ExciteAtHome is moving to cash in on Germany's Internet boom by cutting a deal with a major cable operator there to provide a German version of its high-speed Internet service.
The announcement is the latest move in ExciteAtHome's strategy to partner with international cable operators. The company has already entered similar pacts in the Netherlands, Japan, Australia and Canada.
The German joint venture, called AtHome Deutschland, is expected to increase ExciteAtHome's cable penetration outside the U.S. to about 16.3 million homes. Worldwide, the company equips about 70 million homes with cable access.
ExciteAtHome is forming the joint venture with Deutsche Bank (DTBKY) Investor and its subsidiary Tele Columbus, the second-largest cable operator in Germany after Deutsche Telekom (DT). Tele Columbus passes cable to 2.2 million homes, representing about 10 percent of German cable households, according to Christian Dahlen, director of business development in Europe for ExciteAtHome. Three other cable companies service about 1 million homes apiece, he said.
ExciteAtHome will distribute the new service not only to Tele Columbus subscribers but also to subscribers of other cable operators that are free to join the venture, Dahlen said. Deutsche Telekom's cable division is being sold off in nine regional chunks, and the companies that purchase those units are potential partners, he added. Cable operators who sign up will get cobranded services to bring Internet access to their subscribers.
Germany has the third-largest number of Internet users in the world after the United States and Japan and is second-largest (after the U.S.) in terms of homes connected by cable, with about 27 million homes passed largely because of a government-backed rollout, according to Dahlen.
The number of users and the country's Internet access fee structure make it an attractive market for cable. Users pay online charges by the minute for both access to a telephone line and online service, whereas ExciteAtHome subscribers pay a flat monthly fee, which is $40 in the U.S.
Some service providers are starting to offer free Internet access in Europe to nudge more users online. Even if the Internet access service charge is abolished in favor of a flat fee, users will still pay for all the time they spend connected via the telephone line, Dahlen said. "We're well positioned to capture a significant market share there," he added.
ExciteAtHome's chief competitor in Europe will be the Chello partnership owned by United Pan-Europe Communications, a large cable broadband operator, according to Patti A. Reali, an industry analyst with Dataquest. "Cable penetration is high in a place like Germany, but it's a matter of how quickly new partners can upgrade their networks," she said.
Cable and other broadband access providers are expected to give the incumbent carriers a jolt, since they can build advanced networks that can handle other applications like telephony over the Internet, Reali said.
From a content perspective, ExciteAtHome faces the obstacle of making its base engine culturally sensitive to each new country it enters, said Robert Rosenberg, president of Parsippany, N.Y.-based Insight Research.
"This will jump-start the quality of content, but the real wild card could be [the wireless market], where there are lots of new providers," he said. ExciteAtHome Tuesday announced a partnership with AirFlash, a wireless services and technology provider, in a bid to attract mobile users in the United States.
AtHome Deutschland is expected to be up and running by late 2000. The ventures in the Netherlands and Canada have launched already while those in Australia and Japan are expected to be in operation in early 2000.
