Updated from 10:48 a.m. EDT
Time Warner (TWX) said Monday that it reached a deal to allow Juno Online Services (JWEB) to offer high-speed Internet access over its cable network.
The deal comes as Time Warner faces pressure from regulators scrutinizing its merger plans with America Online (AOL) to open its cable network to Internet service providers.
The deal is the first between New York-based Time Warner and an ISP not affiliated with the media company. It will allow Juno to offer Internet access and content to Time Warner Cable
customers. Juno will offer its existing dial-up customers in Time Warner Cable's service area the ability to upgrade to Juno's high-speed service, Juno Express.
Juno and Time Warner will conduct a trial in Columbus, Ohio, before announcing when the new service will be available.
"Juno is committed to being a leader in the area of high-speed Internet access, and this relationship is a major step in our plan to offer subscribers nationwide a wide range of options," said Charles Ardai, Juno's president and chief executive officer, in a statement. "We believe this relationship with Time Warner will allow us to offer an attractive new option for Juno subscribers who are ready to make the move to broadband."
Under the agreement, both New York-based Juno and Time Warner Cable will market Juno Express to their customers and are able to price and package the service independently.
The deal is the first between a cable company and an Internet service provider, cooperation made possible by the pending AOL-Time Warner deal, said Frederick Moran, an analyst at Jefferies & Co.
who covers both Time Warner and Juno. For the deal to meet regulatory muster, it is widely acknowledged that Time Warner will have to open its cable network to independent Internet service providers. At a Federal Communications Commission hearing
on Thursday, regulators questioned AOL and Time Warner executives about opening up their cable network to ISPs.
"Regulators on the AOL-Time Warner deal will look at a number of issues," Moran said. "This is a step in the right direction of promoting competition. It has to catch regulators' eyes."
In a statement, Glenn Britt, president of Time Warner Cable, alluded to the competitive concerns of regulators. "This groundbreaking agreement underscores Time Warner Cable's commitment to offer its cable customers a choice of Internet Service Providers and will help expand the number of high-speed data subscribers on our cable systems," he said.
"We look forward to reaching agreements with other ISPs as quickly as possible and to offering our customers a broadening array of choices in how they experience the Internet."
Moran said Time Warner will likely re-examine the terms of its Internet joint venture with AT&T (T)
, called Road Runner.
The deal is seen as a test case for cooperation between the two industries -- cable and ISPs, he said. "Historically, cable has maintained exclusive access," he said. "Now they've become much more amenable to cooperation." Moran has a buy on Time Warner and a hold on Juno, partly because of the difficulty Internet companies have accessing capital in the current market climate. His firm has acted as an underwriter for Juno.
Time Warner has over 12.6 million cable customers, with 11.5 million homes capable of receiving high-speed Internet service. Juno has about 3 million active subscribers, making it the third-largest Internet service provider, after AOL and EarthLink (ELNK)
Juno stock soared on the news, finishing Monday's trading session up 1 1/16, or 13%, at 9 1/16. Time Warner shares closed up 1 5/16, or 2%, to 76 11/16.