@Home, Road Runner in
talks
By Jeff Pelline
February 6, 1998, 4:00 a.m. PT
@Home (ATHM) and Time Warner's Road
Runner are holding talks about merging their
high-speed Internet access services, a move that
would unite the cable industry in an effort to take
on the Baby Bells in this burgeoning market,
company sources said.
If completed, the deal also could clear the way for
long distance telephone companies to join the
merged group, they added. Using their vast
network, which ultimately will pass by more than
75 million homes, the long distance carriers could
provide local phone service via cable--fulfilling a
pressing goal.
The prospect of an @Home-Road Runner
combination comes less than two months after
Road Runner agreed to merge with US West
Media Group's MediaOne Express, creating the
nation's largest broadband online service, which
eventually could reach 27 million homes.
In addition, the "urge to merge" is fueled by the
need to build critical mass; only about 110,000
customers get Net access via cable despite rapid
growth in the industry's infrastructure.
The February 2 issue of Broadcasting & Cable
also is reporting that @Home and Road Runner are
in "serious" discussions about merging. Both firms
cautioned, however, that no deal is imminent and
that talks could break down. Road Runner has
talked with other companies, including cable
operators and even America Online, about deals
for expanding its service, according to executives.
"We have had conversations in the past with
@Home, and these are ongoing," a Road Runner
representative said. @Home also confirmed the
talks.
Added another source familiar with the discussions:
"Lately, things seem to have become more friendly,
but there's still a long road ahead before a merger."
Some sticking points include how much control
Tele-Communications IncorporatedCox
Communications and Comcast also hold major
stakes in @Home.
Moreover, @Home must cut US West Media
Group into the deal because of US West's
previously planned merger with Road Runner.
MediaOne and Road Runner hope to work out
details of their combination by March 31.
An arrangement combining all three broadband
services makes sense, however, industry executives
and analysts said.
For @Home, such an arrangement would let the
company expand its "footprint" in the nascent fast
Net market. The service has some 50,000
subscribers, compared with 45,000 for the
combination of Road Runner and MediaOne
Express. @Home also would get full access to
content from Time Warner's media empire.
High-quality content is key to penetrating the mass
market and competing with the likes of AOL,
executives added. For many consumers, the high
speed provided by the network is taken for
granted, @Home has found.
For Road Runner, a merger would give the
company access to @Home's private backbone for
connecting users to the Internet at speeds of up to
10 mbps. Road Runner also would get access to
some of @Home's features, such as streaming
video and audio.
The deal would unite the cable industry's biggest
companies in the battle against the telcos to provide
high-speed Internet access, said Michael Harris,
president of Kinetic Strategies, a consulting firm.
Despite its clout, Harris didn't think the alliance
would be anticompetitive because the Baby Bells
are rolling out high-speed Net access services of
their own, such as DSL (digital subscriber lines). In
one instance, however, US West Communications
is rolling out DSL while its sister company, US
West Media Group, could become part of the
cable venture. Both are owned by US West, but
the company proposes to split them into separate
public companies by year's end.
Analysts also agreed the three-way venture could
lure long distance telcos such as AT&T because it
would offer a large network to provide local phone
service.
Unconfirmed reports of a possible investment in
@Home by AT&T have been circulating since
December. In January, the two companies have
become connected in a more roundabout way,
through Teleport Communications Group. In
January, AT&T agreed to buy Teleport for $11.3
billion. @Home is under a five-year strategic pact
with Teleport to provide high-speed Net access to
businesses. |
