SAN FRANCISCO — Excite@Home received court approval Tuesday to continue high-speed Internet service for about 2.1 million subscribers through February under a series of deals that will generate $355 million for the bankrupt company while preserving the right to sue its cable partners for alleged abuses.
The agreements approved by U.S. Bankruptcy Judge Thomas Carlson ensure that customers who buy the Excite@Home service through six cable companies will retain their high-speed connections until they are switched to other networks.
Excite@Home subscribers who received the service through AT&T haven’t been as fortunate.
Redwood City-based Excite@Home unplugged the AT&T customers earlier this month after AT&T refused to negotiate new terms for continuing the service.
AT&T says it has switched its all 850,000 @Home customers to its own cable network, but many customers have complained about connection problems and sluggish downloading speeds.
The agreements approved Tuesday cover the customers of these six cable companies: Cox Communications, Comcast, Rogers Cable Inc., Insight Communications, MediaCom Broadband and Mid Continent Communications.
Excite@Home’s bondholders threatened to block the deals last week, but dropped their opposition Tuesday after receiving assurances the new contracts protect what might be the company’s most valuable remaining asset — the right to seek damages against the cable companies.
The company’s management, bondholders and unsecured creditors allege that Excite@Home’s demise stemmed from alleged abuses of power among cable giants AT&T, Cox and Comcast, which all held Excite@Home stock and board seats.
The cable companies blame ExciteAtHome’s failure on bad management and adverse market conditions.
An in-depth analysis of the potential damages hasn’t been done yet, but the creditors believe “a lot of money” lost in ExciteAtHome’s bankruptcy may be recovered in lawsuits, said William Weintraub, an attorney for bondholders owed $750 million.
ExciteAtHome also is considering lawsuits against the cable companies, said company attorney Suzzane Uhland.
The new agreements prevent ExciteAtHome and its creditors from suing Cox and Comcast for saddling the company with unprofitable contracts and building their own high-speed cable networks at the same time they continued to use the ExciteAtHome service.
ExciteAtHome and the creditors retain their right to sue for a wide variety of alleged abuses dating back to the company’s formation in the mid-1990s.
Because it didn’t sign the new contracts, AT&T remains open to all legal claims by ExciteAtHome and its creditors. The company’s shareholders also have threatened a major lawsuit against AT&T, which owned most of ExciteAtHome’s voting stock and controlled the company’s board until October.
The six cable companies that signed the new contracts agreed to waive their right to sue ExciteAtHome for alleged violations of the earlier agreements. ExciteAtHome had estimated it might be liable for damages ranging between $290 million and $500 million if the cable companies sued.
Tuesday’s court approval clears the way for ExciteAtHome to begin winding down its operations. As part of the process, ExciteAtHome has indicated it will start trimming its remaining work force of about 1,300 employees.
Management is trying to cuts cost so it can hold on to most of the $355 million due under the new agreements. After expenses, ExciteAtHome hopes to net at least $205 million from the contracts.
When ExciteAtHome filed for bankruptcy in September, AT&T agreed to buy its high-speed network for $307 million. Bondholders protested the deal, claiming AT&T engineered the bankruptcy in an attempt to buy the cable network at a deep discount, resulting in a showdown that produced the new contracts and prompting AT&T to withdraw its offer.
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