(FORTUNE Magazine) – It's sometimes said that a man can be judged by the enemies he has made. The same might be said of a company, especially if those enemies are the competition. The louder they complain, the better the company must be doing. By that measure, Excite@Home is doing pretty well, because it has a powerful, and vocal, set of enemies. America Online, for one. GTE, for another. The Baby Bells aren't happy with it either. Nor are hundreds of rival Internet service providers.

What has Excite@Home done to attract such a stellar lineup of enemies? The company and its 23 cable TV partners, firms like Comcast, AT&T, and Cox, have signed up close to one million subscribers for Internet access to the home. They are adding new subscribers at a rapid clip--220,000 last quarter. And these are not ordinary Internet subscribers. They are broadband customers; each pays about $40 per month to connect to the Internet over cable lines, which provide speeds up to 50 times faster than those available to narrowband subscribers using standard phone lines. Excite@Home has the largest collection of broadband consumer subscribers in the U.S.; with the launch early next year of its redesigned Website, it will have the lead in creating the next generation of broadband Internet portals. In other words, Excite@Home has positioned itself to become the AOL of the broadband world. That's what scares competitors--and intrigues investors.

To understand how Excite@Home got into this enviable position, step back five years to late 1994. Netscape had just launched its Web browser, and the world was beginning to notice the Internet. So too was the venture capital firm Kleiner Perkins Caufield & Byers. It had been smart and lucky enough to invest in Netscape and now was looking for more Internet opportunities. Two big ones appeared pretty quickly. In January 1995, partner Vinod Khosla got Kleiner to invest in the search engine Excite (then called Architext). Two months later, John Doerr led Kleiner's investment in @Home. Doerr had actually hatched @Home with Bruce Ravenel, an executive at cable giant Tele-Communications Inc. Their idea was to create a company that would work with cable providers to offer consumers the same sort of ultrafast access to the Internet that businesses enjoy, and do so at an affordable price. The cable companies and @Home would also collaborate in designing content for a broadband connection, things like music and video clips that couldn't easily be piped over regular phone lines. Working together, the cable companies and @Home would get a jump on the phone companies and secure a dominant position in the emerging broadband market.

Meanwhile, Excite evolved from a search engine to a full-fledged Internet portal, providing a wide range of content and services for Internet users. Portals became big business. But by 1999, Excite was lagging behind Yahoo and AOL, who led the market and had the hefty market caps to prove it. Microsoft had MSN; Infoseek had aligned with Disney. Excite had to do something to compete, so in May it merged with @Home. The merger boosted @Home's meager content efforts and gave Excite a chance to leapfrog the competition into broadband. Today two-thirds of the combined company's $420 million in annual sales come from what used to be Excite, and one-third from the former @Home.

Doerr's vision of creating the broadband equivalent of AOL is now very close to reality, which is why the @Home side of the business has the greatest potential. Excite@Home has built a nationwide network, a parallel Internet whose 16,000 miles of fiber-optic cable interconnect 24 regional data centers. This private Internet allows Excite@Home users to bypass the congested public Internet a good deal of the time, boosting their speed. Excite@Home's network reaches the consumer by tying directly into the local cable systems of its partners at about 900 locations, called cable head ends. Excite@Home's cable partners, for their part, had fat coaxial cable running to people's homes but had to upgrade these networks to support fast two-way Internet access. To date the cable companies have upgraded about 30% of their systems--meaning that of the 72 million U.S. households passed by the 23 cable operators, 21 million now have potential broadband Internet access.

Excite@Home and its cable partners needed nearly five years to reach this point. But now big economies of scale come into play. Consider this: During the past quarter, the cable companies upgraded systems passing another four million homes. In the same period, Excite@Home increased the percentage of homes in upgraded neighborhoods that subscribe to its service from 3.5% to 3.9%, a proportion that has been increasing each quarter. Play those numbers out over the next two years, and Excite@Home ends up with a projected 4.7 million customers by the end of 2001, up from just under one million today; subscription revenues grow from $95 million in 1999 to $460 million in 2001. (Excite@Home gets about $13 of the monthly subscription fee, with the other $27 going to the local cable company.)

The numbers could go higher if any of several initiatives pay off. The first is the launch early next year of a new Excite@Home portal. The existing @Home portal, designed before the Excite merger, does little to exploit the service's broadband capabilities. It's even cruder than what's available on narrowband portals like Yahoo. "The new site will be much better," promises President George Bell. Not only will the site offer personalization (automatically allowing a user to see scores of his favorite baseball team, for example), but it will integrate video, audio, and graphics into everyday items like stock charts and weather reports. Before the merger, @Home had just 30 people working on its broadband portal. Since the merger the number has doubled, with another 340 working on Excite's present portal. (That's the one designed for narrowband access, which you see when you go to excite.com today. Excite will continue to offer it because most users still surf the Net via narrowband connections.)

