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Wednesday, May 29, 2002 |
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• Adelphia sinks to new 52-week low, Tow joins board • Alcatel buys voice-web software maker • AT&T to bump
high-speed fee, • Nasdaq puts SoftNet on notice • Global Crossing: We can work it out • Comcast gets hit with privacy suit • CableLabs hires law firm to handle OCAP patents • Diagnostics could help DSL gain ground As customer spending for telecom gear continues to wane, Nortel Networks is weighing its options. The latest: the company plans to cut 3,500 more jobs. The reductions will affect employees working in Nortel's optical long haul business sector. The company says it will streamline the business, but will not rule out a sale of its optical components division. Nortel does not expect the long haul optical market to recover until late 2003 or early 2004. Nortel expects to incur charges of roughly $600 million related to the cuts. Since last year, Nortel has eliminated roughly 50,000 jobs, including 4,000 last month. The company had expected to level off its work force at 44,000, but has trimmed that number to 42,000. Looking ahead to the second quarter, the company is forecasting revenue will be flat to down 5 percent compared to the $2.9 billion posted in the first quarter. If Nortel reaches the high-end of its Q2 guidance, revenue will be in line with analysts' consensus estimates of $2.91 billion for the quarter, according to Thomson Financial/First Call. Nortel shares were off 2 cents, trading at $2.50 as of 12:03 p.m. EDT. Related stories:
Adelphia sinks to new 52-week low, Tow joins board The hits just keep on coming for Adelphia Communications Corp. After the MSO detailed its co-borrowing agreements and deals with the Rigas family, the company's stock plummeted more than 30 percent. In a victory for one of the company's major shareholders, Leonard Tow was appointed to the board of directors. Tow, who owns roughly 12 percent of Adelphia's common stock, has been named to the board of directors. Scott Schneider also has been named to the board. Tow is Chairman and CEO of Citizens Communications, while Schneider holds the post of vice chairman. Tow notified Adelphia two weeks ago that he planned to exercise
his right to appoint three new board members in an attempt to gain
control of the company from its founding family, the Rigases. Under pressure, the Rigas family surrendered their seats on the board last week -- John Rigas, and his sons Timothy, Michael and James resigned as directors of the company. Click here to read a related story detailing Adelphia's 8-K filing. As of 12:43 p.m. EDT, Adelphia shares were hovering around $1.38. Related stories:
Alcatel buys voice-web software maker Alcatel will fork over $136 million in stock to acquire voice Web access software platform maker Telera Corp. The addition enables Alcatel to add voice services to its Web access product portfolio. Telera will be folded into Alcatel's Genesys contact center software business, adding a voice self-service platform to Genesys' product line. Telera's patented technology uses VoiceXML and other open standards to enable businesses and service providers to develop advanced voice applications. The technology enables Web content to be accessed using voice or touch-tone commands. Alcatel will fund the development of the business using Telera's $30 million in cash. Alcatel believes the Telera purchase will enable it to help accelerate the adoption of converged voice and data networks. "Voice access to the Internet will be the spark for a powerful transformation in the way the Web is used and in the consumer services that are made available by enterprises and the service providers," said Olivier Houssin, president of Alcatel's eBusiness Group. The deal, which is subject to approval from Telera's shareholders and other customary conditions, is expected to close in July. Related stories:
AT&T to bump high-speed fee,
AT&T Broadband confirmed Wednesday that the MSO will boost cable modem service fees by $7 a month on July 1, and plans to standardize customer upstream speeds across its high-speed data footprint. The price increase initially will be felt by HSD customers who own their cable modems -- a group that represents only about 10 percent of AT&T Broadband’s aggregate base of 1.63 million high-speed data customers. Instead of $35.95 per month, they will pay $42.95. The base price of the service, whether the customer owns or leases the modem, will move to $42.95 per month. However, customers who choose to lease the modem will not see any net change in their monthly fee of $45.95. Though the base service fee goes up by $7 per month, the monthly lease fee is dropping from $10 per month to $3 per month as cable modem unit prices have continued to spiral well below the $99 range. AT&T Broadband spokeswoman Sarah Eder says the new pricing decisions were made to remain competitive and to reflect the true cost of the modem. “We think that the new price…accurately reflects the price of the service,” she says. Cable modem owners won’t see an increase until January 2003 because the MSO is offering them coupons for six months to offset the $7 boost. Eder says the new price structure will go into effect July 1. Separately, AT&T Broadband also is hoping to make the launch of multiple ISPs an easier process by making its upstream data speeds consistent across the MSO’s high-speed Internet footprint. Presently, HSD customers in former TCI markets receive upstream speeds of 128 kilobits per second, and cable modem customers in former MediaOne markets get a faster upstream rate of 300 kbps. Under a new, common standard, all AT&T Broadband HSD customers will get 256 kbps in the upstream and continue to get downstream speeds of 1.5 megabits per second. The commonality, Eder added, will help the MSO offer definitive
packages when it starts to offer speed tiering options sometime
this summer. AT&T Broadband hasn’t disclosed its data tiering
roll-out plans. Related story:
