AOL's cable service hits a speed bump

From...

By Stephen Lawson

(IDG) -- AOL Time Warner has hit a slight snag in its plans to offer high-speed cable Internet access.

High Speed Access, one of the company's proposed Internet service provider partners for the cable service, has dropped out of the deal due to financial difficulties, AOL Time Warner said Thursday. AOL Time Warner in July sought approval from the U.S. Federal Trade Commission for a plan to include three alternatives to AOL -- HSA, EarthLink, and Juno Online Services -- on its cable Internet service nationwide. Following the merger of AOL and Time Warner last year, the FTC was concerned about the possibility of the merged company dominating both transmission and content in its cable Internet services. (AOL Time Warner is the parent company of CNN.com.)

The FTC has approved the EarthLink deal, and the HSA deal had been before the agency for approval, according to Mike Luftman, an AOL Time Warner spokesperson. The Juno deal is still up for approval, he says.

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AOL Time Warner may have to conclude deals with three ISPs and bring them online as soon as the end of this year. However, it expects to have no problem meeting this target, Luftman says.

"We have ongoing negotiations with other ISPs, and we're confident we will have another national ISP signed up," Luftman says. "We have plenty of time to get one done."

Coming Soon

AOL Time Warner expects AOL and EarthLink Internet services to become available over AOL Time Warner cable networks later this month in Columbus, Ohio, and Syracuse, New York. In each market where AOL Time Warner starts cable Internet services, there must be three alternative ISPs approved by the FTC within 90 days of the service launch.

HSA announced its deal with AOL Time Warner in May. The company provides Internet access to customers nationwide through partnerships with cable providers, according to HSA spokesperson Katina Arnold. Because HSA does not have a national brand, before launching any trials with AOL Time Warner it wanted to form a partnership with a national provider of Internet content to help it acquire customers, market HSA's offering, and provide some consumer services, Arnold says.

"Since we didn't succeed in finding a national content provider, we decided not to pursue the agreement," Arnold says.

Last month HSA announced a net loss of just over $34 million for the second quarter, up from a loss of $28.5 million for the second quarter of 2000. In late July the company announced it was reviewing a proposal by Charter Communications to acquire some assets of HSA's cable modem business. That proposal is still under review, Arnold says.