The company sits at the enviable confluence of content and high-speed access to the Net--a combination that elicits dollar signs in many analysts' eyes. But a handful of service problems and proposed limits on data uploads have some users feeling like they're being short-changed.
The company says that despite a series of incidents, the promise of the technology they provide--fast navigation around the Web via a cable-based connection to a PC--is a reality. It is only isolated details, such as network upgrades, that need to be smoothed over.
Industry analysts admit lofty expectations surrounding @Home are likely to let down some users in the early years of its growth, when supply may not be able to keep up with demand.
And if a rumored pairing with AT&T's WorldNet dial-up service becomes a reality, the focus on the performance of @Home may only grow sharper, especially after its acquisition of Excite. The merger--the biggest Internet deal to date--makes @Home a serious player in the high-speed Net arena.
Yet for all the hype and recent interest in broadband connections, even alternatives like digital subscriber lines (DSL) only have a limited number of subscribers. About 500,000 people use cable modems, while DSL is used by fewer than 100,000 people, by most analyst accounts.
As the largest provider of cable Net service, the company is the biggest broadband game in town.
"Expectations have been set perhaps way too high," said Michael Harris, president of Kinetic Strategies, a broadband market research firm. "You hear about people complaining that the service is not as fast as it should be. But ask them if they'd give it up and go back to dial-up?"
Still, Wall Street--where many financial analysts have "buy" or "accumulate" ratings on the stock and shares have traded at more than $100 for about two weeks--loves the youthful data-over-cable company.
But if @Home wants to continue leapfrogging its competitors and retain its stratospheric stock price, it needs to avoid being saddled with the stigma that its service has become a victim of the company's success, according to critics.
"I think that we'll see more [service problems] as more and more users sign up and as the applications change and as users become more accustomed to the speeds and demand more from it," said Lisa Pelgrim, senior analyst at Dataquest.
Regional performance problems persist
@Home says its customers typically attain download speeds of 1.5 megabits per second (mbps) to 3 mbps.
But thousands of @Home subscribers in Connecticut have suffered with slow service, and some information packet loss, for months. The company said increased usage and network traffic slowed access speeds there considerably.
The problem, at a regional data center in Hartford, Connecticut, affected subscribers accessing @Home via its partnerships with three separate cable operators: Tele-Communications Incorporated, Cox Communications, and Cablevision Systems.
"The thing I do not understand is why the cable companies can not just come clean and say 'Yes we have a problem, and we are working on it,' instead of trying to pass the buck and say that the network is broken because our users are using the service they pay for," said Scott Greczkowski, moderator of the Connecticut @Home Users Group. Greczkowski, who works as an information systems director for a law firm, formed the group in response to the performance problems in Hartford.
@Home did later lease a new high-speed DS-3 circuit to alleviate the sluggishness. Yet a couple of the group's members have even considered filing a class action lawsuit on behalf of area users.
In addition to the slow service, a TCI spokesman confirmed that some data transfers were experiencing packet loss, or missing information, from incorrect filters. That problem was fixed late last month.
But those service problems in Hartford were not the first for @Home.
Last year the company had similar problems in Fremont, California, its first market and a neighboring community to @Home's corporate headquarters in Redwood City, California.
@Home blamed that problem on "a misconfigured router that inadvertently capped download speeds." The company resolved the issue in December. But some consumers in the area continue to complain about performance and customer service issues, claiming @Home and TCI have failed their first customers.
"The simple fact is this: TCI is not delivering the service they are advertising," said Robert Magruder, an @Home subscriber in Fremont. "They are adding users as fast as they can, while allowing existing users with unreliable service to call repeatedly, only to be given an unbelievable run-around and promises of fixes within a matter of weeks."
Technical troubles and speed limits?
The company also has some users upset over a plan to curtail allowable upload speeds.
@Home already has imposed upstream limits on some users in the Fremont market. Now the company is considering--but has not yet implemented--the same upload limit in all of its markets nationwide.
