Here's a stroke of "master of the obvious" genius. Time Warner (NYSE:TWX) has finally managed to patch things up between its AOL and Road Runner properties. It's difficult to imagine that it's taken this long, but at least it has finally come to pass.
Yesterday, Time Warner announced that Time Warner Cable, which provides the Road Runner broadband Internet service, will offer broadband connectivity to AOL customers in its territories. The fee will strike a middle ground between AOL's premium dial-up fee and the higher fee associated with high-speed Road Runner.
Way back in April, we noted that Road Runner and AOL were making nice by promoting one another's products. In the meantime, AOL has been fighting defections from its dial-up service by bulking up its premium content offerings -- and subsequently trying to lure paying subscribers through a bring-your-own-access (BYOA) offering.
However, a major shortcoming for AOL has been the obvious fact that for most people, dial-up Internet access is no longer perceived as good enough. (For other potential areas of improvement, see longtime Fool Rick Munarriz's fun and insightful piece, "Saving America Online.")
At any rate, this partnership -- now seen as mutually beneficial, seeing how the online advertising market has picked up and given AOL a little more leverage -- offers 3 million of AOL's 23 million users the opportunity to keep their AOL service and easily add a broadband connection without calling in a third party like Comcast (NASDAQ:CMCSA) or Verizon (NYSE:VZ). (And let's face it, judging by AOL's defection rates, most subscribers who call in a third party are likely to kiss AOL goodbye).
According to Reuters, this isn't just newfound love between AOL and its Road Runner sibling -- AOL is also seeking out similar agreements with other cable providers.
As I've said before, I can imagine AOL's newest Internet niche as premium content, where it can excel if it plays its cards right and banks up the kind of content that would make its service worth people's while. If you'd care to flash back enough years, AOL was once the road map to what was once dubbed "the information superhighway" -- a term that is now a bit of an anachronism, much like AOL could become if it doesn't come up with positive points of differentiation.
However, deals like the one with Road Runner that give people what they want -- namely, high-speed connectivity -- could very well ensure that America Online does not become the road less traveled.
Can AOL be saved? Read the following commentaries from Rick Munarriz:
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Alyce Lomax does not own shares of any of the companies mentioned.
