REDWOOD CITY, Calif. -- At

Excite@Home

(ATHM) - Get Report

, if it's not one thing it's another. And now, it's both.

The high-speed Internet service and content company, already besieged with

merger rumors, now faces a new bogeyman: slowing subscriber growth.

Right now, Excite@Home enjoys a head start in the race to become a broadband behemoth. The company finished its second quarter with 620,000 cable-modem subscribers -- or 59% of the North American market -- up from 460,000 subscribers in the previous quarter.

However, in light of the 17 million homes that have been upgraded to support cable modems, analysts and investors say their subscriber-acquisition rates have been surprisingly slow. By contrast,

America Online

(AOL)

-- the company that Excite@Home has in its crosshairs -- signed up its most recent 1 million customers in 125 days. (Excite@Home's cable-modem service costs about $20 more per month than AOL's dial-up service.)

Subscriber growth has always been the key metric for Excite@Home, but now that its acquisition of Internet portal

Excite

is complete, pressure is mounting for the merged company to accelerate its acquisition of new customers.

"Given their current model, they're going to have a hard time hitting their targets," says Michael Harris, president of

Kinetic Strategies

, a Phoenix-based broadband research firm.

Excite@Home has a history of biting off more than it can chew. The company once vowed to have 1 million subscribers by the end of 1997, but it won't have a shot at reaching that milestone until the end of this year. Excite@Home's failure to execute gives phone companies and satellite providers a window of opportunity to develop rival technologies. The company currently claims that it's shooting for 1 million to 1.1 million subscribers by the end of this year. Many analysts and investors, however, have been expecting Excite@Home to have 1.1 million to 1.2 million customers.

"I gave up on making projections because mine were always higher than the Street, and they never made them," sighs one portfolio manager of an investment firm that recently sold off its entire multimillion-share position in the company. The firm of the manager, who requested anonymity, was one of the top 25 holders of the company and had been an investor in Excite@Home since its IPO.

"I'm too nervous about it," adds the manager, who controls $900 million. "It should be moving faster. You would think that in the infancy of this business, they'd be able to beat those numbers."

The difficulties that Excite@Home is having in acquiring new subscribers stem from a fundamental limitation of its business model: the company's dependence on its cable partners for the distribution, marketing, delivery and support of cable-modem service. Excite@Home must rely on its cable partners to rebuild their cable networks to handle high-speed, two-way data traffic. But the dependencies run much deeper. Its principal cable partners, for instance, have the right to block access to certain content, including streaming video segments longer than 10 minutes.

"If you don't control the whole process, how can you be assured of your ability to execute?" asks Nancy Casey, a portfolio manager with

Valhalla Capital Management

. Casey, a former Excite@Home investor who is thinking of getting back in, says she is concerned that the company could miss its subscriber targets. Excite@Home's managers "have to be better managers than the average managers just to execute their business plan, which involves exogenous factors beyond their control," she says.

The most well-known bottleneck constraining deployment of cable modems is what's known as the truck roll. In order to install a cable modem, the cable company must send a trained technician to a household, who then spends a couple of hours splitting the cable line, installing the modem and network card and configuring the user's computer.

But there are a few new lesser-known bottlenecks. One major external factor slowing down cable-modem deployment in the short term is cable industry consolidation. Since the mid-1990s, the entire cable industry has been busy swapping millions of customers, redrawing the Balkanized boundaries of markets that were established 20 to 30 years ago to make them more efficient.

"It's a short-term negative because it means that some of the systems being built out get delayed while the swaps are going on," Excite@Home President George Bell told

TSC

during a recent interview. "I don't want to invest in building out two-way, fiber-rich capabilities if I'm ultimately going to hand over these homes to you."

In the long term, though, Bell said swaps will accelerate deployment. "It does enable us to go to a specific partner and say, 'Oh you control all of Philadelphia,'" explained Bell. "Whatta ya say we do this advertising deal in stores, pizza parlors and cable systems on TV."

Not surprisingly, some of Excite@Home's cable partners take umbrage at this criticism.

"The rollout of @Home is a top priority and is not affected by the possibility of future deals," says Larae Marsik, spokeswoman for

AT&T Broadband Internet Services

, Excite@Home's most powerful partner. "But I can't say that in every market we're upgrading we have a long-term commitment to that area."

David Woodrow, senior vice president for

Cox Communications

(COX)

, one of Excite@Home's principal cable partners, says swaps will not delay his company's deployment. The reason: For swaps, Cox has been targeting cable markets that have been upgraded.

Another problem with cable operators is they have agendas that may conflict with cable-modem deployment. The cable industry is spending billions of dollars upgrading its cable plant not only to offer lightning-quick Internet access, but to offer telephony, digital video and more obscure services like energy management. Cable operators are betting that these services are going to fuel their future growth.

In an Aug. 23

BancBoston Robertson Stephens'

research note, for example, analyst Keith Benjamin wrote that cable operators have a finite number of time slots for house calls. Benjamin estimates that cable operators are devoting "roughly 25%" of the spots to Excite@Home installations.

"While

cable modems are a major part of cable companies' business, it's not the only part of their business," says Bruce Leichtman, the

Yankee Group's

director of media and entertainment strategies.

Besides, Excite@Home already may have picked the "low-hanging fruit," slang for customers that are easiest to acquire.

"The second wave of customers is a little harder to get," Leichtman says.