CABLE COMPANIES PLEDGE EXCITE@HOME BANKRUPTCY WON'T CAUSE INTERRUPTIONS
Companies scrambled to reassure their customers that their Internet service would continue without interruption despite bankruptcy filing by Excite@Home, nation’s largest provider of Internet service over cable. Cox Communications, country’s 5th largest cable company, said it was heartened by AT&T’s decision to acquire Excite’s broadband access service before company filed for Chapter 11 bankruptcy protection in U.S. Bankruptcy Court, San Francisco. “We welcome the operating strength of AT&T,” said Dallas Clement, Cox senior vp-strategy and development. He said companies would work together to “ensure the high-quality uninterrupted high-speed Internet service that our Cox@Home subscribers expect.” Cox also owns 7% of Excite@Home, and that stake may be lost or worth pennies on dollar when Excite emerges from bankruptcy. As of June 30, Cox had about 448,000 customers for Excite@Home service. Cox spokeswoman said that between now and June 4, 2002, company would “transition” all of those customers from Excite@Home to Cox-managed system. She said Cox technicians were working to ensure “seamless” transition with “absolutely no service outages.”
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AT&T offered to buy essentially all of Excite@Home’s broadband access business for $307 million cash. Agreement remains subject to better offers, but industry insiders said they doubted there would be any. If sale is approved by bankruptcy court and SEC, AT&T said it planned to improve broadband high- speed Internet service and hoped to close transaction early next year. With 23% ownership of Excite@Home, AT&T also has 3.7 million customers with Excite service. “Our stake is pretty much out the window,” company source said. In effort to avoid scenario similar to Northpoint, where customers lost service, AT&T is scurrying to build its own network to avoid any gaps, source said.
AT&T officials said they hoped to work with other MSOs that depended on Excite@Home. Excite@Home has affiliate partnerships with Adelphia, Charter, Cogeco Cable, Comcast, Cox, Insight , Midcontinent Cable, Prime Cable, among others. Last month, Comcast and Cox said they would withdraw from their partnerships with Excite once their exclusive contracts expired next year and would begin offering Internet service over their own cable networks. Big part of that is rooted in FCC’s open access question. In allowing merger of AOL-Time Warner (AOL-TW), FTC and FCC said AOL-TW must offer access to independent ISPs seeking to offer Internet service over their cable lines, and FCC has encouraged competitors, including cable, to get into Internet business. Charter, which has 90,000 customers who receive service with Excite@Home portal, is moving those customers to other Internet service providers, spokesman said. Although customers won’t see “any major hiccup” in service, they may have to switch their Internet addresses or e-mail, spokesman said.
Much of Excite@Home’s troubles have been evident for some time. In SEC filing in Aug., its auditors questioned whether it could “continue as going concern” (CD Aug 21 p6). Then, investment company Promethean Group called in $50 million in notes and Excite was unable to meet deadline to pay (CD Sept 4 p2). Promethean spokeswoman declined to comment on how bankruptcy filing would affect its investors. Last week, Excite said it would cut 500 jobs as it dropped its MatchLogic subsidiary, which handles interactive marketing services (CD Sept 27, p7).
AT&T officials discounted notion that Excite’s assets would be acquired to boost asset portfolio of AT&T Broadband, largest cable operator in nation, which AT&T wants to spin off or sell. Comcast in summer made unsolicited $44.5 billion bid for broadband unit, which was rejected. But Comcast and AT&T since have signed confidentiality agreement and are negotiating in earnest. In fact, one AT&T source said retaining Excite@Home assets would give AT&T “a toehold,” in Internet business, should it seek to reenter that market once broadband unit was gone.