AOL Strikes First Canadian MSO Deal

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America Online Inc. has struck its first deal with a
Canadian cable operator, offering high-speed online service with Newfoundland-based
Regional Cablesystems Inc.

Although the deal was announced on the heels of a Canadian
regulatory order that the country's MSOs must provide unbundled resale of their cable
Internet-access services, AOL said its relationship with Regional goes well beyond resale
and into actual wholesale purchase of broadband access.

AOL Canada CEO Stephen Bartkiw said the online-service
provider would be using a new client interface for the broadband service that is branded
entirely as AOL, adding that the company would be the sole point of contact for all
service and support.

"It's kind of like the next step, where we know we're
going to end up with the other cable companies in Canada -- a true third-party wholesale
relationship," he said.

Regional passes about 250,000 homes in 1,000 nonurban
communities of British Columbia, Alberta, Saskatchewan, Manitoba, Ontario, Quebec and
Newfoundland. AOL's service will initially be offered to customers this fall in Sturgeon
Falls, Ontario.

"This is the next logical step in our competitive
cable-access process," Regional president Brendan Paddick said in a prepared
statement. "This introduction is the key to a successful national launch."

Bartkiw added that Regional already had deals with multiple
Internet-service providers in some markets, and that the AOL relationship was not
exclusive.

He noted that AOL Canada was talking with other
broadband-service providers, and it expected further deals in the coming months, although
not necessarily with major MSOs that have resisted forced resale and wholesaling.

"The major cable companies in Canada have a pretty
cohesive viewpoint with respect to wholesale third-party access," Bartkiw said.
"As long as they have the ability to be the sole provider of online services via
their cable plant, they can increase their market share."

On Sept. 14, the Canadian Radio-television and
Telecommunications Commission -- which mandated three years ago that MSOs provide
broadband service for resale by competing ISPs -- ordered cable operators to provide their
broadband Internet service for resale to ISPs at 25 percent below the lowest price they
charge they own customers.

The CRTC set a 90-day deadline for opening the cable
networks to resellers, although major MSOs have asked for more time to ready their
networks, which may not be done until the middle of next year.

The decision was publicly criticized by the nation's
largest MSO, Rogers Cablesystems Ltd. In an interview with the Financial Post,
founder and CEO Ted Rogers said MSOs were being "bludgeoned" into resale.

"We're talking about trying to force Rogers to
subsidize other people by our huge, hundreds of millions of dollars of investment and our
innovativeness of creating a brand-new industry, of almost inventing it," Rogers told
the newspaper. "And then Johnny-come-latelies want to come in here and, in effect,
nationalize it."

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