SoftNet Systems Inc. has been shedding its assets one by one for some time now, and the Nasdaq National Market has taken notice. The company recently received a letter warning that its shares may be delisted. SoftNet is fighting the claim. Citing the closure of SoftNet's Intelligent Communications Inc. operating unit in April, the staff determination letter contends that the company does not have ongoing operations. As a result, the company does not meet continued listing requirements. SoftNet has requested a hearing to review the determination. In
the meantime, the company's shares will continue to trade pending
the outcome of the hearing. The company's shares were down 9 cents,
trading at $1.83 as of 10:37 a.m. EDT. Industry consolidation has weighed on SoftNet's pocketbook for more than a year now. The company began closing some of its subsidiaries at the end of 2000. The first to close its doors was SoftNet's turnkey ISP Channel cable-modem service subsidiary, followed by Aerzone, a wireless-broadband unit that targeted business traveler, and Intellicom, a broadband satellite service provider. Earlier this month Loral CyberStar said it inked a deal to provide continued service to former broadband satellite customers of Intellicom. Related stories:
Global Crossing: We can work it out
Unhappy with a buy-out offer from two Asian companies, creditors of Global Crossing Ltd. plan to join the bankrupt telecommunications carrier in proposing a restructuring plan that would give them far greater control of the broadband provider's worldwide operations. The company's proposal is intended partly to lure new bidders and to entice a better offer out of Hutchison Whampoa Ltd. and Singapore Technologies Telemedia. Global Crossing said Tuesday, May 28, it would present a restructuring plan to a New York bankruptcy court after negotiations with its creditors and bank lenders, led by J.P. Morgan Chase & Co. The announcement came two days after Hutchison and ST Telemedia withdrew a preliminary offer to invest $750 million in Global Crossing in exchange for a 79 percent stake in a reorganized company. Though details remain in discussions, the company and its creditors would most likely get a majority of Global Crossing's equity. Global Crossing and its creditors have been talking for weeks about a plan that would give them a larger stake in a restructured company than the 21 percent offered by the Hutchison-ST Telemedia proposal. It also is likely that a current Global Crossing customer or another telecommunications company could help finance the plan in exchange for a small equity stake. "It is possible there could be a combination of financial investors as well as strategic investors that might like to take a position in Global Crossing in order to work more closely with the company," said Chris Nash, Global Crossing's director of corporate development. "This plan is intended to keep the auction process healthy and alive." Integral to any plan would be raising at least $300 million to finance company operations until it becomes cash-flow positive. Though Global Crossing has lowered overhead costs since filing for bankruptcy in January, the company still spends more than it generates. The original Hutchison/ST Telemedia bid would have allocated about $450 million to creditors, the rest to company operations. Global Crossing hopes that selling some noncore businesses could help it lower the amount of money needed to maintain its 27-nation, 100,000-mile network. The company said it has received proposals to sell its Global Marine Systems business, which lays underseas cables, a U.S. conferencing unit and Racal, its U.K. broadband network. Though Hutchison and ST Telemedia had offered to make another $200 million line of credit available on top of its original offer, creditors wanted a greater equity stake in a reorganized company. Also, creditors refused to guarantee that the two companies would be eligible for a $30 million breakup fee should a competing bid trump their final offer, further convincing Hutchison and ST Telemedia to withdraw their preliminary bid. Sources said it was still likely the two Asian companies would make a follow-up proposal by June 20, the bankruptcy court's deadline for bids. An auction is scheduled for July 20, but the company likely will ask the court to move deadlines for both the bids and a final sale forward by a few weeks. The talks with Hutchison and ST Telemedia apparently soured because the Asian companies thought they were being asked to bid against themselves before the auction had begun, sources said. Meanwhile, the company and its creditors argued that Global Crossing had grown in value since the two Asian companies presented their takeover offer in late January as part of Global Crossing's bankruptcy filing. The company said it is spending much less on operations than in 2001. Global Crossing said its operating expenses would fall 42 percent to about $900 million in 2002 from $1.55 billion in 2001, excluding its Asia Global Crossing Ltd. unit. As of April 30, the company said it had $913 million in cash, just slightly less than the $965 million the company reported having at the time of its filing with the U.S. Bankruptcy Court for the Southern District of New York. Part of the cost reduction came from lowering its employee base to 5,000 from more than 13,500 at the beginning of 2001 and 7,700 at the start of 2002. Global Crossing also said it would save about $100 million this year through office consolidation. Global Crossing said it remains committed to keeping together the main pieces of its worldwide network: its U.S., European and Asian broadband network. However, a string of bankruptcies involving U.S. and European broadband providers has made it harder to value fiber-optic communications systems, said Stephan Beckert, a researcher at TeleGeography, a Washington, D.C.-based consultancy. As examples, Beckert pointed to Williams Communications Group and Metromedia Fiber Networks Inc. in the U.S. and KPNQwest, Carrier One and Storm Telecommunications in Europe. "It certainly makes it more difficult to price Global Crossing due to the fact that there are so many assets to choose from," Beckert said. "These bankruptcies also makes prospective buyers increasingly nervous about the market and more eager anxious to get a lower price." Other bids for parts of the network are also possible. U.S. discount long-distance carrier IDT Corp. has shown interest in just buying Global Crossing's domestic operations, mostly the assets acquired when it bought Frontier Corp. for $9.86 billion in 1999. Some observers maintain that Hutchison and ST Telemedia may ultimately bid on only Asia Global Crossing, the company's largest unit. Related stories:
