At&t B'band To Go Multi-isp

In the latest agreement between a cable company and an Internet service provider, AT&T Broadband said last week that it will roll out broadband Web services by EarthLink to compete with its own high-speed product in at least two of its cable markets this year and further systems in 2003.

The agreement, the terms of which were not disclosed, marked the first ISP deal for AT&T's cable firm. It followed just two weeks after Comcast struck its first ISP pact with United Online, which operates the Juno and NetZero brands.

Some industry observers said the back-to-back deals could be a first sign that cable firms have accepted the idea of multiple ISPs as a viable business proposition after high-speed services have turned out to be a boon to them in recent years. This could lead to increased ISP deal activity in the coming months, they predicted.

Others, however, cautioned that the cable industry has no longer-term experience with multiple ISPs, meaning that business implications are unclear and activity will likely remain patchy.

"We expect to drive further the penetration of our Web product and at the same time improve our customer satisfaction," AT&T Broadband CEO Bill Schleyer told analysts and reporters last week. This makes it a win-win deal for both partners, he said.

"The idea is to make cable consumers happier and stickier by delivering more choice through multiple ISPs," Credit Lyonnais analyst Jea-Hun Shim said. While cable firms will lose some high-speed subscribers and revenue to an ISP partner, this could be more than made up by driving broadband user penetration deeper, he said.

"Also, ISPs tend to take over a lot of branding and marketing of high-speed services, which saves cable companies subscriber acquisition costs and stimulates their overall user growth," Shim said.

As a result, Shim and other observers are predicting more multiple-ISP activity as the year unfolds.

But some analysts believe that cable operators will continue to drag their feet on new ISP deals unless they are under regulatory pressures.

AOL Time Warner's Time Warner Cable unit has been rolling out multiple ISPs most aggressively because it has an obligation to do so. Under the Federal Trade Commission's conditions for allowing the merger of America Online and Time Warner last year, AOL TW must open local cable markets to at least three unaffiliated ISPs before it can offer its own high-speed product there.

AOL TW said it will have multiple ISPs and its own high-speed service in all 40 Time Warner Cable markets by summer.