NorthPoint Communications terminated digital subscriber line service to one of its Internet service providers Wednesday, a likely sign it doesn’t expect to receive past-due revenues anytime soon.
Flashcom DSL customers received an email Wednesday morning from rival DSL provider Telocity, Inc., telling them NorthPoint’s relationship with the troubled Internet service provider was ended. The email maintains Telocity entered an exclusive contract with NorthPoint to switch without a lapse in service.
The email read:
“Because you are served by a DSL connection from NorthPoint Communications, we are sending you this urgent notification. As you may know, NorthPoint has terminated its commercial relationship with your current ISP. But, don’t worry, because NorthPoint and Telocity have an exclusive arrangement to prevent disruption of your DSL service.”
It’s good news for Flashcom customers who have been increasingly frustrated with poor service, but bad news for NorthPoint, which was depending on the money from Flashcom to pay for the DSL lines it was using.
Covad Communications is also trying to collect on unpaid revenues from the national broadband ISP, with the same results. Unpaid bills by ISPs, Flashcom included, led the data CLEC to financial problems of its own. As of Tuesday, Martha Sessums, Covad’s vice president of corporate communications, said Covad was working to find solutions to Flashcom’s financial problems. It’s unclear whether Covad will decide to “cut bait” and run, too.
NorthPoint was forced to adjust its third quarter results, increasing revenues loss before interest, taxes, depreciation and amortization by more than $10 million. The adjustments were made, officials maintain, because ISPs like Flashcom could not pay for the DSL lines it ordered.
As if the revenues loss increases wasn’t enough, Verizon broke off its takeover plans with NorthPoint a week after the third quarter adjustments, citing a clause in its Aug. 7 contract which said debt increases were excuse enough to end the merger of the two company’s DSL operations.
Verizon’s defection prompted a nose dive in NorthPoint’s stock, resulting in a sharp drop to its current value of approximately 46 cents a share. NorthPoint officials, who did not call back in time to respond to today’s news, said they are still pursuing legal options in response to Verizon’s actions.
By ending its relationship with Flashcom, NorthPoint is effectively conceding defeat in its attempts to collect the past-due revenues. This defeat means the data competitive local exchange carrier will likely seek redress through the courts, which may be a case of trying to squeeze blood from a rock.
Flashcom, which has been looking for a buyer the past month, has been under fire recently for poor customer service and an infrastructure that hasn’t done its job collecting money from its own customers. It’s inability to collect funds and keep customers, along with a failed third round of financing, has caused Flashcom to renege on its current contracts with the data CLECs.
Flashcom officials were not available for comment at press time.
