Flashcom Creditors, Workers Share Pain
Flashcom Inc., the troubled Huntington Beach provider of high-speed Internet access, has filed for bankruptcy protection and laid off more than 40% of its work force.
In its Chapter 11 petition to reorganize its debts, Flashcom listed $94 million in assets and $55 million in debts as of Oct. 31.
The layoffs--the third round in recent months--left Flashcom with about 250 employees and a skeletal operation, down from more than 500 workers in early November.
The company, which sells digital subscriber line service, has been shifting some of its customers to its wholesale DSL providers, NorthPoint Communications Inc. and Rhythms Netconnections Inc.
But the fate of Flashcom customers whose service comes through Covad Communications Co. is still unclear. Flashcom continues to serve those customers for now. Flashcom uses Covad for about half its business, according to Flashcom’s bankruptcy attorney, Marc Winthrop.
“Our focus today is on making sure that our existing customer base doesn’t have any break in service and that we do the best we can for the creditors we have,” said Flashcom’s chief executive, Richard Rasmus.
According to public documents, Flashcom had 31,000 customers in early May. Rasmus declined to provide a newer figure.
For weeks, customers who have tried to call Flashcom often have been asked to try again later. The company has established a Web site to handle customer inquiries: https://start.flashcom.com/ispx.
Flashcom’s struggles come amid several recent setbacks for the DSL industry. Wholesale DSL providers, such as Covad, NorthPoint and Rhythms, have been losing millions of dollars and their stock prices have plummeted. All three are struggling, and Covad recently lowered its revenue expectations because several customers have not paid their bills.
One of those delinquent customers is Flashcom. According to Flashcom’s bankruptcy petition, filed in U.S. Bankruptcy Court in Santa Ana, it owes $13 million to Covad, $2.7 million to NorthPoint and $1.2 million to Rhythms.
While Flashcom was able to sell its customers back to Rhythms and NorthPoint, the negotiations with Covad haven’t progressed in that direction, Winthrop said.
Flashcom has seen a dramatic downturn since last spring, when it received $84.15 million in venture capital and filed papers with the Securities and Exchange Commission to initiate plans to go public.
Last month Rasmus attributed the first round of layoffs to an inability to obtain more venture capital. A second round soon followed.
The disruption of service, meantime, is sending some business customers fleeing to other providers. Jay Johnson said his Anaheim travel agency, Coastline Travel Advisors, has been hurt because of interruptions to DSL access. Service is back up now, but Johnson says he will begin using another carrier soon.
Times staff writer Elizabeth Douglass contributed to this report.
