On the one hand, the portal and Net access provider--which boasts AT&T as its biggest shareholder--needs to offer free Net access to compete with similar strategies from Yahoo and AltaVista. But the service now competes directly with AT&T's dial-up WorldNet offering, one of the largest Internet service providers (ISP) on the Net.
AT&T did sign off on the deal, and the companies say there is no direct conflict. But Ma Bell is far from enthusiastic.
"It is something we were aware of, but we did not strategize with them," said AT&T spokesman John Heath. "But they're a separate publicly traded company, and have to do what's best for all of their stockholders, not just us."
The conflict highlights a growing tension in the Internet industry as more brand-name players begin offering free Net access in competition with established players like America Online or Microsoft. It also underlines what some analysts say has been a consistently vague Net strategy from the long-distance giant.
Close on the heels of the original merger between Web portal Excite and cable-based Net access provider @Home, AT&T was rumored to be considering folding its own WorldNet brand into the high-speed Internet company's operations. That never happened. But in the ensuing year, some analysts said WorldNet has had a less-than-stellar performance.
"WorldNet hasn't been their primary focus for a while," said Jupiter Communications analyst Zia Daniell Widger. "The numbers have stayed pretty static."
But analysts say the AT&T-Excite@Home tug-of-war could provide the clearest example yet of how free and pay services increasingly will coexist, even under the same roof.
"What's happening is that the industry is looking at numerous ways to attract different people to the Internet," said Jeff Sadler, an analyst with FAC/Equities who focuses on the ISP business. "I think there's plenty of room for all of them."
America Online has actually taken an early lead in offering multiple Net brands for different kinds of subscribers, analysts note. That company uses its CompuServe service to offer low-cost access, and has even started a free service in the United Kingdom under its Netscape brand. The flagship AOL brand has kept its $21.95 price tag, however.
Excite@Home's new free service is likely to cannibalize some WorldNet subscribers, analysts say. AltaVista has said that about 50 percent of its users have made its free service their primary means of accessing the Net. If this figure holds true for Excite@Home, WorldNet is likely to see some attrition.
"I think people will shift around based on taste," Sadler said. "But that's why the companies have numerous brands."
To some extent, AT&T is mirroring AOL's strategy by allowing Excite@Home to go down the path of free access. Even if it loses some WorldNet customers to the free access world, it hopes to get them back as Excite@Home persuades its dial-up customers to move to the AT&T-controlled high-speed cable Net access service, analysts said.
"If Excite@Home pulls people away, they will eventually be signing up for the cable service anyway," said Emily Meehan, an industry analyst with the Yankee Group. "They're kind of in this together."