Missing the (North)Point

NorthPoint Communications became the first of the big three DSL wholesalers to pull out of the high-speed Internet access race when it discontinued service, stranding more than 100,000 business customers across the U.S.

The loss of service caught most DSL customers off-guard, and many have been forced to settle for dial-up service or, worse yet, face the inconvenience of no Internet access at all.

From the time it declared bankruptcy in January until its $135 million asset sale to AT&T late last month, NorthPoint — within its legal rights — contacted partner ISPs and said they would be fined if they tried to move customers to an alternate DSL provider without NorthPoint's written approval.

Pleasanton, Calif.-based MegaPath Networks said it had a customer transition plan in place before the sale, but NorthPoint tied its hands.

“We tried getting a [letter of authorization] before this happened, but they said no and that we might be subject to more than $1000 per line,” said Dan Foster, chief sales and marketing officer of MegaPath. “After AT&T bought the assets, it was clear that they weren't buying the rights to run the network, and NorthPoint did an about-face.”

A coalition of ISPs began negotiating with NorthPoint and creditor banks to pay $2.4 million to extend the network's life until customers could be moved. But negotiations ended when the banks did not guarantee to keep the network running.

“People owed NorthPoint money, and the banks said they would use it as an accounts receivable offset,” Foster said. “The point of raising several million dollars was partially to take down the accounts receivable but also to have some guarantee that the network would stay up.”

One salient question raised in this is whether the same set of regulations should apply to data and voice services in every state. As it stands, a 30-day notice is required by law to discontinue voice service. But in some states, data services such as DSL are not held to the same standards.

Following the service discontinuation, the California Public Utilities Commission ordered NorthPoint to return service to the 40,000 DSL customers in the state. The commission said that, because NorthPoint had competitive provider status in California, it could not discontinue service without the PUC's authorization and is subject to the same set of state rules that govern other carriers.

“There's a contrast between data and voice in regulation laws,” said Ron Westfall, senior analyst at Current Analysis. “But we can all anticipate that the two will become so intertwined that a new set of laws and regulations will evolve that address both types of services simultaneously.”

NorthPoint's plunge

• Nov. 29, 2000
  Verizon pulls out of $800 million investment deal that would have staked a 55% claim in the DSL provider

• Jan. 16, 2001
  NorthPoint files for Chapter 11 bankruptcy protection

• March 22, 2001
  A U.S. bankruptcy court in California approves AT&T's $135 million bid for NorthPoint's tangible assets, but not its subscriber base

• March 28, 2001
  NorthPoint pulls the plug on its DSL service, stranding more than 100,000 customers