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For Public Inspection FOR PUBLIC INSPECTION July 17, 2000 Ms. Royce Dickens Deputy Chief, Policy and Rules Division Cable Services Bureau Federal Communications Commission 445 12th Street, S.W. Washington, D.C. 20554 Re: Applications of America Online, Inc., and Time Warner Inc. for Transfers of Control (CS Docket No. 00-30) Response to Document and Information Request of June 23, 2000 Dear Ms. Dickens: This letter sets forth the narrative responses of America Online, Inc. (“AOL”) and Time Warner Inc. (“Time Warner”) to your letter of June 23, 2000, requesting certain documents and information. In accordance with the instructions set forth in the letter to us from To-Quyen Troung, Associate Chief, Cable Services Bureau, dated June 9, 2000, and the Protective Order adopted by the Cable Services Bureau on April 6, 2000, the parties are filing the documents which accompany these narrative responses under separate cover letter. * * * AOL-TV 2.1 Please explain AOL-TV’s business plan for offering its services to multichannel video programming distributor (“MVPD”) subscribers. On June 19, 2000, AOL announced the launch of AOLTV, a new interactive service designed to enhance the television viewing experience and make the TV more entertaining and useful for consumers. It should be understood that AOLTV is not a programming service that is “carried” by an MVPD in the way that HBO or ESPN are carried. Instead, AOLTV operates independently of the user’s existing video programming source. The elements of the service consist of: · Navigation—AOLTV features a state-of-the-art program guide and navigation features designed to help viewers quickly and easily navigate to any channel carried by their cable operator. · AOL Features Designed For TV—AOLTV brings some of the most popular AOL features and services to the TV, enabling users to read and send e-mail, exchange Ms. Royce Dickens July 17, 2000 Page 2 instant messages, and chat online. In addition, AOLTV allows users to browse the Internet and provides access to all content available on the World Wide Web. · Enhanced TV—For video programmers, AOLTV provides an opportunity to offer viewers enhanced, complementary interactive content optimized for display on the television screen. AOLTV is initially being launched in select geographic locations, including Phoenix, Sacramento, and Baltimore, but will eventually be available nationwide. In order to access the AOLTV service, consumers need only acquire an AOLTV set-top box and sign up for the service directly with AOL. Existing members of the AOL online service can add the AOLTV service for an additional $14.95 per month, but consumers do not need to be AOL subscribers to become AOLTV subscribers: AOLTV-only subscriptions are available for $24.95 per month. a. Describe the general rights, obligations, terms, conditions and prices of the agreements that AOL-TV has negotiated and/or will negotiate with video programming networks for carriage on AOL-TV and its interactive services. In particular, describe what, if any, limitations these agreements may place on the right of a video programming network to obtain carriage of a particular interactive service, particular content, or advertising on the interactive services screen that AOL-TV will provide the video programming network. As a threshold matter, a video programmer does not need any agreement with AOL for its video programming to be viewed by an AOLTV subscriber. AOLTV, which currently uses a dial- up modem connection to enable interactive functionality, operates independently of the user’s existing video programming source by simply passing through the subscriber’s video signal. In addition, because AOLTV supports the Advanced Television Enhancement Forum (“ATVEF”) Enhanced Content Specification, video programmers can make available to AOLTV subscribers interactive content using ATVEF “streams” even without an agreement with AOL. AOL is just beginning to enter into agreements with video programming networks for the creation of interactive content for the AOLTV service, and the specific economic relationships between AOL and video programmers will undoubtedly evolve over time. Agreements with video programmers do not, however, place limitations on the right of a video programmer to obtain carriage of a particular interactive service, particular content, or advertising, except as to provisions by which partners agree: (1) to comply with AOL’s design guideline templates and co- branding requirements; (2) to not provide advertisements, promotions, or links from competitors to AOL on AOLTV itself; and (3) to not carry interactive content as to which AOL is bound by the pre-existing exclusive rights of a third party. Because AOLTV is built around open Internet standards, video programmers will be