Posted on 11/30/2001 3:38:37 PM PST by spycatcher
*update* SAN FRANCISCO--A bankruptcy court judge ruled Friday that angry bondholders and cable partners of Excite@Home must go back to the bargaining table, leaving four million customers of the high-speed Internet service in limbo.
Judge Thomas Carlson said Excite@Home could cancel contracts with its cable partners. Carlson didn't rule on whether the cable-modem service would be shut down, but the cable companies have threatened to cut off service if their contracts, which expire at midnight Friday, were terminated.
Attorneys for the cable companies said Friday afternoon they were unsure whether or when they would shut off the service. Representatives for Excite@Home said they did not have any comment on Friday's ruling.
Despite threats from the cable companies, Carlson and numerous attorneys for bondholders and unsecured creditors said that shutting off service was highly unlikely--chiefly because such a move would be detrimental to all parties involved. Excite@Home and various cable partners, including AT&T Broadband, Cox Communications and Comcast, share infrastructure and content, and the companies split revenue that comes from paying subscribers.
If cable companies enrage customers by switching off their high-speed Internet service, the judge and bondholders argued, then the cable companies would harm themselves and shrink their customer ranks. One bondholder said cable companies would engage in a "murder-suicide" pact with the Excite@Home if they switched off service.
"It's clear that the continued operations have substantial interests to the cable companies," Carlson said to a packed courtroom where attorneys, Excite@Home executives, journalists and others jockeyed for seats and flooded into the courtroom's aisle and rear.
Corporate America has been keenly watching the bankruptcy proceedings of Redwood City, Calif.-based Excite@Home, which became the largest Internet company when it was formed in a $6.7 billion merger of Web portal Excite and cable company @Home in January 1999. It remains one of the most high-profile and strained marriages of the Old and New Economies, with AT&T owning about three-quarters of Excite@Home's outstanding stock.
Victory for bondholders Carlson's decision was a major victory for bondholders and unsecured creditors, who are desperate to boost revenue of Excite@Home and thereby minimize losses on the bondholders' and creditors' investment. By some estimates, Excite@Home is burning through $6 million per week because of outdated contracts with the cable companies.
Although the contracts are complicated documents and vary widely depending on the cable partner, the agreement is weighted in cable companies' favor. With the average cost of Excite@Home service at about $46, the cable companies collect roughly 65 percent of that, while Excite@Home collects only 35 percent.
Interim contracts that parties negotiated in October are slightly different than the official contracts that may now be renegotiated, but the interim agreements also funnel a disproportionate amount of money toward cable companies. Contracts are also slightly different in Canada, where cable companies take as much as 80 percent of the revenue, leaving only 20 percent for Excite@Home.
By allowing Excite@Home to renegotiate its contracts with the cable companies, the judge opens the door to new contracts that substantially increase Excite@Home's cut in revenue. Because Excite@Home filed for Chapter 11 bankruptcy protection in September, the judge said that Excite@Home may legally break its existing contracts in order to increase its chances of survival.
But the decision also opens the door to a termination of Excite@Home's high-speed Internet service to more than four million subscribers. The cable companies, including Cox, Comcast, Charter Communications and others, have stated or implied for weeks that new contracts could result in termination of the service.
"The contract is the means by which we operate a service," an attorney representing cable company Charter Communications said in court Friday. "If there is no contract, there is no service."
But attorneys for bondholders and unsecured creditors said the cable companies' protestations are nothing but idle threats--an attempt to hang onto lucrative contracts without having to renegotiate them at potentially less favorable rates.
"They're playing a high-stakes game of chicken at the expense of customers," said Richard Slack, a New York attorney representing Excite@Home's bondholder committee. "The court was pretty clear about the importance of renegotiating contracts."
Even after Carlson heard arguments for two hours and ruled that Excite@Home could renegotiate contracts, attorneys for the cable companies protested. One said he planned to appeal the decision. Several other attorneys for cable companies argued that the judge should, at a minimum, let the companies continue operating under the existing contracts for several days.
But Carlson said it was in the best interest of the consumers to renegotiate the contracts immediately. He rejected cable companies' argument that the contracts should be maintained in order to preserve the Internet service of 4.1 million customers.
"Bankruptcy typically causes much disruption," Carlson said. "While the cessation of customers' Internet access is regrettable, it does not jeopardize public health or safety."
A shutdown would strand 45 percent of the cable modem users in North America, disrupting small-business owners, telecommuters and even students, since many cable companies have donated high-speed data lines to schools, according to a research note by Anthony Gikas, an analyst at U.S. Bancorp Piper Jaffray.
