EarthLink to Offer Broadband Over Time Warner Cable
By Derek Caney
NEW YORK (Reuters) - Time Warner Inc. (NYSE:TWX - news) has agreed to offer EarthLink Network Inc. (NasdaqNM:ELNK - news) high-speed Web services on its cable system, EarthLink said on Monday, a move that could pave the way for Time Warner to complete its merger with America Online Inc. (NYSE:AOL - news).
As a condition for approving the $112 billion merger of Time Warner and No. 1 Internet service provider America Online, federal regulators have insisted that they open high-speed cable lines to one or more Internet rivals such as EarthLink.
EarthLink, the No. 2 U.S. Internet service provider, said in a statement that it expects to start providing its high-speed, or broadband, services over Time Warner Cable systems in the second half of 2001.
Time Warner Cable is the second-largest U.S. cable operator after AT&T Corp. (NYSE:T - news).
EarthLink Chief Executive Garry Betty told Reuters he believes the agreement with Time Warner Cable meets the criteria set forth by the Federal Trade Commission on open Internet service access on cable lines.
``This definitive agreement represents the first national agreement with an unaffiliated party for providing customer choice over a national cable system,'' Betty told Reuters.
Merrill Lynch analyst Henry Blodget said in a research note, ''We believe this is the final hurdle to get FTC approval of the deal.''
In July, Juno Online Services Inc. (NasdaqNM:JWEB - news), the No. 3 Internet service provider, struck an access deal with Time Warner Cable, but the terms of the deal, including a date for access, were not ironed out at that time.
EarthLink and Time Warner Cable did not disclose details of their agreement. The deal depends on Federal Trade Commission approval and the closing of the AOL-Time Warner merger.
Time Warner and AOL said they expect to complete their merger by the end of the year or in the ``very early days of 2001.'' AOL and Time Warner executives said earlier this month that the deal was on track to close later this fall, which ends Dec. 21.
``While the delay is not positive, if in fact the Federal Trade Commission approves the deal by mid-December, we do not believe investors will be worried about the extra few weeks by then,'' Blodget said in his note.
EarthLink and Time Warner have been haggling over access terms for two years. ``The terms they had originally proposed to provide open access were insufficient to allow anyone to make a profit,'' Betty said. ``Suffice it to say,... we have addressed those issues. We believe we have negotiated an agreement that allows us to make a return.''
The move to provide EarthLink access to Time Warner's cable lines drew praise from the Walt Disney Co. (NYSE:DIS - news), one of the most vociferous critics of the AOL-Time Warner combination.
``Anything that opens up these AOL-Time Warner pipelines is certainly a good big step in the right direction,'' said Preston Padden, Disney's top lobbyist in Washington.
Disney, a big provider of children's movies and programming, has urged regulators to impose conditions on the AOL-Time Warner deal requiring that all Internet services have fair access to the Time Warner pipeline and ensuring there is no discrimination against rival companies and their content.
Time Warner Cable currently has an exclusive agreement with high-speed Internet access company Road Runner through the end of 2001. Time Warner Cable has a 38 percent stake in Road Runner. Time Warner has said in the past it wants to restructure the contract to allow open access.
After the restructuring is complete and after technological modifications are complete, EarthLink will be able to offer its services over Time Warner in the second half of next year.
``The technical hurdles are minor ones, not large ones,'' said EarthLink President Michael McQuary in a conference call with investors. ``Time Warner Cable systems have not been enabled yet to provide (access to) more than one ISP. They've just started doing some trials to flesh out the technical feasibility. We will be joining those trials immediately.''
McQuary called the deal ``non-discriminatory,'' meaning that EarthLink will be able to market a range of high-speed Internet offerings, not just those over Time Warner's cable lines. It will also be able to market Internet services through satellite and over digital subscriber lines, which allow high speed connections over conventional telephone lines.
``Time Warner will also offer EarthLink services as an option when it offers Internet access to its customer base,'' McQuary sa |
