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Federal judge orders Excite@Home to cut off MSOs in bid for new deal
By John M. Higgins -- Broadcasting & Cable, 12/2/2001 7:00:00 PM
A judge on Friday ordered Excite@ Home to turn off its high-speed Internet cable service as of that midnight, an action that, at press time, had 4 million customers in Web limbo. Prior to the ruling, cable operators contended that they could deal with losing the service, though in a way that was unlikely to please customers.
With his decision, U.S. District Court Judge Thomas Carlson in San Francisco was betting that the deadline would motivate Excite@Home and major cable companies to hammer out new pacts. The companies were talking on Friday, according to Reuters. Previously, Excite@Home said that, under the current contracts, it was losing $6 million a week. Holders of Excite@Home's junk bonds—and they're all junk bonds at this point—used the shut-off threat to squeeze more money out of cable operators, particularly majority shareholder AT&T Broadband, Comcast and Cox.
"As a business, they're getting $30 to $40 a pop per home, and that's cash flow those cable companies don't want to give up," said Bill Rose, vice president for Arbitron Webcast Services. He also said consumers "won't forgive them very easily" if they feel that cable companies made weak efforts to keep Excite@Home.
Creditors want operators to pay more than the 35% of revenues they now forward for Excite@Home's backbone and customer-service assistance.
AT&T has offered $307 million to buy the network assets. But bondholders and trade creditors, who are owed more than $1.5 billion, want more.
If no eleventh-hour deal comes, at worst, Excite@Home cable Internet customers could be out of service for weeks. At best, they would lose their e-mail addresses, a problem that cable executives earlier acknowledged will send customers screaming.
On Friday, many Excite@Home e-mail holders were warning friends and business contacts that they might be difficult to reach in just a few hours.
One cable executive earlier on Friday characterized Excite@Home's battle as "a game of chicken" between cable companies and the high-speed service, as the money-starved company tries to get a price closer to $700 million.
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