscribers/cable television franchises will impact the original agreement with AT&T Corporation AT&T Comcast Transfer Application Supplemental Report Page 4 Creighton Bradley & Guzze[ta, LLC Tune 28, 2002 concerning disposition of TWE.) by dumping already monetized ownership interests in securities (although still not guaranteed, we concur that this option is available), by selling other systems, (no plan or anticipated final revenues were presented for this option) and by conducting a few minor other revenue generating sales (nothing in this category affected the conclusions of our Report). As for ongoing system operations (directly affecting the local subscribers), they (and Wall Street) would ask you to rely upon the simple fact that the merged company will be led by Mr. Brian Roberts (head of Comcast) who is a very talented man. (Mr. Roberts has an excellent reputation as the head of a telecommunications empire. Our report assumes the head of the company is qualified, but we were unable to assume that he may also be a magician. Without data suggesting he or anyone in his organization had even projected what revenues they might expect and what expenses they might be faced with, it is not possible to assume success by his fortitude and personality alone.) They (and Wall Street) assert that the companies are in a great business (while there is no debate that telecommunications is an important business, there is also no dispute that the telecommunications industry has faced difficult and challenging financial times. Without a well thought out plan by Comcast or AT&T as to the going forward business plan for the company as ultimately expressed at the local level, "business greatness" does not an approval make) where people buy stuff they sell and probably will buy more of it at higher prices (we believe this to be one of the most reckless and dangerous assumptions by the companies and Wall Street without well thought out projected expense and revenue plans founded on reasonable and verifiable assumptions). Further, the companies think they can combine some existing duplicative operations and save some money which is currently being spent by each of the AT&T and Comcast operations functioning separately (we repeatedly asked for an explanation of the economies of scale that Comcast or AT&T factored into the going forward business plan of the companies. We were only provided with Wall Street analysis of where a new company such as this could cut corners by combining duplicative functions). The companies explain that there will be enough revenue counter-balancing expenses so that the whole thing works (not one ounce of company ink was shed to present a single line of acompany-prepared business plan that included projected expenses at the system level and the assumptions supporting those expense projections, projected revenues at the system level and the assumptions supporting those revenue projections, and projected cash flow assumptions and calculations). In response to our inquiry for details as to how they will pull this off, the companies made clear that any such questions are either none of our business, beyond our legal scope to even ask such things or beyond their legal obligation to answer the questions (this approach of supplying information did not help the open and free communication on issues of importance to the LFAs). n Comcast has informed CBG and AS that no such business plan has been created by Comcast. Either this is untt'ue, making this a prima facie reason for denial of the transfer, or it is U'ue, asking the LFAs to just approve a proposed multi- billion dollar merged