WorldCom Confirms Rhythms Deal

WorldCom executives confirmed rumors of a partial
buyout of Rhythms NetConnections network Tuesday
morning, stating they intend to take $40 million worth of the defunct
digital subscriber line (DSL) provider.

The deal is subject to court approval, which has the final say in matters
affecting a company currently in bankruptcy proceedings. Rhythms recently
filed for Chapter 11 bankruptcy protection.

While WorldCom officials didn’t say which portion of the network they were
buying up, it’s good news for any Rhythms customer in that area. WorldCom
has already agreed to take on “debtor-in-possession” responsibility, which
means they will finance the continued operations in those cities.

That doesn’t mean Rhythms customers have a new home, however.

Officials at the long-distance company say they are buying Rhythms assets
only in areas they already have a DSL presence, and that the purchase only
boosts its capability and performance in those cities to support its frame
relay and virtual private networking (VPN) services for its business-class
DSL customers.

To date, Rhythms creditors have been forced by the Federal Communications
Commission to keep the company’s service running, in order to ensure a
smooth transition for its customers.

On Monday, reports had WorldCom placing un unspecified bid for
“significant” portions of the troubled data competitive local exhcange
carrier’s (DLECs) network.

The provider had originally planned on closing down Sept. 10 but the FCC,
after listening to complaints brought up by equipment maker Cisco Systems,
Inc., ordered Rhythms to remain open until Monday at midnight. Cisco
maintained its operations would have been seriously hindered by the
shutdown, since as many as 8,500 of its employees used the Rhythms service.

The arrangement is similar to the AT&T Broadband buy of NorthPoint
Communications, which went
out of business
earlier this year.

NorthPoint, which filed for Chapter 7 bankrupty, closed down its network
with little notice to customers, prompting a nationwide outcry of
protest. Many in the industry consider the abrupt cessation of services as
a contributor in the loss in confidence in the DSL industry.

AT&T Broadband later paid $135 million for NorthPoint assets, which
consisted mainly of DSL access multiplexers (DSLAMs) at central offices
(COs) nationwide.

But unlike AT&T, which hasn’t done anything with the equipment its bought
so far, WorldCom intends to immediately put the DSLAMs to good use.

It’s good news for Rhythms creditors, who had hoped a similar scenario
would occur so they wouldn’t be stuck finding individual buyers for its
nationwide network of routing equipment.

Rhythms officials were unavailable for comment on the WorldCom buy or how
many customers remained on its network.

News Around the Web