Excite At Home Cuts Off AT&T Customers
interactive.wsj.com
December 3, 2001
Talks Over Service Continue With Others
By MYLENE MANGALINDAN and DEBORAH SOLOMON
Staff Reporters of THE WALL STREET JOURNAL
Excite At Home Corp. cut off AT&T Corp. from its Internet network, disrupting service to about 850,000 AT&T cable subscribers and casting a cloud over the telecom giant's plans to buy Excite At Home's assets. But the company seemed poised to strike service deals with two other cable companies.
The moves came after the collapse late Friday of negotiations between AT&T and Excite At Home for a new service agreement, after a bankruptcy-court ruling earlier in the day that allowed Excite At Home to cancel such contracts with cable operators that use its network. People close to the matter say AT&T refused to pay the amount sought by Excite At Home to continue the service, which they put at more than $300 million.
Negotiations continued through the weekend with Cox Communications Inc. and Comcast Corp., two other cable operators that depend on the Excite At Home facilities. Service to their customers hasn't been disrupted. Sunday, Comcast and Cox both signed a letter of intent to pay more than $300 million to maintain service for several months, people close to the situation said. The companies were close to signing a definitive agreement Sunday night.
A Cox spokeswoman said the company was close to signing a letter of intent with Excite At Home.
AT&T has been working around the clock to finish work on its own high-speed network to replace Excite At Home, allowing it to take a tougher line in negotiations. Indeed, AT&T said it has put more than 86,000 of its customers in Oregon and Washington on its new network since Saturday morning, and plans to shift 800,000 more over in the next two weeks.
Bankruptcy May Shutter Excite At Home Unless It Gets New Deal With Cable Firms (Nov. 30)
Court Approves InfoSpace's $10 Million Bid to Acquire Some Assets of Excite At Home (Nov. 28)
Cox Communications Is Building Network to Remove Its Reliance on Excite At Home (Nov. 28)
Excite At Home has probably had better moments. Six years ago, the Redwood City, Calif., company pioneered the concept of using cable networks to deliver Internet access. Two months ago, however, facing heavy debts and a cash squeeze, Excite At Home filed for Chapter 11 bankruptcy protection. AT&T later offered to buy the Excite At Home network assets for $307 million, an amount some creditors contend is too low.
Maintaining a relationship with Excite At Home allows AT&T to preserve customers' current e-mail addresses, among other things. But the longer the company operates without Excite At Home's facilities, the more customers are likely to be shifted over to the new AT&T network and the less likely AT&T is to buy the Excite At Home assets, people familiar with the situation say.
AT&T declined to comment on prospects for the asset purchase or details of the negotiations. An Excite At Home spokeswoman couldn't be reached for comment on details of the talks.
Since early October, AT&T has had some 400 engineers, software developers, technicians and other employees working 24 hours a day, seven days a week to construct a network capable of handling high-speed Internet traffic. Led by AT&T's chief technology officer, Hossein Eslambolchi, the telecom giant leaned heavily on vendors and raided its own inventory to deploy more than 250 communications circuits and more than 300 routing and switching devices, and to reach agreements with local phone companies in some cases.
"This had been like building a giant stadium in seven weeks," said an AT&T employee who worked on the project but declined to be named. "We had to build a foundation and put in the seats."
In the meantime, AT&T customers affected by the situation were forced to turn to slower dial-up lines to access the Internet, and the future status of e-mail sent to their old addresses is unclear. Ken Nelson, an AT&T customer in Plano, Texas, complained that the service disruption is hurting his small business, which is in the middle of trying to publish a new Web page, and depends on its high-speed Internet service. "Frankly, this is the kind of foolishness that gives business a bad name," Mr. Nelson lamented in an e-mail message.
Excite At Home, along with its creditors, on Friday asked a bankruptcy court to reject the cable-service agreements, stating that they were costing the company $6 million a week. Lawyers for Excite At Home's cable partners argued that their customers would be hurt by a rejection of the contracts, which could lead to service disruptions for consumers.
Bankruptcy Judge Thomas Carlson called the cable companies' arguments "unpersuasive." While he acknowledged the potential inconvenience to customers, he noted that the value of Excite At Home's assets was short-lived. Once the cable companies built their own networks, the cable companies could swiftly abandon their contracts.
The ruling triggered the talks over the weekend between Excite At Home and the cable companies. Meanwhile, competitors quickly moved in to take advantage of the confusion surrounding Excite At Home. Covad Communications Group Inc., which offers high-speed digital subscriber line service and which sought bankruptcy protection in August, offered a special promotion to Excite At Home subscribers that allows consumers to use dial-up service while waiting for their DSL installation. DirecTV made a similar offer.
Write to Mylene Mangalindan at mylene.mangalindan@wsj.com and Deborah Solomon at deborah.solomon@wsj.com |
