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Time Warner opens access
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November 20, 2000: 2:54 p.m. ET
Will carry EarthLink's Internet service to Time Warner cable subscribers
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NEW YORK (CNNfn) - In a concession to government regulators, Time Warner Inc. agreed Monday to allow Internet service provider EarthLink to provide its high-speed Web services over Time Warner cable systems.
The move is seen as a bid by Time Warner Inc. (TWX: Research, Estimates) to appease antitrust regulators by opening up its high-speed cable lines to Internet service providers other than America Online Inc. (AOL: Research, Estimates). AOL is acquiring Time Warner, and Time Warner said it now expects to complete the deal by year-end or early next year. The companies previously planned to close the deal by this fall. Time Warner is the parent company of CNNfn.
Meanwhile, AOL is negotiating a deal to give Microsoft Corp. (MSFT: Research, Estimates) access to Time Warner's cable lines, according to the Washington Post, which quoted unnamed sources familiar with the story.
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 Garry Betty, CEO of EarthLink, chats with CNNfn about the deal. |
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The Federal Trade Commission, the antitrust agency examining the $112.3 billion deal, has demanded that AOL and Time Warner give Internet service providers other than AOL access to Time Warner's high-speed cable lines to allow Internet subscribers to choose between service providers. Government officials have made the issue a major sticking point, since Time Warner is the country's No. 2 cable company and AOL, with 25 million subscribers, is the biggest Internet service provider (ISP).
The news also delays the merger review process by the FTC for at least another two weeks, according to the companies, and an FTC decision may not be issued until mid-December or early January, instead of the earlier November deadline.
A spokesman for the FTC would not comment on the Earthlink announcement.
But Earthlink CEO Garry Betty told CNNfn that the Internet service provider (ISP) as been in discussions with Time Warner "for some time."
"The timing is propitious. The FTC did help us perhaps get this done a little bit sooner than it would. I think Time Warner is genuine in their interest in providing multiple ISPs access to their cable plan and we're happy we're the first one," Betty said.
Under Monday's deal, EarthLink (ELNK: Research, Estimates), the nation's No. 2 ISP, with 4.6 million subscribers, will be allowed to offer its high-speed Internet service to about 20 million homes in reach of the Time Warner cable networks.
Financial terms of the EarthLink-Time Warner Cable pact were not disclosed. The deal is contingent on FTC approval and the closing of the America Online-Time Warner merger.
In a conference call, Earthlink officials said they weren't sure when they would be able to launch broadband services over Time Warner Cable network.
"There's still a couple of contingencies, the largest of which is of course is the completion of the AOL, Time Warner merger and Time Warner also needs to break their exclusive agreement with Road Runner, which they've already publicly stated that they're in negotiations to do so," said an Earthlink official.
 "We don't even know ourselves right now when we will be able to begin offering service, but we are guaranteed that no other provider will be able to offer service with their system before Earthlink."
Previous reports said that Time Warner wanted to require ISPs other than AOL to fork over about 75 percent of subscription revenues, which the FTC took issue with. Betty wouldn't discuss specific financials, but told CNNfn that he was pleased with the terms. [311KB WAV] or [311KB AIFF]
SG Cowen analyst Scott Reamer said Monday the deal was important to satisfy FTC requirements and now believes that the merger will close by the end of this year or the beginning of 2001, and reiterated his "strong buy" rating on AOL/Time Warner.
Merrill Lynch analyst Henry Blodget said in a research note Monday that since AOL and Time Warner are signing a competitive ISP, "We believe this is the final hurdle to get FTC approval of the deal."
Blodget also said that while the closing of the merger will put off for another few weeks that, "While the delay is not positive, if in fact the FTC approves the deal by mid-December, we do not believe investors will be worried about the extra few weeks by then.
In Monday trading, shares of Time Warner fell $1.60, or 2.2 percent, to $71.35, EarthLink jumped $1.06 cents, or 16 percent, to $8.19, and AOL fell $1.64, or 3.3 percent, to $47.92. 
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