The limits of about 128 kilobits per second (kbps) are equivalent to ISDN speeds. @Home has said 128 kbps uploads are in line with competing DSL offerings, and are substantial for all but the largest of file transfers.
Access: Internet through TV cable
Speed: Averages 1.5 to 3 mbps
Price: About $39.95 per month.
Continuous connection to the Net, no dial-up necessary. One single price for high average speed. Services like @Home have a large internal network cache that can reduce congestion from the Internet.
Users in any given neighborhood share cable network's bandwidth. If many users are online simultaneously, can possibly cause congestion and slower download speeds. Service available only in small number of areas.
$99 to $175
Number of users:
End of 1998, about 500,000 in U.S.
Speed: Averages 1.5 to 3 mbps
Price: About $39.95 per month.
Advantages: Continuous connection to the Net, no dial-up necessary. One single price for high average speed. Services like @Home have a large internal network cache that can reduce congestion from the Internet.
Limitations: Users in any given neighborhood share cable network's bandwidth. If many users are online simultaneously, can possibly cause congestion and slower download speeds. Service available only in small number of areas.
Startup costs: $99 to $175
Number of users:
End of 1998, about 500,000 in U.S.
Internet using upgrade to existing phone lines.
384 kbps to 7.1 mbps.
About $49.95 to $189.95 per month
Continuous connection to the Net, no dial-up necessary. Service shares phone line with traditional voice services. User has dedicated line to central phone office.
Speed of line drops sharply with distance from main phone office. Harder to get high speeds in areas with dispersed population. Service still available only in small number of areas.
$200 to $550
Number of users:
End of 1998, fewer than 60,000 in U.S.
Speed: 384 kbps to 7.1 mbps.
Price: About $49.95 to $189.95 per month
Advantages: Continuous connection to the Net, no dial-up necessary. Service shares phone line with traditional voice services. User has dedicated line to central phone office.
Limitations: Speed of line drops sharply with distance from main phone office. Harder to get high speeds in areas with dispersed population. Service still available only in small number of areas.
Startup costs: $200 to $550
Number of users: End of 1998, fewer than 60,000 in U.S.
But, again, some users are perturbed by the limitations, considering the regulations a potential step backward. Also, some heavy-duty users are afraid that in order to get faster upload speeds, @Home will want to charge them a higher fee in the future.
"Basically they are trying to take services away from us and charge us more," Greczkowski said.
Yet of the customer complaints forwarded to @Home from cable partners, only one percent had to do with speed issues, company spokesman Matt Wolfrom said.
"There may be some smoke, but there's no fire," he said.
@Home did not make executives available for this article. But as recently as November, in an interview with CNET News.com, @Home chief executive Tom Jermoluk said the company is reaching out to as many customers as possible, as quickly as possible.
"Right now it's a land grab--this isn't a margin game. It's how many customers do you get signed-up and establish a relationship with," Jermoluk said.
Share and share alike
The @Home cable modem service is known as a "shared network," an aspect that differentiates it from DSL networks.
The shared network concept is simple, but poses some interesting problems. Users on any given neighborhood network "share" a limited amount of bandwidth. The more users on the network at any one time, the slower the speed for everyone, as the bandwidth capacity is split equally. DSL access speeds, in contrast, are not affected by the amount of users on a network.
Customers have joked that such potential bandwidth traffic jams have kept them from recommending the @Home service to a neighbor--for fear of slowing their own service.
The shared network aspect is not necessarily a drawback; it just means service speeds can fluctuate widely. In theory, if everyone is online at the same time, data traffic could become congested. In practice, traffic on the Net--traveling via Internet Protocol--typically occurs in short bursts, meaning even if many @Home users are online at once, they may not affect others' service speeds.
However, it does leave @Home in an awkward position: the more successful the company is, the more it chances clogged bandwidth and angry customers, who must contend with the slower service.
@Home has limited the length of "broadcast quality" video users can download since the company went public in 1997. The 10-minute limit applies only to streaming video delivered at a rate of 30 frames-per-second--the same quality used by television stations and cable programmers.
