Clash of the titans Roadrunner, @Home take it to the streets >BY SHIRA LEVINE, New Media Editor

If 1996 was the year of cable modem promises, then 1997 is likely to be the year of deployments, as smaller multiple systems operators begin following the lead of the industry heavyweights and rolling out service in their markets.

But over the last year, cable operators have found that they need more than speed to sell cable modem service-consumers want more than the same old stuff, and faster.

The country's largest MSOs have dealt with that problem by creating their own content. Time Warner dipped into its corporate parent's extensive resources for its Roadrunner on-line service, including the company's various publications, Warner Music and Warner Bros. Studios, as well as CNN, New Line Cinema and Castle Rock Productions, assets acquired in the recent Time Warner/Turner Broadcasting merger.

On the other side of this tug of war is the @Home Network, an on-line service backed by Tele-Communications Inc., Cox Communications and Comcast Corp., which has forged relationships with on-line programmers such as USA Today, Discovery Channel Online, The New York Times Electronic Media Co. and Knight Ridder Inc.

But while smaller MSOs may be enthusiastic about cable modems-and the extra revenue that they're likely to produce-they are also realizing they don't have the money or the resources to develop content compelling enough to offer the sort of high-class content that Roadrunner and @Home are churning out.

The answer, for at least two mid-sized MSOs, is to join one of the two teams. Intermedia partners announced late last year that it would begin offering the @Home Network to subscribers in Nashville starting in late 1997, while Cablevision Systems has begun rolling out its Optimum Online service on Long Island, N.Y., which includes a hot link to Roadrunner.

"Our focus is totally local, but at the same time we wanted to offer users access to national and international content that isn't available on the Internet," said Chris Travers, director of content development at Cablevision.

Intermedia gave similar reasons for its decision to join forces with @Home Network, although the relationship is somewhat different. While Cablevision is handling its back office operations and distributing the cable modems itself, Intermedia is relying on @Home for those aspects of the service, providing itself only the hybrid fiber/coax network, customer service support and local content, said Bill Haggarty, director of subscriber services for Intermedia.

Other options for national content may emerge, but Roadrunner and @Home are likely to remain the two main services to watch, said Gary Kim, principal at Itibiti Ventures, Littleton, Colo.

Even if the two companies don't acquire a significant number of MSOs who will carry their services, an enormous percentage of cable systems will fall into one camp or the other by virtue of their owners, Kim said. If Time Warner eventually spins off its cable systems to U S West as expected, those networks, along with the systems that U S West acquired through the Continental buyout, will probably stay in the Roadrunner camp. Those systems, combined with the systems owned by the three @Home partners, account for over 50% of the country's cable subscribers, he said.

But another analyst believes that TCI's involvement with @Home may give Time Warner the advantage by default.

"Smaller cable operators are always trying to find a way to avoid giving in to the TCI monopoly on things," said John Aronsohn, senior analyst at The Yankee Group, Boston. "They're looking for services from someone other than TCI because TCI's sizes makes the company able to influence what the industry does."