It's official: Ma Bell has disowned her wayward child.
Not only that, but she's clamping down on Internet usage for the remaining members of her high-speed household.
said Tuesday that it has ended its 2-month-old agreement to purchase the assets of its majority-owned subsidiary
, which is now operating under bankruptcy court protection.
In September, AT&T had promised to pay $307 million for the remains of high-speed Internet service provider Excite@Home. But the companies' relationship turned ugly over the weekend, once they broke off negotiations for extending their partnership, and Excite@Home disconnected AT&T subscribers from the cable modem service.
The purchase is off, says AT&T, which notes "a number of significant breaches and other violations of the agreement by At Home." AT&T says it expects that 80% of its former Excite@Home customers will be on the homegrown AT&T Broadband Internet service by Tuesday night, and that the balance will be hooked up by Friday morning.
Andrew Johnson, a spokesman for Ma Bell's AT&T Broadband cable subsidiary, declined to specify what these breaches and violations were, given that the matter will inevitably end up in court. "I'm sure this'll be fairly well litigated," he said.
At least Excite@Home's management and bondholders are getting a little help from outside the family -- namely, other cable operators that have been marketing Excite@Home in their service areas.
are splitting a $320 million payment to Excite@Home in return for continued service over the next three months, enabling them to transfer current Excite@Home customers to in-house Internet connections.
, a smaller cable operator, is spending $10 million for the same privilege.
The fate of Excite@Home's assets after the end of February is unclear, but presumably the company's bondholders -- not to mention shareholders who are hoping they'll have a say in the company's reorganization -- hope to reap some value for the network.
Meanwhile, some of the AT&T Broadband Internet customers newly migrated from Excite@Home are chafing at limitations on the speed of their connections. Though former Excite@Home customers were often able to download music, graphics and other data from the Internet at speeds as higher than 2 megabits per second -- and sometimes as high as 10Mbps, according to
DSL Prime editor Dave Burstein -- AT&T has firmly capped the download speed at 1.5Mbps.
Johnson is unapologetic about the change, saying that it's perfectly adequate for the residential customers at whom the service is targeted. The noise is coming from "power users," he says, a group of customers he terms as "very vocal." Says Johnson, "The power users obviously will always be concerned that they can't get enough. ... To the power user's way of thinking, they'd like their own fiber optic connection from their computer out to the world."
With AT&T charging customers $44.95 a month for cable modem service, or $10 less if they already own a cable modem, the company is examining the idea of charging more for a higher throughput service, Johnson says. But no deadline has been set for offering it, he says.