The limitations were spelled out in @Home's IPO registration statement with the Securities and Exchange Commission, and have been included in every quarterly filing since. But when the news media--including CNET News.com--highlighted the problem and consumers caught on, many expressed their disapproval.
@Home contends allowing 30 frames per second (fps) clips would bring down the network if multiple users tried to access the bandwidth-hungry videos at the same time. And few, if any, sites offer 30 fps video clips, a spokesman said. The company to date has no limitations on other streaming video, typically 15 fps clips.
The company is taking steps to avoid any exceptions. @Home announced a partnership with RealNetworks to create a streaming audio/video standard for broadband networks, a relationship that could put an end to video-related issues for the company.
"By tweaking its distributed data architecture to accommodate the needs of streaming media, @Home is positioning its network as one that is once again ideal for downloading rich media content from the Internet," noted a recent report from industry watcher Zona Research.
Waiting for Godot?
Another gripe about the @Home service--something that, in fairness, also has plagued DSL technology--is that consumers who would gladly pay for the service, don't live in areas where it's offered.
For example, the service is not yet available in Los Angeles or San Francisco, one of the most technology-centric cities in the nation. Ironically, even employees at @Home's company headquarters in Redwood City cannot access the Internet over the cable infrastructure.
Yet while the deployment delays aren't necessarily @Home's fault, the company shoulders some of the blame for the slow rollouts.
The company is often at the mercy of its cable partners' ability to upgrade their systems to handle Internet traffic and voice telephony. The upgrades are capital intensive projects, however, that require substantial up-front funding.
Thankfully, the pace with which @Home's cable partners are upgrading their systems appears to have quickened recently. Some of the company's cable partners are now adding 1,000 subscribers per week, according to reports. And the deep pockets of AT&T are likely to alleviate some of the slow rollouts. AT&T should be able to fund TCI's upgrades at a faster pace.
About 45 percent to 50 percent of the nation's cable systems have been upgraded to the more advanced two-way cable, according to analysts.
Raising the bar
Since @Home's service is "always on"--or continuously connected to the Net--its users are freed from busy signals and cumbersome dial-up procedures. But while those freedoms endear @Home to most of its customers, for others its advertising promises fall somewhat short.
"Compared to surfing at 56K, this service is a dream," said Stephen Garrison, an @Home user and service provider technician in Richmond, Virginia. "Unfortunately, the speeds they advertise are nowhere near close to what I'm actually getting."
Although @Home advertises speeds of up to 3 mbps, Garrison said he gets speeds far slower. But, despite the disappointing performance, Garrison, like most @Home users, won't change. "For $40 a month it's still a steal, even though the transfer rates are slower than they should be," he said.
Kinetic Strategies' Harris said @Home's subscriber retention numbers tell the story best. "It's not like people are defecting," he said.
Many users, if they have experienced problems with @Home, shrug them off.
"They're an ISP, and they're expanding and they're going to have growing pains just like AOL went through growing pains," said Bruce Byrd, an @Home user in Livermore, California. "I haven't seen any of the hiccups."
Byrd said he has only been without service one day in about a year.
"I wouldn't trade the service," he said. "I'm really spoiled now with the speed."
The company contends that its service, although not free from problems, is better than anything else on the market.
"They're still getting a service that's more robust than anything else out there," said @Home spokesman Matt Wolfrom. "You can see that by the fact that we're adding more people everyday."
Fans on Wall Street
Despite the series of service issues, and @Home's admitted reliance on the cable operators to make its service available, Wall Street has cheered the startup company.
Of course the broadband Internet access market is still in its infancy, but @Home did end 1998 with 331,000 subscribers--ahead of even the highest projections.
Shares have soared of late, spurred by recent deals. The stock jumped about 50 percent in a two-week period after @Home signed a 20-year Internet backbone agreement with AT&T. Shares are now trading above the psychological $100-a-share barrier and have peaked as high as 126.75.
Most analysts say the company's potential is huge, despite its quarterly losses. It already is the leading cable modem service and most projections peg @Home's subscriber base at more than 1 million users by the end of 1999.