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).