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By NicoDetourn
August 23, 2001

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Agence France-Presse reported that analysts at Bank of America have reportedly said Excite@Home "should be able to restructure its relationship" with the MSOs in part because, AFP said, "the cable partners would be 'very reluctant' to go through growing pains with another company."

That is a frequently expressed point of view that appears to make some sense, but I don't believe it reflects what's really going on here.

The cable "partners" and Excite@Home have been through several restructurings over the last two-plus years. Those restructurings bring about new business relationships, and the MSO's are old hands at tweaking business relationships -- at times it appears that's all they do. Since all the parties understand and abide by the terms of these restructurings (at least until the next one), very few of the reported possibilities currently on the horizon would actually involve what the AFP calls "growing pains with another company," emphasis added. So what could this be referring to?

Where we might expect to find "growing pains" -- in the sense of there being a learning curve and a period of adjustment -- is at the technology level, where services currently provided to the MSOs by Excite@Home are provided by someone else, or are independently developed by each MSO for itself.

This is the same issue that gets raised in the familiar analysis that the MSOs couldn't easily replace what Excite@Home provides and carry on in its absence. (This is also what's at issue when subscribers wonder, "What will happen to my service if ATHM folds?")

However, the problem with this learning curve and "growing pains" analysis is that even if the MSOs are dependent on @Home for Internet services, it still has nothing to do with whether or not Excite@Home survives as a "going concern."

From the point of view of the MSO, avoiding "growing pains" requires only that the operation of the @Home network -- its hard core functionality -- not be disrupted.

Beyond that, though, it seems clear (as it has for a long time now) that the MSOs could hardly care less about the the company Excite@Home, and that its remaining in business is only a matter of their convenience. All that matters is the control and management of the company's network and the uninterrupted provision of services.

Since there is consumer demand for cable Internet services, it seems a safe bet that the provision of services to the MSOs will be picked up by whichever company ends up owning and controlling the relevant assets of Excite@Home. Whether that is AT&T Broadband, Comcast, AOL Time Warner, Disney, Microsoft, or someone else, the interested parties will structure new agreements and that will be that.

So when we read that analysts at Bank of America said, emphasis added, "the cable partners would be 'very reluctant' to go through growing pains with another company," it doesn't refer to anything real: The "[an]other company" is likely already one of "the cable partners," and the only "growing pains" they'll experience will be the traditional "one time" restructuring charges, and the inconvenience of haggling over what remains of Excite@Home, which is simultaneously the center of the action and a bit player. The report is just another Alice in Wonderland analysis of the shell game we've been watching for two years at least, and arguably since @Home's founding.

That's why I said what I did the other day (#53452) about confusing companies with their products, and confusing products with their underlying technologies. These are usually different things and are easily separated. There's a chain of dependencies, from the company, to the product and service, and down to the relatively independent technology, which is the ultimate source of the value. Companies, products, and brands may come and go, but useful technologies will continue to be applied and adopted.

Based on that, in the eventual absence of Excite@Home:

� Cable broadband will continue to grow.

� The "At Home network" will continue to operate, no matter who owns it or how it is named and branded.

� The MSO's subscribers to the current @Home service will continue receiving service, with minimal if any disruption. Most won't care about the change. Some won't even notice. Impact on new subscribers will be nil. (Internet access is a commodity product with limited branding potential, and we'll find that this is even truer for broadband than narrowband. @Home's brand equity is minimal, and bigger brands are sacrificed all the time.)

� One or more of the controlling MSO's will administer broadband Internet services to the rest of the cable "fraternity" (makes 'em sound like a buncha swell guys, donnit?)

� The final status of Excite@Home is a detail to be worked out on a timetable governed more by tax consequences than anything else, including existing partner agreements, which can be honored or rewritten mostly at AT&T's pleasure.

� Unaddressed so far is the status of the media properties, which have got to wind up somewhere. I believe the most logical of the front line players to be interested in the media properties would be AOL Time Warner. But at that point we're looking at rather far-reaching negotiations (read: late-stage open access deals.) I wouldn't entirely rule that out, though: AOL has always had eyes for cheap eyeballs. Taking over the media properties on some basis (not necessarily a buyout) could neutralize them as a problem for Excite@Home, or for AT&T's "management" of Excite@Home as a component of AT&T Broadband. AOL Time Warner would probably want something in return.

I think the MSOs, under the broad direction of AT&T, are following a script (albeit one with room for improvisation and surprises, e.g., Comcast's bid for AT&T Broadband) whose final act was already written by the time George Bell's resignation was announced 11 months ago. "Script" doesn't mean the dark conspiracy often suggested -- I don't think there is one. It's a tragedy, but I doubt it's a crime.

The[y] are simply acting on an analysis (a correct one, in my view) that sees no place for a separate company and brand in the role that @Home, and then Excite@Home, was intended to play. So the company is being restructured out of existence.

Nico Detourn