WorldCom Inc. gained approval from the U.S. Bankruptcy Court for a US$40 million purchase of network equipment from bankrupt DSL (Digital Subscriber Line) service provider Rhythms NetConnections Inc. on Tuesday, permitting WorldCom to keep providing high-speed Internet service to customers even as its beleaguered partner fades away.

WorldCom chose to use partners like Rhythms and Covad Communications Co. to bring DSL to its business customers while it built out its own network, said Natasha Haubold, a WorldCom spokeswoman. Regulatory requirements prevented WorldCom from offering service directly in certain markets, she said.

The purchase rescues Internet service for customers in 31 major metropolitan areas by acquiring the routers and switches connecting Rhythms' customers to 700 central telephone switching facilities. The deal provides $32 million of debtor-in-possession financing to sustain Rhythms' network operations.

WorldCom said it would continue to provide DSL service for its own customers, and would deal with other Rhythms' customers on a case-by-case basis. Haubold did not know if pricing changes would follow the purchase.

Displaced and displeased DSL customers of defunct NorthPoint Communications Group Inc. continue to face difficulties. NorthPoint's storied bankruptcy and shutdown marked the beginning of the telecommunication meltdown this year, stranding customers, many of whom had waited months for service installation. ISPs (Internet Service Providers) played a shuttle game, transferring from one DSL reseller to another looking for stability.

In March, AT&T Corp. bought NorthPoint's physical assets, including its network equipment located at the central offices of incumbent local service providers like Verizon Communications Inc. or SBC Communications Inc. For $135 million, AT&T bought its way cheaply out of a major problem other DSL providers faced -- the process of installing DSL gear in an incumbents' central offices had proven time consuming, labor intensive and unprofitably expensive.

AT&T said it planned to use the gear to provide DSL service later in the year to consumers through its consumer telephone division, and to its business customers through its business division. In the meantime, the NorthPoint network has been off line.

Rhythms filed for Chapter 11 bankruptcy in August, and received permission to shut down its network from the U.S. Federal Communications Commission (FCC), Haubold said. Covad also filed for bankruptcy in August, and is in the process of reorganizing. The company said the financial reorganization will not affect its network operations.

It's too early to speculate if WorldCom will step in if Covad flounders, said Haubold. "We will continue to provide Internet DSL through Covad as long as Covad continues to provide sufficient quality of service."

WorldCom, in Clinton, Mississippi, is at +1-601-360-8600 or http://www.wcom.com/. Rhythms, in Englewood, Colorado, can be reached at +1-303-476-4200 or at http://www.rhythms.com/.

» posted by abennett

IDG News Service

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