A union between AOL's cable unit and AT&T Broadband would create the largest high-speed cable provider in the US, accounting for 40% of the market.
AOL's proposal would merge AT&T Broadband with Time Warner Entertainment, both of whom are currently in partnership. The deal would give AT&T shareholders a 60% stake in the combined venture.
AOL's Time Warner Cable unit has 12.7 million analogue cable TV subscribers and more than one million high-speed Internet customers. AT&T Broadband has a cable subscriber base of over 14 million. As of June 30, the division had 848,000 telephone customers, 1.3 million high-speed data customers and 3.1 million digital cable TV customers.
AOL's reported bid for AT&T Broadband follows a bid by Comcast, which had been in buyout talks for the broadband business. After Comcast's $58bn (£39.5bn) offer was rejected by AT&T's board in July, Comcast reportedly entered talks with AOL, Microsoft and The Walt Disney Company in a continuing effort to acquire the broadband unit.