A decent analysis of the T/ATHM issues. From the Fool ATHM thread:
Subject: The best business model for Excite@Home? Date: 8/19/99 8:40 PM
Author: clippus Number: of 17531
Warning: long post
I've posted before that I've never been comfortable with the marriage between Excite and @Home. That's not to say I've been uncomfortable, just ambivalent. I've never managed to see how the two truly compliment each other.
The FCC signed off on AT&T's acquisition of TCI, in part, because of AT&T's promise of unimpeded internet content. That's different than access, and it's at the crux of the whole "open access" argument. Thankfully, Kennard has demonstrated that he understands this, despite all the doublespeak of the FONC. I'm preaching to the choir, I know.
Now, back to Excite@Home, and the seemingly conflicting goals of Armstrong and Jermoulik/Bell/Doerr et al. The latter clearly see themselves as following the AOL business model, of providing both access and content. That makes sense. It's a proven business model. But -- how would this be accomplished? It would be accomplished by making Excite the start page, and "deepen" it, a la AOL, in order to keep eyeballs on Excite real estate. This would naturally lead to using the same types of tactics AOL uses to accomplish the same goals. No references to the outside community. Be as "sticky" as possible.
Nothing necessarily wrong with this (although I think as people become more and more internet educated, it becomes more difficult to do) -- UNLESS you are Michael Armstrong, trying to steer AT&T through a regulatory labrynth, one they have dealt with in the past (and lost). He is looking down the road a bit further, and he not only has part of Excite@Home's future at stake, but Pa Bell's as well. He does NOT want to have to share his pipes, at least not on anybody but AT&T's terms. He sees a potential slippery slope here, one that could ultimately undermine his IP telephony vision as well. Yet he wants to maximize data traffic on his pipes as soon as possible in order to pay for his $100 billion gamble.
So he walks the fine line. He publicly says things like "we're open to all comers." This stance is not only intended to mollify the FCC, but it is also the truth. But he is talking about content. I do not believe that he has EVER talked to AOL about allowing them "access" to their cable in the way @Home has access. Despite all the innuendo spread by the press. It simply makes NO sense. I believe that all they have EVER discussed is 1) giving AOL a spot on the @Home start page (for a price), or 2) allowing AOL to be the start page for an @Home subscriber (for a bigger price). Apparently they couldn't agree on the price.
What is the best way to deal with the Excite part of Excite@Home from Armstrong's perspective? Simply give them (or appear to give them) no preferential treatment. Treat them like any other portal. Except for two things:
1) Excite is the default start page for those with @Home service, unless the subscriber changes it to something else (can you imagine AOL doing this?). But a subscriber could only change it to, say, Yahoo, if Yahoo paid a fee to @Home that allows Yahoo to be the start page on @Home's network. @Home's property. Yahoo (or whoever) could be charged a small fee each time Yahoo was opened as a start page. If the customer wanted their start page to be CNET, but CNET had no prior agreement with @Home, they simply could not do it. Is this "wrong" (in an ethical sense)? Does this mean the customer cannot get to CNET? No. It just means he/she will have to see the Excite page first. From there, it is only a bookmark away. If they go there via their own bookmark, @Home gets no revenues from it.
Does it cost the customer more if they want a different start page than Excite? Only if they want their AOL! :) With the free content providers, the bill is footed by the providers, not the customer. They pay for the real estate, the same way their own advertizers do.
2) Excite, being owned by @Home, has the advantage of being under the same roof and developing things together. This is not really preferential treatment, it's just the Excite broadband advantage.
So @Home becomes an on ramp and a sort of "mega-portal". Other cyber properties (Yahoo, AOL, Lycos, CNET, GO, etc.) can buy space on the Excite start page, or, on a subscriber-by-subscriber basis, pay a fee to be the actual start page (i.e., they enter into an agreement to pay a fee to @Home each time a subscriber opens their site as their start page). If AOL can make a go of it by charging customers a premium over @Home's subscription fee, more power to 'em.
How much more open could you be? That alone is WAY more "open" than AOL has ever been or ever will be, unless they become in infrastructure company. They must be as "closed" as possible to survive, especially if subscription fees truly do trend to zero.
This way, Armstrong can say, "Hey, we ARE open", and he will be telling the absolute truth. The Openetters won't have a leg to stand on. With @Home, you can go anywhere you want on the WWW, and you don't even have to look at @Home's content. Their true motive -- a free ride on AT&T/@Homes's infrastructure -- will be glaring.
Excite can compete in the portal wars on their own merits, with maybe a touch of preferential treatment from @Home (default start page, collaboration on broadband content). The other "customers" may not love the cozy Excite and @Home relationship, but if @Home has 10 million sets of eyeballs, AND the best broadband delivery system, hey...pay us, or go build your own.
There is absolutely nothing wrong with charging all comers a fair price for a prominent presence on Excite@Home's network. After all, isn't that EXACTLY what AOL and all the others do? Isn't that the underlying driver of the commercialization of the internet? Isn't that the entire online advertizing model?
I believe this is the direction that Armstrong is steering Excite@Home in. NOTHING he has said, in my mind, conflicts with this model. In fact, I think everything he HAS said dovetails with it nicely. He opens his network to everybody, including AOL (without flooding and destroying the network with 20 million people all at once, as AOL would have it), in a way that isn't necessarily detrimental to Excite@Home. I would argue that it is better for Excite@Home, because it sort of throws the Excite portion to the wolves and keeps them from getting complacent. Excite EARNS their eyeballs.
In the end, @Home would wind up being sort of a hybrid of Yahoo and AOL, or maybe just a slightly watered-down AOL. A kinder, gentler, faster AOL. They provide [fast] access, and content. BUT - they don't just provide their OWN content. ANYbody can be on the start page; hell, they can BE the start page. For a price.
So. Have at it.
Craig |
