NorthPoint Breakup Leaves Ex-Clients Stranded
Rick Rossiter was visiting Richard-Marshall Inc.’s Hawthorne headquarters for routine meetings last month when the wood-flooring maker’s Web site, e-mail and Internet access went dead.
By the next day, the enormity of the problem was clear: The company’s DSL provider, NorthPoint Communications, had ceased to exist, leaving Richard-Marshall incommunicado, at least in the electronic sense. Rossiter, the company’s chief technical officer, booked a room at a nearby extended-stay hotel and headed to the Nordstrom Rack for more clothes. He hasn’t set foot in his Sacramento home since.
The disruption at Richard-Marshall is being repeated nationwide as thousands of NorthPoint customers scramble to work around lost Internet connections.
“Now we’re sort of back to the ‘70s, with mail and faxes,” said Rossiter, who works in the company’s Roseville, Calif., office. “Two people are using dial-up America Online accounts and I’m on EarthLink. Everything is just slowing down.”
Rossiter and others in his position are learning painful lessons about the telecommunications revolution. Among them: the importance of high-speed Internet connections to everyday business tasks, the need for backup communications plans and the possibility that providers can go out of business, leaving customers in the lurch.
NorthPoint’s former customers are dealing with those new realities in different ways. Richard-Marshall bought two fax machines and several fax modems to keep orders and information moving, and it now is sending computerized floor designs using computer disks and Federal Express. Still, Rossiter said, “It’s been difficult to keep the ball rolling.”
The company, which makes high-end wood flooring for celebrities and builders of million-dollar homes, does much of its critical work by hand. But it has come to rely on technology too.
Richard-Marshall bought its own network equipment, hosts its own Web site, manages its own e-mail and signed up for high-speed Internet service through InternetConnect, an Internet service provider that relied on NorthPoint’s network.
Over time, the network has become integral to the company’s daily operations by quickly shuttling orders, floor designs, billing and payroll data and shipping and delivery instructions between the headquarters and sales offices in Las Vegas and Roseville, as well as among customers and suppliers.
Companies like Richard-Marshall didn’t know it, but their troubles began late last year, when telecom giant Verizon Communications pulled out of a deal to merge with NorthPoint.
The surprise move left NorthPoint begging for a financial bailout that never arrived, and the company filed for bankruptcy protection in January.
Over the last few years, NorthPoint had become one of the nation’s largest wholesale providers of digital subscriber line technology, or DSL, which carries data over copper phone lines at speeds up to 25 times that of a dial-up modem.
NorthPoint had grown to provide nearly 120,000 DSLs across the country--including about 43,000 in California. In most cases, the lines were sold through Internet service providers such as MSN.net, Telocity and MegaPath.
Until the very end, many businesses and consumers had no idea that their DSL connection was hanging in the balance as NorthPoint headed to bankruptcy.
But no bidders emerged for NorthPoint’s customer base, and AT&T; Corp. agreed to buy the company’s physical assets for $135 million. Those events, finalized in late March, triggered the abrupt cutoff of Internet connections from New York to Los Angeles.
Although a fast Internet connection pales in importance to electricity or the basics of food and water, businesses and consumers have come face to face with how much they rely on their DSL lines.
“It’s almost like color TV and black and white, or like the difference between a manual and an automatic garage door. . . . You tend to take it for granted and become very dependent on it,” said Ira Swartz, a certified public accountant in Tarzana who lost service just as tax season shifted into high gear.
“The timing wasn’t good and the lost productivity was certainly a setback. We probably had to spend over $1,000 altogether to recover,” Swartz said. “It was quite a blow.”
In Pasadena, Father Vazken Movsesian felt the pain too. He had planned to broadcast the week’s Easter services and events over the Internet for faraway worshipers and relatives. But the DSLs at St. Gregory Armenian Orthodox Church were now useless. They were provided by NorthPoint.
“This year we had very, very big plans. We were going to broadcast events from Palm Sunday until Easter, when we’re just flooded with services,” Movsesian said. “We had invested in the equipment and had everything ready to go . . . but the show’s going to go on” at the church.
For many of NorthPoint’s victims, recovery will be excruciatingly slow. Only the very lucky among them have had DSL service restored through an alternate provider. Most will be waiting for several more weeks before they are back to normal operations.
Many of them are now reluctant to connect through a lesser-known company, fearing a repeat of the NorthPoint affair. That doesn’t bode well for Covad Communications or Rhythms NetConnections, the two largest remaining DSL competitors to Pacific Bell and other Baby Bell phone companies.
Covad, which is partly owned by PacBell parent SBC Communications, and Rhythms are struggling financially. Many ISPs also are suffering through a cash crunch, and their inability to pay their bills to NorthPoint, Covad and Rhythms are partly to blame for the looming meltdown.
The situation has businesses reassessing their options.
Swartz got new DSL service within 24 hours of calling a company that was relatively unknown.
He couldn’t be happier. But he also has his doubts. “They’re just a small start-up, and I have a real concern about how viable they are. . . . I could be shut down with them just like I was with NorthPoint,” he said.
Richard-Marshall is abandoning the DSL market, having ordered a T-1 connection from AT&T.; It’s still not hooked up--there have been snags with PacBell--but once it’s functioning, it will cost $1,200 a month, more than double the price of the company’s now-defunct symmetrical DSL service.
Some of the frustration is landing squarely on AT&T;, which some NorthPoint customers blame for not picking up the customer base or at least agreeing to operate NorthPoint’s network until customers could be safely moved to a rival service.
An Internet petition is circulating that chides AT&T;, and many of its signers have pledged to retaliate by canceling their AT&T; long-distance, cable and wireless accounts.
“We don’t want people canceling service with us because they think we’re shutting down their service, when the fact is that we’re not,” said June Rochford, an AT&T; spokeswoman. “It’s not an AT&T; issue. It’s out of our control.”
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Businesses Plug In to DSL
High-speed digital subscriber line technology is most often associated with residential markets, but it’s an attractive offering for businesses too.
*
Business users of DSL (in millions)
1999: 0.15
2000: 0.42
2001*: 0.73
2002*: 0.93
2003*: 1.10
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* Estimates
Source: EMarketer Inc.
