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AT&T moves good for Excite, exec says

Last week's AT&T-led cable industry shakeup may have helped Excite as much as any other company not involved in the dealings.

Last week's AT&T-led cable industry shakeup may have helped Excite as much as any other company not involved in the dealings.

AT&T's acquisition of MediaOne and its earlier acquisition of Tele-Communications Incorporated--not to mention its winning a $5 billion investment from Microsoft--suddenly made the telecommunications giant the largest cable operator in the United States. Since AT&T--via TCI--is the majority shareholder in @Home, Excite's pending merger with the cable Net access company suggests potential advantages that didn't exist when it agreed to be bought in January.

Excite could become the face of high-speed Internet cable connections in millions of homes.

But the reality of See related story: The new world order broadband Net access today is a far cry from the figures being tossed around for the future. Some estimate there were only 500,000 homes with cable modem service at the end of 1998. As for longer-term growth, broadband penetration into U.S. households, which includes access through competing digital subscriber line technology, will reach a mere 18 percent by 2003, according to market research firm the Yankee Group.

For now, the Internet is still a dial-up world dominated by the likes of Yahoo and America Online.

Once considered the second-largest Web portal, Excite in the past year has seen its reach slip behind many of its competitors such as Lycos and the Go Network, according to figures from Media Metrix. And while Excite is sitting on a huge network that can be piped directly into people's homes via desirable high-speed connections, the portal still lacks the powerful first-comer brand that nemesis Yahoo enjoys.

CNET News.com caught up with Excite chief executive George Bell to discuss his company's role in the broadband universe and the benefits of riding on Ma Bell's high-speed cable train.

CNET News.com: Since Microsoft invested $5 billion in AT&T it seems like broadband is really becoming more validated. But when it comes down to the marketplace, what's the time frame for broadband to really take off? Do you see yourself as well-positioned for that?
Bell: I think that the results of last week could not have turned out better for Excite and @Home. AT&T brings in more subscribers with MediaOne. MediaOne owns 35 percent of [high-speed cable Net access firm] Road Runner, so it brings the probability of Excite and @Home being able to do something with Road Runner--at an operational level or beyond--into sharper focus. So all of that was good for us last week.

And we also believe frankly that Microsoft's investment in AT&T is good in the sense that we may be able to accelerate some of our content and portal pipe discussions with Microsoft where I think they've built a lot of terrific verticals. So from our point of view, just speaking for Excite and @Home for a minute, the events of last week had a happy ending. But that's just circumstantial, and you're right--it just does show that a lot of these companies are focused on the broadband future.

Your other question was, "When is it taking off?" I think the critical years are the early years. Look at the advantages that Yahoo has today, not only because they started 18 months before anybody else. And so you might not think that it's an important month now or important quarter now when you think about the total number of subscribers in broadband and so forth, but it absolutely becomes the foundation for people's brand recognition and loyalty.

But in households, dial-up is still the preferred access platform and analysts predict it will continue to be for the next few years. So it seems like there's a lot of money being put on something that's probably not going to come to fruition some time. Do you think people may be just kind of jumping the gun on this?
If anybody had a crystal ball and could have seen how fast the Internet has grown, it wouldn't have taken one company public in '95--which was Netscape--and four companies public in '96, which were the search engines. They would have taken 50 companies public in '95, right? The world would have been willing to throw a huge amount of money at these things if they could have seen into the future and recognized that the value of what the Internet would deliver to people was going to be really important for advertisers and direct marketers and business-to-business.

So I guess I would say about broadband is that we're trying to take the lessons of the Internet, which is that it got much bigger, much faster than anybody thought...and let's not miss that opportunity now.

With AT&T and Microsoft teamed up together and now beginning to square off against America Online and its Netscape-Sun Microsystems alliance, where does this put the competitors who have not joined any of these alliances or have not sided with a specific platform?
I think that their future is less certain. In other words, behind Excite and @Home stand some of the largest and most well-financed media companies in the world, with AT&T and obviously TCI and MediaOne and Comcast and Cox and so forth. So we've got all the cultural values of Silicon Valley in our two companies, but all the power of traditional media behind us. And I don't know that that could be said for any of our competitors, including AOL.

And so we like our position, but we're not smug enough to believe that other viable positions couldn't be stitched together, too.

But it's also been widely rumored that, say, Yahoo would do a deal with @Home. Isn't that kind of a conflict of interest?
It would depend what the deal would be. In other words, if Excite/@Home purchased Yahoo outright, you'd probably have no conflicts because you're all the same company. But if you said, "Let's just do a distribution agreement," then it becomes tougher to align incentives.

But I was trying by way of example to give you a notion of how Excite and @Home might work with another portal. It's possible, but it would be complex. Now whose stuff are you going to favor? Yahoo's stuff or Excite's stuff? But equity in some cases becomes a Band-Aid to get you over, to bridge some of those problems.