Excite@Home pulls the plug on AT&T cable Net

When cable Internet provider Excite@Home Inc. stopped answering the customer service calls from AT&T Corp.’s customers in the early hours of Saturday morning, AT&T knew for certain that the Internet service provider had pulled the plug.

Excite@Home received permission from a federal bankruptcy court on Friday to shut down service to its cable company partners at midnight local time in California. Even though AT&T has a US$307 million bid on the table to buy out the troubled ISP, negotiations broke down on Friday evening and, almost immediately, Excite@Home began cutting off service to AT&T, stranding 850,000 customers without high-speed Internet service.

AT&T Broadband Inc. had moved about 330,000 customers from Excite@Home’s network to the new AT&T Broadband Internet network by Monday morning, according to an AT&T press release. Another 327,000 cable Internet subscribers in San Francisco and Illinois are to be moved Monday and Tuesday, AT&T said. The company expects to have all its customers on the new network in the next few days.

At present, according to AT&T, areas without service include parts of Chicago; the state of Connecticut; Denver and its Rocky Mountain region in the mountain West; Pittsburgh; Salt Lake City; Sacramento and the Bay Area in California; and some Michigan markets.

People close to the matter say AT&T refused to pay a share of the US$300 million demanded by Excite@Home to keep the network running, according to a report in The Wall Street Journal. Cox Communications Inc. and Comcast Corp. both signed a letter of intent to pay Excite@Home’s maintenance requirements, according to the report.

Excite@Home is playing a game of chicken with their cable partners, according to one analyst.

“They’ve got the AT&T buyout on the table, and it gives them peanuts,” Walter Janowski, a research director at technology market research firm Gartner Inc. “They’ve got nothing to lose” by shutting off service.

Excite@Home’s creditors wanted the freedom to shut down the network to give leverage to their negotiations with the cable companies for either a buyout or more favorable contract terms.

Several cable companies filed an emergency motion for a stay pending an appeal to the Bankruptcy Appellate Panel of the 9th Circuit in Pasadena, Calif. on Friday afternoon, and all except AT&T continued negotiations over the weekend, according to an Excite@Home statement.

AT&T and other cable companies had been preparing for the possibility of a service shutdown for months, pacing the rate of their network build-out to the accelerating decline of Excite@Home’s finances. Though many cable companies had equipment of their own ready to be turned on when Excite@Home’s servers disconnected the company’s Internet subscribers, the language of their contracts forbade them from switching over the networks as a proactive measure.

“We’ve taken a process that would have taken nine to 12 months and made it into nine to 12 weeks,” said Andy Morgan, a Charter Communications Inc. spokesman.

Charter had 140,000 customers on the Excite@Home service – about 20 per cent of its Internet subscribers, he said. When Judge Thomas E. Carlson of the Bankruptcy Court for the District of Northern California issued the ruling permitting Excite@Home to break its master distribution agreements, he also permitted Charter to start the switch.

All but about 14,000 customers had been switched over to the Charter Pipeline service on Sunday, he said. Charter will finish the job once the local phone company provisions lines for the remaining customers in Washington and Oregon, he added.

Those of Excite@Home’s 4.2 million customers still connected to the Internet at cable bandwidth likely dread the prospect of returning to a dial-up connection one-tenth the speed. Cable companies had been winning the battle against broadband over DSL (Digital Subscriber Line) and broadband over satellite dish, said an analyst.

But after customers have waited months and months for service, an outage could eat away at cable’s lead, said Janowski.

“My gut feeling, I think anything more than two weeks is too long,” he said. “If I’m a customer and they’re telling me 30 days, 60 days … (cable companies) don’t have the credibility.”

Excite@Home, in Redwood City, Calif., can be reached at http://www.excite.com/. AT&T, in Basking Ridge, N.J., can be reached at http://www.att.com/.