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AOL hatches interactive-video unit

AOL Time Warner taps Time Warner Cable's CEO to head the Interactive Video division, which will help meld parts of its cable and Internet businesses.

AOL Time Warner on Thursday said it created a new division to spearhead the media giant's interactive-cable initiatives.

The Interactive Video division will allow AOL Time Warner to manage efforts to meld parts of its cable and Internet businesses. One important element of the merger between America Online and Time Warner was the company's ability to introduce interactive services through its cable network, the second largest in the country after AT&T.

AOL Time Warner executives have touted the company's ability to transform itself into a new breed of media company. The Interactive Video division will be one test of these much-vaunted promises.

For now, the division will focus on introducing high-speed Internet services on Time Warner Cable, enhanced versions of AOLTV, video-on-demand and cable IP telephony. Most of these efforts have not taken off in the mass market or have been in the testing stage, leaving the financial benefits of the division unclear.

Joseph Collins, chief executive of Time Warner Cable, will become chief executive of the Interactive Video division. Collins will report to AOL Time Warner CEO Gerald Levin.

Glenn Britt, president of Time Warner Cable, will replace Collins as CEO of Time Warner Cable. Britt will report to Bob Pittman, AOL Time Warner's co-chief operating officer. Tim Rutledge, senior vice president of Time Warner Cable, will become president, reporting to Britt.

In an interview, Collins emphasized the ability to draw from the many businesses in the AOL Time Warner family to grow his own.

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Joe Collins, chairman of AOL Time Warner's Interactive Video Division, says that cable broadband lines are ready for video on demand. (:45)  
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"We are a major cable operator, but equally as important, we have the content," Collins said, referring to AOL Time Warner. "We have the broadest and best set of copyrights in the world, and with AOL we have the capability to bring up and operate a nationwide digital platform that we think is unique."

Collins said he is currently the only employee in the Interactive Video division and will be focusing on building a staff. The division has not established its headquarters.

AOL Time Warner added that it will launch multiple Internet service providers on its cable network in September. The company already has agreements with its AOL division and rival ISPs such as EarthLink to offer high-speed versions of these services to subscribers.

The weight of experience
Collins is a Time Warner veteran who headed Time Warner Cable since 1989 and ran Time Inc.'s cable company before its merger with Warner Communications. Prior to that, Collins was president of HBO from 1984 to 1988.

More recently, Collins was the focal point of controversy when Time Warner Cable blacked out Walt Disney's ABC network after a business dispute. Time Warner's actions caused public outrage by millions of cable subscribers around the country.

Creating a media titan More damaging, the move prompted federal regulators to carefully examine the AOL-Time Warner merger and opened a window of opportunity for Disney to wage a lobbying crusade against the deal.

The Federal Trade Commission issued a consent order last year that imposed conditions to approving the deal. AOL Time Warner must offer a rival ISP before offering AOL on its cable system and then offer two additional ISP services within 90 days of launching AOL. In September, Time Warner Cable will likely launch EarthLink first and then AOL immediately afterward.

For now, Collins said the Interactive Video division will primarily focus on getting video-on-demand into the mass market. Time Warner Cable has been testing a video-on-demand service through HBO in Columbia, S.C., and other services in Austin, Texas; Tampa, Fla.; and Honolulu.