In a stunning move, HarvardNet, a Medford, Mass., company that was the first to build a digital subscriber line (DSL) network in New England and has raised more than $235 million to extend it south, has quit the DSL business and fired 280 of its 480 workers.

In a brief announcement, HarvardNet said it would focus on expanding its Web hosting operations, including a division unveiled just two weeks ago to secure and manage traffic for small to mid-sized business Web sites.

The news comes amid a series of crushing blows for the DSL industry, which has seen financial backers flock en masse.

Just months ago predicted as one of the primary ways customers would get high-speed Internet service, DSL companies are retrenching in a bid to prevent the technology from becoming to broadband infrastructure what beta was to VHS videotape technology.

HarvardNet President and CEO Mark Washburn said, "The DSL business is very capital intensive, and the recent dramatic downturn in the financial markets makes it difficult to continue offering DSL services."

HarvardNet fired 200 of its 480 workers immediately. Another 80 people will work until January to wind down the company's DSL operations before being released.

Sales and customer care offices in Westbrook, Maine, Portsmouth, N.H., and Providence, R.I., will be closed by January. Web hosting operations will remain in Boston, Philadelphia and New York City.

HarvardNet has raised $120 million in venture funding, with backing coming from, among others, Fidelity Ventures, M/C Venture Partners, Osborn Capital, The Sturm Group and Paul Allen's Vulcan Ventures Inc. Just a year ago those firms gave $70 million to extend HarvardNet's DSL network from Maine to Virginia.

The company has also secured $120 million in debt financing from Cisco Systems Capital, along with a partner relationship to use Cisco hardware in its network.

HarvardNet spokeswoman Susan Shelby said the move comes at a time when layoffs are hitting the DSL industry in droves. Others that have recently slashed staffs include DSL.net of New Haven, Conn. (141 workers, or 28 percent) and New Edge Networks of Vancouver (135 workers, 30 percent). Flashcom, Covad and Network Access Solutions have also let workers go this year.

Shelby also stressed that employees will be given severance packages (she gave no details) and access to a private job fair on Dec. 11, for which 20 companies have already signed up.

Washburn said, "We are working diligently to help everyone get through this difficult time and quickly find employment with companies that can benefit from their skills."

Privately held HarvardNet does not release revenue figures. Shelby said the company had been getting about half its revenues from the DSL business, half from Web hosting.

Putting a brave face on the news, Shelby said the Web hosting industry is expected to grow to $19 billion in revenues by 2003, giving the HarvardNet "an enormous amount of potential for growth," especially with small business customers.

How many customers will be affected by the cancellation of HarvardNet's DSL business remained unclear.