Excite@Home's Woes

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Four major MSOs, and a few others, took a belt to the chops when Excite@Home Corp. said it would not accept orders to provision new cable-modem customers as of 3 p.m. EST on Oct. 10.

Cox Communications, Comcast Corp., AT&T Broadband and Insight Communications Co. Inc.— the company's principal affiliates — were left scrambling to speed up their self-provisioning backup plans.

That's a daunting task, given the short notice, or some might say ultimatum, from Excite@Home.

But the union between @Home and its affiliates has never been strong. In the early days, when cable operators first launched the high-speed Internet service, there was plenty of finger pointing as to why the service was so glitchy.

We all remember the bad reviews when the product first rolled out. Computer magazines had a field day flaming the service and predicting that digital subscriber line would prevail in the end.

Since then, several cable MSOs have cut off financial backing, leaving Excite@Home to look for new funding. Last June, the company secured two separate deals that brought in $185 million. They were an investment from Promethean Investment Group LLC and a sale-leaseback of its backbone network to AT&T Corp. for $85 million.

But it wasn't enough. Last July, new company CEO Patti Hart told investors that those deals would not be enough to keep the company running until the end of the year, as had been earlier believed.

Apparently, she wasn't crying wolf, given last week's news. That left Excite@Home's cable MSO partners annoyed about the short notice, and worried about how to continue to grow this new revenue stream and satisfy ongoing customer demand.

And the demand is there, according to a recent Cable & Telecommunications Association for Marketing study which showed that 80 percent of cable-modem users were very satisfied with the service. About 60 percent of those cable-modem users are probably @Home customers, as CTAM president Char Beales estimated.

Since Excite@Home launched, the service has improved remarkably. Even computer novices, like some of my relatives in Chicago, now glide though the Internet with the greatest of ease, and give @Home high marks.

Is that all in jeopardy now? It's hard to say, but future rollouts will be slowed down if some compromise is not struck. The take from Wall Street suggests that Excite@Home is trying to gain some leverage over its MSO affiliates, which cannot afford to have service interrupted.

Analysts at Solomon Smith Barney predicted last week that this latest development could have a negative impact on cable-modem subscriber growth.

One worried camper is Insight chief operating officer Kim Kelly. She doesn't think that any MSO is capable of hooking up new modem customers via self-provisioning today.

Kelly reports that Insight has a two-week backlog of orders for cable-modem service, and that Excite@Home said it would make good on those orders because they were taken before the Oct. 10 announcement. But after that, all bets are off.

Kelly hopes a solution can be negotiated before that time frame disappears and slows down cable-modem rollouts.

But can that really happen? Remember Cox and Comcast just announced two weeks ago that they were severing their exclusive ties to Excite@Home as of Dec. 4. They're now busily working on provisioning, backbone and content replacements for the service.

It can be done, but it takes time. Cablevision Systems Inc., once a partner with Excite@Home, bailed out of the game early.

Today that MSO boasts one of the highest cable-modem deployments under its own Optimum Online brand.

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