Advances in cable-modem technology should also spur subscriptions. Until recently, different cable systems required different cable modems. Now there is a standard cable modem for all systems, which consumers can buy from retailers instead of renting from cable operators. Circuit City, the Good Guys, Office Depot, and CompUSA have all begun carrying the new modems as part of Excite @Home's first in-store marketing campaign. To make the buying process even easier, consumers can type their home address into an in-store kiosk to check whether their local cable provider offers Internet access. Excite@Home has also begun marketing the broadband service to the 44 million registered users of its regular Excite portal. The zip codes of registered Excite users can be cross-referenced with those of neighborhoods where cable systems have been upgraded, producing a list of potential customers. The cost of reaching these prospects via the Net is much lower than with the postal mailings that cable operators were using, and the response rates are much better. "We're seeing conversion rates [people signing up for broadband service] in the 5% range, compared to 1% with mail," brags Bell.

If things are looking so good for Excite@Home, why have investors hammered the stock from its high of $99 per share in April to its recent $44? Two reasons, both of which can be summed up by one word: uncertainty. The first is fear that the government will step in and break up the cozy partnership that Excite@Home and 23 cable companies have established. The cable companies have made Excite@Home their exclusive provider of Internet access, generally for a period of seven years from the time the cable system is upgraded. Cable outfits can do this because they are not subject to the same stringent regulations as the phone companies, which are regulated as common carriers and must let almost any company offer services over their network. That has opened the way for the large independent Internet service providers like AOL, MindSpring, and EarthLink.

Cable companies, on the other hand, can restrict access to their network. For the most part that's what they've done. This power was originally granted for video services but has been extended by the federal government to Internet access. Consumers who want access to the Internet over cable lines have to sign up with their local cable company and its designated ISP, which in most cases is Excite@Home. (The notable exceptions to this are Time Warner, the parent of FORTUNE, and MediaOne, large cable companies that started their own ISP, Road Runner.)

These exclusive deals between the cable companies and their ISPs are what riles AOL, GTE, and the others. AOL is working with the telcos to provide fast Internet access using DSL technology, but AOL doesn't want to be shut out of the cable market. So far only 500,000 homes have signed up for DSL service, vs. about three times that many for cable-modem access with Excite@Home and Road Runner. AOL and others have launched a major lobbying campaign to persuade federal, state, and local governments to regulate cable companies under the same rules as the phone companies.

Some municipalities, such as Portland, Ore., have taken up the fight, but so far it has gone nowhere. And Federal Communications Commission Chairman William Kennard has indicated he has no plans to alter current regulations for the next few years, time enough to allow the cable companies to recoup their investment in upgraded systems. In all likelihood the laws will stand, and the cable companies and Excite@Home will enjoy exclusive access for a few years. Nevertheless, the uncertainty surrounding this issue continues to spook investors.

AT&T's acquisition of TCI has also added to the uncertainty. The deal makes AT&T the largest cable operator in the U.S. and the largest shareholder in Excite@Home. AT&T's broad strategy is to provide the communications network for voice, video, and data and leave the delivery of content to others. "We don't want to compete with our customers," says John Petrillo, executive vice president of corporate strategy and business development. Excite@Home's other 22 cable partners have a different philosophy, in which content and distribution are intertwined. "We believe coupling content with distribution is important," says David Woodrow, executive vice president of business development at Cox Communications. Petrillo acknowledges that AT&T can't do much to change this until its first contracts with Excite@Home run out in 2002, but "we're thinking about what our alternatives will be."

Despite these uncertainties, Excite@Home's irrepressible CEO Tom Jermoluk keeps plowing ahead. "We have 23 cable partners, and each has its own agenda," he says. "We just have to execute like crazy." In other words, intense discussions among the partners continue, but Excite @Home is moving ahead with its plan to become the next AOL.

Dispelling any question about whether Excite@Home would back away from the content business, the company announced last month it would pay up to $1 billion to acquire the Internet greeting-card site Blue Mountain Arts. Content is, after all, the biggest part of the company. Analysts estimate that in 1999, Excite and related businesses will account for $285 million in sales, @Home subscribers $95 million, and @Work, which provides high-speed connections for businesses, $40 million.

Given those numbers, AT&T shouldn't hold its breath waiting for Excite@Home to exit the content business. But that's Excite@Home for you. Not content to upset its many competitors, it has even its biggest shareholder in a tizzy.