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Today's report from Web Editor
Susan Rush
• Poor Economy Leads To More Staff Cuts At BellSouth
• Covad Gets Green Light To Emerge From Bankruptcy
• No Vote On Tauzin-Dingell This Year
• Broadwing Amends Credit Agreement
• Vivendi Takes EchoStar Stake
• Broadband Briefs
Poor Economy Leads To More
Staff Cuts At BellSouth
Our business is not immune to the economy, says BellSouth
Corp. The regional Bell operator plans to trim its payroll by 1,200
employees in the first quarter of next year.
The affected employees hold non-management positions in the company's
Network Operations division. BellSouth will offer voluntary separation
packages to employees throughout its nine-state region.
The 1,200 cuts are in addition to the 3,000 BellSouth announced in October.
To date, roughly two-thirds of those cuts have been identified -- mostly
management positions in the metro Atlanta area.
"The reductions we are announcing are tied to an economy that has
slowed significantly over the course of the past year and to a resulting
drop-off in the volume of demand work we have been experiencing," says
Rod Odom, executive vice president of BellSouth Network Services.
In November, BellSouth warned that the economic uncertainty surrounding the
telecom market would drag on through at least mid-year 2002. The company
does expect the broadband market to be profitable in 2003 -- generating more
cash by the fourth quarter of next year than it uses up.
Related Stories:
BellSouth
Expects Revenue Growth To Dip In 2002, 11/6/01
Sonus
Lands RBOC Deal, 7/23/01
Covad Gets Green Light To
Emerge From Bankruptcy
Some said it couldn't be done, but it could be done -- a U.S.
bankruptcy court gave Covad Communications
Inc. an early Christmas present yesterday approving its reorganization plan
to emerge from bankruptcy.
The DSL carrier intends to exit from bankruptcy on Dec. 20. In
mid-August, Covad filed for bankruptcy protection under a pre-negotiated
filing designed to eliminate $1.4 billion of its debt without affecting the
company's operating subsidiaries or service offering.
Under the plan
approved by the courts, Covad has agreed to pay bondholders $283.3 million
in cash, a payout of 19 cents on the dollar. Bondholders will be issued 33
million shares of new preferred stock, amounting to a 15 percent stake in
the company. Shareholders will retain roughly 80 percent of the
company. "We went into Chapter 11 with a prepackaged plan -- with a
half a billion in cash and a reduced cost structure," says Abhi Ingle,
Covad's vice president of marketing. The filing was designed to preserve the
interest of Covad's shareholders, Ingle says.
As of Dec. 20, the date forecast by the judge for the proceedings' paperwork
to be complete, Covad will be fully funded. "We will maintain ongoing
financial discipline, but our emphasis will be to grow into profitability.
We have built and paid for our network and 2002 is the year we fill it
up," Ingle says.
Unlike many other broadband service providers that have filed for bankruptcy
protection with the intent to emerge from the proceedings, Covad has become
the first broadband service provider to actually make it happen. The telecom
industry has watched several bankrupt companies such as Excite@Home, Rhythms
NetConnections and NorthPoint Communications try and fail to reorganize
under the protection of a Chapter 11 filing.
Related Stories:
Covad
Gets A Helping Hand From Rival, 11/14/01
Covad
Files For Bankruptcy Protection, 8/16/01
No Vote On Tauzin-Dingell
Bill This Year
Despite efforts to get the so-called Internet Freedom and
Broadband Deployment Act to the House floor for a vote this year, the vote
has been shelved until next year.
A vote on the bill was tentatively scheduled for today, but delayed after
lawmakers expressed the desire to have more time to review legislation, and
recess for the holidays.
The bill, sponsored by House Commerce Committee Chairman Billy Tauzin,
R-La., and Rep. John Dingell, D-Mich., is designed to relax operating
restrictions on the incumbent local exchange carriers.
Rep. Tauzin was more than happy to delay the vote, so lawmakers could go
home for the holidays, in exchange for a firm commitment that the bill will
be voted on in March, Energy & Commerce committee spokesman Ken Johnson
tells Broadband Week. "This was a delay, not a defeat," he
says. The battle has been to get the bill to the House floor, Johnson says.
"We have a firm commitment now for moving the bill to the House floor.
We have the votes to pass it by a wide margin and the champagne has been
ordered."
Although the bill's supporters remain confident that it will pass when it
comes before the House next year, opponents have a different view.
"Serious questions emerged about the harm Tauzin-Dingell would do to
healthy competition, the immediate negative impact on our economy and the
unraveling of important consumer protection planks in current telecom
law," Voices for Choices Co-chairman Steve Ricchetti said in a
statement regarding the vote delay. Voices for Choices is a coalition of
associations and companies that support fair competition in local telephone
service and high-speed Internet access.
