Excite@Home to fold operations in 3 months

Excite@Home threw up its hands yesterday, announcing it would shut operations completely after its negotiated contracts with Cox Communications and Comcast expire Feb. 28. AT&T Broadband delivered the deathblow to the carrier the same day, saying it would withdraw its $307 million bid for @Home’s network assets.

Over the weekend, negotiations between AT&T and @Home collapsed, leading the bankrupt carrier to cut off AT&T’s 850,000 @Home customers. But AT&T managed to move most of its customers to its own network by Monday, effectively declaring its independence. Immediately afterwards, AT&T withdrew its bid.

AT&T officials said the only reason they bid for the network assets was to prevent this weekend’s scenario from occurring.

“We put in that bid as the one way to ensure our customers wouldn’t lose their service,” an AT&T spokeswoman said. “When Excite@Home began to terminate our service, despite our good faith negotiations, we had no choice to institute our contingency plan.”

@Home officials declined comment for this story.

For the extra three months of service, remaining partners Comcast, Cox, Rogers Cable, Insight Communications, Mid Continent Communications and Mediacom agreed to pay a combined $355 million to keep their customers connected. While AT&T’s bid only totaled $307 million, the bid also agreed to take on $86 million in debt from the company and would have transferred operations to AT&T.

“If [@Home’s bondholders] sold the damn thing right now, they wouldn’t have the operational expenses for the next three months,” said Bill Rochelle, a bankruptcy attorney for Fulbright Jaworksi in New York. “In the end, they’ll net a loss.”

The only thing left for @Home to do is auction off its physical assets for pennies on the dollar, Rochelle said. But just because the company shuts down doesn’t mean the battle is over. Rochelle said @Home’s bondholders likely will sue AT&T, claiming wrongful termination of contract.