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EarthLink Might Shift Focus to DSL

With its advance into new cable broadband markets at a standstill, EarthLink Inc. may change its tune to one that's more focused on digital subscriber line service in 2003.

In the past year, the Atlanta-based Internet-service provider has pegged cable-modem service as its more promising broadband outlet. But when asked last week about the prospects for more distribution deals with MSOs during the company's quarterly conference call, CEO Gerry Betty said talks were still underway.

Part of the challenge is a lack of consensus among cable operators, Betty said.

While cable now makes up more than half of EarthLink's retail broadband growth, the ISP has not signed any new deals beyond its deployments with Time Warner Cable and the former AT&T Broadband markets of Seattle and Boston, now owned by Comcast Corp.

"The cable companies basically are confused as to how this business model is going to continue to evolve," Betty said. "I still think that we will be successful in gaining access and carriage to a number of additional properties, but it is difficult to say when that is going to happen because things are currently in flux."

But he also that said EarthLink is moving forward with DSL distribution deals, most notably a pact with SBC Communications Inc. to enter 53 of the telco's markets.

Betty said EarthLink expects to have all of the incumbent local-exchange carriers signed to some sort of distribution deal by the middle of this year.

The Atlanta-based ISP added a record 98,000 broadband subscribers in the final quarter 2002, bringing its high-speed customer base to 779,000. For 2003, EarthLink expects the broadband business to attract 300,000 new subscribers.

For the quarter, EarthLink's revenue grew to $347.9 million, up 6.3 percent compared to the $327.2 million posted in the same quarter of 2001. The company also narrowed its net loss to $32.9 million (24 cents per share), down from a loss of $73.9 million (55 cents per share) in fourth-quarter 2001.