SAN FRANCISCO — A bitter battle between the creditors and business partners of bankrupt ExciteAtHome threatens to unplug the cable network’s high-speed Internet service for 4.2 million subscribers as early as Friday, depending on the outcome of a pivotal court hearing.
ExciteAtHome bondholders owed more than $1 billion hope to convince U.S. Bankruptcy Judge Thomas Carlson that shutting down the company’s high-speed cable network is the best way to start a bidding war for the system. A hearing on the request is set Friday in San Francisco, but Carlson might not rule until next week.
It’s unlikely Carlson will shut down the service, said Frank Thomas, one of the leaders of an ExciteAtHome shareholder committee that submitted a reorganization plan outlining a way for the company to emerge from bankruptcy as an independent company.
“This is just a bunch of huffing and puffing by some very big elephants,” said Thomas, a Heathrow, Fla., money manager. “It’s in the best interest of the nation if ExciteAtHome becomes an independent company.”
But one of the three biggest cable companies that sell high-speed Internet access through the AtHome network began preparing its customers for the worst Wednesday.
Comcast advised its customers to back up their e-mail files and personal Web pages in case the AtHome service shuts down Friday. Comcast also set up a Web link to provide its AtHome customers with a dial-up Internet connection through NetZero in case the cable network is cut off. NetZero provides 10 hours of free Internet access per month.
“I’m apoplectic,” said ComcastAtHome subscriber Duane Roelands of Silver Spring, Md., after reviewing Comcast’s contingency plans. “I have been singing Comcast’s praises since I got my cable modem, but now I’m just incredibly frustrated. They are just leaving their customers hanging.”
Comcast on Wednesday was still negotiating with all the principals involved in ExciteAtHome’s bankruptcy case to reach a compromise that will keep the cable network running, said spokeswoman Susan Leepson.
Cox Communications, another key ExciteAtHome partner, eventually plans to switch its AtHome customers over to an independent cable network under construction, but that service won’t be available until some time next year.
Carlson resolved the fate of another ExciteAtHome asset Wednesday by approving InfoSpace Inc.’s $10 million purchase of the Web portal Excite.com.
ExciteAtHome paid $7.8 billion for the Web portal two years ago.
Bellevue, Wash.-based InfoSpace plans to run the search and directory services offered on the portal. The company may sell or license other parts of Excite.com to iWon, another popular Web destination.
The tug-of-war for control of ExciteAtHome’s cable network — and its 4.16 million subscribers as of Sept. 30 — pits the company’s creditors against the company’s business partners.
The bondholders contend that AT&T Corp. used its controlling position on ExciteAtHome’s board to steer the company into bankruptcy in late September so it could buy the cable network at a steep discount — $307 million.
“Only the prospect of turning off the switch will unlock the true value” of ExciteAtHome’s cable network, bondholder attorneys reasoned in a brief.
The outcry among all the customers who lose high-speed access to their e-mail and the Internet will persuade either AT&T or another bidder to pay substantially more than $307 million for the cable network, the bondholders argue.
AT&T opposes the attempt to shut down AtHome. The company also denies it abused its insider position to buy the AtHome network at an unfair price. To avoid a conflict, AT&T gave up four of its six ExciteAtHome board seats last month, several weeks after the bankruptcy filing.
Bondholder attorneys say they have gathered evidence of AT&T’s unfair advantage in depositions taken from top executives at AT&T and ExciteAtHome.
A group of 350 ExciteAtHome shareholders protesting AT&T’s proposed purchase also maintains that the $307 million is far too low.
Under the shareholders’ reorganization plan, the cable companies would agree to pick up all marketing costs to attract new customers to the cable network while paying ExciteAtHome $15 per month for each subscriber. Over the 10 years outlined in the shareholder plan, ExciteAtHome would lower its monthly fee to $12.25 per subscriber, Thomas said. Creditors would have to extend some debt payments, but eventually would be repaid in full.
If their plan is adopted, the shareholders predict the AtHome network will have just under 25 million subscribers by 2010. Over the same period, the company’s revenue would increase by six-fold to about $3.6 billion in 2010, the shareholders said.
On The Net:
Comcast’s information page for AtHome customers: http://www.comcastonline.com.info.htm