News

Jones, Others Join @Home

7/05/1998 8:00 PM Eastern

@Home Network scored three more MSO affiliates last week,
beating out Road Runner in the footrace to secure Jones Intercable Inc., Cogeco Cable Inc.
and Garden State Cable TV.

The separate deals mark 10 additional MSO affiliates since
the beginning of the year, extending @Home's high-speed-data reach by 10 million
homes, to what it characterized as one-half of the cabled homes in the United States. Word
of the deals bumped parent company At Home Corp.'s stock up again last week.

The Jones deal was perhaps the bigger coup of the three for
@Home. Since Jones lost a legal ruling over the deployment of its own Jones Internet
Channel service, both @Home and Road Runner have been wooing the Denver-area MSO.

@Home figured that it will gain access to about 2 million
Jones homes, and Jones has around 1 million cable subscribers. @Home officials have said
that the service is closing in on access to 60 million homes in North America through its
cable affiliations.

Phil Laxar, senior vice president of programming for Jones,
said last week that Jones' receipt of @Home equity warrants -- along with its
scalability and speediness in getting connecting to Jones' customers -- were what
sealed the decision.

"The equity in @Home was attractive, but there
wasn't a single deciding factor," Laxar said, adding that it was the total
package.

The equity takes some of the sting out of the 35 percent
revenue split pocketed by @Home, compared with 30 percent for Road Runner.

Terms of the warrants weren't disclosed. After
Cablevision Systems Corp. signed on in October with warrants that can be exercised at 50
cents per share, other MSOs have insisted on equity, too. Warrants issued to other MSOs --
including Century Communications Corp. and Canadian affiliates Rogers Cablesystems and
Shaw Communications -- were at At Home's initial-public-offering price of $10.50 per
share, and they can only be exercised after meeting performance standards based on
available two-way homes.

The @Home signings may not be all bad for Road Runner,
looking longer-term. MSO executives in the @Home camp have spoken confidently about the
prospects for combining @Home and Road Runner, even though AT&T Corp.'s efforts
to broker such a marriage failed before AT&T cut its merger deal with
Tele-Communications Inc.

Also, a complicated arrangement related to exclusivity
expiration between @Home and its MSO equity partners in 2002 -- coupled with Microsoft
Corp.'s $1 billion investment in Comcast Corp., which could give Microsoft the right
to determine Comcast's data moves in 2002 -- may ultimately turn in Road
Runner's favor, sources said last week.

Microsoft and Compaq Computer Corp. agreed to plunge $450
million into Road Runner's coffers last month. Microsoft declined to comment last
week on the specifics of its Comcast investment, including on whether or not Microsoft
will determine Comcast's data destiny following the end of its exclusive arrangement
with @Home in 2002.

"I'd keep a close eye on that one," one MSO
source said, requesting anonymity. "I believe [that Microsoft] gets to make the call
as to when and where and what [Comcast] does when the @Home exclusivity runs out."

@Home executives have said that they're unconcerned
about the exclusivity sunset in four years. In an interview late last year, @Home CEO Tom
Jermoluk said that at some point, "you earn your right to exist."

"Exclusivity just gives you a way to get
started," Jermoluk said. "We are either are a good thing -- people like us, and
they're not going to live without their @Home -- or we haven't earned it."

@Home will first launch in Jones' Alexandria and Dale
City, Va., systems by the end of this year, Laxar said. Jones already has about 2,500 JIC
customers in those markets that will convert to Jones@Home.

@Home may have gained an inside track since Comcast, one of
@Home's first and biggest MSO investors, cut a deal with Jones shareholder BCI
Telecom Holdings Inc.(BTH) that will eventually leave Comcast in control of Jones. But
Jones officials said the Comcast connection didn't influence its selection of @Home.

Jones wanted to deploy JIC, owned by sister company Jones
International Inc., throughout its cable systems. But it was forced to find a new
high-speed-data-service provider after major shareholder BTH sued to block that
arrangement, claiming that it violated a shareholders' agreement and deprived Jones
of potential benefits such as @Home equity.

In Canada, Cogeco will work with its MSO neighbors, Rogers
and Shaw, to deliver the @Home service by year-end, executives said.

Louis Audet, president and CEO of Cogeco, said he also
liked @Home's integrated-service approach.

"Combined with our local broadband network, this will
ensure that our customers have the fastest, most robust Internet service available,"
Audet said.

In New Jersey, the addition of Garden State will lift
@Home's potential customer base by 300,000 homes passed in Camden and Burlington
counties. @Home will roll out in those areas by year-end, executives said.

Neither Cogeco nor Garden State received equity warrants in
@Home.

In an interview before the Jones deal was announced,
Jermoluk said @Home has selectively offered equity to MSOs based on what the MSOs bring to
the table. Century got warrants covering only some of its homes, Jermoluk said, and
Lenfest Communications Corp. got warrants because its systems fit in well with
Comcast's @Home markets. Bresnan Communications and Insight Communications Co.
didn't get warrants, he said.

He added, "We always do it in a way that says that the
value of the homes that we get exclusive access to over the business period [is higher]
than the value of the warrant that we get. So I think that it works out for
everybody."

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