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The Philadelphia Inquirer

By Tony Gnoffo, The Philadelphia Inquirer

Oct. 13--Comcast Corp. and Google Inc. are in talks to buy America Online's Web site and to combine content owned by the three companies into a new Internet gateway available only to paying customers, according to a person with direct knowledge of the discussions.

Such an Internet portal would allow Comcast to offer a trove of online content not available to high-speed Internet customers of competitors such as regional phone companies Verizon Communications Inc. and SBC Communications Inc.

The content could include access to television programs and even movies owned or controlled by Philadelphia's Comcast and AOL's parent, Time Warner Inc.

SBC and Verizon recently announced plans to develop Web portals in partnership with Google's chief competitor, Yahoo Inc.

The trio of Google, Comcast and AOL could produce "a pretty dynamic portal," the person familiar with the talks said. Besides providing high-speed Internet service, Comcast and Time Warner also are the nation's number-one and number-two cable-television operators, with about 33 million subscribers nationwide between them. In addition, they have numerous investments in motion pictures and television networks.

The talks are in an early stage, and a final deal may be weeks away, the person said.

Officials at Comcast, Time Warner and Google declined to comment on the discussions yesterday. At Google, spokesman Michael Mayzel said: "Google and AOL have a healthy global partnership, and AOL remains a valued partner."

AOL already uses Google's search engine for its online subscribers - primarily dial-up customers - and receives a cut of advertising revenue generated when Google serves ads to AOL subscribers. That relationship produced about $300 million in revenue for AOL last year.

The talks come as investor Carl Icahn has been pressuring Time Warner Inc. to sell some of its assets to generate greater value for its shareholders.

Microsoft reportedly has been talking with Time Warner about buying a 50 percent stake in AOL.

If those talks are continuing, it would put Comcast in competition with its own biggest shareholder, Microsoft, for an AOL deal.

The person familiar with the Google-Comcast talks said Time Warner approached Comcast last summer to see whether it was interested in buying AOL. But the price tag - about $20 billion - and the prospect of buying AOL's dial-up Internet business were not attractive to the cable company.

But teaming with Google to buy only AOL's Web portal would be considerably less expensive for Comcast, and possibly a better fit.

"All of these companies are becoming more and more hybrid-like," said Jimmy Schaeffler, chairman and senior research analyst at the Carmel Group, a consulting and market research firm in Carmel, Calif. "On the content side, they're out to get as much content as they can. That kind of alliance fits that."

For its part, Google, which operates the Web's leading search engine, could gain Comcast's knowledge of the entertainment industry and TV networks. Google has expressed much interest in providing additional free services, such as video searches to its users, but has found itself in unfamiliar territory as it tried to negotiate for content from entertainment companies.

That, the person familiar with the talks said, is why the cash-rich company turned to Comcast.

"They see Comcast as a company that has these relationships already established and that somehow it might be an interesting partnership," the person said.

The deal, as envisioned now, would leave Time Warner with AOL's dial-up business, which currently has more than 20 million subscribers but is steadily declining.

Most of those subscribers are expected to convert to broadband access in the next few years. In the meantime, though, they, and the advertisers trying to reach them, produce a steady flow of cash to AOL.

Comcast is the nation's leading high-speed Internet provider, with about eight million broadband customers. Time Warner Cable has about four million high-speed Internet subscribers.

Staff writer Wendy Tanaka contributed to this article.

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