Feeling @Home
By Corey Grice
Staff Writer, CNET NEWS.COM
Called TJ by friends and co-workers, Tom Jermoluk, with his
swath of platinum blond hair, could pass for a California surfer just as
easily as a high-tech executive.
But Jermoluk doesn't have time for the beach. The 42-year-old chief
executive of @Home Network, has been
building his company up to capitalize on the data revolution by providing
data services and high-speed Internet access over cable networks.
The Redwood City, California-based @Home provides an integrated set of
Internet-based services for cable television operators who 
want to cash in
on the higher profit margin data business. And, since cable allows transfer
speeds up to 50 times faster than dial-up connections, the industry--with
@Home as the bellwether--has gotten a lot of attention.
@Home had more than 210,000 customers as of last quarter. Those numbers
pale in comparison to America Online's 14 million subscribers, but lead
data-over-cable competitor Road Runner, a
joint effort between Time Warner
and MediaOne.
Regardless of recent success, Jermoluk and his company still face a number
of challenges ahead.
Until standards-based cable modems hit the retail market in full force,
services such as @Home's are unlikely to realize significant subscriber
spikes. Online leader and competitor America
Online is also lobbying for access to many of @Home's cable partners'
broadband pipes. Additionally, @Home has had to limit broadcast-quality
video downloads, for fear of overloading its networks. The proposed limits
have irked some customers who signed on to the service specifically for its
alleged massive bandwidth capacity and blazing download speeds.
Jermoluk recently discussed the Internet and cable landscape, competing
technologies, and why he thinks 1999 will be a big year for his company
with CNET News.com reporter Corey Grice.
News.com: Your company's subscriber numbers seem to fall within
expectations, but have yet to show any strong growth. What is holding the
company back?
Our [subscriber] numbers right now are actually pretty
predictable--and that's why we're basically just on them. And it all has to do
with how many homes you get handed, and how many installation crews you get
put together to get out there and install the service, because everything
today is scheduled. We've gotten better and better at that process?but it's
still very labor-intensive and scheduling-intensive. If I could go into a
market, and have [the service] available in a box? and you went
home and it all just worked, and you never had to have a tech show up at
your house. Then you could have quarters where you'd do the right marketing
campaign and people respond and wow, suddenly you blew [subscriber
numbers] out. Well, that's what we are striving for very strongly.
Cable has a great penetration rate with home users, but that penetration
rate falls significantly with the business user, which is a higher
profit-margin customer. How do you reach the business user as well?
Well 80 percent of small businesses in America are passed by cable. For
small businesses, it's a big opportunity. But say 25 percent or 30 percent
of our business will be commercial, that's significant and it's very
| |
profitable, because the infrastructure of our company was built and paid
for by the consumer service. When we resell [ the @Work service] to
businesses, it's incrementally much more profitable than our core service.
Our obligation is to provide the service--and we do, but how we'll make all
our profit is in leveraging it into commercial and media businesses.
How important is content to you, as you create your own front-end
navigation page. How heavily do you plan to invest in creating a new kind
of interface?
As far as content, in actual content we fully intend to partner, we don't
intend to be an original content creator. Now, content comes from Disney or [Time]Warner
or Sony or CNET or New York Times or whoever. Those
are real content providers. But as far as the portal goes, we intend to
create that ourselves. We have a big investment in our company; it's a huge
part of our budget, probably 20 percent to 30 percent of our company today goes into the development of our broadband portal interface.
How big a part of your revenue is the portal-like front page and the
content arm of @Home?
It's greater than 10 percent of the
revenue of the company. We have been incredibly attractive to advertisers.
They want to get on and
understand what broadband is all about. Our click throughs and impressions
are so much higher than what anybody else is
getting on the Web, that [advertisers] are willing to pay?two to
three times higher than anything they're getting on Yahoo or AOL.
And maybe it's only 200,000 or 300,000 subscribers, but guess what? They're
[users] spending three to four times as many hours online per month
as they do on the dial-up side, and they're viewing twice as many page
views because the service is so much faster. So they're operating like they
are millions of users in terms of eyeball hours because of the amount of
time and the amount of things that they're looking at.
The Competitive Landscape
