America Online signed a deal to provide nationwide digital
subscriber line (DSL) service through Covad Communications, officials
announced Thursday.
In addition, AOL was issued warrants to purchase 3.5 million shares of
Covad common stock at an aggregate value of $3.5 million. It would give
the ISP a 1.5 percent share in the company, if officials decide to go
through with the stock purchase.
That’s good news for AOL Broadband customers, who have watched DSL pricing
at the Baby Bells steadily increase over the past two years. Covad, on the
other hand, is taking the risky chance of dropping pricing to grab more
customers.
The largest Internet service provider (ISP) has offered DSL through the
incumbent telephone companies for years now, which were regional deals that
didn’t migrate past the carrier’s borders.
Charles Hoffman, Covad chief executive officer and president, said its the
reason AOL went with a nationwide provider.
“(The contract) gives America Online the flexibility and scalability of a
single, national resource for millions of customers who want to upgrade
from dial-up to a high-speed, always-on broadband connection,” he said.
AOL, though it has delayed
broadband promotion to keep its dial up customers, seems to be making
more of an effort to migrate its dial up customers to broadband.
Jonathan Miller, AOL’s new chief executive officer, has been moving quickly
to sign deals to get the ISP division of AOL Time Warner back on
track. Last month, AOL penned a
deal to provide broadband service to potentially 10 million Comcast
Corp. customers.
