Comcast might lose Internet link today

High-speed service hinges on court case

November 30, 2001|By Andrew Ratner | Andrew Ratner,SUN STAFF

Linda Ferguson, who sells 1960s-style and other vintage clothing over the Internet from her home in Abingdon, fears that her business will be interrupted at the height of the holiday season.

Brian Darmody, a college administrator who handles trademark licensing for the University of Maryland, College Park, worries that he won't be able to communicate as easily with vendors seeking approval to use the Terrapin logo, as the college's winning football and basketball teams gain in popularity.

And David C. Troy has seen inquiries to his Severna Park-based Internet connection business mushroom.

The reaction is all due to news that Comcast Corp. and other major cable companies throughout the country could lose their Internet service today, depending on what happens in a federal bankruptcy courtroom in San Francisco.

Analysts described it as a high-stakes "game of chicken." Bondholders of At Home Corp., which manages and equips high-speed Internet service for cable providers, have asked a judge to shut down the service today.

They had rejected a bid from AT&T Corp. of $307 million for the Redwood City, Calif., company, which reported about $400 million in assets and $1.2 billion in debt.

At Home announced in September that it would sell to AT&T, but bondholders unhappy about the price moved to block the sale. AT&T, Comcast, Cox Communications Inc. and others have been involved in negotiations with At Home.

At Home's many ill-fated moves included buying the Blue Mountain online greeting card business in 1999 for $780 million, which it sold to American Greeting Corp. this year for $35 million.

If a deal isn't reached by today, and Judge Thomas E. Carlson in California's Northern District bankruptcy court agrees with bondholders, the service could be shut down - and 4 million customers would be without high-speed links to the Internet.

"The customers are part of a taffy pull. It appears neither side cares much about them," said Scott Cleland, president of the Precursor Group, a Washington-based broadband analyst. "It's a black eye for everybody involved."

A shutdown could send shock waves through the fledgling broadband industry. Companies that offer quick Internet connections via satellite or digital subscriber lines would likely rush in to snap up customers, although they don't cover some areas that cable does.

DirecTV didn't even wait for the judge's decision as it announced a promotion yesterday "as a public service to local cable customers ... in immediate need of a broadband alternative." The Connextion, an Ellicott City-based Internet provider, put out a similar offer yesterday.

The impact in the tumultuous cable industry, where the Internet connection business has been a rare success story, could also be dramatic: AT&T might be in a better position to spin off or build its broadband unit with some competitors weakened. Or, Comcast might be in a stronger position to renew its previously rejected bid for AT&T Broadband because the value of AT&T's business might be reduced.

Either way, fewer providers would likely lead to higher prices and further deter consumers from investing in high-speed Internet connections for their home computers.

"If a company as robust as Comcast would allow this to happen, anyone who would continue with them would be crazy," said Jim Leanos, 57, who uses Comcast's Internet service at his home in Towson. "I will very quickly go to DSL, and Comcast will never be in my house again. Comcast is playing a game here."

Comcast and the other cable companies have been left in the lurch because they initially signed an agreement with At Home that they wouldn't build their own systems. The cable providers severed that exclusive arrangement this year, but too late for them to have an alternative in place by tomorrow for customers who would be inconvenienced - and possibly lost to them.

Spokeswomen for Comcast and AT&T declined to comment yesterday other than to say talks with At Home were continuing.

New York-based AT&T wrote customers this week that their service "may be interrupted temporarily" while it completes its own network.

Philadelphia-based Comcast declined to say how many customers it has in the Baltimore-Washington area, but the region is believed to be a stronghold of its Internet business. Nationally, Comcast has about 800,000 Internet customers - double what it had a year ago - and 8.4 million cable television subscribers.

In an e-mail to customers this week, Comcast offered a toll-free hot line for information.

Comcast also led subscribers to free, albeit slower, dial-up service through a company called NetZero, but some customers said yesterday that phone lines were jammed and they couldn't get through to back up their Web files.

"They don't want to lose these customers. It's highly likely to be worked out" by today, said Kevin Calabrese, a telecommunications analyst with Argus Research in New York.

Brian Darmody can't imagine the alternative.

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