Pieces of Broadband - Company Business and Marketing

All is not lost at Excite@Home

Don't cry for the beleaguered Excite@Home.

You can say all the negative things you want. That open access set them on the defensive, preoccupying its senior executive staff. That the MSOs who sit on the board couldn't agree on how to respond to open access and other tough issues. It reminded media analysts of the downside of companies run by MSO committees. How can anyone forget Primestar?

And then Excite@Home's new number-one nemesis in 1999, AOL, goes out and buys Time Warner, rewriting the media-Internet landscape. The deal automatically increases the complexity of certain relationships, the biggest being how AT&T, the principal owner of Excite@Home, and AOL-Time Warner work out a myriad of issues: Road Runner, Time Warner Entertainment ownership, cable-telephony and TV portal deals.

But never underestimate the value of a growing incumbent. Just look at AOL, and how it stormed out of the middle of the ISP pack just a few short years ago.

Excite@Home has a sound multifocused business, one that makes sense as long as you appreciate it's a multifaceted, multi-opportunistic company. Pigeonhole it, and you can kill it off. Take a step back and let the parts reassemble itself, and you've got something.

Forget about today, look ahead to the year 2002. The company will have extended its backbone reach around the world. It will have six million high-speed cable modem subscribers, with perhaps half of those subscribers owning their own modem.

They will have a strong, Excite-branded broadband product. They will continue to have relationships with cable opera-tors, standing side-by-side with them with hands out to grab a piece of the revenue coming their way from ISPs desperate to get on cable's broadband pipes. And they may have a sizable part of the TV portal business. Remember cable always likes to have a few vendors for any product it buys.

This issue's Q&A on page 28 with Excite@Home CEO George Bell points up the opportunities the company sees, even in a nonexclusive world.

And here's what Bell points out that people sometimes miss. Excite, the narrowband service, has 51 million registered users. Yes, hits to the pure Excite.com site have had a plateau, but the same could be said for pure Yahoo! or Lycos sites. Web portals are only growing if they buy new properties.

Some two-thirds of Excite users access the service at work at speeds ranging up to T1. Yes, Excite will reinvent its narrowband Web service by adding more broadband-type content.

Some may look at the small residential broadband universe and say that's ludicrous, even though the segment is growing. But if many of your customers can use broadband content features from work during the day, the switch to broadband is less scary.

It's also smart marketing. The more consumers use broad-band transmission speeds and content at work, the more likely they'll be to buy cable modems for the home.

Second, the six million home headstart with strong Excite-based content should make modem churn figures, circa 2002 and 2003, very small. Do some people churn out of AOL today? Yes.

But relatively few people churn out from faster cable modems. Every new home Excite signs up by then just gives it a headstart over potential ISP competitors.

Third, Excite@Home may find only half its total reach is in North American homes in 2003, down from the 80% today. That will help set Wall Street minds at ease.

And fourth, and perhaps most the important, Excite@Home, circa 2002, will have the most experience running a broadband backbone with more subscribers than any other company out there. They will be the experts in a new frontier. And people pay dearly for that kind of experience.

And any new ISP wanting to get on a cable system will likely pay a toll to Excite@Home, unless it wants to take on the more expensive proposition of replicating a huge Internet network itself.

Plus Excite will have had the experience of handling thousands of simultaneous videostreams and other worst-case broadband traffic nightmares. To the experienced goes the spoils.

The one caveat in that scenario is whether the terms cable operators dictate for carriage will be so onerous that ISPs go running to the government for help. That would open up a Pandora's box.

And if all else fails, someone will always want Excite's content or its backbone. The companies' cable operator owners usually get their money's worth out of big investments, one way or another.

Even up until 2002, there will be Excite doubters. But given the company's asset base, plenty of executives would gladly take Excite's "problems."

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