ISP partner drops out of AOL cable deal

High Speed Access Corp. (HSA), one of AOL Time Warner Inc.'s proposed Internet service provider (ISP) partners for its cable Internet service, has dropped out of the deal due to financial difficulties, AOL Time Warner said Thursday.

AOL Time Warner in July sought approval from the U.S. Federal Trade Commission (FTC) for a plan to include three alternatives to AOL -- HSA, EarthLink Inc. and Juno Online Services Inc. -- on its cable Internet service nationwide. Following the merger of AOL and Time Warner Inc. last year, the FTC was concerned about the possibility of the merged company dominating both transmission and content in its cable Internet services. The FTC has approved the EarthLink deal, and the HSA deal had been before the agency for approval, according to Mike Luftman, an AOL Time Warner spokesman. The Juno deal is still up for approval, he added.

AOL Time Warner may have to conclude deals with three ISPs and bring them online as soon as the end of this year. However, it expects to have no problem meeting this target, Luftman said.

"We have ongoing negotiations with other ISPs and we're confident we will have another national ISP signed up," Luftman said. "We have plenty of time to get one done."

AOL Time Warner expects AOL and EarthLink Internet services to become available over AOL Time Warner cable networks later this month in Columbus, Ohio, and Syracuse, New York. In each market where AOL Time Warner starts cable Internet services, there must be three alternative ISPs approved by the FTC within 90 days of the service launch.

HSA announced its deal with AOL Time Warner in May. The company provides Internet access to customers nationwide through partnerships with cable providers, according to HSA spokeswoman Katina Arnold. Because HSA does not have a national brand, before launching any trials with AOL Time Warner it wanted to form a partnership with a national provider of Internet content to help it acquire customers, market HSA's offering and provide some consumer services, Arnold said.

"Since we didn't succeed in finding a national content provider, we decided not to pursue the agreement," Arnold said.

Last month HSA announced a net loss of just over $34 million for the second quarter, up from a loss of $28.5 million for the second quarter of 2000. In late July the company announced it was reviewing a proposal by Charter Communications Inc. to acquire some assets of HSA's cable modem business. That proposal is still under review, Arnold said Thursday.

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