US Cable Industry Restructures, AOL Time Warner and AT&T to Dominate High-Speed Internet Access

Strategic Insights -

The restructuring of the US cable industry's two main internet access services has led to AOL Time Warner and AT&T assuming control of Road Runner and Excite@Home, respectively. The realignment, prompted by regulatory requirements, will likely result in a shift in market dynamics, with facilities-based companies holding a stronger position. Time Warner will take full control of Road Runner, with 1.1 million customers, while AT&T will continue to own Excite@Home, which had 2.2 million customers at the end of the third quarter.

Key Takeaways:

  • AOL Time Warner will take full control of Road Runner, a cable internet access service with 1.1 million customers.
  • AT&T will continue to own Excite@Home, a rival cable ISP with 2.2 million customers at the end of the third quarter.
  • The reorganization was prompted by a regulatory requirement for AT&T to shed its Road Runner interest due to an overlap with Excite@Home.
  • Time Warner will buy back the 20% stake held by Microsoft and Compaq, which purchased their share for $425 million two years ago.
  • The restructuring will result in a change of ownership structure for Road Runner, with Time Warner acquiring the service and AT&T retaining most of the customers.
  • AT&T has stated that about 1 million of its cable customers use either the @Home or Road Runner service.
  • The technicalities of connecting to rival networks will favor facilities-based companies, according to Dana Serman, an internet analyst at Lazard Frères in New York.
  • AOL Time Warner is expected to maintain Road Runner as a separate ISP brand in parallel to a broadband version of its core AOL service.

Statistics:

  • Road Runner has 1.1 million customers.
  • Excite@Home had 2.2 million customers at the end of the third quarter.
  • AT&T has about 1 million cable customers using either the @Home or Road Runner service.
  • The cost of Time Warner's restructuring will be around $570 million.
  • AOL has 26 million subscribers to its narrowband internet access service.

Sources:

  • "Time Warner takes control of Road Runner," [Source not provided]
  • AT&T press release, [No date provided]
  • Dana Serman, internet analyst at Lazard Frères, New York, [No date or citation provided]
  • "AOL Time Warner Seeks to Expand Its Internet Base," [No date or citation provided]