Comcast gets hit with privacy suit After enduring a firestorm over monitoring cable-modem subscribers' Web-surfing activities earlier this year, Comcast Corp. is now facing a class-action lawsuit claiming that the Philadelphia MSO violated federal privacy law. Filed in U.S. District court in Michigan, the lawsuit claimed that Comcast's now-discontinued practice of monitoring its 1 million high-speed-data customers' Internet habits violated the 1984 Cable Act, which bars MSOs from collecting personal information from customers without prior consent. The Cable Act does allow cablers to collect such information if they can prove that they need it for their network operations. Comcast -- which said it was using the data to increase efficiency on its new cable-modem network -- discontinued the Web monitoring Feb. 13 after a flood of protests from privacy advocates and subscribers. The suit seeks damages, including a minimum $100 daily for each Comcast subscriber for the December-through-February period when Comcast was actively monitoring their traffic. It comes at a time when Comcast is seeking federal approval for its $45 billion merger with AT&T Broadband. Just last week, Comcast president Brian Roberts testified before the U.S. Senate Judiciary Committee's Subcommittee on Antitrust, Competition and Business and Consumer Rights, arguing in favor of the merger. Rep. Ed Markey (D-Mass.) brought up the potential privacy-law violation in a letter he wrote to Roberts in February. Markey said he had 'concerns about the allegations raised in these reports and the nature and extent of any transgressions of the law that may have resulted in consumer privacy being compromised.' Comcast has issued a statement saying it respects its cable-modem
customers' privacy and 'has not in any way compromised their privacy
or linked Internet-usage data to personally identifying information
about any specific subscriber. In addition, Comcast has not shared,
and will not share, personal information about where our subscribers
go on the Internet, except as required by law or as authorized by
our subscribers. We believe the lawsuit is without merit and Comcast
intends to defend itself vigorously.' Related stories:
CableLabs hires law firm to handle OCAP patents CableLabs has hired the law firm of Wilmer, Cutler & Pickering (WCP) as its patent coordinator for the OpenCable Application Platform (OCAP) specification, which serves as the common middleware layer for advanced OpenCable-based digital set-top boxes. Under its current form, OCAP borrows heavily from the Digital Video Broadcasting Project’s Multimedia Home Platform specification. WCP also is serving as the patent coordinator for the MHP effort and “other related specifications.” As the patent coordinator, WCP will review submissions by companies that hold patent rights applicable to the OCAP and MHP specifications. CableLabs said the objective there is to encourage patent holders to form a pool of intellectual property rights (IPRs) for the OCAP specification, and create a joint licensing agreement that enables a “one-stop-shop” facility for those licenses. Under arrangements with WCP, patent declarants will be required to pay a $3,500 fee for each patent submitted. In turn, WCP will determine applicability for both the OCAP and MHP specifications and make recommendations to each group. If “critical mass” of rights in respect of any specification has been identified, WCP said it will encourage right holders to consider forming a licensing program. WCP said the deadline for patent declarations is May 31, 2002.
Diagnostics could help DSL gain ground Though the residential broadband market has a well-publicized battle between cable modem and DSL service going on, so far, cable operators aren't looking too hard at the telco competition over their shoulder. After all, cable was the first to market with the voice-video-data bundle, and ILEC providers were initially slow to react out of the gate. But, cable operators beware: DSL is looking to get its act together and is making some moves to make the race more competitive. Service and installation is one area where DSL has had some serious problems, but the picture is improving on the telco side. Installation times are on their way down, and some telcos are revamping their systems to serve customers better. A new deal between DSL modem maker Westell and diagnostic software firm Motive Communications reflects this trend. The two announced a partnership today that will integrate Motive diagnostic technology into Westell DSL CPE, enabling service providers to extract rich diagnostic information from modems in the field. With more device data on hand, the idea is that providers will be better able to determine problems from afar, reducing service times and resources in the process. The deal brings a CPE player into Motive's strategy of partnering with network monitoring and broadband equipment companies. They hope to offer providers a real diagnostic-driven platform that should help them over the customer service hump that has plagued DSL service in general so far. Currently, Motive is working with Verizon Online to develop said
platform. Westell is a leading provider of DSL CPE to Verizon, so
this new agreement should bring additional efficiencies to the ongoing
Motive-Verizon troubleshooting effort.
• Excite@Home puts everything up for sale After the sale today, Excite@Home bondholders are expected to file suit against Excite@Home for running the company into the ground. Excite@Home ceased operations in February. • Optinel appoints Pizii • Ethnet to offer DirecWay in the U.K.
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