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Finding a backup to Excite@Home

Cable companies are scrambling to come up with alternative plans for their high-speed Internet access customers since Excite@Home could soon block service.

The possibility that Excite@Home could block service Friday has forced cable companies to scramble to come up with alternative plans for their high-speed Internet access customers.

Excite@Home, which filed for bankruptcy last month, said earlier this week that it could shut off its service to cable companies as early as Friday. Sources say Friday's potential end game was forced by creditors who are trying to get AT&T to raise its $307 million bid for Excite@Home. These bondholders fall later in the creditor food chain and are trying to salvage the best return they can, sources say.

The squabble puts Excite@Home's fate with bankruptcy court Judge Thomas Carlson, who is scheduled to hear creditors' arguments Friday. Carlson will decide whether Excite@Home has the right to shut down its cable access service and, if so, how long the transition period should be to allow its partners to migrate customers to another network.

In October, Carlson seemed to have sided with creditors, saying it would be hard to approve an AT&T purchase with griping bondholders. Analysts, however, said Carlson may not want to shut down Excite@Home and leave 4.1 million customers--not to mention cable partners AT&T, Cox Communications, Comcast and others--stranded.

"What am I supposed to do with no access?" asked Blair Buscareno, a Bellville, N.J., high school computer teacher. If Buscareno, who subscribes to Excite@Home through Comcast, endures a long outage, he said he's likely to switch to cable's competing service: DSL.

Sources say creditors are scheduled to meet Thursday with Excite@Home's cable partners, excluding AT&T, to try to work out an agreement to keep service going. Other creditors have argued that Excite@Home should shut down.

"This isn't something I've created, and they've had time to work this out," Buscareno said.

Faltering negotiations
It didn't have to be this way. In September, AT&T agreed to purchase Excite@Home's assets, but that proposal faced strong opposition from Excite@Home's bondholders.

That opposition led to a series of fruitless talks in which creditors demanded a higher price from AT&T for Excite@Home and Ma Bell refused to budge, said a source close to the negotiations.

Excite@Home files for bankruptcy The source said some creditors have been advocating for a shutdown, but if they were faced with Excite@Home liquidation--a possibility that would result in a complete loss--or an AT&T bid, they would likely switch sides and back Ma Bell.

An Excite@Home spokeswoman said the company is prepared to negotiate beyond Friday if it would mean uninterrupted service.

A deal could also be worked out with a transition period of a "couple months," a solution that would enable AT&T and Cox, two companies that would be the most affected by outages, to prepare to migrate customers, the source said.

In any case, an outage would be a big problem for some of Excite@Home's cable partners. Robert Martin, an analyst at Friedman Billings Ramsey, estimated that in the best-case scenario an Excite@Home shutdown could result in a two-week service outage for cable giants, and in a four-week to six-week outage in the worst-case scenario.

According to analysts, AT&T would be hurt the most because it doesn't have its own network ready to take customers. That's why AT&T is bidding for Excite@Home assets, analysts said.

Cox Communications would also have a lot of trouble since its broadband network isn't complete yet, and Comcast would likely face service disruptions. Charter Communications would have the easiest transition because it already has its network prepped for high-speed Internet service, analysts said.

Backup plans
Worries about a service shutdown have cable companies accelerating plans to build their own networks to keep high-speed Internet access customers in the loop. Cox announced Wednesday that it will use gear from Riverstone Networks and ADC Telecommunications to build its network faster. Cox had planned to have its own broadband network built by June 2002 but has since "moved up the timetable," according to a spokeswoman.

The effect of an Excite@Home outage would vary for each cable company. Following is a look at how cable providers plan to cope with a possible shutdown.

• AT&T Broadband: About half of its 1.37 million cable customers use the Excite@Home network, said spokeswoman Sarah Eder.

In case the company does not win the bid to acquire Excite@Home's assets, it has been building an alternative network that would support those customers, Eder said. She would not discuss a timetable for that network to get up and running, but did say "we'll be able to migrate in a relatively quick fashion...It's not going to be months but also not going to be two hours."

AT&T Broadband can migrate about 20 percent of Excite@Home customers to its own systems quickly if necessary, Chief Executive William Schleyer said Wednesday at the cable TV industry's Western Show convention in Anaheim, Calif.

The remainder of AT&T Broadband's cable customers use the RoadRunner network. Although those customers won't experience an outage in Internet access, they could run into problems accessing content provided by Excite@Home.

• Cox Communications: 550,000 customers may be affected if Excite@Home shuts down, said spokeswoman Ellen East.

Cox has 780,000 high-speed Internet access customers, but 16 percent are on Cox-run or RoadRunner networks.

East declined to speculate on what Cox would do as a backup plan or how long its customers would be without broadband. "There will be plans in place," she said, adding that executives were working on backup options Wednesday. "If there are any service disruptions, they will be short-lived."

• Comcast: Spokeswoman Jenni Moyer said the company was "continuing to talk with Excite@Home and working to try and reach a resolution." She would not comment on the company's plans in the case of an outage.

In a letter sent to customers, Comcast said it was working "to develop a Comcast-managed network" to provide service. The letter also gave customers phone numbers and Web sites for more information, and stated that the company would automatically credit customers' accounts for time without service.

• Charter Communications: The company has been working for several months to set up a parallel network for its Excite@Home customers. Charter had 549,000 high-speed data customers at the end of the last quarter, about 20 percent of whom used Excite@Home as their service provider, spokesman Andy Morgan said. The remainder used Charter's Pipeline service.

Because of legal limitations, Charter can't tell customers to switch to the Pipeline service, but it has been "notifying customers for about (a) month that there was high likelihood Excite@Home could shut down," Morgan said. "I think we're on the third round of letters."

see Special report: Excite@Home marriage doomed at the altar? He said there are only a few thousand customers still using the Excite@Home service, and Charter has been working "around the clock" to get the Pipeline service up and running in all of its locations. Some locations, however, likely would not be ready by Friday. Customers who do lose service will be compensated with two free days of service for every day they were down once an alternative is up and running, he said.

It's likely cable companies will have to offer freebies to keep customers happy, said Friedman Billings Ramsey's Martin. "There will have to be some sort of discounting and rebates."

But that may not be enough.

San Francisco Bay Area scientist Srikar Rao uses Excite@Home through AT&T. He said he got a letter from AT&T a few days ago alerting him to the possibility of a service outage.

"If it's going to affect my access, that's a problem. AT&T just raised their rates a month ago," he said. "If the service goes down for more than a few days or a week, I'll think about DSL. But that takes time to install; it's not an easy decision."

Whatever his decision, going back to dial-up service isn't an option, he said. "It's impossible (to go back). It's not one of those things you can get away with."

Staff writer Tiffany Kary contributed to this report.