Excite Begins Slow, Painful Shutdown

Bankrupt broadband provider ExciteAtHome says it has shut down service to 850,000 of its AT&T customers this past weekend.

The blocking began just past midnight Saturday after Judge Thomas Carlson cleared the way for Excite to cancel its contracts with other cable contractors. Excite had asked for the court’s approval in forcing its cable partners to pay higher fees to get access to its network. The cable companies had been paying a monthly fee of $12 per subscriber – that is until Excite filed for bankruptcy protection.

Out of Excite’s more than 4 million subscribers, so far only AT&T’s customers have been blocked from their access. And to add insult to injury, individual subscribers have been shut down first – business customers have yet to be affected, according to an Excite spokeswoman.

The other cable companies, including Cox Communications , Comcast Corp. Rogers Communications and Insight Communications, must now negotiate new agreements acceptable to Excite or risk the possibility that their service contracts will be terminated.

AT&T, which owns a majority share of Excite, is still looking to buy out the broadband Internet service provider at a bargain-basement rate of $307 million.

But to make that purchase even remotely successful, the company is scrambling to get their Excite customers back online.

So far, AT&T says it has switched over about 86,000 customers in Oregon and Washington to its AT&T Broadband network by Saturday.

The remaining customers in Hartford, Connecticut; Chicago; Pittsburgh and other western cites may have to wait anywhere from two to 10 days before being able to surf at high speeds. And even then, there will be major changes in store. Customers with AT&T billing and an @home.com domain are expected to automatically migrate to @attbi.com.

AT&T says it will not change those customer’s monthly rates and for every day of interruption, customers are expected to receive two days free service.

The other cable companies say they are still negotiating their contracts but the DSL providers are smelling blood in the water.

Switch Over To The DSL Side

In the flurry of confusion about how to get back online, some companies including the nearly bankrupt Covad Communications are taking advantage of Excite and AT&T’s woes and offering sweetened deals on DSL connections.

Some are letting customers to move to DSL for free, with no up front costs, and even letting them have access to dial-up services while they are waiting for the DSL line to be installed. Others can get rebates on DSL modems, which basically makes installation free after the rebate.

For example, DIRECTV DSL, the broadband ISP arm of Hughes Electronics Group , was quick to push a promotion of two free months of DSL service for stranded cable customers if they signed up for a one-year deal.

The catch is that installation time can take from 11 to 13 days.

Bad Blood

So why did AT&T customers get the ax first? Well, Excite’s bondholders have accused AT&T in the past of abusing its majority stake on Excite’s board to force the company into the poorhouse making it easier to sell off as part of its AT&T Broadband arm.

But now that other cable companies have been negotiating a new Excite service deal, some analysts say this made AT&T Broadband less willing to sign a new contract because it would raise the value of Excite.

AT&T denies the charges.

The negotiations are expected to continue at a slow bleeding pace because the cable companies do not want a repeat of last year’s NorthPoint Communications debacle after it shut down its network at the behest of creditors, who wanted to minimize their loss at the expense of customer’s connectivity.

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