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Deal no boost to broadband
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January 19, 1999: 4:08 p.m. ET
@Home acquisition of Excite won't push high-speed 'Net access
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NEW YORK (CNNfn) - With its proposed $6.7-billion acquisition of Excite Inc., @Home Corp. is looking to boost the delivery of high-speed Internet access to more homes. But analysts doubt Excite's Web portal clout will push high-speed access into the mainstream.
By teaming up with a well-known Internet brand in Web portal Excite (XCIT), @Home (ATHM) - a provider of Internet services over cable television wires - is looking to push high-speed access to a mass-consumer level.
Cable-based Internet access can provide service up to 300 times faster than services over traditional phone lines.
Despite @Home's hopes, analysts don't believe the deal will boost broadband Internet access into more homes.
Currently, broadband Internet access - with which a single channel can carry several data channels simultaneously - has been limited by infrastructure. Very few consumers have access to cable-based Internet service, and cable and phone-service providers are still working to build their networks.
"I don't think it changes the landscape," said Bruce Smith, an analyst at Jefferies & Co. "It gives [broadband] a higher profile, and maybe it pushes phone companies to be more aggressive in building their networks."
Although @Home's link with an established Web player may help promote more awareness of high-speed Internet access, analysts say Excite's services and brand name won't be enough to drive more users to subscribe to @Home.
"The way browsers work, you can set any default portal you want," said Philip Sirlin, an analyst at Schroder & Co. "In a world where you can hop from point to point with a click of a mouse, it's unclear how much a portal is really worth."
Forcing AOL's hand
One short-term effect of the deal, however, is that it forces the hand of other Internet service providers, particularly America Online Inc. (AOL). Consumer demand for high-speed Internet access is on the rise, and analysts believe the next two years will be a boom for broadband as services become more widely available.
AOL recently hooked up with local phone-service carrier Bell Atlantic Corp. (BEL) to offer Digital Subscriber Line (DSL) access to Bell Atlantic's customers.
Also, rumors are swirling regarding a deal that would link AOL with Hughes Electronics - which owns the DirecTV satellite broadcasting service - to provide some sort of high-speed Internet service.
But analysts say AOL still needs to outline its broadband strategy.
"For AOL, the question is: What is going to be their high-speed access answer?" said Daniel Rimer, analyst at Hambrecht & Quist. "How is it going to be competing with @Home over the long term? It catalyzes the pressure AOL is under to understand and explain their high-speed strategy."
In one sense, however, the deal could work to AOL's advantage. Last June, AT&T Corp. (T) acquired cable provider Tele-Communications Inc. (TCOMA), which has an affiliate agreement with @Home.
When that deal was announced, AOL expressed its interest in working with AT&T to offer broadband services to AOL subscribers.
"AOL is very aggressively going after broadband," Smith said. "Does this deal put them at a disadvantage? I don't know. I know AOL wants access to @Home's network. But it certainly makes @Home a more direct competitor to AOL."
The deal also puts more pressure on Road Runner, Time Warner Inc. 's (TWX) cable-based Internet provider. (Time Warner is the parent company of CNN and CNNfn.) The company reported Tuesday that it had reached 180,000 customers, but that's far short of @Home's 330,000 subscribers.
Also, @Home and Road Runner called off merger talks last March when the companies failed to agree on key terms. @Home and Road Runner planned to team up to take on AOL, which is exactly what @Home is now doing with Excite.
@Home shares jumped 10-3/4 to 112-3/4 in late trade. Excite shares soared 41 to 108-1/2, while AOL gained 2-15/16 to 149-7/16. 
-- by staff writer John Frederick Moore
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