Excite@Home Service Could Cease

If Excite@Home creditors have their way, the high-speed cable Internet service will shut down Friday, November 30, to keep the network from burning any more cash while debt holders negotiate with AT&T and other cable operators for better financial terms in a reorganization or buyout.

Excite@Home briefly stopped hooking up new customers after it filed for protection under Chapter 11 of the U.S. Bankruptcy Code in September. It reached agreements with its largest cable partners--Cox Communications, Comcast, and Rogers Cable--to restore Internet service deployment, but those agreements expire Friday.

Creditors of the bankrupt service provider seek to shutter the company to conserve capital while trying to better a $307 million buyout offer from AT&T. Most of AT&T Broadband's approximately 1.35 million customers get Internet service through Excite@Home, an AT&T spokesperson said. Excite@Home's management opposes efforts to shut the network down, as does AT&T, she said.

Warning Customers

Some of the cable companies that rely on Excite@Home equipment and network management services to provide their own Internet service are scrambling to reassure customers. Among the 21 companies that contract with Excite@Home are AT&T Broadband, Comcast, and Cox Communications.

Insight Communications in New York sent e-mail to its customers saying it does not believe the system will go down on Friday. "We are working on a number of fronts to prevent this from happening, including direct motions in the Court," says Kim D. Kelly, executive vice president and chief operating officer, in a message that is also posted on the company's Web site. Insight is also exploring options with other ISPs to ensure continued service for its customers, Kelly says.

Several other companies' sites are offering information on back-up access services. Excite@Home's own site did not refer to any possible problems.

Stranding Customers

The Excite@Home bankruptcy carries shades of the NorthPoint Communications Group DSL shutdown in March of this year. NorthPoint's demise abruptly cut off tens of thousands of customers--mostly small businesses--from their high-speed Internet connections. California regulators moved to block the shutdown, demanding a 30-day warning period and exhorting service providers to make alternative arrangements in haste.

The impact of an Excite@Home shutdown is significantly greater than NorthPoint's. Excite@Home reported 4.2 million residential broadband customers nationwide in its third quarter earnings report this month.

AT&T will keep Excite@Home alive if its bid is accepted and approved in another federal bankruptcy court hearing next week in San Francisco. AT&T already holds about a 38 percent ownership in Excite@Home, with voting interest of 79 percent.

Shaky Months

The @Home Network merged with the Excite portal in 1999 in a deal with an estimated value of $6.7 billion. However, the merger was not the financial success that both companies anticipated. The company has acknowledged that advertising revenue did not materialize as expected.

In September, @Home laid off close to 25 percent of its staff and made large cutbacks in its portal services. However, the company emphasized that despite its financial troubles, customers would continue to receive their broadband access services. For one thing, many AT&T Broadband customers receive their service through Excite@Home.

AT&T has emphasized that the sale of Excite@Home to AT&T Broadband should make it possible for customers to continue using the company's service. AT&T has also said that if the asset sale is approved, it will build on the equipment it acquires and develop a more robust network, while improving and growing its broadband high-speed Internet access business.