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Friday, October 1, 1999 Published at 14:55 GMT 15:55 UK

Business: The Company File

Is AT&T still @ home?

Excite@home is the leading broadband Internet service

Speculation is growing that AT&T, the biggest US telephone company, is preparing to split up its high-speed Internet service Excite@home.

Shares in Excite@home rose by 23% in the past two days on the belief that AT&T might sell part of the company to a rival like America Online.

[ image: The Excite portal may be for sale]
The Excite portal may be for sale
On Friday AT&T admitted that it was in discussions with third parties, but denied that it planned to break up the company.

Leo Hindrey, the head of AT&T cable, said that "there are no discussions underway to split the company between its content and distribution activities."

Broadband assault

AT&T has spent $120bn buying up cable television networks, primarily to launch its broadband service which combines telephone service, high-speed Internet connections, and video on demand.

It merged its broadband subsidiary, @home, with Internet portal Excite in May in a $7.2bn deal, in order to create more content for the service.

Although Excite@home only has 500,000 subscribers, analysts believe that within a few years a substantial number of Internet users will convert to the high-speed services.

They are up to 100 times faster than existing services, offering instant downloads and television quality video pictures.

Rivals object

But the attempt to provide content as well as a distribution system accessing the Internet has provoked the ire of other companies.

America Online, the world's biggest Internet Service Provider, has demanded that AT&T allow open access to other providers through its fibre optic cable network.

It is threatening to sue AT&T in the courts, and making strong representations to the regulatory authorities in Washington.

That could block its latest cable deal, the acquisition of Media One, which gives AT&T access to half of all US households.

Insiders believe that AT&T would be willing to sell Excite to a third party if it meant that it could get regulatory approval for its expansion.

But the sticking point has been the price - with AT&T having bought Excite at the height of the Internet stock boom.

"Everybody's been talking for months," one industry source said.

"Nobody wants Excite, but they're willing to take it to get access" to broadband services, he added.

It is thought that Yahoo, the leading Internet portal, has also been in discussions with AT&T.

Splitting the company

Speculation that Excite@home would be split up was started when the company announced a restructuring, setting up separate divisions covering media and marketing, and cable infrastructure and subscribers.

"I think that plays into their ability to split the company," said John Segrich, an Internet analyst at CIBC World Markets. "I think it's really a critical step that clears the way to split the company into two."

Any move to split up the company would be vigorously opposed by cable operator Cox Communications, a minority shareholder which would have a veto over the deal.

Some analysts predict that AT&T and AOL will eventually come to a deal, giving AT&T access to AOL's 20m subscriber base in return for open access to its network.

Currently, AOL is attempting to bypass the fibre-optic cable system by doing deals with regional telephone companies, using another technology called DSL which uses existing phone lines for high-speed services.

In the UK, similar services are due to be launched by BT and other operators within the next 18 months.

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