Merger Fuels Speculation of @Home-Road Runner Deal

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New York -- Little did @Home Network know that its swank,
"home-of-the-future" demonstration here last week would serve as a telling
backdrop to its own destiny.

At a posh, rented SoHo loft, @Home and its new equipment
partner, Bay Networks Inc., spent last Tuesday and Wednesday educating the press and
analysts about how future homes will tap into the services afforded by Internet-protocol
data linked to high-speed backbones.

Landing squarely in the middle of the three-day demo was
AT&T Corp.'s decision to merge with Tele-Communications Inc., causing some senior
officials to hint at a coming merger of @Home with Time Warner Cable's and MediaOne
Group's Road Runner service.

That move, although apparently not imminent, would create a
much-needed nationwide data backbone that the entire broadband industry can leverage.

An @Home/Road Runner merger has been widely rumored for
more than a year, with top cable technologists repeatedly saying that no technical
barriers stand in the way -- only business issues.

Road Runner just completed its long-awaited merger with
MediaOne Express two weeks ago, landing Microsoft Corp. and Compaq Computer Corp. as key
technology investors.

For months, cable executives have said that an @Home/Road
Runner merger makes too much logical sense not to happen. Plus, AT&T's initial
interest in the cable industry last year centered on an @Home/Road Runner arrangement.
That way, AT&T could be afforded a reach into all cable homes, and not just the homes
of @Home's or Road Runner's separate MSO affiliates.

The notion of a merged, nationwide backbone that links
@Home and Road Runner is "a thrilling prospect, and one that becomes more and more
encouraging every day," said TCI president and chief operating officer Leo J. Hindery
Jr., soon to be president of AT&T Consumer Services, after a press conference last
Wednesday.

When asked if such a deal was imminent, Hindery would only
reiterate that he is "encouraged," adding, "I just haven't had time to
get to it yet."

Road Runner and @Home officials said last week that they
had no knowledge of specifics, but they agreed that a merger was too logical to be
dismissed.

Meanwhile, at @Home's public demonstration, examples
of telecommuting, commercial high-speed-data applications and packaging of IP services
lined the interior of the loft.

Segmented into family, child and home-office sections, the
"home of the future" showed everything from video-on-demand to online grocery
ordering.

Don Hutchinson, senior vice president and general manager
for @Home's @Work division, said that division now provides 600 high-speed T-1 or
fractional T-1 lines to corporate customers -- a notably large number that reflects some
45 percent of @Home's total revenues.

"We expect that [revenue percentage] to continue
through the end of the year," Hutchinson said.

Bay, which provided the headend equipment and cable modems
for the event, also used the occasion to show that IP services are on the rise.

In an office area of the loft, for example, Bay systems
engineer Susan Plourde demonstrated how home personal computers can be linked over
high-speed-data services like @Work to securely attach telecommuters to corporate-network
files -- a technique known as "virtual private networking."

Plourde said MSOs are increasingly looking to commercial
applications, like telecommuting, when they consider cable-modem deployment.

"The commercial side always gets the most
interest," Plourde added.

Bay and @Home also used the event to show a cornucopia of
IP services, like book-sized "multimedia-player units," made by Seiko Espson
Corp. and Gestalt Technologies LLC, with built-in credit-card readers, connected to Bay
cable modems.

Scattered throughout the two-story loft, the multimedia
players ran live stock quotes, weather and video-news clips, while enabling point-of-sale
grocery shopping and other types of electronic commerce.

Also on display: streaming CD-ROM content, developed by
Arepa Inc., which company officials said they will launch commercially this fall; as well
as @Home's TV-based broadband platform, which is under development with TCI.

Bay and @Home also used the event to announce their
collaboration on data equipment, with @Home saying that it will test Bay's newly
rebranded "Versalar" cable-modem headends. The effort means that @Home will
integrate the Versalar gear into the suite of hardware that it offers to cable operators.

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