Time Warner bolsters Road Runner stake

(Telephony) As anticipated, Time Warner increased its ownership stake in the Road Runner high-speed Internet service and said it would manage its operation. The Road Runner restructuring resulted from a Department of Justice mandate that AT&T divest its interest in Road Runner in order to complete its acquisition of MediaOne.

Road Runner was constructed as a joint partnership of MediaOne, Time Warner, Compaq Computer and Microsoft. When AT&T bought MediaOne, it acquired a 25% stake in Road Runner that many believe conflicted with its existing stake in high-speed Internet provider Excite@Home.

"The DoJ said you had to get rid of @Home or you had to get rid of your Road Runner shares, so they made the obvious choice," said Time Warner Cable spokesman Mike Luftman. "They're doing what needs to be done, and we're doing what needs to be done to make sure that the business keeps operating and providing its service to a growing number of customers."

That includes buying out--for an undisclosed sum--Microsoft and Compaq's 20% of the service and dissolving the partnership. Time Warner did not detail the cost of buying up the Road Runner stakes but said its affiliates would incur expenses of $570 million.

Time Warner also will dissolve its exclusivity agreement with Road Runner and open its broadband networks to competing ISPs. That comes as part of last week's Federal Trade Commission consent decree on the Time Warner-AOL merger.

"The FTC is requiring us to add multiple ISP choice," said Luftman. "This facilitates that choice. We (Time Warner Cable) have an affiliation agreement that permits us to provide Road Runner to our cable customers. That agreement had restrictions and limitations on offering any other ISP but Road Runner. Once the partnership is dissolved, those restrictions go away."

Road Runner will survive, Luftman promised.

"We're doing this because we want to continue to operate the service. We want to make sure that we continue to grow it, that there's no disruption of service," he said.

The ownership, he continued, is not as tangled as it might seem.

"Time Warner Cable is going to run Road Runner. Time Warner Cable is going be part of AOL-Time Warner, but there aren't going to be any changes at Road Runner as a result of that," Luftman concluded.