company which plans apparently to commence business with no knowledge of revenues and expenses that it either expects or needs for success. Such an assertion is astouishing. AT&T Comcast'Pransfer Application Supplemental Report Page 5 Creighton Bradley & Guzzetta, LLC June 28, 2002 IS THIS PROCESS JUST A SHAM OR A RUBBER STAMP? To listen to the Wall Street pundits, the newspaper writers and even the companies, it is inconceivable that some ordinary policymaker could even understand this proposed $60 billion dollar transaction, let alone deny it. After all, great minds with great experience and even greater amounts of money think the proposed transaction is a wondrous opportunity to unite a couple of the largest telecommunications companies in the world. Missing from that analysis is the stark unforgiving fact that all LFAs' franchises, and therefore federal law, and Minnesota and Wisconsin state laws, require unequivocally that a local franchise authority must review and approve any such transaction before it can become effective as to that local franchising authority. Extensive research at all levels of government by CBG has not uncovered any requirement that no such review should even be attempted if the deal is worth $60 billion dollars. Stated less facetiously, if the multilevel legal requirement of review and consent by local authorities means anything, then it must encompass the possibility that such review could result in approval or' denial of the request to change control or ownership. Any other conclusion would make the legally required process nonsensical. Additionally, the L,FAs are aware that in situations of such an application to a legislative body, the deliberative body is required to approve the application unless there exists some reasonable basis upon which it could base any ultimate denial. The process employed by the LFAs must comport with the federally prescribed process, which springs from the local or state processes except where preempted as to timelines and related procedural steps, and must not otherwise in its application be arbitrary or capricious. The process, therefore, is a terribly significant one. The participation of the LFAs in the process is recognized at all levels of government as penultimate for any proposed transfer of control or ownership. A denial of any such request is also final, subject to refiling, but for judicial review of only the most limited nature. Remedies for• companies who might disapprove of a decision of an LFA are limited to injunctive or declaratory relief by 47 USC § SSSa. Assuming the absence of arbitrary or capricious decision making, and assuming the existence of a reasonable basis for any such decision, the decision of the LFA is determinative as to that particular franchise. MAY 30, 2002 The Report of CBG of May 3Q 2002 recommended that the LFAs deny the application for approval of the proposed merger (said Report is incorporated herein by reference and available at www.creiehtonbradle}_com). The primary basis for the recommendation was significant concern AT&T Comcast Transfer Application Supplemental Report Page 6 ® Creighton Bradley & Guzzetta, LLC Tune 28, 2002 raised by the financial analysis of the proposed merger conducted by AS and further reviewed by CBG. After the issuance of the CBG Report, CBG openly and freely encouraged the companies to review the Report and point to each and every fact or conclusion in the Report for which the companies chose to supply additional information or simply to challenge. The enstting weeks provided an opportunity for the companies to present additional informations Our observations