Cable Operators

Finally Making a Corporate Connection

2/06/2005 7:00 PM Eastern

Time Warner Cable will help corporate sister America Online Inc.’s drive to increase its broadband Internet customers by agreeing to jointly market a customized version of its Road Runner high-speed Internet service to the 3 million narrowband AOL customers within the MSO’s footprint.

The product, branded “Road Runner Plus AOL,” will also be pitched to other cable operators for distribution.

“AOL would like to offer this to other cable operators, and conversations have started along those lines,” Time Warner Cable CEO Glenn Britt told reporters on a conference call last week.

Time Warner Cable will provide the high-speed connection to subscribers, while AOL will manage and sell advertising for the new broadband product and its portal (www.roadrunner.com).

“This deal recognizes that the cable company is the primary seller of access and AOL is the primary seller of features and advertising,” Britt said. After America Online and Time Warner Inc. merged in 2000, there was a conflict between the companies concerning which provider would sell broadband access, Britt added.

The companies wouldn’t disclose the pricing for the broadband service, which Time Warner and AOL began testing last week in Raleigh, N.C. But one source said Time Warner customers — who currently pay prices ranging from $44.95 to $59.95 for standard cable-modem service, depending upon which video package they buy — wouldn’t have to pay a premium for Road Runner Plus AOL.

Subscribers that opt for the Road Runner Plus AOL service will also get 10 hours of monthly access to AOL’s dial-up Internet service.

Time Warner Cable installers will give new cable-modem customers a new version of AOL’s client software for Road Runner Plus AOL. Those customers will be booked as broadband subscribers on both Time Warner and AOL’s books, since the MSO is providing the high-speed connection and AOL will pitch media buyers ads that would reach that subscriber base.

Through its “bring your own access” strategy, America Online counts about 5 million broadband customers that pay AOL $14.95 per month, in addition to fees they pay to their local cable operator or telephone provider for a broadband Internet connection. Time Warner Cable counts some 3.7 million high-speed data subscribers.

The AOL.com portal will be set as the home page for Road Runner Plus AOL customers.

AOL CEO Jonathan Miller predicted that the majority of the 3 million AOL dial-up subscribers that live in Time Warner Cable’s footprint would convert to the Road Runner Plus AOL service within three years.

“We have every intention of moving share to Time Warner Cable,” said Miller. “We’ll market actively to our base and try to get them onto Time Warner Cable.”

America Online and Time Warner Cable will share both advertising and subscription revenue from Road Runner Plus AOL customers. Time Warner will handle billing and customer care for the service.

AOL expects to increase its ad revenue from broadband customers, Miller said, noting that marketers are attracted by the ability to use streaming video in their spots.

“The big difference is the ability to do it with in-stream video,” Miller said. “Broadband users not only search more; they also consume a lot more video in all of its forms.”

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