SAN JOSE, Calif. – AT&T Corp. dropped its $307 million bid for the assets of ExciteAtHome on Tuesday and accused the bankrupt cable Internet provider of violating their contract by cutting off service.
Excite severed the high-speed connections for 850,000 customers of Englewood, Colo.-based AT&T Broadband customers over the weekend after a federal bankruptcy judge authorized ExciteAtHome to end "burdensome" contracts.
ExciteAtHome's biggest remaining cable partners are still receiving service and have agreed to pay hundreds of millions of dollars to keep it running for three more months — until they can develop their own cable Internet networks.
Cox Communications Inc. and Comcast Corp. agreed Monday to each pay ExciteAtHome $160 million for the three months. Rogers Communications and Insight Communications reached similar deals but did not disclose the price.
Those payment plans are scheduled to be reviewed Friday by U.S. Bankruptcy Judge Thomas Carlson in San Francisco.
AT&T said it withdrew its bid for ExciteAtHome's assets because the Redwood City-based company violated their agreement. Also, AT&T's new cable Internet access network eliminated the need for ExciteAtHome's system, said June Rochford, a spokeswoman for AT&T Broadband.
AT&T owns 23 percent of ExciteAtHome, which uses a fiber-optic network backbone leased from AT&T. AT&T surrendered its majority representation on the company's board in October, hoping to avoid criticism it had engineered the company's bankruptcy so it could buy the cable access network at a steep discount.
Now ExciteAtHome bondholders, who are owed at least $1 billion, are considering whether to seek damages from AT&T for allegedly engaging in collusion in its bid for ExciteAtHome and then withdrawing the offer.
"There may be a lot of damages, frankly," bondholders' attorney Joseph Allerhand told Judge Carlson on Tuesday.
Rochford called the allegation "ludicrous."
About 500,000 of the 850,000 AT&T Broadband customers who lost service had been moved to AT&T's new network as of Tuesday, mainly people in Oregon, Washington, Texas and San Francisco. Next in line were customers in Illinois, Denver and Salt Lake City.
Customers in Pittsburgh, Sacramento, Michigan and the Rocky Mountains were due to be plugged in on Wednesday and Thursday; people in Hartford, Conn., on Friday.
The process was far from smooth for Brian Smith, 55, of Kent, Wash. His cable modem was restored Sunday on AT&T's new network but conked out Monday. He estimated Tuesday morning that he had spent more than 10 hours on the phone, waiting on hold and talking to several AT&T technicians, but still had no service.
"I'm not a multimillion-dollar customer and they're just blowing me off one way or another," Smith said.
Other customers said they were worried that e-mails sent to their old "AtHome" addresses were lost forever.
The ability of AT&T and the other cable companies to move customers onto their own Internet access networks appears to mean ExciteAtHome's remaining life is rather short. An ExciteAtHome spokeswoman would not comment.