Interview with Tom Jermoluk: part 1
No Place Like @Home
March 01, 1999
by Chuck Lenatti
Like the cable broadband service it's trying to
build, @Home Network is a work in progress.
Construction continues inside its modern,
officeless headquarters (formerly occupied by
Ampex Corp.) and down the street from
Kenworthy's Carburetor Electric Service in
Redwood City, Calif. New buildings are
sprouting up across Broadway Street in anticipation of even more
growth.
Then there's the merger with larger next-door neighbor Excite Inc.,
which @Home bought in January for about $6.7 billion in stock.
Similar to the twin fountains that separate @Home from Excite, the
buildings are virtually mirror images of each other--at least they won't
have to redecorate.
But @Home's major project is to build its cable-modem service. The
company had hoped to ride the coattails of its cable TV partners, such
as Tele-Communications Inc. (TCI) of Englewood, Colo., and provide
cable subscribers with fast, two-way communications. TCI,
however--which owns a 39 percent stake in @Home--was more
interested in developing digital cable than broadband, and only about 3
percent of TCI's cable plants are two-way. As a result, @Home's
service has been limited to pockets such as Fremont, Calif., Hartford,
Conn., and San Diego--a total of about 330,000 subscribers. Based
on @Home's Jan. 29 stock price of $123 and outstanding shares of
122 million, the cost of providing its service is about $45,000 per
subscriber.
Enter AT&T Corp. Chairman and CEO C. Michael Armstrong, who
in July bet his company's future on broadband cable by purchasing TCI
for about $48 billion. Long- distance giant AT&T sees cable as its
conduit to the local telephone market, which it has been denied access
to by the Regional Bell Operating Companies (RBOCs), and @Home
is a critical component of Armstrong's plan--in fact, it's "strategic and
integral to AT&T's vision," he says.
Before you try to download "Titanic," though, remember that relatively
few cable subscribers can get @Home--not even residents of the
company's Redwood City home. Upgrading the cable infrastructure
will cost billions of dollars and can't be done overnight--even by
AT&T. Then there's the challenge of tying all these fractious cable
systems together. After all, what's the point of having broadband if you
can't send e-mail to Aunt Minnie in Milwaukee? In addition, the
company doesn't offer much in the way of unique content; it primarily
aggregates content from other sites.
Moreover, the competition is heating up. In November, America
Online Inc. (AOL) of Dulles, Va.--which not long ago seemed
destined to partner with @Home--purchased Netscape
Communications Corp. of Mountain View, Calif., for about $4.2
billion. Like @Home, AOL wants to "own" Internet consumers, no
matter how they access the Net. In addition, last October the
telephone companies settled on a digital subscriber line standard,
G.Lite, which may lead to broadband over telephone wires.
Suddenly, after several years of relative obscurity, @Home's feisty
young CEO, Tom Jermoluk (known as "TJ"), has become very busy.
A former resident of Hawaii, Jermoluk is accustomed to big waves,
and they've been coming fast and furious during the past few months.
Jermoluk has been a tireless proponent of cable broadband. Now,
with AT&T, he has a company behind him that's as committed to
@Home's success as he is.
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