@Home will pay telephone giant AT&T an undisclosed sum for two fiber optic channels, capable of speeds reaching 2.5 Gbps (gigabits per second) each. Stretching over AT&T's 15,000-mile network, the new backbone capacity will provide @Home with a hundredfold expansion of its ability to deliver online access, according to the company.
Shares of @Home jumped 20 percent to close at 96.375--well above its 52-week high. The stock has traded as high as 84.75 and as low as 20.5 in the past year.
Investment bank Janco Partners, however, cut its rating on the stock to "market perform" from "buy."
"We love the company long-term...but this is based on price appreciation," said Janco Partner analyst Ted Henderson.
As a result of the deal, @Home will no longer use Sprint as its backbone provider, since under the new contract with AT&T, it will not have to pay for additional capacity. Redwood City, California-based @Home has used Sprint's services since the company launched in 1996.
Even though @Home is a cable company, it depends on fiber optic technology to deliver data over most of its network. Coaxial cable is essentially limited to the so-called last mile into the home.
Set to be first deployed by April, with completion of the project in August, the fiber optic network will allow @Home to provide service to 5 million broadband users, according to the company. As of last quarter, @Home claimed about 210,000 customers. Many analysts now peg that number closer to 300,000.
The backbone will use dense wave division multiplexing (DWDM) technology, which increases capacity by transmitting data as different colored pulses of light. DWDM will also enable @Home to increase its capacity as the technology advances--without having to pay for additional hair-like strands of fiber.
In addition, @Home gets co-location space in many of AT&T's facilities, and as a result will be able to install routers and other equipment.
Company executives said the network switch will allow the company's @Work business division to sell broadband virtual private networks (VPNs) to large corporations. The company's @Media content division will be able to develop more multimedia content and use higher-bandwidth applications, executives said.
One of the leading high-speed data-over-cable providers, @Home has partnerships with 18 of the top cable operators. Tele-Communications Incorporated, in the process of being bought by AT&T in a $48 billion deal, is the largest @Home shareholder.