Rhythms NetConnections to End Service

Rhythms NetConnections Inc., as expected, said on Friday that it has sent out 31-day service termination notices to all of its customers. The broadband Internet service provider also has cut about 75 percent of its workforce.

Competitors were quick to seize upon Rhythms’ announcement. Both ibuybroadband of Indianapolis, Ind., and Covad (which disclosed its own intentions to file for bankruptcy earlier this week) said they would assist Rhythms DSL customers with the transition to new service providers.

On Aug. 2, the Englewood, Colo.-based DSL operator announced that it and all of its wholly-owned U.S. subsidiaries voluntarily filed for reorganization in the Southern District of New York under Chapter 11 of the U.S. Bankruptcy Code. The move came after Rhythms failed to secure an asset buyout or acquisition in June.

Like other data competitive local exchange carriers (DLEC), Rhythms was hit hard by the economic slowdown. It has struggled with layoffs, was delisted by the NASDAQ in May, and in June said it would pull out of 150 central offices and disconnect the affected customers by Aug. 13.

In a statement issued Friday, Rhythms said it intends to assist its
customers in transitioning their existing digital subscriber line services to alternative broadband providers during the next 31 days. Notices were sent out Thursday night.

The company also said it is reducing its workforce today by approximately 700 employees, or approximately 75 percent of its total workforce. Approximately 85 percent of the affected employees are in Colorado.

At the time of the bankruptcy filing, Rhythms said it had about $133 million in unrestricted cash and cash equivalents. It intended to use its unrestricted cash on hand and future cash from operations to fund its business following the Chapter 11 filing, rather than seek debtor-in-possession financing.

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