Ma Bell's No Stay@Home Parent

AT&T risks alienating cable Net users in its latest tangle with Excite@Home.
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Ma Bell's cord has been cut. Now let's see who wants to hang around and reconnect.

Some 850,000


(T) - Get Report

customers receiving high-speed cable modem service through Excite@Home lost those Internet connections over the weekend after the companies broke off negotiations over modifying their business partnership.

Now AT&T, which hopes to provide those subscribers with an in-house alternative to Excite@Home, faces a race -- dotted with hazards in technology, customer service and public relations -- to keep those customers from deserting AT&T for other high-speed Internet providers. AT&T dropped 5 cents Monday to $17.44.


The dispute between AT&T and Excite@Home, of which Ma Bell is a majority shareholder, illustrates how the slide of Excite@Home, which filed for bankruptcy protection in late September, is creating problems for major cable operators that have been marketing its service to their subscribers.

Continuing to negotiate with cable partners






, Excite@Home has been able to patch together agreements with those firms that kept service alive to those companies' cable modem customers served by Excite@Home. After Excite@Home won a bankruptcy court ruling Friday enabling it to cancel its contracts, those firms will presumably have to be paying higher prices to Excite@Home to keep the service running on their systems.

With AT&T -- which has hoped to buy Excite@Home's assets for $307 million -- walking away from subscription fee negotiation, the company obviously won't run the risk of overpaying Excite@Home for the service it provides. But now the company runs the risk of losing the loyalty of its cable customers who might blame AT&T for the outcome of the business dispute.

Certainly, AT&T is bending over backward to make its customers happy. On Saturday, the company said it had already moved 10% of its Excite@Home customers, in Oregon and the Vancouver, Wash., area, to the in-house AT&T Broadband Internet service. AT&T says it will automatically credit customers for two days' worth of service for each day of service interruption they suffer. Customers who suffer longer outages will receive free AT&T dial-up Internet access in the meantime.

Goat's Horns

Popular sentiment, though, remains a wild card for AT&T. In the past, when TV programming has been cut off in local cable systems in a dispute between the operator and a programming provider, individual subscribers have tended to blame the operator -- the party in the dispute to which they send their monthly check. (Most recently,

Time Warner

was perceived as the villain when, in a fight with


, certain cable systems stopped running Disney-owned channels.)

Public sentiment, if any, has been hard to gauge as it relates to Excite@Home and AT&T. On, a site devoted to discussion of high-speed Internet service, blame for the cutoff seemed equally targeted at AT&T and Excite@Home, with people accusing Excite@Home of poor management and AT&T of trying to pick up Excite@Home on the cheap with its $307 million bid.

Certainly, onlookers were surprised by the dysfunctional family portrait painted by AT&T and its subsidiary failing to reach even a temporary agreement. Frank Thomas, a Florida investment adviser who's part of an Excite@Home shareholder group that's submitted a bankruptcy reorganization plan for the company, says the group believes that the company would still have a positive net present value should it lose Cox or Comcast as customers. But as to whether it would be as well situated without AT&T as a customer, he couldn't say. Because the shareholders believed that AT&T's contract with Excite@Home was rock-solid through 2008, he said, "We never really examined that in detail."