Pat, more broadband needed:
AT&T to Build At Home's Backbone
Craig Bicknell
12:00 p.m. 6.Jan.99.PST
At Home, the company that provides fast Internet
access over cable, will pay AT&T US$100 million to
provide At Home with a new Net backbone that will
makes its services available nationwide.
The company said on Tuesday that the system,
consisting of two fiber-optic channels capable of
moving data at 2.5 gigabits per second, would
begin operation in the middle of the year and
would boost At Home's capacity by 100 times,
allowing it to serve up to 5 million broadband
users in the near term, and nearly unlimited
numbers in the future.
The broader reach and greater capacity could help
At Home, based in Redwood City, California,
create a next-generation, high-speed online
service to challenge traditional Internet service
providers -- not just the niche cable-modem
markets, analysts said.
"This makes a lot of sense," said Jennifer Klein,
an analyst with Deutsche Bank Securities. "It puts
them in a more strategic place against America
Online" and other Internet service providers.
The news sent At Home's (ATHM) stock soaring,
up $10.88, nearly 15 percent, to $91.12 by late
morning on the Nasdaq.
"The big benefit to consumers is that our
backbone will be one of the fastest, if not the
fastest, in the United States," said Milo Medin, At
Home's chief technology officer and cofounder.
"More importantly, we'll be able to maintain that
performance as we add many, many new users."
Those users may include Fortune 500 companies,
which will tap At Home's @Work service for
high-speed network needs. Under At Home's
previous contract with Sprint, the company
couldn't pursue large corporate customers for fear
of overtaxing its network resources.
At Home didn't disclose the value of the contract,
but analysts said the company was investing
about US$100 million in the new backbone.
"This deal won't change our commitments to Wall
Street in terms of profitability," said Medin. "It's
neutral in the short-term, but we expect big
benefits in the long-term."
The big loser in the deal, according to Medin,
could be At Home competitor RoadRunner, a unit
of Time Warner, which still buys backbone
services from multiple providers.
"This separates the top tier from the second tier."
Medin insisted that At Home selected AT&T (T)
based on merit, not because of AT&T's pending
acquisition of cable TV operator TCI (TCOMA), At
Home's largest shareholder. |