If the House vote is favorable, the bill is still expected to meet
opposition in the Senate. Senate Commerce Committee Chairman Ernest Hollings
has said he will move to defeat the bill.
Separately, Rep. Tauzin introduced legislation supporting the spectrum settlement between the FCC,
NextWave Telecom Inc. and several top carriers,
says Johnson Aside from Tauzin, sponsors of the bill include Rep. F. James Sensenbrenner, R-Wis., Rep. John Conyers, D-Mich., Rep. William Thomas, R-Calif., Johnson says.
Related Stories:
FCC
Probes Local Network Access, 12/13/01
Broadband
Bill Is Back In The Hot Seat, 11/15/01
Regulators
Query Telecom Competition, 11/9/01
Broadwing Amends Credit
Agreement
Broadwing Inc. gets
the thumbs up from lenders to amend its credit agreement.
The amended agreement will enable Broadwing to exclude the effects of its
previously announced restructuring charge from the covenant calculations,
the company said in a statement. Broadwing sees the amendment approval as a
vote of confidence from its lenders in regards to the company's efforts to
strengthen its financial position and streamline its business focus.
At the end of November, Broadwing decided to close six sales offices to
concentrate on its top 30 markets, as well as exit the construction line of
its business, which primarily built networks for other carriers. Company
officials said they plan to concentrate on maintaining and adding customers
to Broadwing's network.
At the time the restructuring initiative was announced, Broadwing said it
was reducing its work force by 15 percent. The company also revealed plans
to downsize its Web hosting centers from 11 to 3 -- Cincinnati, Austin and
Newark, Del. Broadwing expects to take a fourth-quarter restructuring charge
of up to $300 million, $75 million of which will be a cash component.
Related Stories:
Broadwing
Sacks 15 Percent Of Staff, 11/30/01
Broadwing's
Metro Moves, 8/20/01
Vivendi Takes EchoStar
Stake
Under an eight-year distribution partnership, Vivendi
Universal plans to fork over $1.5 billion to capture a 10 percent stake
in EchoStar Communications Corp.
Under the terms, Vivendi will develop and provide EchoStar's U.S. satellite
television customers with interactive television services and programming.
The companies will work together to develop new broadband channels featuring
interactive games, movies, sports, education and music. The channels will be
launched over a three-year period.
Vivendi also will offer EchoStar customers an expanded selection of
video-on-demand and pay-per-view movies from current Vivendi Universal
films.
In exchange for the $1.5 billion investment, EchoStar will issue preferred
stock at an issue price of roughly $26.04 a share. Jean-Marie Messier,
Vivendi's chairman and chief executive, will become a member of EchoStar's
board of directors. The deal is subject to U.S. regulatory approval.
EchoStar plans to use the funds to finance its proposed merger with rival
DirecTV. The FCC and the U.S. Department of Justice are currently reviewing
the merger in the United States. If the EchoStar-DirecTV deal is approved,
Vivendi will own less than 5 percent of the combined company.
EchoStar Chief Executive Charles Ergen contends that a marriage between the
two satellite companies will create a powerhouse that could effectively
compete with cable operators and increase broadband options for rural
Americans.
Related Story:
EchoStar
Submits Merger App To FCC, 12/4/01
Broadband Briefs:
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NextWeb
inks deals to deliver high-speed fixed wireless Internet access to a
variety of hotel chains in the San Francisco Bay Area. Holiday Inn
Express, Ramada Ltd. and Quality Inn are among the hotels that have
turned to NextWeb for the broadband Internet service.
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Verizon
Wireless and Wingcast LLC team
to deliver advanced wireless voice and data services to certain Ford and
Nissan vehicles. The duo will work to offer consumers a variety of
voice-activated services, including emergency services, high-speed data
and location-based applications that will be delivered over Verizon's
digital network.
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Wireless phone vendors Ericsson
and Siemens complete a second round
of 3G interoperability testing with Effnet.
The tests are designed to verify the interoperability of systems that
use a new IP header compression protocol to improve response times,
error rates and voice/image quality for IP services delivered over 3G
wireless phones. Ericsson, Nokia,
Siemens and Effnet completed a first round of tests in August.
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AT&T
Broadband names Joe Stackhouse senior vice president for the Greater
Chicago market. His responsibilities will include overseeing operations
supporting the delivery of local telephone service, high-speed cable
Internet access and video entertainment services to the company's 1.7
million customers in the area. Stackhouse has been the senior vice
president of AT&T Broadband's Denver region since 1998. For more on
the industry's new hires, check out Broadband Week's People
on the Move section.
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