able to use content developed for the AOLTV service on other interactive television services. Ms. Royce Dickens July 17, 2000 Page 3 b. Please produce all agreements between AOL-TV and all video programming networks (e.g., Starz Encore Group) relating to AOL-TV’s interactive service. The parties are producing documents in response to this request under separate cover letter. c. Must AOL-TV have an agreement with a cable operator in order to offer AOL-TV to that cable operator’s subscribers? Describe the general rights, obligations, terms, prices and conditions of such an agreement. Must AOL- TV have an agreement with Hughes in order to provide AOL-TV to DirecTV’s subscribers? AOL does not need an agreement with a cable operator to offer AOLTV to that cable operator’s subscribers. As described above, the recently launched AOLTV service simply passes through the video programming provided by the cable operator and relies upon a dial-up modem connection to enable interactive functionality. As for DirecTV, AOL has an agreement with Hughes Network Systems to develop a combination AOLTV/DirecTV set-top box; AOL does not anticipate developing an AOLTV set- top box outside the context of that agreement. d. Please produce all agreements between AOL and Hughes, including but not limited to agreements relating to AOL-TV. The parties are producing documents in response to this request under separate cover letter. e. Does AOL-TV have an exclusive contract to provide interactive services to DirecTV subscribers? AOL does not have an exclusive contract to provide interactive services to DirecTV subscribers. In fact, on June 12, 2000, Microsoft Corp., DIRECTV Inc., and THOMSON multimedia announced that they are teaming to launch a competitive, all-in-one interactive TV set-top box and service.1 In addition, Hughes Network Systems recently announced an agreement with Juno Online Services, Inc. to offer high-speed Internet access via satellite.2 1 See Microsoft Press Release, June 12, 2000, “Microsoft, DIRECTV and THOMSON multimedia Join Forces To Make Television More Personal and Interactive,” available at <http://www.microsoft.com/PressPass/press/2000/Jun00/DirecTVpr.asp>. 2 See Hughes Network Systems Press Release, July 10, 2000, “Juno and Hughes Network Systems Form High-Speed Satellite Access Relationship,” available at <http://www.hns.com/ news/pressrel/csp_pres/p071000.htm>. Ms. Royce Dickens July 17, 2000 Page 4 f. Please produce all agreements between AOL and all cable operators relating to AOL-TV. AOL has not entered into any such agreements, and thus the company has no documents responsive to this request. g. Does AOL have any exclusive contracts with a cable operator to offer AOL- TV to the cable operators’ subscribers? If so, please produce these contracts. No. AOL does not have exclusive contracts with any cable operator to offer AOLTV to the cable operator’s subscribers; moreover, as explained above, AOL does not require agreements with any cable operator in order to offer AOLTV services to that cable operator’s subscribers. h. Will AOL-TV revenues derived from viewer subscription fees be shared with video programming networks, cable operators and/or Hughes? AOLTV does not intend to share revenues derived from viewer subscription fees with video programming networks, cable operators, or Hughes. 2.2 Please describe the services that AOL-TV currently provides and the services that it intends to provide within the next two years. Please produce documents to support your response. AOLTV currently provides a number of features designed to enhance the television viewing experience. These include: · AOLTV Program Guide—AOLTV features an innovative interactive program guide which organizes and simplifies TV navigation, and provides more control for viewers so they can quickly find what they want on TV. · Picture-in-Picture Viewing—AOLTV allows users to watch TV and access AOLTV features at the same time. · AOL Features and Services—AOLTV provides access to a number of popular features of the flagship AOL online service, including e-mail, Buddy List, instant messaging, chat, You’ve Got Pictures, Favorites, and Keywords. · AOLTV Content Channels—AOLTV content channels provide online content and interactivity relevant and complementary to television viewing. AOLTV’s content channels are organized into the same eleven channels—Networks/Local, News, Money, Sports, Kids & Family, Movies, Interests, Music, Shopping, Pay-Per-View, and Local Access—used to categorize the available video programming in the AOLTV program guide. · Support For ATVEF Interactive Streams—AOLTV supports the Advanced Television Enhancement Forum (“ATVEF”) Enhanced Content Specification, a public Ms. Royce Dickens July 17, 2000 Page 5 standard for delivering interactive
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