regarding some specific information items are found elsewhere in this Report. However, a general response to this after-report information is pertinent. First, virtually all of the substantive information supplied after May 30, 2002, had already been reviewed by both CBG and AS. Some "new" detail for previously received information had been requested from the inception of the analytical process and was subsequently provided. Of the "new" information provided, the majority of the information was the submission of reports from analysts from outside Comcast and AT&T, although not all independent.b CONCLUSION All information provided to CBG and AS by the applicants herein as of the date of this Supplemental Report has been reviewed on behalf of the LFAs. This additional information does not alter the views presented in our initial Report. AT&T Comcast's continual response to LFAs and to Wall Street is that Comcast should be trusted to be able to make this merger work to the benefit of all. Based on our review, we find no reason to change our report of May 30, 2002. s In order to provide for the reasoned analysis of all information, the companies were given the unrestricted opportunity to provide and to allow that analysis within the federally mandated (and extended) timelines, the "record" was closed on June 26, 2002. e CBG must cote that [he cooperation and information provided by local representatives of bolt AT&T and Comcast was second to none. Timely and appropriate responses wet'e pt'ovided to our concerns. Nothing could be done by local representatives to remedy the ultimate fatal flaw of the complete absence of any going forward business plan as discussed later in this Supplemental Report, as well as the May 30, 2002 Report. Por either company to attempt to place blame for these conclusions on any local representative would be tantamount to "shooting the messenger" when it was in fact "corporate" that shot itself in the foot. AT&T Cmncast Transfer Application Supplemental Report Page 7 Creighton Bradley ~ Guzzetta, LLC June 28, 2002 CREIGHTON, BRADLEY & GUZZETTA RECORD Index of Materials 0 Undated Comcast Cor .Presentation (undated) 11 13 00 AT&T Cot• .SEC Form 10-Q for Period Ended 9/30/00. 11 14 00 Comcast Cor oration SEC Form 10-Q for Period Ended 9/30/00. OS OS Ol Comcast Corporation SEC Form 10-Q for Period Ended 3/31/01. OS 15 Ol AT&T Cot• .SEC Form 10-Q for Period Ended 3/31/01. 06 30 Ol AT&T Cor .SEC Form 10-Q for Period Ended 6/30/01. 08 07 Ol Comcast Cor ot•ation SEC Form 10-Q for Period Ended 6/30/01. 12 19 Ol AT&T Comcast Corporatimt SEC Amendment No. 3 Annexes and Exhibits to form S-4 Registration Statement 12 19 Ol Se aration and Distribution A reement between AT&T Cor .and AT&1' Broadband. 10. 12 19 . Ol 'Agreement and Plan of Merger. 11. 12 31 Ol Comcast Cot• .SEC Form 10-I{. 12. 02 11 02 AT&T Comcast SEC form S-4 Registration Statement. 13. 02 25 02 Bernstein Research Re ort. 14. 02 28 02 AT&T/Comcast Applications and Public Interest Statement -Description of Transactions, Public Interest Showin and Related Demonstrations and A endices 15. 03 OS 02 A11394s 16. 03 29 02 FCC Public Notice - ATScT Comcast Seek FCC Consent for Pro osed Transfer of Control. 17. 03 29 02 Letter to Shiela Willard/Comcast from Government of the District of Columbia re incomplete transfer a licatiotilquestions regardin saute. 18. 04 ^ 02 Asset Pat•chase Agreement among Bresnan Broadband Holdings, LLC and AT&T Broadband Parties. 19. 04 17 02 Minnesota PUC Disposition approving request to transfer control of AT&T Broadband of Minnesota, Inc. from AT&T Cor . to AT&T Comcast. 20. 