ISPs get broadband deal with Comcast

The companies said Tuesday that Comcast would now offer NetZero and Juno High-Speed Internet Service, both owned by United Online, over its cable systems, complementing the broadband services it already offers to around 950,000 customers through its own ISP, Comcast High-Speed Internet.

Since the AOL-Time Warner merger, the Federal Communications Commission has pushed large companies to offer services through more than one ISP. AOL Time Warner has responded by inking pacts with ISPs such as EarthLink.

Terms of Comcast's agreement with United Online were not disclosed, but the companies said the deal is not exclusive and won't prevent Comcast from making other ISPs available to its customers in the future. The company is in a technical trial with EarthLink, and hopes to be in talks with other ISPs soon, according to Comcast CEO Brian Roberts, speaking during a conference call Tuesday.

The Comcast deal comes as the company is hoping to overcome regulatory concerns about its proposed purchase of AT&T Broadband. The company's planned purchase of AT&T's cable assets has the Department of Justice concerned that Comcast's vast cable properties will give it too much control over programming. Comcast has said the AT&T deal would close by the end of 2002.

But Comcast said that the deal wasn't a move to appease regulatory issues. "This is a business opportunity," Roberts said. "We want maximum penetration of the broadband market, even without AT&T."

The agreement with United Online will give Comcast access to the combined 5.6 million dial-up users that subscribe to NetZero and Juno.

For its part, United Online is trying to weather tough times. The company was formed last year via the merger of Juno and NetZero, the two remaining large and free ISPs at the time. The company has also been cutting costs, recently stopping service for a small percentage of paying--but expensive to maintain--customers.

United Online has also been trying to cut its reliance on advertising and garner monthly subscription fees, a move that has been largely successful, said Thomas Weisel analyst Peter DeCaprio in a recent research note.

DeCaprio said United Online could emerge as a "national value player" as it competes with pricier rivals such as AOL and EarthLink, eventually becoming "the Southwest Airlines of the ISP market."

Though the companies wouldn't disclose a price for the new broadband service, United Online CEO Mark Goldston said they "intend to have a very competitive-priced offering consistent with the brand reputation of NetZero and Juno."

The Comcast deal could give United Online an avenue to boost its paid subscriber base, but converting dial-up users to broadband hasn't been easy. AOL has had a problem getting customers to convert their AOL dial-up accounts to broadband services over the Time Warner cable network. EarthLink has extended its marketing budget to convert more dial-up subscribers to the higher-margin broadband service.

United Online said the Comcast pact will allow it to offer broadband access without incurring big expenses.

"To date, United Online has been reluctant to enter the broadband marketplace. Many of the ISPs entering the market have incurred large capital expenditures while generating gross profits per user--much below their dial-up business," Goldston said in a company release.

United Online will begin offering the service within 90 days to Comcast customers in Nashville, Tenn., and Indianapolis, Ind., and will offer them to other Comcast markets later.