The waiting game

While AT&T and Comcast act out their grand drama under the spotlights, one supporting player stands in the wings waiting reluctantly to make an entrance.

Excite@Home may have a minor role in the AT&T/Comcast soap opera, but its stake in the outcome is extremely high. AT&T Broadband is @Home's single largest customer, and AT&T Corp. is its single largest benefactor. Wherever AT&T Broadband goes, @Home will try to follow, but so far it appears Comcast isn't really interested in @Home tagging along.

The AT&T board last week rejected Comcast's $58 billion offer for its cable properties, effectively sending out an open invitation to other cable and media giants to up Comcast's bid.

So far, Excite@Home hasn't even been mentioned in negotiations, and all indications from Comcast are that it wants nothing to do with AT&T's 23% stake in the ailing cable ISP, said Michael Goodman, senior analyst for The Yankee Group. Comcast recently cut its own stake in @Home from 10% to 8% and has renegotiated its service exclusivity agreement with the ISP so it can back out of the deal in December.

Meanwhile, AT&T has propped up the company on more than one occasion and has negotiated deals with Cox Communications and Comcast to buy back their stakes in @Home in exchange for AT&T stock. But if AT&T gives up its cable broadband unit, it will have little reason to continue supporting the ISP.

“Excite is sweating right now,” Goodman said. “I don't think Comcast is interested in Excite and is probably interested in replacing it. So the big question is, What happens to Excite@Home? That's a huge unknown right now.”

Even before Comcast made its bid, @Home's future was already in question because of AT&T's spinoff plans for the broadband unit, Goodman said. If the Comcast deal goes through, AT&T might be stuck with a huge stake in a cable ISP but no cable network — not an optimal situation considering @Home's poor financial performance, Goodman added. @Home's shares have hovered around $2 since the beginning of the year, and the company has been forced to shut down its portal and content operations in Europe.

“AT&T either wants it to make money or get it off its books,” Goodman said.

Cox and Comcast announced plans to open their networks to other ISPs beginning in December when their exclusivity agreements with @Home expire.

Comcast won't say what exactly will become of its relationship with @Home, but Comcast President Brian Roberts last week said his company looks at @Home “as another ISP.” Cox, which also owns an 8% stake in @Home, is taking a similar tack.

“We're doing an open-access trial, but we haven't reached any commercial agreements,” a Cox spokeswoman said. “We believe that's going to be the wave of the future.”

Without AT&T's backing, @Home will become just as exposed as any other ISP, said Abby Christopher, a senior telecom analyst in Ovum's U.S. office.

“It will be vulnerable property,” Christopher said. “Even without the [Comcast] acquisition, @Home is still exposed. AT&T is looking at its divisions as separate entities that stand on their own. If @Home isn't doing its job as a compelling ISP, why should they keep it?”