Troubled High Speed Access Corp., strapped for cash and considering an asset sale to its largest shareholder, said last week that it would not become a secondary Internet-service provider on Time Warner Cable systems because it could not raise the necessary funds.
HSA, which is still considering a $73-million buyout offer for its high-speed data-over-cable assets from Charter Communications Inc., told Time Warner on Aug. 24 that it wouldn't be able to participate. The company revealed that information in a Securities and Exchange Commission filing Aug. 31.
Time Warner expects to launch its first multiple-ISP service later this month in Columbus, Ohio and Syracuse, N.Y. with EarthLink Inc.
HSA was the third ISP Time Warner Cable had signed on – Juno Online Services Inc. was the second – as part of Federal Trade Commission approval of the $112-billion merger between America Online Inc. and Time Warner Inc.
The FTC conditioned its approval of that merger on AOL Time Warner opening its MSO unit's high-speed cable lines to at least three unaffiliated providers to foster competition.
Some consumer groups objected to HSA's participation in the launch because they claimed HSA had economic ties to AOL Time Warner. HSA's largest shareholder — Vulcan Ventures Inc. — is controlled by Charter chairman Paul Allen. Charter buys some programming for its cable systems from Time Warner.
Time Warner Cable spokesman Michael Luftman said the multiple ISP launch won't be set back. He said Time Warner has been talking to several different ISPs, although he declined to name them.
"It was never our intention to limit the launch to three unaffiliated ISPs," Luftman said. "We are moving forward with our plans, and this won't affect that."
According to the FTC ruling, Time Warner has 90 days from the start of EarthLink service to launch two other ISPs. Juno, which is currently undergoing FTC review, is expected to be approved shortly. That gives Time Warner three months to find another ISP.
If Time Warner Cable cannot reach an agreement with a third ISP by the 90-day deadline, the FTC would become involved in facilitating a deal.
"When we looked at what it was really going to take to aggressively market and to have additional services that would compel a customer to choose us over AOL, EarthLink, Juno and the other ISPs that were likely to be in there competing at the same time, we needed more," said HSA spokesman Andy Holdgate.