2 Cable Giants May Merge Online Ventures

Time Warner Cable and MediaOne, two of the country’s largest cable television companies, are expected to announce today that they are merging their Internet ventures.

The deal, to be announced at a cable industry trade show in Anaheim, would mark the beginning of a heated battle between industry leader Tele-Communications Inc. and the as-yet-unnamed fledgling venture.

Officials at MediaOne and Time Warner declined to comment on Tuesday.

After years of dabbling in high-tech ventures, cable companies now say they are ready to deliver on their breathless promises of speedy Internet access. The expected merger would give the two companies a stronger presence in their move to expand into the small--but growing--area of Internet access via cable.

“Conceptually, it’s a win-win situation,” said Bruce Leichtman, an analyst with the Yankee Group, a technology research firm based in Boston.

Such a merger would only mean good news to consumers, who would be able to use their cable company as their Internet service provider, industry analysts say.

“Competition is always positive for the public,” said one Time Warner Cable insider. “People are looking for fast and easy ways to get on the Internet, and they’re willing to pay for better service. The cable world is now ready to sell customers that high-speed link.”

Cable modems have been available for several years, but have not been widely accessible to the public. These set-top boxes are designed to be connected to the coaxial cable, which can carry both traditional television signals and Internet data at very high speeds. The benefits, analysts say, are that cable modems receive data up to 50 times faster than standard telephone modems, are connected to the Internet at all times and don’t tie up phone lines.

Among the drawbacks of this technology, are its limited availability and potential capacity problems.

The largest cable modem venture is the At Home Network, which is backed by TCI and several cable affiliates. The service, carried by Comcast Corp. and Cox Communications, is available in parts of Orange and San Diego counties.

MediaOne, the cable company that serves communities from Santa Monica to San Pedro and east to Pomona and Riverside County, offers its MediaOne Express service to homes in Culver City. Last month, Boston-based MediaOne--formerly Continental Cablevision--said it planned to make the service available to all of its 340,000 customers in the Los Angeles area by early 1998.

Time Warner’s cable venture, dubbed Road Runner, is offered in portions of San Diego County.

Though the companies refuse to disclose their subscription numbers, cable insiders estimate that At Home Network has about 35,000 subscribers, Road Runner has nearly 25,000, and MediaOne Express trails with about 15,000.

The anticipated deal would play off the close association between MediaOne and Time Warner. Telecommunications giant US West--MediaOne’s parent company--has a 25% stake in Time Warner Entertainment, which includes the cable systems, Warner Bros. and HBO.

A merger would improve both firms’ ability to market their Internet cable service, which faces fierce competition from At Home. In October, At Home added East Coast cable giant Cablevision Systems Corp. to its list of backers, expanding its pool of potential users to nearly half of all the cable subscribers in the nation.

Officials with At Home, as well as the cable companies that carry the service, say they’re not threatened by the expected news.

“Is Pepsi good for Coke? I’d say that’s a definite yes,” said Joe Rooney, executive director of programming for Cox Communications in Orange County. “Because there are so many cable companies invested in the At Home Network, we already have a huge pool of potential customers to draw upon. Time Warner and MediaOne don’t.”

But if Time Warner and MediaOne combined their services, the larger customer base could even the playing field, while allowing the companies to share their cable-related costs, experts say.

“It’s always been a challenge for Time Warner to convert its technical trials into profitable business ventures,” said Dan Lavin, a technology analyst with research firm Dataquest. “In the past, they’ve often partnered with other companies on their cable endeavors. . . . The key is to find a partner who can help shoulder the burden of research and expansion costs.”