eMailbag From Readers: AT&T-TCI, Egghead, @Home, USWeb

First reader up this week writes: “Steve, what is your opinion on whether
or not ATT will get
their way with bundled Internet access with TCI…or do you think it will
be regulated? What are the two likely scenarios for ISPs like Mindspring,
AOL, Earthlink, etc., if ATT gets its way, or if they don’t. I would
imagine if the FCC regulates, ISPs such as Mindspring will see rapid rise
in stock; HOWEVER, my main concern is what if ATT “wins?”

Reply: I think the war is over the wire first and that the FCC
should not try and regulate the future without knowing what that future
looks like. One of the reasons the world’s largest telco AT&T (NYSE:T)
wants to acquire the world’s largest cable operator TCI (NASDAQ:TCOMA)
centers on providing data.

Data is data, whether that’s voice, e-mail,
audio, video — it doesn’t matter. The bias is that voice is somehow more
valuable than other data types, wrongly so.

Early 20th century
communications law has no place in 21st century communications. You cannot
have a horse and buggy regulation on the automobile.

That said, I believe
the FCC will have to say that the wire is a wire in the “common carrier”
way a telco wire is, that ISPs can resell that wire just as they do in the
dialup Internet business.

Otherwise, we’re all back to the interactive TV
debacle and proprietary systems looking to monopolize what the Internet
will become. Let the marketplace decide the winners, not those that control
the copper wire, the least valuable aspect of the value chain.

Eggsactly Now What?

“Steve, what do you see in What could I expect from EGGS in
the near future?”

Reply: Check out
the report on (NASDAQ:EGGS) here.

An update: for the quarter
ending September 26, EGGS reported $35 million revenue, up 73% from 2Q97
and loss of $7.2 million. Six months revenue reached $64 million, up 67%
and loss of $12.7 million. Losses are to be expected in our perspective
since seems more like a startup than a oldtimer given its
Web-only relaunch. EGGS trades at 1.7x annualized revenues, which looks
fairly tame compared to its growth rate.

It has deals with AOL, Netscape,
Microsoft, ZDNet, CNET’s and to sell software/hardware
via their outlets. Cash position as of latest quarter, $59.5 million. Said
another way, subtracting the cash, EGGS enterprise value sits at about $160
million or 1.4x annualized revenues. We would like to see Egghead get more
aggressive, however, in its outlets.

Rethinking USWeb?

“Wow-what’s the news on USWeb? Up 2 5/8 yesterday to close at 17 for an
18% gain. I can’t seem to find any news to support the surge.”

Reply: CEO and founder Joe Firmage passed the baton to former
Oracle VP Robert Shaw. Firmage will become “chief strategist.” Also, USWeb
and CKS (NASDAQ:CKSG) in a pending merger, will be redubbed ‘Reinvent
Communications’ where Shaw will be CEO and CKS chair Mark Kvamme will be
chairman. Wall Street apparently expects some growth here with a few new
faces at the top. Unusual? No. Yahoo’s founders, Earthlink’s founder and
others have all handed the management to experienced managers.

Cable Channels?

“First, your @Home analysis – come on! Internet channels like a cable model
– please!! There are a bunch of reasons to purchase @Home and becoming a
content provider/controller of Web content is not one of them. The Web
will never be channel-ized! I felt that you would be the last person to
fall into the well know trap of trying to equate the new Internet model to
former communication channels.

Reply: @Home (NASDAQ:ATHM) is on my top 10 stocks to watch list
for 1998 so I’m a fan of what it’s doing. My concern centers on the ability
of the cable industry to come to grips with being data carriers and not
monopoly programming providers.

That’s like asking some of them to
undergo frontal lobotomies and pay for it. Cable providers see programming
or content much different than ISPs. Cable providers don’t know what
“access” means, they know what “subscribers” mean.

They see Internet
access as a “premium” cable channel offering, not as an all-you-can eat
free for all of content and services.


“When do you expect the top 10 watch for 1999 and will it be available to
general public. If so where (Web address exactly I should be looking for?)
The calls for 1998 were outstanding – no words to describe.”

Reply: Thank you. We’re putting up 1999’s top 10 to watch list as
close to December 31 as possible, same as last year.

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