AOL will have access to a network that covers more than 40 million US homes and businesses, Covad said. The company estimated that its network reaches approximately 40% to 45% of all US homes and businesses.
By using DSL services through Covad's network, AOL, which is the largest ISP (Internet service provider) in the US, will gain the flexibility and scalability of a single resource when offering customers the ability to upgrade from dial-up Internet service to broadband, Covad said.
As part of the agreement, AOL has been issued warrants by the company, giving it the option to purchase a total of 3.5 million shares of Covad common stock, with an estimated value of $3.5m (£2,.2m), Covad said.
Covad emerged from bankruptcy last year when the US Bankruptcy Court for the District of Delaware approved the company's reorganisation plan.
Over the past few months, AOL's parent company, AOL Time Warner, has been trying to kickstart AOL's Internet unit, which has been suffering from a lack of significant subscriber growth in recent quarters.
Last month, AOLTW said it had restructured its long-standing cable partnership with AT&T in a manner that created the first third-party broadband cable carriage agreement for AOL.
As part of the deal, AT&T Broadband and Comcast, which have announced plans to merge and form AT&T Comcast, will make AOL's high-speed broadband access service available on their systems. AOLTW said that it expects AT&T Comcast to reach more than 10 million homes within two years of the completed merger