SAN JOSE, Calif. – In one of the technology world's most prominent flameouts, high-speed Internet service provider ExciteAtHome announced that it is about to go out of business.
The bankrupt company released a statement Tuesday saying that it would keep its Internet access service running for three months in exchange for immediate payments totaling $355 million from many of its cable partners. ExciteAtHome, which has 1,300 employees, said it will cease operations for good on Feb. 28.
The announcement came after AT&T Corp. withdrew a $307 million offer to buy ExciteAtHome, saying the Internet company violated agreements by cutting off service to 850,000 AT&T customers. A federal judge had authorized ExciteAtHome to cancel unprofitable deals with its cable partners.
The cable companies paying Excite to stay around — Cox Communications Inc., Comcast Corp., Rogers Cable Inc., Insight Communications, MediaCom Broadband and Mid Continent Communications — have said they need time to develop their own cable Internet networks.
The agreements exclude Charter Communications Inc., Adelphia Communications Corp. and several smaller cable companies collectively known as the At Home Solutions Group. Internet service to those companies is being terminated, ExciteAtHome spokeswoman Londonne Corder said.
The plans are scheduled to be reviewed Friday by U.S. Bankruptcy Judge Thomas Carlson in San Francisco.
AT&T withdrew its bid after its new cable Internet access network eliminated the need for ExciteAtHome's system, said June Rochford, a spokeswoman for AT&T Broadband. The other cable companies' ability to similarly develop their own networks sealed ExciteAtHome's fate.
ExciteAtHome was formed in 1999 with At Home Corp.'s $6.7 billion acquisition of the Excite Web portal. Some analysts expected the company to become a powerful Internet player that could challenge America Online.
The company was hurt by questionable management decisions, high expenses and the drastic downturn in the online advertising market, even as its cable Internet access business grew. The company went from 331,000 subscribers in 1999 to 4.1 million before ExciteAtHome began canceling service last weekend.
Many assets associated with the Excite.com Web portal were bought for $10 million by InfoSpace Inc., which issued a statement Tuesday assuring users that the popular portal is not affected by the meltdown of the cable access business.
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. Others were scheduled to be switched over later in the week.
AT&T owns 23 percent of ExciteAtHome, which uses a fiber-optic network leased from AT&T.