Citing escalating operational costs associated with providing cable-modem
services to one-way systems, High Speed Access Corp. said it could begin
shutting off cable-modem services to some of its affiliates as early as May
31.
HSA said it's giving cable affiliates that serve one-way systems an option to
restructure their current turnkey contracts to more equitable network-services
agreements, or to agree to service termination.
Because of the high costs associated with one-way systems, HSA said, it
expects the majority of affiliates in that category to choose the termination
option.
HSA's emphasis on the NSA model in two-way cable systems has 'greater
potential for both profit and growth,' added president and CEO Dan O'Brien in a
press release.
Tied to that decision, HSA said it will lay off roughly 10 percent of its
full-time staff this month. HSA said it had 716 employees as of Dec. 31. Most of
those cuts will affect corporate and field positions linked to HSA's turnkey
model, a spokesman said.
The company made additional reductions earlier this year to bring staffing
levels in line with current operating requirements, but it would not provide
specific figures. Details on those cuts are expected to surface May 8, when HSA
discloses its first-quarter earnings results.
The majority of cable-modem customers served by one-way systems represent
less than 4 percent of HSA's customer base, which hit the 100,000 mark by the
end of last year.
Overall, HSA's decision will impact between 20 and 25 affiliates representing
approximately 50 systems. That process is already under way, HSA said.
HSA declined to disclose which systems or operators could be affected. A
company spokesman added that Charter Communications Inc., HSA's largest
affiliate, is not affected by Thursday's announcement.
HSA said 5.2 million of its 6.6 million homes under contract by the end of
2000 adhere to the new network-services model.
The move is also tied to HSA's strategy to shift from a turnkey model to one
based on NSAs, which distribute costs more evenly between HSA and cable
operators. The turnkey approach has proved to be extremely cost-prohibitive and
led to the downfall of ISP Channel, a former SoftNet Systems Inc. subsidiary and
HSA competitor.
Because one-way cable systems use telephone lines in the return paths for
high-speed services, connectivity costs are nearly double those in two-way
systems, HSA said. Those dual-connectivity costs are only magnified by extremely
high T-1 costs in rural markets, which represent the majority of one-way systems
that have contracts with HSA.
HSA officials said the company will give customers 60 days' notice before
service is shut down, allowing them to seek other alternatives. The company will
also credit those subscribers during the transition period.
The decision will not affect HSA's projections to end 2001 with 240,000
subscribers, the company said.
