RealTime IT News

Judge Postpones @Home Hearing

SAN FRANCISCO -- A federal judge in Excite@Home's Chapter 11 bankruptcy proceeding has decided to postpone approving a bid by five cable companies to keep the cable service running another three months.

Judge Thomas Carlson is giving bondholders until Tuesday to look over particulars of the $355 million agreement they find confusing. The judge is clearly eager to get all parties involved in the deal, from creditors and bondholders to the cable companies, to reach a compromise.

"There are some colorable claims by the bondholders," the judge said. "What we have here is a deal that almost everyone agrees on that is advantageous to the estate."

The main sticking point with bondholders is a slew of complicated release clauses including some $4 million in minor assets attached to the @Home service.

@Home bondholders have, in spirit if not officially, agreed to the terms of the agreement. They also agree that AT&T Broadband/@Home services and Charter Communications are not part of the contract extension, unless they want to "opt-in" to the agreement.

One of the attorney's representing @Home bondholders said even though most of the extension agreement looks good on paper, some of the details use what he calls "fuzzy logic."

"We have no real opposition to the deal (in general) but we are concerned that the cable companies are spiking the ball in the end zone and patting themselves on the back," he said. "We need to keep our eye on the ball."

@Home lawyer Robert White of O'Melveny & Myers and a host of other cable representatives in on the deal said the deal "is what it is" and said that bondholders cannot "have it both ways."

@Home number-crunchers expect the broadband Internet service provider (ISP) to cost $50 million a month to operate, conservatively speaking. That leaves $205 million to split between @Home bondholders and creditors.

Most of the ISPs equipment lessees were on hand Friday, to make sure their interests were voiced. Normally, equipment lenders are lower down the food chain than bondholders. While many do not expect the equipment lenders to get left out of the payout process, most were on hand to ensure they came away with something.

Today's decision is critical for the five cable companies that agreed to pitch in $355 million to keep @Home's network up and running for another three months. All are in the middle of hastily assembling a ISP service to replace the @Home network, a process that can take weeks to accomplish.

While several of the cable operators had already signed non-binding agreements with @Home to continue cable services, as in the case of Cox Communications, all bets are off when it comes to a ruling by the judge in a Chapter 11 bankruptcy filing.

Judge Thomas Carlson has already shown that he won't consider the inconvenience of temporary service interruption, as he has demonstrated with his ruling to shut down AT&T's @Home customers, which put 850,000 customers in the dark.

In its own defense, AT&T says it has finished moving some 850,000 former @ Home users to its network. The company acknowledged, however, that some AT&T Broadband high-speed Internet customers have been encountering difficulties in activating and connecting their computers to the new network due to several causes.

Cox Communications, with its recent order for hundreds of Riverstone routers to handle Internet traffic, is still a couple months from extricating its roughly 550,000 Cox@Home customers away from the failing service. That had a lot to do with its decision to pony up $160 million (Comcast Corp., with a deep customer investment in @Home, also pitched in $160 million).

The other four cable operators Comcast Corp. , Insight Communications , Mediacom Communications and Mid Continent Communications are at similar stages in a network build.

A network shutdown would make this week's AT&T Broadband @Home shutdown look like a warmup. Of the 4.1 million North American @Home subscribers, nearly two million of them fall under the umbrella of the five companies who agreed to pay up.

The judge did, however, give the green light to an asset sale of @Home subsidiary MatchLogic.

In the case of MatchLogic, which was give n the axe in September, the judge agreed to split the data and equipment assets of the @Home subsidiary between General Motors Cyber Works and Proctor & Gamble.