October 1, 1999
Excite At Home at a Defining Moment;
Partnerships Considered With Rivals
By KARA SWISHER, REBECCA BLUMENSTEIN, LESLIE CAULEY and
NICK WINGFIELD
Staff Reporters of THE WALL STREET JOURNAL
When there is smoke, there is fire. But in this case, there is only smoke --
so far.
Some news stories and Web message boards have suggested in recent
days that Excite At Home Corp., the Redwood City, Calif., company that
provides high-speed Internet access over cable lines, may make any
number of wildly different moves. These range from selling its
much-trafficked Internet portal to America Online Inc., to splitting its
content and access business into separate companies. Excite At Home's
stock has fluctuated accordingly, as have the shares of perspective dance
partners.
But people close to the situation say such dramatic moves are unlikely for
now. Excite At Home and its cable owners -- especially AT&T Corp. --
have been in increasingly complex talks about how to settle the issues that
face the company.
Critical topics include settling a contentious
political fight with online companies, especially
AOL, regarding access to cable systems. Also
on the table: simplifying the complex rules that
govern Excite At Home, and addressing
AT&T's desire to focus on its high-speed Internet access distribution
business and not content. In a statement, AT&T acknowledged it has had
discussions about the future of Excite At Home but described them as
preliminary. Excite released a statement noting that it is continually
assessing its alternatives both internally and externally, but it won't
comment further until it decides its course of action.
Talks also have been reinvigorated with AOL, Yahoo! Inc. and Microsoft
Corp. about possible alliances that would allow their services to be carried
on Excite At Home's service.
But people close to the situation at all these companies say they are wary
of investing in Excite At Home in exchange for broader access to its
high-speed service. They cited the high price of an ownership stake, as
well as the likelihood that they wouldn't be able to get lucrative preferential
treatment on the system, or complete access to its customers.
Asked whether a cable-access deal was imminent, Steve Case, AOL's
chairman and chief executive, said in a recent interview, "There's more
desire on the part of the cable companies then there once was" to strike a
pact. An AOL spokeswoman declined to comment on whether the
company is negotiating with Excite At Home.
One idea suggested by AT&T is to split up Excite At Home so
distribution, which refers to the access network, would be separate from
content, which includes Excite and the other interactive services At Home
offers. But so far, there have been no formal proposals, said people
familiar with the situation.
Nonetheless, AT&T is under pressure from regulators to persuade its
partners in Excite At Home to open up At Home's home page to other
online providers. C. Michael Armstrong, AT&T's chairman and CEO told
analysts this summer that AT&T would adopt such a position after 2002,
when AT&T's exclusivity agreement with At Home expires.
This week, Mr. Armstrong said this remains his best option. "What I think,
and what I am working on, is to bring some definition to post-exclusivity,"
said Mr. Armstrong, who is actively involved in sorting out AT&T's At
Home affairs. "I have announced that AT&T would welcome and seek
commercial terms from other parties."
Mr. Armstrong has been emphatic that AT&T wants no part of the content
business on the Internet, and that the phone company's future rests on its
role as a distribution medium that is open to all sorts of content. AT&T
inherited its stake in At Home with its purchase of Tele-Communications
Inc. That 57% stake of the company's voting stock became more
complicated when At Home purchased Excite in January. The purchase
caused widespread confusion about whether Excite would get priority on
Excite At Home's interface with users of its cable service.
AT&T could simply proclaim that it will open up its own network post
2002, and persuade the cable players to strike an agreement before then
with another provider such as Yahoo, thereby proving to regulators that
the system is open. It also could push to separate Excite At Home into two
companies, one for content, the other for distribution.
AT&T's cable partners are getting fed up with the entire hullabaloo.
"Something has to be done soon," laments one At Home cable partner.
"All this speculation is getting in the way of business."
And business, at least for the At Home board, has been tough lately.
According to people close to the situation, At Home board meetings have
turned rancorous, with AT&T and its cable partners going back and forth
about the best way to proceed. A big part of AT&T's problem is that it
has no control over its cable partners. Though it owns a majority of voting
stock in At Home, AT&T can't force through decisions because of the
way the company has been structured. Any major deals or corporate
governance changes must be approved by key cable partners.
That is not to say AT&T hasn't tried to throw its weight around. Aiming to
get more support, AT&T recently threatened to put out a public statement
saying that it didn't intend to continue having an "exclusive" arrangement
with At Home once its contract runs out in 2002. The implicit threat was
that the statement, issued in such a public manner, would cause At Home's
stock to take a hit. Several people say they saw a draft of an AT&T
statement that was never released. AT&T Thursday declined to comment
on the matter.
Any kind of talk that paints Excite At Home as a pawn among cable
powers has riled Tom Jermoluk, the company's chairman. He has asserted
publicly many times that Excite At Home controls a critical juncture point
of the broadband Internet future. This is why, he has said, companies like
AOL, Yahoo! and Microsoft are interested in striking a deal.
But that has not happened yet, despite continuing talks between Excite At
Home and many of the major Internet companies. In fact, after a long
series of talks, the relationship between At Home and AOL has
deteriorated into the bitter political fight over open access. And a deal with
Yahoo! that was negotiated in January by Leo Hindery, president of
AT&T's cable and Internet unit, was rejected by the board because board
members believed it gave up too much control to Yahoo!. |