04 23 02 Merrill Lynclt Comment on Comcast Corporation. 21. 04 23 02 Statement of Consumer Federation of America, Consumers Union, Center for Digital Democracy, and the Media Access Project on AT.4cT Comcast Merger submitted to the Subcommittee on Antitrust Business Rights and Compekition Senate Judiciary Committee. 22. 04 24 02 AT&T Earnings Commentary -Quarterly Update -First Quarter 2002 23. 04 25 02 Memo Summary from Mike Katz/KFA Services to David Olson/NIHCRC re AT&T Comcast Nler er. 24. 04 29 02 AT&T Comcast SEC Amendment No. 2 to Form S-4. 25. OS Ol 02 Comcast Presentation -Banc of America Securities Growth Telecom Media & Entertainment Conference 26. OS 03 02 Mor an Stanley Research Report. 27. OS 10 02 Beat• Steams Re ort. 28. OS 14 02 AT&T/Comcast Joint Proxy Statement/Pros ectus (mailed to shareholders on May 14, 2002). 29. OS 15 02 AT&T Corp. SEC Form 10-Q. 20 31. OS 20 02 AT&T/Comcast Due Diligence Report: Final Report prepared by Dr. Barry Orton and Stuart Cha man/Munici al Services Association. 32. OS 21 02 AT&T/Comcast Reply to Comments and Petitions to Deny Applications for Consent to Transfer Control and Ap endicest 33. OS 23 02 Nloss & Barnett Re ot•t to San Mateo County Telecommunications Autttorit . 34. US 30 02 Creighton, Bradley &Guzzetta, LLC Report Relating to FCC Forms 394 mtd Related Materials Filed by AT&T Cor .and Comcast Cor oration. 35. 06 03 02 Charles Gramliclt & Associates Re ort re aced for the City of Mobile, Alabama. 36. 06 04 02 Cotncast Presentation - lOt Annual Deutsche Banlt Media Conference 37. 06 04 02 Comcast/Deutsche Banc Presentation 38. 06 OS 02 Letter from Adrian Herbst/Baller Herbst to Greg NIoore/Nortltwest Suburbs Cable Communications Commission re 6nanciat ualitications.` 39. 06 OS 02 Ronald J• Rizzuto, Ph.D. Repot•t prepared for City and County of Denver re Financial Implications of AT&T Comcast Merger for Mile Hi Cable Partners. 40. 06 12 02 Lettet• from Gai•th Ash augh/Ash an h &Sculco. 41. 06 13 02 Comcast Presentation -Merrill Lynch 5t Annual Nledia & Entertainment Conference (cable commet•ce content) 42. 06 13 02 Letter from Dave Seykora/AT&T to clients in response to Creighton, Bradley &Guzzetta Initial Report. 43. i 06 n 13 n 02 Letter frmn George Kohl/Commnnication Workers of America to clients supporting proposed __ mer er. 44. 06 21 02 45. 06 21 02 46. 06 21 02 Letter from John Gibbs/Robins Kaplan Miller &Ciresi re additional information and response to document requests. 47.. 06 26 02 Letter from John Gibbs/Robins Kaplan Miller &Ciresi re Time Warner Entertainment Interest 48. 06 26 02 Letter from Gartlt Ash au h/Ash augh &Sculco. 49. 06 28 02 Letter from Kathi Donnelly-Cohen to clients and member cities iu response to Creighton, Bradley & Guzzetta's Supplemental Report dated 6/28/02 (contained in two folders 34a and 34b). 50. 06 28 02 Creighton, Bradley &Guzzetta, LLC Supplemental Report Relating to FCC forms 394 and Related Materials Filed by AT&T Cor .and Comcast Cor oration. 51. ~ ~ ~ Comes ondence Binder -See Index A 52. ~~O 53. 0~~ G:WT&T-Comcast Vlerger2002\Correspondenceu2ecord File - TOC W 1002.doc Including Agreement and Plan of Merger between AT&T Corporation and Comcast Corporation; List of Licenses to be Transferred; Separation and Distribution Agreement between AT3cT Corporation and AT~zT Broadband; Chart Depicting AT3aT Comcast Ownership Structure; Microsoft QUIPS Exchange Agreement; Chart of Comcast Cable Systems, Ownership Strucnae and Total Number of Customers; Chart of AT&T Broadband Cable Systems, Ownership Structure and Total Number of Customers; June 6, 2001 Letter from AT&T Broadband to Cablevision; Declaration