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
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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%
,.
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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