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Excite@Home and the lessons of hype

CNET News.com's Ben Heskett writes that no one in the Net era has failed quite like this one-time high flyer--and as we can now see, its demise was only a matter of time.

When @Home Network Chief Executive Tom Jermoluk strolled into CNET News.com's offices in the winter of 1998 for an interview, he confidently dubbed the company's broadband business prospects a "no-brainer." Things looked promising for the company then, given the number of cable television subscribers in the country and the deals @Home was striking with operators like Cox Communications and Comcast.

Clearly, Jermoluk was on to something. The lack of brain power exhibited during the rise and fall of what is now Excite@Home is truly striking--the broadband equivalent of the ongoing Enron debacle.

You see, Jermoluk, or "TJ" as he's known to friends, is right. It is a no-brainer.

Excite@Home, with 4.1 million subscribers as of its last quarter, was a slam-dunk. You take the homes passed by a cable network to deliver television, imagine that a certain chunk might like to add fast access to the Web, and what have you got? A bankrupt non-entity that drops service with little notice to hundreds of thousands of loyal customers and subsequently announces its intentions to disappear into thin air by the end of February 2002?

It's crazy.

Counting just the major strategic snafus, such as the bizarre $6.7 billion merger with Excite to "marry" broadband with Internet content and its Byzantine relationships with its cable partners--particularly AT&T--Excite@Home may be best thought of as a triumph of that most hated of marketing words: synergies.

Excite@Home has some assets, such as an Internet network. But it was also born in the Net era, when everything was "virtual" or otherwise represented by some PowerPoint cloud. As investors realized over time, the company was simply a middleman between stodgy cable companies and the Internet, taking a 35 percent toll for every customer along the way.

Taking that basic, stable business and extending it to a broadband dreamland where someone would pay for a variety of services we haven't even thought about yet--as is often spoken in technology--and running the operations like the revenue possibilities are infinite was a prescription for disaster.

But 4.1 million subscribers don't lie.

The loser is, as usual, the typical person who simply wants a fast connection to the Net. What was once a healthy broadband market with a wide array of competition between phone companies, cable companies and start-ups has rapidly dwindled to next to nothing. Stodgy Baby Bell versus stodgy cable company? That hardly seems like a recipe for competition, pricing pressure or innovation.

Excite@Home had a little more than 200,000 subscribers back in 1998, when Jermoluk--who now resides at original @Home investor Kleiner, Perkins, Caulfield & Byers--predicted smooth sailing for the venture. Now, with the dismantling of a 4.1 million subscriber broadband behemoth, millions of customers are left holding the broadband bag as executives and lawyers duke it out for the scraps.

Analyzing failed businesses can often be like so much Monday morning quarterbacking--a day late and a dollar short. But no one in the Net era has failed quite like Excite@Home, and as we now see, its demise is the no-brainer.