What Happens if [email protected] Shuts Down?

A service cut-off could be hinder cable in the race for broadband supremacy. But cable, and the courts, may have learned from DSL failures.

Speculation about the immediate future of cable data-service provider [email protected] has to center on one overarching question: What would happen to the bankrupt service providers 4.1 million customers if it is forced by the U.S. Bankruptcy Court in San Francisco to shut down its network Nov. 30?

The answer, so far, is tough to pin down.

"We want to continue service beyond Nov. 30 and are in discussions with the cable partners, bondholders and creditors," says Stephanie Xavier, spokeswoman for [email protected], which filed for bankruptcy protection in September.

Some cable operators that offer [email protected] data service have notified their subscribers that a service shutdown could happen Nov. 30. Cable companies that offer the service include some of [email protected] original investors, such as AT&T Broadband, Comcast and Cox Communications.

Although [email protected] continues to negotiate with cable operators on a deal that would allow the service to continue, any such deal would have to be approved by the bankruptcy court.

[email protected] creditors had filed a motion in the bankruptcy court a few weeks back, asking that contracts with [email protected] be renegotiated because they didnt reflect fair market value. In contention is AT&Ts $307 million bid for [email protected] assets, a number that drew fire from creditors as being too low. AT&Ts bid to purchase the company assets is scheduled to be reviewed by the court Dec. 5.

Industry watchers contend that there is little chance the court will force [email protected] to shut down without a transition plan in place that guarantees continued service to subscribers. That sentiment is based largely on the fallout from NorthPoint Communications DSL-service shutdown earlier this year.

"NorthPoint is an example," says Dana Tardelli, an analyst at Aberdeen Group. "I think weve learned a lot of lessons from that, and leaving customers out in the cold is something no one wants."

Although cable operators arent rolling over for [email protected], they could be the biggest losers if service gets disrupted. Cox says that 550,000 of its 780,000 data-service subscribers get their access through [email protected] If [email protected] is ordered to shut down its network, those customers, theoretically, will be left without Internet service.

The marketing ramifications of such a scenario could be devastating for cable, given its ongoing battle with the phone companies for market share in the broadband arena. The NorthPoint fiasco helped cable operators widen their lead over the telcos in the broadband race, because it raised questions about service reliability. Any service interruption on the cable side, especially at the start of the holiday shopping season, would be a severe blow.

One popular outcome now being floated by market watchers is that the court will give cable operators anywhere from three to six months to get alternative Internet services in place before mandating that [email protected] shut down.

But how real the cable partners Internet service contingency plans are at this point remains unclear. Cox says that it has been planning for months to move its [email protected] users to a Cox-run service, but the timing of that plan was based on the June 2002 expiration of Coxs contract with [email protected] Cox will not say how far along it is in building its own Internet-service network.

"Our customers have been told that we are building our own self-managed network," says Ellen East, spokeswoman for Cox. "That timeline is still being finalized."