Excite@Home Corp. — trying to conserve cash and possibly squeeze better terms out of affiliate cable operators — stopped taking new cable-modem service orders last week, giving only hours' notice to affiliates that could wind up taking a big financial hit until they make other arrangements to provision new customers.
Collectively, the MSOs said they had no warning that Excite@Home would cut off new-subscriber provisioning. All the companies were notified either on Oct. 10 or late in the day Oct. 9 that the Internet provider would no longer accept new subscribers as of 3 p.m. EST on Oct. 10.
With 3.67 million customers as of July 1, Excite@Home is by far the biggest cable-based Internet service provider. Road Runner has about 1.5 million customers, most of whom are Time Warner Cable subscribers.
AT&T Corp. spokeswoman June Rochford said major affiliate AT&T Broadband — with more than 1.3 million cable-modem customers — expected at least a 30-day notice of such an action and was surprised when service was abruptly cut.
Cash-strapped Excite@Home filed for Chapter 11 bankruptcy-law protection on Sept. 28.
Excite will continue to work through a backlog of orders accepted before last Wednesday's deadline, and operators said they were hopeful that solutions could be put in place before much damage is done. But it appears likely that new subscribers in affiliate territories could face digital subscriber line-like delays between ordering and receiving service until the conflict is resolved.
The most directly affected affiliate MSOs are AT&T Broadband, Comcast Corp., Cox Communications Inc., Insight Communications Co. and Midcontinent Communications, which depend on Excite@Home for all or most of their cable-modem service.
Other MSOs that took a hit include Charter Communications Inc. and Adelphia Communications Corp., along with Canadian MSOs Shaw Communications Inc. and Rogers Cable Inc.
Shaw of Calgary, Alberta, has been shifting its 600,000-plus high-speed data subscribers over to its own Internet Data Center and last year launched Big Pipe Inc., its own Internet-backbone division, which operates a national fiber backbone for Shaw and outside customers.
"We've been running down the road to be self-sufficient for two years now," Shaw president Peter Bissonnette told Multichannel News
last month.
The shutdown also affects Excite@Home Solutions, which serves such rural MSOs as Mediacom Communications Corp. Mediacom had switched to @Home after its previous cable-modem service provider, ISP Channel, left the business.
Mediacom senior vice president of marketing and consumer services John Pascarelli said his company has about a 10-day to 12-day backlog to provision "so it really hasn't impacted us yet." He said he hoped the situation would be resolved soon.
LEVERAGE MOVE?
An Excite@Home spokeswoman said the new-subscriber cutoff was needed "to preserve our cash and ensure the continuation of our existing core operations. Adding new subscribers entails incremental capital cost outlays, which directly affects the company's cash flow during the bankruptcy process."
Industry analysts believe Excite@Home also is trying to gain negotiating leverage with its MSO affiliates, which don't want to lose new subscriber revenue. Cox and Comcast have reported new-subscriber signup rates that averaged 8,500 per week in July and August and were on pace for a strong finish in the second half of the year.
A Goldman Sachs & Co. analysis warned that though MSOs might face modest new-subscriber revenue losses, there was a greater danger that this conflict with creditors could eventually shut down service to existing subscribers.
Others believe it stems from creditors' discontent with AT&T Corp.'s $307 million bid to buy Excite@Home's assets, which is widely considered a low offer. The creditors may be demanding that AT&T boost the bid; a cut in new-subscriber provisioning may be a way to add pressure.
Added to the complex mix is the fact Cox and Comcast will end their exclusive contracts with Excite@Home as of Dec. 4, and will sever ties with the ISP entirely as of June 4.
As they prepare to leave, there are reports that Cox and Comcast owe Excite@Home money under the existing operating agreement. When asked, Excite@Home and Comcast declined to comment. And a Cox spokeswoman said the MSO is not only paid up, but Excite@Home actually owes it money.
"We believe that we are current on everything the we owe under the master distribution agreement," she said. While she could not give specifics, she added, "It's our belief that there is money owed to us for services provided that have been paid for."
The MSOs say they are working with Excite@Home to restore new subscriber provisioning.
"In the meantime, Comcast has taken steps to continue rolling out modems while we work to reach a resolution," MSO spokeswoman Jenni Moyer said in a statement. "Given that Excite@Home provides high speed Internet services to more than 3.6 million customers at many of the world's largest MSOs including Comcast, Cox and AT&T Broadband, we are confident that the bankruptcy process will allow for a practical solution to quickly be found."
Cox spokeswoman Laura Oberhelman expressed the same sentiments, and said the suspension of new-customer provisioning was temporary. The Atlanta-based MSO is telling its customers it will take the new-service request, but "there's going to be a temporary delay associated with the installation of your service," the spokeswoman said. "What we are telling them is that we're taking all the steps necessarily to resume installation efforts ASAP. Currently it's going to be a few weeks out before we can schedule Cox@Home, and this is a temporary thing."
Cox is working on its own cable-modem provisioning system to take over after the MSO exits the Excite@Home network June 4, but such a system likely wouldn't be rushed into service in the near term.
"I don't think a few weeks out is the time frame in which that is going to happen," the spokeswoman said. "We are actively working on other high-speed Internet solutions that would be implemented by June 4 next year when the contract ends.
"If we can install customers earlier than a few weeks out we will call them back and say 'Hey, this has been resolved.' "
AT&T Broadband is sounding a more confident note. A spokeswoman said the MSO is taking customer orders and setting installation dates for sometime next month. That may result in new subscribers receiving electronic-mail addresses in the @attbroadband.com Web domain.
"We think we will be able to provision these customers," the spokeswoman said.
Insight chief operating officer Kim Kelly said her MSO did not have a backup plan in place yet.
"I don't think anybody can hook up a new order for self-provisioned service today. I don't think any MSO can," she said.
Insight — which uses Excite@Home to provide high-speed-data service in all markets except Columbus, Ohio — reported having 46,400 high-speed-data customers as of June 30.
Kelly said Insight has about a two-week backlog of orders for cable-modem service — orders Excite@Home has said it will fulfill, because they were taken earlier. She added that she hoped a solution could be negotiated before those two weeks elapse.
While a lion's share of its service territory is not part of the Excite@Home network, Charter does have @Home customers in Fort Worth, Texas and Greenville, S.C. A Charter spokesman said the MSO thinks it could get self-provisioning up and running in 45 to 60 days.
PROVISIONING OPTIONS
AT&T Broadband and Charter appear to be closer to taking over provisioning than other MSOs. Along with Adelphia, the two MSOs use BroadJump Inc.'s Virtual Truck automated provisioning software. Recently, the MSOs have come to BroadJump to discuss provisioning service on their own, according to CEO Kip McClanahan.
"We are in chats with each of those customers to help them solve all of their deployment issues," he said. "We have been in very recent discussion with them."
BroadJump's product can take care of users' computer configuration, software installation and provisioning, but a cable operator would still have to find or create another ISP service to provide e-mail, chat and content.
