Road Runner Signs IPO-Bound HSA

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Just weeks before its initial public offering of stock,
Littleton, Colo.-based high-speed Internet-service provider High Speed Access Corp. has
signed a major deal with data-over-cable service Road Runner that could put it in front of
millions of additional homes.

According to documents filed with the U.S. Securities and
Exchange Commission, HSA has signed a letter of intent to provide service as a Road Runner
subcontractor to small operators, akin to @Home Networks' @Home Solutions service.

HSA, which counts Microsoft Corp. cofounder and billionaire
Paul Allen among its investors, targets cable systems with fewer than 100,000 subscribers.

The company already has a deal with Allen's Charter
Communications to provide high-speed cable-modem service to 750,000 of the St. Louis-based
MSO's subscribers.

The revelation came as part of an amended registration
statement HSA filed at the SEC last week related to its upcoming IPO. HSA hopes to raise
about $156 million from the stock sale, slated for early June.

The company also revealed that Microsoft agreed to buy
nearly 900,000 shares in HSA in an offering concurrent with the IPO, spending $10 million.
Other companies agreeing to buy shares in that offering included Cisco Systems Inc., which
will buy $7.5 million worth of stock, and Com21 Inc., a cable-modem-equipment vendor,
which is buying $1 million worth.

Microsoft appears to be playing both sides of the
cable-modem fence, at least within small cable systems. The software giant is also a
partner in @Home Solutions.

Of course, Microsoft has shown itself to be an
equal-opportunity cable investor. After its seminal $1 billion purchase of a Comcast Corp.
stake in 1997, it recently agreed to invest $5 billion in AT&T Corp., helping AT&T
to outbid Comcast for MediaOne Group Inc.

And Microsoft already owns 10 percent of Road Runner. Its other
owners are affiliates of Time Warner Inc., MediaOne, Advance/Newhouse and
Compaq Computer Corp.

The Road Runner deal makes perfect sense for HSA, which has
made a living by providing service to small markets. And it appears to be a good move for
Road Runner, which has limited its rollout to larger cable systems, for the most part.

According to the document, HSA has agreed to
"negotiate in good faith toward an agreement under which we would provide our service
as a Road Runner subcontractor to cable systems we jointly designate to receive our
services."

HSA, Road Runner and the cable operator would share
revenue. HSA would also grant Road Runner warrants to buy one share of HSA's common
stock for $5 for every home passed that the two companies designate to receive the
service, up to 5 million shares. Road Runner also gets the right to provide its content
over the service.

Road Runner vice president of business development Bob
Rukas said the decision to offer Road Runner to smaller operators was a response to @Home
Solutions.

"Road Runner has been exclusively focused on
deployment geared toward the 200,000-homes-plus environment," Rukas said. "We
didn't have a good solution that scaled down to smaller areas."

While Rukas said the market for the HSA/Road Runner
offering could be in the 5 million range, the actual penetration would depend on how
aggressively both companies decide to deploy the product.

However, he added, Road Runner has been talking with
several operators, and it could have some deals soon.

Rukas said he doesn't expect the competition with
@Home Solutions to be overwhelming. "I think the package Road Runner and HSA have put
together and discussed with various operators compares very favorably," he added.

HSA is evaluating a list of Road Runner affiliates that are
potential sites for the small-system service, Rukas said, adding that HSA has previously
said that it can get a system up and running 90 days after completing a deal.

HSA declined to comment on the deal, citing its "quiet
period" for its IPO, during which it is prohibited from promoting its stock.

PaineWebber Inc. vice president of equity research Tom
Eagan said the deal makes sense for both parties and further establishes the fact that
there is a market for high-speed Internet access in small cable systems.

"This proves this is a viable business," he
added.

It could also help both companies with regulators, which
have shown concern over the growing consolidation trend in the cable industry.

"At least now you're going to have more
choice," Eagan said. "Washington wants more diversification of offerings, and
anytime you have more providers, you have more choice. One concern out of Washington is
that high-speed Internet wouldn't be launched in smaller markets."

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