Excite@Home customers have grown increasingly upset as their Internet access provider has struggled through bankruptcy proceedings. Many say termination would force them to rely on dial-up connections, which are vastly slower than high-speed cable modem access. Digital subscriber line (DSL) is another fast alternative to cable access, but the service is not widely available, and it requires new hardware and installation fees.
"I will cancel all of my AT&T services" if Internet service is terminated, said Bryan Kennedy, a software engineer in Dallas. "This affects my family's ability to work at home. The cost of setting up DSL and going through the process is too much of a headache. I would go back to a dial-up account until I could find a reasonable high-speed alternative."
Some sources have said that the cable companies hope to extend their contracts at least through next week, when AT&T is expected to make a $307 million bid for Excite@Home's cable assets. If and when the sale is finalized, AT&T could renegotiate contracts again.
AT&T's bid has also become rife with controversy. Many Excite@Home shareholders and creditors say the company's cable assets are worth vastly more than $307 million--some insisting that fair market value is as high as $1 billion.
AT&T Broadband representatives said this week they could assume about 20 percent of Excite@Home customers if the company shuts off service. Excite@Home has been in meetings for the past several weeks with AT&T as well as other cable companies.
Sources close to the deal said few of those involved in the talks really want a shutdown of Excite@Home, and some bondholders are willing to accept bids even marginally more than $307 million.
"Anything is possible with enough money," said Bill Weintraub, an attorney who represents the bondholders committee. But he added that the $307 million offer was "clearly inadequate at this point."
Of course they mean Pacific time. What other time would a California company and a California court mean?
Arrrrgh! I'm not staying up much longer. I guess I'll find out in the morning. I called the Comcast hotline and checked my e-mail one more time and there is no further news.
They took control of @home, controlling perhaps 25% of the common shares but over 70% of voting shares. They installed their cronies on the board. They ran a company that was about to go cash positive into the dirt.
They filed chapter 11, and that very day, AT&T conveniently had their ludcrous $307M buyout ready. The stink can be detected as it leaves the solar system at warp speed. It was described on another thread as 'Corporate Terrorism', and I'd have to agree.
If AT&T had simply conducted business, they could have probably satisfied the creditors and gotten @home, so they could spin it off with AT&T Broadband to the Cable providers for a tidy profit. But nooooo, that wasn't good enough. They had to try to steal it. But now, their bluff has been called, and guess who ends up paying for it? Certainly not C. Michael Armhole or any of the other T felons.
If my broadband goes bye-bye, so does my AT&T Long Distance, and you'd better believe they're gonna know why.
What do you expect from a company that uses the Death Star for it's corporate symbol?
HEADLINE STORIES FOR THE YEAR 2035
1. 32nd Anniversary of the demise of AT&T, an American Titan that few remember illegally tried to kill today's worldwide communications giant AtHome. Company unravelling began in 2001 and ended in 2003.
2. Castro finally dies at age 112; Cuban cigars can now be imported legally but President Chelsea Clinton has banned all smoking.
3. Spotted Owl plague threatens Western North America crops & livestock.
4. Last remaining Fundamentalist Muslim dies in the American Territory of the Middle East (formerly known as Iran, Iraq, Syria, and Lebanon)
5. Afghanistan still closed off; physicists estimate it will take at least ten more years before radioactivity decreases to safe levels.
6. George Z. Bush says he will run for President in 2036.
7. 35 year study: diet and exercise is the key to weight loss.
8. Nursing home event... Bill Clinton denies allegations of affair with candy striper.
9. Texas executes last remaining citizen.
10. Upcoming NFL draft likely to focus on use of mutants.
11. Baby conceived naturally.....scientists stumped.
12. Authentic year 2000 "Chad" sells at Sotheby's for $4.6 million.
13. Ozone created by electric cars now killing thousands in Los Angeles.
14. Average height of NBA players now nine feet seven inches.
15. Microsoft, a wholly owned subsidiary of AtHome, announces it has perfected its newest version of Windows so it crashes BEFORE installation is completed.
16. New California law requires that all nail clippers, screwdrivers, and baseball bats be registered by January 2036.
So far nothing, but maybe in a few,AAAHHHHHHHHHHHHHHH.........gurgle, gurgle, click......(silence)
Dial up is not that bad. Open up multiple browser windows, read what is on one page while the other is loading...and now that all you other people are on high-speed connections, there is less traffic clogging up the dial up connection.
Dial up is not that bad. Open up multiple browser windows, read what is on one page while the other is loading.
I am still here on the east coast at 3:24 am. I would rather slit my wrist than have dial up. I have never used dial up except at a friends house. I was one of cables first customers 5 or 6 years ago when they rolled it out in a few test areas.
Ditto that on this end. I'm still on and still fast.
Still standing in Contra Costa County.
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