Bankruptcy Court Starts Selling @Home

As rumors that @Home's network will shut down surface on CNBC and Reuters, Cox announces that its own cable network is in place, making the company independant of @Home, and @Home's portal is sold for a pittance.

by Jim Wagner of internetnews.com [November 29, 2001]

Federal judges approved Wednesday the $10 million purchase bid for certain assets of Excite@Home (NASDAQ:ATHM) to InfoSpace., Inc. as part of @Home's Chapter 11 bankruptcy proceeding.

And so it begins. Excite@Home, the combination consumer portal/broadband Internet service provider (ISP), is going to slowly but surely get whittled down by buyers looking to capture key assets of the once-promising company.

The win is a minor victory for Excite@Home creditors and bondholders, who, it seems, will be lucky to get back pennies on the dollars they've invested in the company. The deal is a good one for InfoSpace, as the company will add Excite.com's extensive search and directory components to their existing service.

Naveen Jain, InfoSpace chairman and chief executive officer, was jubilant over the bid approval.

"We believe this is a solid business opportunity that will expand distribution for our profitable search and directory products," he said. "This opportunity is in line with our strategy to continue to license our platform of wireline products to blue-chip customers and provides another recurring revenue stream in our wireline business."

InfoSpace and Excite@Home officials were unavailable for comment on the implementation date or how many jobs are affected by the deal.

The approval comes three weeks after Excite@Home announced the InfoSpace bid for certain Excite.com assets, namely the domain space, trademarks and user traffic. What isn't included is any of the equipment used to run the popular portal, employees, or Excite's current services or products.

Excite@Home officials were likely trying to drum up interest in their portal with the early November announcement, hoping to lure bigger investors as it tries to free itself from the mire of lost profits and creditor demands.

In essence, InfoSpace spent $10 million for ownership of the domain and the people that use the portal for their home page or meet others in online communities. The company has already announced its intentions to either sell or license much of Excite.com's existing service to cash prize website iWon.com.

Steve Stratz, InfoSpace public relations manager, said the company will manage the Excite.com search and directory components, its core competency. He said the timetable for migration is uncertain.

"We could begin migrating the Excite service to our platform by the end of the week, but both sides are still working the terms out right now," Stratz said. "The important thing is how it affects our customers; Excite users should see zero difference when they switch over."

Even though it is already Wednesday, the court approval marks the beginning in what is surely going to be a long week for @Home officials, who have been left in a holding pattern as organizations outside their control try to determine the company's fate.

On Friday, the same court that approved Wednesday's deal will make a determination on the fate of @Home's broadband cable Internet service, with 4.1 million users worldwide. If creditors are unable to make a deal with the cable companies that have a major presence on the @Home network, the entire network could conceivably be shut down.

@Home officials have confirmed the possibility, although they've been understandably silent when it comes to discussing any of the bankruptcy proceeding details.

AT&T Broadband (NYSE:T), Cox Communications (NYSE:COX), and Comcast Corp. (NYSE:CCZ), the three major investors in the company are also trying to grab a piece of the company before it's network is shut down, for their own purposes.

AT&T Broadband has spent the past couple months trying to win support for its $307 million bid for the broadband ISP, unsuccessfully. Cox and Comcast are both busy building up their networks to migrate their @Home customers onto their own service, a process that could take months.

Comcast has been trying to buy up AT&T Broadband, which was originally slated for an initial public offering (IPO) on the stock market. AT&T board members have balked at what they see as a meager price for the largest cable network in the U.S.

Many analysts expect the AT&T purchase of @Home is an attempt to beef up its asking price to Comcast board members down the road, one they see as inevitable.

Lights out at home?
@Home has a hearing with the San Francisco bankruptcy court on Thursday afternoon.

@Home has been the subject of much debate in the broadband community lately. In addition to filing for Chapter 11 bankruptcy in September, shareholders have been angered over the actions of its board of directors, primarily made up of AT&T executives, who decided to sell the ISP to AT&T Broadband for $307 million.

Talks over the bargain basement rate, which heavily favors the cable network giant and gives shareholders and investors a meager return on their investment, have bogged down in bankruptcy courts since then. Officials at @Home said the company's operations, which are losing money every day, can't keep the service running indefinitely unless emergency funding is made available.

It's a prospect that has many residential cable Internet users worried. Not only would it strand them when the network shuts down, many of the cable companies have yet to implement their own cable ISP services to replace @Home. Some customers are unaware there is a potential problem at all.

A cable's length ahead
Meanwhile, Cox broke away from the pack and informed the world that it is ready to support Cox Internet customers with or without @Home.

Cox Communications officials Wednesday said they are adding a bevy of routers to its cable network in a move to become self-reliant.

The company will deploy "hundreds" of Riverstone Networks Inc. routers throughout its 28 cable systems over the next several months in order to provide services currently handled by its cable Internet service provider (ISP) @Home arm.

The need for Cox to provide its own Internet service is one officials have acknowledged for nearly a year, as the growth of cable Internet subscriptions have skyrocketed around the country.

With roughly 550,000 Cox customers using @Home services today, the router purchase will get them into the Cox fold. Rumors of an impending shutdown at @Home have only hastened the timetable to get the routers up and running as soon as possible.

If @Home shut down Friday, as some reports have it, more than a half-million Cox@Home users would be stranded until the routers come "online." It's a worst-case scenario that has many cable users nervous.

Jay Rolls, Cox vice president of data engineering, said that it's just as important to get the right equipment on the Cox hybrid fiber optic/coaxial network as getting it in as soon as possible.

"This is a significant network deployment, and we are confident that Riverstone's products will allow us to gain additional capacity while enhancing our network availability," Rolls said. "In building our Cox- managed high-speed Internet service, it is important that we deploy highly reliable technologies that also allow us to transition toward emerging technologies, such as MPLS, RPR, and 10 Gigabit Ethernet."

Riverstone's RS 3000 metro access routers, RS 38000 metro aggregation routers and RS 8000/8600 multi-service metro routers also pave the way for Cox to provide cable telephony services. The routers accommodate asynchronous transfer mode (ATM) and synchronous optical network (SONET) architectures.

Marian Stasney, a senior analyst at The Yankee Group, said Cox made a good decision when signing Riverstone to the multi-million dollar contract.

"With several significant wins under its belt—including Korea Telecom, Dacom, Japan Telecom, Huchison Global Crossing and now Cox Communications—Riverstone has demonstrated its abilities in the deployment, service and post-sales support of incumbent carriers," she said. "While Riverstone is well positioned from a technology standpoint, it has recognized that technology is but one component of delivering a solution to tier-one carriers. Strong pre- and post-sales service, operating efficiencies and a low cost-to-benefit ratio are crucial components in building a tier-one customer base."

— End