December 10, 2002 12:11 PM PST

AOL poised to announce new cable deals

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AOL Time Warner Chief Executive Richard Parsons said the media giant is "close" to announcing new deals with cable companies to offer America Online on broadband networks.

Parsons, speaking at the UBS Warburg Media Week Conference in New York, would not name which companies AOL Time Warner is negotiating with, but added that a deal could solidify within the month.

"We are close with several other MSOs," Parsons said, referring to the industry acronym for large cable networks, known as multiple system operators. "I firmly believe by the end of the year we'll have additional things to say on that front."

Parsons said the model for such deals is AOL's August partnership with AT&T Comcast that allows AOL to market a high-speed version of its service to AT&T Comcast cable customers for an extra fee.

Under that deal, AOL agreed to provide only the front end for a co-branded version of AT&T Comcast's Internet access service, with AT&T Comcast running the back-end technology and billing. AT&T Comcast is the largest cable operator in the United States, with some 22.3 million subscribers.

Sources close to AOL said the company has been in talks with Cox Communications, Charter Communications and CableVision to provide similar arrangements.

An AOL representative declined to comment on pending cable deals.

AOL Time Warner's America Online division fought unsuccessfully for years for the right to run its own broadband service on cable companies' networks. AOL's stance in these talks recently changed, however, and it's now trying to partner with cable companies to become a premium service that cable subscribers can choose to buy on top of their basic subscription.

AOL last week said it no longer wants to run a broadband service, but wants to become an option for existing cable subscribers to buy. AOL also will more heavily market "Bring Your Own Access," which lets broadband customers access its proprietary service for $14.95 a month.

AOL executives added that they plan to focus their deals on cable companies instead of telephone companies that provide high-speed DSL (digital subscriber line) service. Last week, AOL said it would restructure its current agreements to buy DSL access lines from the Baby Bells and Covad Communications.

AOL competitor Microsoft has already inked deals with Verizon Communications and Qwest Communications, while Yahoo has cut a DSL deal with SBC. That leaves AOL with few partnership options.

"It appears they have deep relationships with the DSL players, so it makes the cable players more interested in us," said AOL division CEO Jonathan Miller last week, referring to Microsoft and Yahoo.

 

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