AOL, Time Warner Cable Launch Joint Service

Time Warner today announced a new “Road Runner Plus AOL” broadband access and content package it will market to existing Time Warner Cable customers and AOL dial-up subscribers.

This strategic agreement between corporate siblings Time Warner Cable and America Online marks a new level of cooperation many envisioned when AOL merged with Time Warner four years ago. The two began cross-promoting each other’s offerings in April 2004, but this new service goes beyond a co-marketing arrangement, according to company officials.

“This is different in character, scale and scope than anything we’ve done before,” said Jonathan Miller, AOL chairman and CEO.

AOL advertisers will gain access to Time Warner Cable’s customers, both the ones who migrate to the combined service and those who stay with their existing Road Runner service. AOL will manage advertising and search opportunities for both the new offering and the Road Runner portal, and Time Warner Cable will begin to integrate both branded and “white-label” offerings from AOL into Road Runner content.

Time Warner Cable will offer AOL content services to its existing Road Runner broadband subscribers, and will attempt to migrate AOL’s current 3 million dial-up customers within Time Warner Cable’s service footprint over the next two years.

The move addresses lingering questions of how AOL, long a dominant dial-up access provider, would remain relevant in a broadband landscape. AOL recently began a shift toward its “over the top” strategy, separating content from access. It launched its AOL for Broadband “bring your own access” product in March 2003, providing advertising, search, commerce and select premium services on top of other broadband providers’ offerings.

Cooperation on this sort of offering stalled in the past over who would provide access to customers. Now that AOL is transitioning out of the access business, it’s easier to come to an agreement that suits both corporate divisions, said Glenn Britt, chairman and CEO of Time Warner Cable.

“This deal recognizes that the primary seller of access is the cable company, and the primary seller of features and advertising is AOL,” Britt said.

Miller pointed out the deal couldn’t have taken place two years ago, when AOL was struggling for advertising dollars. Time Warner Chairman Dick Parsons has said AOL will report $1 billion in 2004 advertising revenue when it reveals earnings to Wall Street on Friday.

The new broadband offering will consist of a special edition of the AOL client, with content and features optimized for broadband, combined with Road Runner’s high-speed connectivity and content. Subscribers get unlimited broadband access and 10 hours of dial-up connectivity monthly.

The service will first be offered in the Raleigh, N.C., market, followed by Time Warner Cable’s other national markets. Pricing will vary by market and connection speed, with various offers being tested in each market. Miller and Britt wouldn’t comment on specific price points, but said a pricing strategy will aim to drive share while maximizing profitability. Road Runner broadband is currently priced at $44.95 a month in the Raleigh market, while AOL for Broadband is priced at $14.95 a month on top of any access charges.

Time Warner Cable will manage subscription billing and customer care for its services, providing a share of subscriber revenues to AOL. America Online will provide a share of its advertising, search, commerce and select premium services revenues to Time Warner Cable.

While the service was designed to adopt to other broadband providers in the future, it won’t be available to competing providers in areas served by Time Warner Cable, Miller said.