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AT&T Leverages Excite@Home to Ramp Up Cable Deployment

Demand for broadband services has reportedly forced AT&T to pressure Excite@Home to accelerate its deployment of cable modem services in key U.S. markets.

According to a report in the Wall Street Journal, AT&T (T) executives said Excite@Home's (ATHM) poor performance was the subject of a recent meeting of Excite@tHome and ts cable partners.

AT&T accused Excite@Home of dropping the ball in the high-stakes broadband marketplace and demanded the company improve performance to meet 100 percent of demand, the Journal said.

Matt Wolfrom, Excite@Home spokesperson, said the Denver meeting was a regularly scheduled gathering with its partners to review their performance and establish priorities.

"We attended the MSO Quarterly Summit in Denver last week to keep in touch with everyone because our operation is a partnership and we work together to make things happen," Wolfrom said.

According to the report, AT&T executives chastised Excite@Home as a means to pressure the company into boosting its performance.

Wolfrom said Excite@Home is delighted to see AT&T focus on its data business.

"Clearly they have lofty goals to achieve, and that's something we're glad to see and we look forward to working with out partners to address our scaling and operations on all sides," Wolfrom said.

"It's evident by subscriber growth that there is a great consumer demand for cable services and we're working with our partners to meet the demand and improve our service expansion," he added.

Excite@Home currently supplies cable modem services to over 840,000 subscribers nationwide. AT&T has publicly stated that they want to be serving a million subscribers with cable services by the end of next year.

Wolfrom said the Excite@Home is intent on working with their partners to meet the demand for cable modem access nationwide.

"We're working with our partners to address out scaling and operations on both sides of the business," Wolfrom said.

"We're looking at what's working and what needs to be improved," he added. "As we approach the one million subscriber mark, and look to add millions more, we're going to continue to work closely with our partners to scale the capacity and ramp-up installations."

Bill Whyman, Internet Strategist at Legg Mason (LM), said the tension between Excite@Home and AT&T is the overall performance of the cable system and that Digital Subscriber Line access is beating cable in the race to deploy broadband services.

"The tension between AT&T and Excite@Home is over the performance of cable systems," Whyman said. "Cable is at a disadvantage to DSL services because it was not designed for 2-way connections, even if cable has a broader capacity over DSL, network upgrades are slowing deployment."

Whyman added that AT&T needs high-performance cable capacity in order to provide telephony services.

"Telephone lines provide 99.999 percent reliability with low latency," Wyman said. "Cable doesn't provide that level of reliability, the system just was not designed for it."

Whyman said there is a third reason why AT&T is pressuring Excite@Home to perform. Wyman contends that accelerating cable deployment would put an end to the current open access debate currently taking place in a dozen municipalities nationwide.

"Performance problems for Excite@Home service and downtime is throwing gasoline on the fire for the open access debate," Wyman said. "Local municipalities are rightfully concerned over the quality of service cable modem access currently provides and they want to make sure the terms of the local franchise contracts guarantee reliability."

AT&T is the largest shareholder in Excite@Home, with a 26 percent stake. However, the company controls 58 percent of the voting rights. Other major shareholders include cable operators Cox Communications, Inc. (COX) and Comcast Corp. (CMCSA).