While similar high-speed Internet access companies grab headlines with billion-dollar mergers and high-priced initial public stock offerings, Road Runner has yet to make any bold moves to challenge its closest competitor, Excite@Home. Road Runner lacks a chief executive, appears to have an uncertain mandate from its parent companies, and largely operates in the shadows of the Internet's movers and shakers.
Despite these obstacles, the firm has successfully signed on hundreds of thousands of cable modem customers and has managed to avoid service problems that have plagued some of its competitors.
"Fundamentally they're doing what they need to do on a market by market basis," said Patti Reali, an industry analyst at Dataquest. "And, relatively speaking, Road Runner has had fewer complaints than Excite@Home, so they must be doing something right."
But without a permanent leader, a solid brand, or a concise strategic focus, many in the industry wonder if the company will find what it takes to survive.
"It's kind of a white elephant right now," said Gerry Kaufhold, a cable industry analyst with Cahners In-Stat Group. "The entity itself is not worth that much. I just don't see them being one of the key players three years from now."
Too many cooks
Perhaps because it serves so many masters--it is the product of a partnership of Time Warner, MediaOne Group, Microsoft, Compaq Computer, and Advance/Newhouse--Road Runner is the cyberspace equivalent of a distant star in a large constellation of Internet and media planets.
After all, Road Runner is but one of many assets for Time Warner, which owns the likes of Time magazine and CNN. Microsoft, maker of the world's most popular personal computer software, also owns a stake in the high-speed firm.
To make matters more complicated, MediaOne Group, one of only two Road Runner cable operator partners, is being acquired by AT&T as part of its larger plan to offer local telephone service over cable television networks. Already the largest shareholder in Excite@Home, AT&T will own 37 percent of Road Runner when its MediaOne takeover is complete.
Clearly, Road Runner has established itself in the market with a solid service and has slowly established its name in the broadband market. But analysts say that if Road Runner has plans to continue as an independent company, it will need to firmly establish its own identity.
"If it's just looking to be the cable ISP arm of Time Warner, it's doing a good job," said Joe Laszlo, an analyst with Jupiter Communications. "But certainly it's not anywhere near being strong enough to position itself as a standalone company."
Road Runner executives have considered an initial public stock offering for some time, but the company said it will not pursue an IPO until the MediaOne merger is complete and it has found a chief executive officer. An IPO would not happen at earliest before the second quarter of 2000, said Carl Rossetti, Road Runner's interim CEO.
"We're going to operate the network as soundly as we can in the interest of growing the business. We're very much sticking to the nitty gritty regardless of who owns us, regardless of who we're competing against," Rossetti said.
Without a leader
Road Runner executives concede that the uncertainty surrounding AT&T's purchase of MediaOne has clouded their hunt for a permanent chief executive--a post that has been vacant for more than a year.
"Right now it's a little difficult with the AT&T-MediaOne merger, because any CEO is going to want to look you in the eye and ask you what your plans are," Rossetti said.
But even before the AT&T-MediaOne deal, Road Runner struggled in its search for a full-time leader.
After enlisting an executive search firm earlier this year to help the process, Rossetti said Road Runner believed it had found his replacement three times, only to see the proposed hires scuttled. Although he declined to comment on who had been courted, it was widely reported that Microsoft financial chief Greg Maffei was sought for the job.
"[The CEO search has] taken much longer than it should have," Laszlo said. "Road Runner remains very much subsidiary to Time Warner, and MediaOne and hasn't established it's own independence. The market can't possibly view it as an independent company until it takes a few steps such as getting a permanent CEO."
Others question whether Road Runner's inability to land a chief executive is an indication of deeper strife. "That they still haven't named a CEO tells you that [Time Warner and MediaOne are] not totally committed to this going forward," Kaufhold said.
Analysts give the company credit for quickly offering quality service. Road Runner claims 320,000 customers--Rossetti expects to hit 450,000 by the end of September--with only two cable partners. By comparison, Excite@Home claims 620,000 subscribers but has more than 20 partner companies selling its service.
The company also has begun to aggressively sell cable modems in retail stores, something its competitors have yet to do.
And Road Runner yesterday unveiled new software that will allow prospective customers of its Net-over-cable service to independently sign up and configure their PC for high-speed Internet access.
The new automated online process, which will initially be available only in Minnesota, is expected to speed the installation process as well as save money for Road Runner's cable partners. The company believes that it is the first in the cable industry to offer online registrations.
Road Runner executives expect to sign an alliance with AT&T to use Ma Bell's fiber optic network and perhaps even combine network "backbone" operations with Excite@Home. Rossetti said Road Runner and AT&T have held talks on this front, and he speculated that a deal could be reached in three to six months.
Others doubt that the integration will end there.
"I don't know whether there's a rationalization for a combination of Road Runner and @Home," Rossetti said. "No one can predict the outcome. We're just going to continue doing what we're doing every day."