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MSOs Weigh Their Options For Life After Excite@Home

Excite@Home Corp. ended months of speculation on Sept. 28 when it filed for Chapter 11 bankruptcy and announced a deal to sell off its assets to AT&T Corp. But it also churned up a new round of speculation about how its affiliate MSOs would run their cable-modem businesses.

Even before Excite@Home filed for reorganization, affiliates Cox Communications Inc. and Comcast Corp. said they would end their exclusive affiliation agreements with the high-speed-data provider on Dec. 4 and back out completely in June. Though both companies said the bankruptcy would not speed their exit, the sale of assets to AT&T could affect how each company takes back the service.

For AT&T Broadband — which has posted a for-sale sign of its own —the path toward taking back data-over-cable service will depend on how much time passes between the transition and any change in ownership.

Cox senior vice president of strategy and development Dallas Clement said that for the past few weeks, his MSO had been working on a contingency plan to replace cable-modem service in the event of a bankruptcy filing.

Now, Cox will decide whether to create a fully in-house cable-modem service or to outsource key elements. Its main focus is keeping the service lit and providing a fairly painless transition for customers, Clement said.

"There are definitely aspects that we will definitely take in-house — provisioning the cable modem, billing, customer care, the local network, etcetera," Clement said. "There are pieces that we can take in-house in a matter of speaking. For example, backbone: We won't trench fiber across the country, but there are a lot of backbone providers out there who are eager for the business."

AT&T has already set up a meeting with Cox to discuss backbone-connection services, Clement said. "We'll listen to what they have to say."

For AT&T Corp., gaining the Excite@Home assets is not a slam dunk. The bankruptcy plan allows Excite to consider a better offer from elsewhere.

Other elements — notably electronic mail, applications and content — are still in question.

On the content side, Cox Interactive Media already provides its parent MSOs with broadband portals in Cox's major cable-modem markets. Those efforts could be expanded.

But other ISPs — including EarthLink Inc., Microsoft Corp.'s MSN and even America Online — would also be able to provide content, applications and electronic-mail services. "Clearly, there are a number of folks that are knocking on our door," Clement said.

Cox also has gained experience in running a cable-modem service at the former TCA Cable territories in Texas, Oklahoma, Arkansas, parts of Louisiana and Las Vegas.

"I don't think we've made any definitive statement that we are absolutely, unequivocally taking everything back in-house — owning, controlling, managing everything," Clement said. "I think there are certainly some aspects of the end-to-end service that we think it makes much better sense for us to own.

"Then we have certain capabilities on the rest, but we need to cross-check that against what are AT&T's intentions," he added.

A Comcast spokeswoman said, "at this point we have not made any announcements to the contrary of the Dec. 4 end of exclusivity," though she noted that the situation must still play itself out.

It's not yet known whether the Philadelphia-based MSO would need to renegotiate its interim service agreement with AT&T Corp. once the sale of Excite@Home's assets is complete. As with Cox, the focus for now is on making sure that cable-modem lights keep blinking green.

"Excite@Home will continue to provide its services as it goes through financial restructuring, and our customers will continue to receive the best high-speed Internet service both now and in the future," she said.

At an investors' conference in New York last week, Cox CEO Jim Robbins said the MSO was "working on advancing toward the goal" of transitioning away from Excite@Home, a process that should be complete by the June cut-off date. He added Cox was examining its options for running the service.

"We're looking for a broadband service provider with good, solid levels of service and competitive pricing," he said.

The picture is even foggier for AT&T Broadband. In July, AT&T Corp. turned down Comcast's unsolicited $40 million offer for the cable unit, but last week Comcast signed a nondisclosure agreement and began exclusive negotiations to revive its bid.

And other entities — including Microsoft Corp., AOL Time Warner Inc. and Disney Corp. — are also rumored to be interested.

If the cable unit is sold to Comcast, it may also move away from the Excite@Home service. If not, AT&T Broadband might seek to engineer a new contract with its parent.

"It is too early to tell, seeing that we haven't been sold or bought," an AT&T spokeswoman said.

"The first priority is to make sure the 1.35 million customers that we serve continue to receive AT&T@Home from us," she added. "I think the leaders of the business truly recognize this as a top priority, and we have to make sure that we continue to provide the service."