By Kenneth Li
NEW YORK (Reuters) - Time Warner Cable plans to offer its high-speed
Internet customers free access to America Online service, in a deal
that could potentially add 3 million more high-speed subscribers at
the cable division, Time Warner executives said on Monday.
Current AOL dial-up subscribers who live in regions served by Time
Warner Cable will be asked to trade up to Time Warner Cable's Road
Runner high-speed service, which will now include AOL.
Since the merger of AOL and Time Warner in 2001, one of the thornier
issues has been competition between America Online and its corporate
cousin Time Warner Cable's Road Runner high-speed service, which were
trying to lure subscribers to their respective Internet services.
AOL had been losing subscribers over the last few years to cheaper
dial-up services such as Juno and Earthlink and high speed services
such as Road Runner and services from other cable and telephone
companies.
But with a resurgence in the online advertising market, AOL has become
a more attractive property.
"When I came in 2002, we weren't doing so well in advertising," AOL
CEO Jonathan Miller told reporters, who said the business model needed
to evolve before such a deal could be struck.
AOL is expected to generate about $1 billion in advertising revenue in
2004.
"If we had tried to do that back then, we wouldn't be here today,"
Miller added.
Now, Time Warner Cable is betting that by offering AOL's menu of
exclusive programing, such as music and videos, as a free add-on to
its high-speed offering, it will entice AOL dial-up subscribers to
remain a Time Warner customer.
Currently, high-speed Internet subscribers pay an additional $14.95
for AOL's broadband programing on top of the monthly fee charged by
the cable or telephone company.
AOL, for its part, will bolster its presence in the high-speed market
at a time when its dial-up subscribers are dwindling and provide more
eyeballs for its advertising.
Executives said AOL is in talks with other cable operators to strike
similar deals.
The pricing of high-speed service for AOL dial-up subscribers has not
been set, but it is expected to be somewhere between the $23.90
AOL charges premium dial-up customers and the $44.95 that Time
Warner Cable charges high speed data subscribers.
Glen Britt, CEO of Time Warner Cable, said it will also help it tap a
new line of revenue from online advertising. AOL will begin selling
ads on the Road Runner.com site.
The deal could potentially add more than 3 million new cable high
speed Internet customers to Time Warner's cable division, the
executives said.
AOL currently serves about 23 million subscribers and about 3 million
of these customers fall within a cable territory run by Time Warner.
"A majority of customers within two years we'd like to see as Time
Warner Cable customers," Jonathan Miller, CEO of AOL told reporters.
Four years after the rocky union of AOL and Time Warner, the deal
signifies its units are seeking more ways to work together. In 2003,
AOL struck a landmark deal to help sell more Time Inc. magazines
through its service.
A video-on-demand music channel launched last year that offers free
music videos at the click of the remote has also become one of Time
Warner Cable's most popular free on-demand channels, one Time Warner
source said.
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Lisa Minter (lisa_minter2001@yahoo.com)