Excite, AT&T Modify Agreement

REDWOOD CITY, Calif. — AT&T Corp. and Excite At Home, the high speed Internet-service provider that it controls, are in discussions to
simplify an arrangement announced in April.

Under the earlier agreement, AT&T was to provide Excite with $75 million to $85 million to allow it to restructure its backbone fiber-optic network and improve its network performance, and Excite agreed to outsource its engineering and operations services.

Excite said Friday that the companies have decided to negotiate a simpler transaction in which AT&T will provide consulting and support services on “commercially reasonable, arms-length terms.” AT&T will assist it in implementing an updated network plan to improve performance in its network, instead of the outsourcing arrangement contemplated in the previous agreement, Excite said.

In addition, the two companies will continue to negotiate separately a restructured agreement on backbone capacity that will provide Excite at least $75 million, Exite@Home said.

In Internet terminology, backbone refers to the Web’s underlying transport system.

Excite At Home (ATHM) provides high-speed Internet access over cable-television lines. The company was created in 1999 through At Home Corp.’s acquisition of Web portal Excite Inc., with the goal of marrying Web content with high-speed Internet access. Since then, Excite has struggled with an array of service and employee problems, and has tried to focus on its Internet-access business rather than its media properties.

AT&T was eager last year to take control of Excite to end clashes with other cable partners, mainly Cox Communications Inc. and Comcast Corp. AT&T holds a 23% stake in Excite and has a 74% voting stake.

The telecommunications giant posted a net loss for the first quarter, hurt in part by the dwindling value of its interest in Excite.