Time is not on service provider's side when it comes to keeping NorthPoint's high-speed access lines buzzing for a month or two. But state PUC appeals to federal courts might buy some time for ISPs and their DSL customers to reconnect with a new provider.

by Jim Wagner of internetnews.com [April 3, 2001]

After an emergency motion for a temporary restraining order to stop NorthPoint Communications from shutting down service failed last week, state Public Utility Commissions might be the last chance for ISPs facing the imminent loss of delivering DSL services.

Recent history
When AT&T Corp.'s consumer division bought the assets and equipment of the bankrupt DLEC, Ma Bell effectively eviscerated NorthPoint when it quit supplying its customers with DSL services. Now, many ISPs that contracted the majority of their DSL connectivity services through NorthPoint are left with no option but to find another provider for their customers—fast.

When NorthPoint abruptly shut down its operations last week, it made it nearly impossible for ISPs to try and broker a smooth transfer of service from one provider to another.

Right after news of the sale to AT&T went public, a coalition of ISPs tried to rescue NorthPoint’s disenfranchised customers in a deal that would have netted another $2.4 million for the new owner. But deadlines came and went and the coalition of 13 ISPs failed, when one of NorthPoint's Canadian creditors insisted on a $6 million price tag.

Ned Hayes, Telocity executive vice president and chief financial officer, said that after a week of good faith negotiations, NorthPoint and its team of bankers decided to significantly escalate the amount of funds necessary to keep the network up for any period of time.

"It seems that NorthPoint's bankers want the ISPs to pay an unreasonable amount of money for the network staying up prospectively, as well as retroactively. Further, NorthPoint and its bankers have backed away from any guarantees of network performance over the next 30 days, even if the funds are provided," Hayes added.

Wrongful death
Granted, NorthPoint was losing money every day it kept DSL operations running. But that's no consolation for ISPs that once trusted NorthPoint to actually provide DSL service to its customers. Consumers and businesses are screaming for vengeance as their lines die and NorthPoint isn't returning any support calls, so disconnected client rage is being directed toward individual ISP resellers—not NorthPoint.

Robert Marsh, chief executive officer of Texas-based Everyone's Internet, said what NorthPoint, its creditors and AT&T have done is flat out wrong. "They have flaunted laws in nearly every state where they have done business," Marsh said.

"When they applied for an operating certificate, the law in Texas says that they need to give 60 days notice to the PUC and consumers," Marsh explained. "They are just absolutely flaunting that and it is a crying shame that the corporate officers at NorthPoint and the banks can't be held responsible for that breach. The customers deserve better."

Marsh said that while dialup customers make up a majority of Everyone's 120,000 subscribers, NorthPoint's reprehensible actions (or is that AT&T's actions?) are going to cost him a couple thousand DSL customers.

"We've been doing everything we can to keep them with us, offering backup dial up service for six months and 10MB of Web space," Marsh said.

Access time
Marsh posted a Web page with the names and contact information of NorthPoint and AT&T corporate officers, along with links to the Texas PUC and other broadband offerings, to keep his customers constantly updated about their connectivity as the issues evolve.

The ISPs only hope is to make the transition to a new DSL provider as smooth as possible. To do that, they'll need time to sign deals with another DSL reseller or as a last resort, give their customers the information they need to go to another provider for DSL services—a provider that did not rely on NorthPoint for connectivity.

But that's going to take time, and time is a luxury that's in short supply these days. Since the federal bankruptcy court isn't looking to provide for disconnected ISPs or their customers, the issue lands squarely with state PUCs to produce a regulatory remedy.

PUC precedence?
The New Hampshire PUC became the hero of Vitts Networks customers when the state regulatory agency denied the bankrupt regional ISPs request to shut down broadband operations in 30 days.

New Hampshire regulations call for a 60-day notice, but Vitts officials, feeling the heat from investors who wanted some of their money back, tried to shut down connections early.

In his decision, Thomas Getz, the New Hampshire commission's executive director, said the rules were put in place to provide for an orderly transition of service for DSL customers in the state.

"The existence of a 60-day notice requirement fosters competition because it provides customers some security when they decide to do business with new companies or take new services," Getz said.

But the ruling is no safety net for Vitts DSL customers when it comes to federal bankruptcy courts, he said. In fact, Getz said, the ruling could mean absolutely nothing if creditors win its case in the Delaware courts. He said the New Hampshire Attorney General’s office will oppose any plan for an early shutdown by Vitts. As it stands, the Vitts ruling could have major implications on NorthPoint's legal rights to shut down DSL services in the states that carry a 30- or 60-day notice requirement.

Getz said the commission already received a filing for review of NorthPoint bankruptcy proceedings too, but he did not want to comment on the issue until the commission had the chance to review all the documents involved.

"The commission will look at the waivers based on the facts presented and make a determination on a case-by-case basis," Getz said. "If a company violates a regulation or a statute then the commission has the authority to impose penalties. But then, I guess that would again be subject to overall resolution of the bankruptcy proceedings, and does bankruptcy law pre-empt circumstances where the company is bankrupt?"

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