of Robert Pick, Senior Vice President, Corporate Development, Comcast; List of AT~T Broadband SNIATV Systems; List of Comcast SMATV Systems; Time Warner Entertainment Securities and Exchange Commission Porm 3-K. ' Including Table of Shortened Citation Forms; Declaration of Gregory Braden; Transcript of ATBcT Broadband and Comcast Joint Analyst Meeting; Declaration of Professor Howard A. Shelanski; Decla~'ation of Professor Janusz Ordover; Declaration of Mark A. Coblitz. `Including Charles Grnmlich's Memo to Adrian Herbst descrihing/explaining/suppor[ing conclusion contained in Baller Herbst Report. Linda Magee -Commission Meetiing Page 1 From: <Krhenke@aol.com> To: <jean.kuehn@ci.columbia-heights.mn.us> Date: 7/15/02 10:47PM Subject: Commission Meetiing Jean, I will be unable to attend the Commission meeting on Thursday evening. Like Tom, I am concerned about the large debt load being assumed by the new combined cable company with no explanation as to how they plan to pay it off. As an analogy I point to AOL and their acquisition of Time Warner. Almost immediately after the acquisition, the stock prices took a tumble (I know because I have a few shares) and AOL's rates went up a little bit. Probably not as much as they would have gone up because there are a lot more Internet companies out there than there are cable companies. As a counter tc the debt load problem, I would ask the question: was there a similar debt load in the other situations where the cable company changed ownership? I don't remember any, but then my memory tends to be a little faulty on such subjects. I don't think that there is any bank or lending institution out there that would provide anyone a loan without some reassurance that the loan would be paid off. In essence the cable company is getting a loan for $32 Billion and I see no collateral or means of paying off the loan other than selling off what I would see as questionable assets and the raising of rates to their customers. I am inclined to take the advice of our Philadelphia Lawyer and Philadelphia Account, that this merger is not in the best interest of the Citizens of Columbia Heights. Sounds like it will be an interesting meeting Ken Henke .~~ ~~ Kathi Donnelly-Cohen Director -Government Relations Law & Public Policy Department Telephone: Facsimile: July 1, 2002 (651) 493-5281 (651) 493-5288 Ms. Linda Magee Assistant to City Manager Columbia Heights Cable Commission 590 40th Avenue NE Columbia Heights, MN 55421 RE: Playboy Espanol Dear Ms. Magee: AT&T 1 ~~~~i~`~ ~~'~~ o ~' ~ ~®02 ~. JUG ~,- Last month we informed you of some changes that were being made effective July 1, 2002 to the Digital offerings. We mentioned in that letter that we were also offering a special package for the Spanish-speaking community which included CNN en Espanol, Fox Sports World Espanol, Discovery en Espanol, MTV en Espanol, Telemundo, VH1 en Espanol and Toon Disney en Espanol. This is a package that is available on an a la carte basis for $6.99 with any Digital package. We also planned to offer a Spanish pay-per-view channel as well, Playboy Espanol. However, after review and consideration, we will not be offering this channel. Unfortunately the channel line-up cards that will be received by customers this month, will list this channel. This will be corrected in the next printing. We do not anticipate any problems with this. As apay-per-view channel, the customer would have to affirmatively order any movies. It would not have been part of a package. If you have any auestions on this matter, please feel free to contact me at 651-493-5281. Sincerely, Kathi Donnelly-Cohen