The strategy talks have been going on for several months and are accelerating, said the source, who asked to remain anonymous.
AOL Chief Executive Jonathan Miller presented the proposal to top Time Warner executives in New York last week,
AOL subscribersin recent years. The company has lost nearly 30 percent of its subscribers since September 2002 and has watched as advertising revenues skyrocketed at Google and Yahoo.
AOL's first-quarter 2006 revenue fell 7 percent from a year earlier on a 13 percent drop in U.S. subscriptions revenue, which still represent most of its business. Advertising revenue, meanwhile, rose 26 percent year over year.
Last summer, AOLin order to open up to all Web users content previously available only to paying subscribers.
Currently, AOL members, paying monthly fees ranging from $14.95 to $25.90 depending on whether they use AOL as their ISP, get AOL desktop software that includes applications like a browser, a video player, a toolbar and an AOL.com e-mail address. Separately, AOL offers Web-based AIM.com e-mail service, which has always been free.