The end of the deal will force the media giant to search for a new ISP partner to satisfy regulatory requirements imposed during review of America Online's acquisition of Time Warner.
The Federal Trade Commission is requiring AOL Time Warner to offer high-speed Internet access over its cable systems from at least three rival ISPs. With the collapse of the High Speed Access (HSA) deal, AOL has agreements to work with just two: EarthLink and Juno Online Services.
"HSA informed us that they have come to a conclusion that in light of financial reverses, the company was no longer able to perform the contract," said AOL Time Warner spokeswoman Kathy McKiernan.
HSA struck its deal with AOL Time Warner in May. A representative for the Littleton, Colo., company could not immediately be reached for comment.
McKiernan said the collapse of the HSA deal would not derail plans to launch EarthLink and AOL services on AOL Time Warner's cable network. The company has said it plans to offer multiple ISPs on its cable systems this month.
AOL Time Warner owns the nation's second-largest cable network, which offers the company a way to sell high-speed interactive services to its subscribers. Regulators imposed conditions on the company's network after competitors raised fears that the media giant's cable ownership would shut out rival ISPs looking to launch their own high-speed services.