Director -Government Relations ~7~(~ Recycled Paper `~ Channel Line-up for Columbia Heights/Hilltop July 2002 Universal Service Basic 1 Basic 2 15 -PUBLIC ACCESS *2 - KTCA (PBS) 24 - QVC 54 -NICKELODEON 16-GOVERNMENT ACCESS 3-N GUIDE CHANNEL 25-ESPN 55-CARTOON NETWORK 18- EDUCATIONAL ACCESS *4-W000 26-ESPN2 56-ANIMAL PLANET 19 -LIBRARY ACCESS *5 - KSTP 27 -FOX Sporls 57 -FOX FAMILY 6 -METRO 6 28 -Undetermined 58 - C-SPAN 7-KPXM 29-ESPN CLASSIC 60-COURTN 8-KMWB (W823) 30-Hallmark 62-TNN *9 - KMSP 31 -CNN 63- GREAT AMERICAN COUNTRY *10-WFTC 32-HEADLINE NEWS 64-VH-1 *11 - KARE 33 - CNBC 65 - MN *12-KVMB 34-FOX NEWS 66-BET *13-M1N 35-WEATHER CHANNEL 67-ROMANCE CLASSICS OPTIONAL SERVICES: 17-KTCI 36-A&E 70-MSNBC 76 -PPV 20 - C-SPAN11 37 -THE DISCOVERY CHANNEL 77 -PPV 21- BRAVO 38-THE HISTORY CHANNEL 78-PPV 22-TBS 39-THE LEARNING CHANNEL 23-WGN 40-AMC 96-HSN 41-TURNER CLASSIC MWIES 98-EWTN/INSP 42-TRAVEL CHANNEL 99 - UNIVISION 43 -LIFETIME 44 -FOOD NETWORK 45 - HGN 46-USA 47-TNT 48 - fX 49 -SCI-FI-CHANNEL 50 -COMEDY CENTRAL 51-E! 52 - N LAND 53-DISNEY CHANNEL July 2002 SERVICE PRICE UNIVERSAL SERVICE NC Basic 1 SERVICE 8.87 Basic 2 SERVICE 26.46 STANDARD CABLE 35.33 PEG Fee 2.00 Basic 1 only Converter 2.00 Non-Basic only Converter 4.70 Remote Control .30 PREMIUM SERVICES: DIGITAL HBO/HBO2 12.99 SHOWTIME 12.99 CINEMAX 12.99 THE MOVIE CHANNEL 12.99 STARZ! 12.99 Encore 4.99 DIGITAL PACKAGES Digital Basic (includes Standard Cable 12.00 Starter (includes Standard Cable) 44.50 Bronze (includes Standard Cable) 46.50 Standard (includes Standard Cable) 51.50 Silver (includes Standard Cable) 59.99 Gold (includes Standard Cable) 69.99 Platinum (includes Standard Cable) 83.99 Spanish Tier 6.99 Variety Tier (a la carte) 5.99 Premier Tier (a la carte) 5.99 PAY-PER-VIEW MOVIES: CABLE PLUS MOVIE 3.99 Adult or Special Events Price varies MONTHLY GUIDE 2.85 SERVICE FEES: LABOR IS CHARGED ON A PER HOUR BASIS PL US MATERIALS Installation -unwired within 125 of existing plant 41.99 Prewired Install 24.99 Additional outlet at initial install 13.49 Additional outlet -separate trip 19.99 Relocate outlet 18.99 Upgrade/downgrade/addressible services 1.99 Upgrade -separate trip 15.99 Downgrade optional service -separate trip 9.99 VCR Connection at initial install 5.99 VCR Connection -separate trip 12.99 Return Check fee 20.00 Unreturned addressible converter 150.00 Unreturned digital converter 300.00 Home service Plan -whole house 1.20/month Hourly Service Charge 27.99 HSD - @Home Service If a cable subscriber 42.95 Modem Lease 3.00 if not a cable subscriber 46.95 Modem Lease 3.00 Premium Internet Installation 99.95 Basic Internet Installation 49.95 Data Outlet Installation 13.49 NIC/USB 49.95 PCMCIA (Laptop) 49.95 Home Networking 9.95/month Mobile Access 2.00/month Unreturned modem 650.00 AT&T Broadband Minnesota Call Center 100% 95% 90% 85% 80% 75% ,. . a. o 91% ~ fi y ~~ .„ m ~ .; ' . ~ ~, ,, p , ~ i ~ ~ _ C ~ L _ _ l S \ 1 , X f n N ) ~~. ., - 'k: ~~ ~ _ ~ ~~ )) ' + t i \ ~ .~ " ~ ) J - ~. .~ i' 1~ Y ~ ~ 4 n f .A . ' -. u ~ $ . ~~ v ~ v~ H I 't- ~ - a - ~ ... .., l ~'~ .. .. ~ :y w):S l t, ) - ~ I Apr-02 May-02 Jun-02 Telephone Service Factor Note: Telephone Service Factor is an internal benchmark rather then an FCC service standard. It gauges the percent of calls that were answered in 30 seconds orless. --- AT&T Broadband Minnesota Call Center 30 25 20 15 10 5 0 Apr-02 May-02 Average Speed of Answer Note: This chart contains raw data that has not been adjusted to conform to FCC measurements. Jun-02 COLUMBIA HEIGHTS Jun-o2 DETAILED OUTAGE REPORT Average Time # Subs Date City Cause Minutes Amps Affected - - _ R _. Shelley Hanson - Mouthy Report-June.doc ~ Page 1 AT&T ®nvHVUta ~~' COLUMBIA HEIGHTS COMMUNITY TELEVISION JITNE 2002 PROGRAMS • Heights Calendar - 0:58:45 • Mayor's Report (6/25) - 0:28:50 • Columbia Heights Jamboree Parade - 1:45:17 • Mn. Thunder vs. Richmond Kickers - 2:30:40 • Anoka County Today - 0:29:30 • Transforming Education - I :33:33 • Welcome To Islam (4 shows) @ 0:29:00 • Mu. Federals vs. Lake City Legends - 2:02:15 • Malayalam TV - 0:59:14 • Lacrosse - 1:52:27 • Germany Today (4 shows) @ 0:30:00 • Destination Germany (4 shows) @ 0:30:00 • Vet's Visit on TV (2 shows) @ 0:29:30 • Humanist Views (4 shows) @ 0:29:00 • Love Power (4 shows) @ 1:00:00 • Light On The Gospel - 1:00:00 • The LaRouche Connection (4 shows) @ 0:58:30 • Jimmy Swaggart (4 shows) @ 0:58:30 • Army Newswatch (3 shows) @ 0:28:30 • The Prophetic Word (4 shows) @ 0:28:30 • That Which Is (4 shows) @ 0:59:00 • Atheists Talk (4 shows) @ 0:29:00 • On Main Street (4 shows) @ 0:28:15 • Christopher Close Up (4 shows) @ 0:28:00 • Somali TV of Minnesota (4 shows) @ 0:59:50 Programs Produced (internal) 4 Programs Produced (external) 63 ;Shelley Hanson - Monthy Report-June.doc Page 2! CHANNEL PROGRAMMING • Cablecast Programs 99 • Cablecast Honrs 111 FACILITY USE • Studio Hours 22 • Editing Honrs 18 • Mac G - 4 Usage Hours 16 • Portable Equipment Checkouts 3 CLASSES • No classes were held in the month of June. Notes: • Cable Camp for two weeks this month. • Three Thunder games scheduled. Debt Summary Credit Statistics of Selected Cable Companies Consolidated Results ~` Source Merrill Lynch ~ Co. _ ___.... _ ..__ ._ _ __ ______.._.__T ________.___ ____ ____.... __ __ _ .. (Dollars in Billions) AT&T Comcast Adelphia As of 12/31/02 AOL Time Cox Cablevision Comm. With Synergies Warner Comm. Systems (F~c-ABIZ7 Ratings Senior ' Baa2/BBB ~~~ Baaa2/BBB' Baa2/BBB Ba2/BB+ '' 62/B+ Financials )zl _... . Subscribers 22.0 12.8 6 2 ' 3.0 5.8 2001E EBITDA $6.5 (s> $9.3 $1.6 $0.8 Total Debt & Convertible Debt $30.8 $29.6 $5.2 $5.4 Leverage Ratio Total Debt & Comertible/EBITDA 4.7 x 3.2 x 3.3 x 6.5 x (1) currently under review (2) Ro forma for all announced transactions (3) Based on 2002EEBfTDA. Includes $500 rrtillion in synergies. $1.4 .. $11.6 8.0 x Charter Insight Comm. Comm B3/B+ B3/B- 7.0 1.3 $1.8 $0.3 $16.3 $2.5 8.9 x 8.0 x AT&T Comcast will be investment grade Deft AT&T COMCAST FINANCIAL RESEARCH REPORTS Wall Street Concensus Debt Forecast Firm Ending Debt Balance Sanford C. Bernstein Morgan Stanley ** Bear Stearns Merrill Lynch Average Year to Year Change *~* 949 -1,048 -3,423 2006 24,384 27,704 19,169 NA 23,752 -2,901 NOTES: * Projected ending debt balances before the application of procee from asset sales. Wall Street _ ._._ __. estimates for the after-tax value of the Company's stake in Ti amer Entertainment (TWE) appro~dmate $6.5 billion. In addition, the Company has rec tly sold $550 million in public equity stak and plans to sell an additional $1.1 billion current marke alue of securities in the next year. _ _ _ __ *" Morgan Stanle~s published research assumes the le of TWE m 2003. In this analysis debt balances have been adjusted upward by Morga tanley to add back the sale proceeds from this as: *** Equivalent to free cash flow from operations. ssumes that free cash flow is applied to reduce the dE Date of Analyst Report 2002PF 2003 2004 2005 Tom Wolzien _. _.~._ 5/20/02 29,240 30,029 _ 28,852 26,650 Richard Bilotti 5/3/02 30 400 32,758 34 529 32 897 Ray Katz 5/10/02 29,676 30,507 29,053 25,087 'Jessica Reif 4/23/02' 31,387 31,203 27,873 21,981 30,176 31,124 30,077 26,654 Consensus Forecasts Significant De-levera ing