Cable-modem penetration in the United States is expected to
break the 1 million-customer milestone next month, as subscriber numbers for the two top
data-over-cable-service providers -- Excite@Home and Road Runner -- increased
significantly in the second quarter.
Road Runner released its subscriber numbers earlier this
month: 320,000 customers as of June 30. And Excite@Home announced last week that it has
increased its subscribership to 620,000, up 35 percent from March 31.
To many analysts who follow the data-over-cable market,
reaching the 1 million-subscriber milestone is significant as it brings the industry that
much closer to critical mass.
Strategis Group Inc. director of cable and satellite TV
Carol Mann said that although the million-subscriber mark does not in itself represent
critical mass, it does show cable operators that there is a viable market for high-speed
Internet access over cable.
"It's a sign that there is a demand," she said.
"Clearly, there are economics behind [the rollout of] high-speed modems. This gives
[operators] more of a comfort level when they start seeing a proven track record. This is
an indication that there is a demand and that people are willing to pay $40 per month for
Stephens Inc. cable analyst John Corcoran added that the
increase also shows that Excite@Home is on track to meet its stated goal of having 1
million to 1.1 million subscribers by the end of the year. However, he added, it's not
going to be easy.
Corcoran estimated that Excite@Home signed on about 13,333
new customers per week to reach 620,000 subscribers. But, he said, to reach 1 million, the
company will have to sign on 14,615 new customers per week in the second half of the year,
and it will need 18,460 new customers per week to reach 1.1 million.
And with more subscribers come improved financial results,
which, Corcoran added, exceeded his expectations.
Excite@Home reported revenue for the quarter of $100.4
million, up from $42.2 million in the same period in 1998. The company, which completed
its $6.7 billion acquisition of Excite Inc. in May, reported a net loss of $5.9 million,
or 2 cents per share, for the period, compared with a loss of $17.1 million (5 cents) in
the same period last year.
For the six-month period, Excite@Home's pro forma revenue
was up nearly 150 percent to $179.2 million from $72.3 million in 1998. The company also
cut its net loss during the period by more than half to $12.5 million, or 3 cents per
share, versus a pro forma net loss of $35.4 million (10 cents).
Excite@Home launched in 21 new markets during the period,
raising its total number of active domestic and international markets to 89.
"They beat everyone's expectations on revenue and
earnings, they made some acquisitions and added on a variety of new services and they've
entered into strategic partnerships and joint ventures with just about everybody and his
brother," Corcoran said.
Despite that, Excite@Home's stock has been hammered lately,
trading at $47 per share last week, down from $80 in April. But Corcoran said that might
not last long, likening the company to another former Wall Street pariah of a few years
ago, America Online Inc.