Allen eyes HSA's cable-modem assets - Broadcasting & Cable

Allen eyes HSA's cable-modem assets

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Microsoft Corp. cofounder Paul Allen late Tuesday offered Littleton,
Colo.-based Internet-service provider High Speed Access Corp. $73 million plus
debt cancellation for assets HSA uses to serve cable-modem customers of Charter
Communications Inc., his cable MSO.

Allen holds a 50 percent stake in HSA.

He may be just slightly ahead of the curve in offering to take over much of
HSA's business. HSA and other cable-focused ISPs are suffering financially.

In the first quarter of 2001, HSA's net loss was $33.4 million on $7 million
in revenue. Excite@Home Corp. -- the ISP launched to serve AT&T Corp.'s
cable customers -- lost $346 million on revenue of $139 million for its most
recent quarter. Finances for Road Runner, the provider once co-owned by Time
Warner Inc. and MediaOne Group Inc., are private, but it is said to be faced
with continuing losses, as well.

If HSA accepts Allen's offer, the company may close shop rather than
continuing. Charter accounts for 85 percent of HSA's revenue.

HSA officials said that if they agree to a deal with Allen, they would
consider an 'orderly shutdown' and distribution of net proceeds to shareholders.
Other options are maintaining all current business lines, which also include
telephone digital-subscriber-line Internet service, international cable-modem
operations, digital-server hosting and ISP service to AOL Time Warner Inc.
customers.

'One thing we have to decide is whether we can serve other cable operators
effectively without the economies of scale created by the Charter business,' HSA
chief executive Daniel O'Brien said.

If Allen's offer is accepted, the Federal Trade Commission won't be on the
hook to decide whether HSA qualifies as one of the three unaffiliated ISPs AOL
Time Warner Inc. must carry as a condition of last year's merger between America
Online Inc. and Time Warner Inc.

Public-advocacy groups have argued that the FTC should bounce HSA from the
lineup because Charter has joint ventures and shared investments with AOL Time
Warner.

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