Excite Will Pull Plug on Internet Operations
AT&T; Corp. on Tuesday withdrew its $307-million offer for the assets of Excite@Home Corp., forcing the once highflying provider of high-speed Internet service to say it will cease operations Feb. 28.
AT&T; had been the only bidder for the assets of Excite@Home, also known as AtHome Corp., since the Redwood City, Calif.-based firm filed for Chapter 11 bankruptcy protection Oct. 1.
A bankruptcy judge ruled Friday that AtHome could shut off its high-speed service if it could not reach a resolution with its cable partners.
AtHome terminated high-speed Internet service to AT&T; customers over the weekend. Most of the company’s other cable partners--including Comcast Corp., Cox Communications Inc., Insight Communications Co. and Mediacom Communications Corp.--agreed to pay AtHome $335 million to avoid a similar cutoff and keep the Internet service provider running for three more months.
Under the agreement, AtHome will not interrupt service for those cable customers until it shuts down.
The U.S. Bankruptcy Court has scheduled a hearing on the agreement Friday.
The turmoil over the fate of AtHome’s 4.1 million subscribers is expected to reshape the booming market for high-speed Internet access, which has mushroomed to nearly 9 million customers in less than three years.
Experts predict a new round of price increases as providers pass on the multimillion-dollar cost of transferring AtHome’s customers. They also foresee a groundswell for government scrutiny of the cable industry and bids by archrivals Microsoft Corp. and AOL Time Warner Inc. to acquire AT&T;’s cable and broadband assets in an effort to secure control over an important Information Age technology.
“This has jolted a lot of people,” said Cynthia Brumfield, head of Broadband Intelligence Inc., a Bethesda, Md., consulting firm. “Cable could lose lots of customers to other high-speed Internet service providers like [telephone] and satellite. And policymakers may take a lot closer look at regulating the cable industry.”
By late Tuesday, the transfer of AT&T;’s 850,000 AtHome customers appeared to be going smoothly. AT&T; Broadband announced that it had moved more than 500,000 cable Internet customers to its new high-speed network.
The move was simplified by AtHome’s limited role in providing high-speed Internet access for its cable partners, as well as the plummeting price of computer equipment, experts said.
AtHome’s cable partners control the most expensive part of the high-speed data network--the crucial last mile of cable wire that carries e-mail and other data to and from subscribers’ homes.
AtHome took care of the complex back-office operation linking the cable connections with the main electronic pipelines of the Internet.
But the falling price of computer equipment and the layoffs of thousands of technicians skilled in computer networking made it easier for AT&T; and other cable operators to quickly assemble their own high-speed connections.
Though creditors insisted that AtHome’s network and customer lists were worth at least $1 billion, AT&T; withdrew its $307 million offer for the company’s assets, citing a deterioration of service to AT&T; customers and other undisclosed breaches of its broadband deal with AtHome.
“When AtHome got started years ago, cable companies did not have a lot of expertise in running data networks,” said Jerry Bennington, a consultant for Cable Television Laboratories Inc. in Louisville, Colo. “It is now a lot easier to pick up the expertise. People are obviously not happy to be offline. ... But I think this is going to be short and relatively painless.”
An AtHome representative could not be reached. But Suzzanne Uhland, bankruptcy attorney for AtHome, said it cut off service to AT&T; after it demanded that AtHome creditors waive their right to sue in exchange for the $307-million payment.
The creditors, who are counting on a big lawsuit against AT&T;, declined.
The new agreement gives AtHome’s other cable partners a limited waiver against lawsuits.
AT&T; predicted that nearly all of its customers would be moved to its broadband network by today. And the other cable companies said they would need less than three months to build similar high-speed capability.
Two other cable companies with about 200,000 AtHome subscribers--Charter Communications Inc. and Adelphia Communications Corp.--also were cut off. Both firms said they were transitioning customers to their own high-speed services.
Though the service disruptions were expected to be short, subscribers lost their e-mail at their old AtHome addresses and any material they maintained on an AtHome Web site.
The disruptions left some customers bitter.
“It’s been an absolute nightmare,” said Dan Calic, head of an AtHome users group in Fremont, Calif., who spent hours on the phone with AT&T; technicians trying to get his broadband connection back.
“AT&T; should have planned better knowing that 850,000 people would be disconnected,” Calic said. “I think that AT&T; realized that there were very few options for getting high-speed connections” and treated its customers accordingly.
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Times staff writer Jon Healey contributed to this report.
