Deal Finally Provides AOL With Direct Broadband Connectivity

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A correction has been made in this story. See below for details.

NEW YORK ( -- Time Warner's America Online and Time Warner Cable today announced an agreement that will, at long last, provide the online service with the ability to offer broadband connections directly to its users.

Time Warner Cable provides AOL with a major missing component.

AOL's earlier persistence in remaining a dial-up-based operation while competitors moved rapidly to high-speed connections has been viewed by many industry observers as a major strategic mistake.

High-speed content
The company finally cobbled together a program that offered broadband content but required paying subscribers find their own broadband connections with some other provider before they could access the video, music and other fast-cable-enabled content that has become such crucial components of major Internet portals.

Now joining with its sibling subsidiary, AOL said it plans to begin to migrate its narrowband customers to Time Warner Cable. AOL will handle regular and search advertising for the new portal as well as for Road Runner, a broadband service owned by Time Warner Cable.

More than 50% of online U.S. households are connected to the Internet by high-speed cable.

"We are going to market to our base and get them to Time Warner Cable in a way we've never done before," said Jonathan F. Miller, AOL's chairman-CEO.

Raleigh, N.C.
AOL and Time Warner Cable will start marketing the service beginning with Raleigh, N.C., this week, an AOL spokesperson said. Other marketing details were not immediately available.

AOL had been gearing up to throw open its gates to non-AOL members through this quarter in the hopes that its broadband-enabled content would attract more traffic.

The troubled online service lost 646,000 subscribers in the third quarter of 2004, although it still has 23.4 million U.S. subscribers overall.

AOL's advertising revenue in the third quarter grew 44%, but analysts said even with that growth it couldn't afford to lose members.

'Odd they haven't done this before'
"With the increase in ad revenue, and provider revenue going down, this can reverse that trend and stabilize all revenue streams," said David Hallerman, senior analyst at eMarketer. "What's odd is that they haven't done this before."

"We think we will get many more broadband customers than we've been getting and more advertising revenue than we've been getting," said Glenn Britt, CEO of Time Warner Cable.

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CORRECTION: An earlier version of this story incorrectly stated that more than 50% of U.S. households are connected to the Internet by high-speed cable. In fact, that figure refers to households already online.

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