SF Advanced TelCom Group declares bankruptcy

By Michael Liedtke, The Associated Press
Friday May 03, 2002

SAN FRANCISCO — One-stop telephone service Advanced TelCom Group filed for bankruptcy protection Thursday and said it will try to sell the company while it dismantles an expansion that backfired in the high-tech slump. 

With its Chapter 11 bankruptcy filing, Santa Rosa-based ATG becomes the latest casualty of an economic downturn that has been especially harsh on telecommunications companies selling Internet equipment and services. 

Founded in 1998, privately held ATG offers local and long-distance phone service as well as high-speed Internet access over digital subscriber lines in small and medium-sized cities in eight states. The company has more than 35,000 customers and about 400 employees, down from a peak of 700 workers six months ago. 

ATG plans to lay off another 100 workers this month, said Executive Chairman Gary Cuccio, who was hired in late 2001 to try to turn around the company. 

The company plans to pull out of four states — New York, Connecticut, Virginia and Maryland. ATG customers in those states already have been notified that they need to find new providers. ATG has about 5,000 customers in those Eastern states, Cuccio said. 

The company will focus on the markets in the four states — California, Nevada, Oregon and Washington — where it has been losing the least amount of money, Cuccio said. 

At least five bidders have expressed interest in buying all or part of ATG, Cuccio said. “Hopefully, by limiting our liabilities, we will be more attractive,” Cuccio said. 

ATG has about $220 million in liabilities and $190 million in assets, Cuccio said. The company burned through about $500 million in venture capital and loans before landing in bankruptcy court, Cuccio said. 

Other Internet service providers to succumb to bankruptcy during the last two years include NorthPoint Communications, Covad Communications, Rhythms NetConnections and ExciteAtHome. Meanwhile, major telecom equipment suppliers such as Cisco Systems, Nortel Networks and Lucent Technologies have laid off thousands of workers while suffering huge losses. 

A group of telephone industry veterans led by Clifford Rudolph founded ATG to fill a perceived void in smaller markets traditionally neglected by the telecom industry. 

The company quickly built a network of 21 offices through a series of acquisitions, including Baltimore, Md.-based NewComm Inc., Olympia, Wash.-based OlyWa, Reno, Nev.-based SourceNet and the Pacific Northwest customers of FairPoint Communications.