The agreement with Qwest comes two days after reports surfaced that AOL Time Warner is in talks with AT&T to acquire the telco's broadband unit. AT&T has been fielding offers since it rejected a $44.5 billion bid from Comcast Corp. last week. An AOL Time Warner spokesman declined to specify what strategic needs the Qwest deal would satisfy, but the company plans to make good use of Qwest's 113,000-mile broadband network to deliver its trademark online service. "It's all a question of maintaining and supporting our strategy of providing easy and reliable access to the AOL service," the spokesman says.
The deal isn't completely broadband-focused. AOL Time Warner also is buying additional dial-up access, as well as network data-transfer services. But it's the broadband access that figures to have the most significant impact on the company's bottom line.
Independent telecom analyst Jeff Kagan says AOL Time Warner has to continue expanding its broadband reach to maintain its status as a media powerhouse. "Time Warner's network is big, but it doesn't reach all of AOL's customers," he says. "You've got to reach as many customers as you can."