ORDER CUTTING OFF CABLE COMPANIES SPARKS RUSH FOR STAY, RENEWED TALKS
SAN FRANCISCO -- Judge’s order late Fri. permitting bankrupt @Home Corp. to cut cable modem service to 14 of its 15 cable partners set off 2 scrambles -- one by cable lawyers vowing to seek U.S. Dist. Court stay before weekend and other by @Home and cable operators to negotiate, under 12-hour deadline, sweeter revenue cut for @Home. At stake was: (1) whether more than 3 million residential customers would lose their high-speed access -- and with it access to e-mail and in some cases their own Web pages; (2) how much blame cable operators would catch; and (3)how much @Home might be worth coming out of bankruptcy sale or reorganization.
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Meanwhile, auction of @Home network, scheduled for Wed., was postponed indefinitely after request from AT&T, @Home’s biggest customer and shareholder. AT&T has offered $307 million, disappointing creditors owed hundreds of millions of dollars more. Cox and Comcast had been negotiating deal with @Home that might eliminate need for sale, Comcast attorney Charles Cohler said at start of Fri. hearing, but it came off table once hearing began. He said 2 providers had offered to continue paying @Home $20 per subscriber per month and to “backstop” @Home’s cash flow to remedy shortfalls.
Bankruptcy Judge Thomas Carlson said law compelled him to defer to “reasonable business judgment” of @Home that threat of service cutoff could compel cable companies to negotiate more favorable terms than $20-per-subscriber payment agreed to after @Home’s bankruptcy filing. Recent terms were to expire Fri. night, putting parties back under agreement that paid @Home as little as $12. Company consistently racked up big losses at that rate, Carlson said. @Home put losses under old terms at $6 million weekly. Carlson denied Cox'S request for even few days’ stay to file Dist. Court appeal. Cox attorney Dale Bratton indicated he would go directly to Dist. Court for stay.
Before his decision, judge received letter from FCC Chmn. Powell urging him to “balance not just the interests of one debtor and its creditors, but also those millions of customers and the American public.” Powell didn’t specifically recommend keeping @Home operational, but did urge court, “at a minimum, to provide for an orderly transition” to new ISPs for broadband customers: “An immediate shutdown of @Home would disrupt broadband service to a significant percentage of the subscribers in the U.S.” Disruption would include schools, libraries and public institutions, he said.
Carlson didn’t order shutdown, leaving it up to @Home’s discretion. He predicted negotiations would resume successfully Fri. and avert any interruption. @Home attorney Suzanne Uhland said her client had issued no “drop-dead ultimatum,” suggesting company wouldn’t necessarily pull plug immediately if agreement were not reached before Sat. But Charter Communications attorney Howard Steinberg reported to Carlson near hearing’s end that Charter customers already were starting to lose their e-mail. @Home didn’t seek authority to cut off Shaw cable, whose deal is profitable to @Home. Comcast attorney Cohler said shutoff would be tantamount to @Home’s unilateral liquidation. Comcast and Cox are rushing to build out their own networks, to provide high-speed cable Internet access without connections from intermediary such as @Home or Road Runner. Judge, denying repeated cable bids for delays, referred to @Home as “wasting asset.”
Meanwhile, open access supporter Andrew Schwartzman of Media Access Project used @Home situation to press for open access, saying choice of ISPs would avoid major problems if one shut down: “If RoadRunner went bankrupt, AOL Time Warner’s customers could switch to EarthLink.”