NorthPoint Dumps Flashcom

Data CLEC likely to seek redress through the courts after failing to squeeze past-due charges from the floundering national DSL reseller.

by Jim Wagner of internetnnews.com [December 6, 2000]

After exhausting regular channels to collect past-due revenues, NorthPoint Communications terminated digital subscriber line service to one of its national resellers Wednesday.

E-mail switching service
Flashcom customers received an e-mail Wednesday morning from rival DSL provider Telocity, informing them that NorthPoint's relationship with the troubled reseller was finished. The e-mail also informed Flashcom DSL users that Telocity entered an exclusive contract with NorthPoint to help them switch serviced.

The e-mail read:

"Because you are served by a DSL connection from NorthPoint Communications, we are sending you this urgent notification. As you may know, NorthPoint has terminated its commercial relationship with your current ISP. But, don't worry, because NorthPoint and Telocity have an exclusive arrangement to prevent disruption of your DSL service."

It's good news for DSL users who have been increasingly frustrated with poor service from Flashcom—but bad news for NorthPoint, which was depending on the money from Flashcom to pay for the high-speed lines it was reselling.

Debtors prison?
Covad Communications is also trying to collect on unpaid services fees from Flashcom, with the same results. Unpaid bills by ISPs, Flashcom included, recently led Covad to the brink of financial disaster. Martha Sessums, Covad vice president of corporate communications, said the company was working to find a solution to Flashcom's back bills. It's unclear whether Covad will decide to cut-lines and run, link NorthPoint.

NorthPoint was forced to adjust its third quarter report, which reflected an increase in lost revenues totaling more than $10 million. Company officials maintain that adjustments were made because ISPs like Flashcom could not pay for the DSL services it ordered.

As if the revised revenue loss wasn't bad enough, Verizon nixed its takeover bid for NorthPoint a week after the third quarter adjustment was made. The East Coast carrier cited a clause in its Aug. 7 contract with NorthPoint, which allowed Verizon to utilize the debt increases as an excuse to terminate the merger. When Verizon defected, NorthPoint's stock took a nose dive resulting in a sharp drop down to its current value of approximately 46 cents a share. NorthPoint officials said they are still pursuing legal options in response to Verizon's actions.

Agony of deficits
By ending its relationship with Flashcom, NorthPoint is effectively conceding defeat in its attempts to collect the past-due revenues. It also places NorthPoint at the front of the line for payment from Flashcom, should the firm be forced to reorganize.

Flashcom is still looking for a buyer to rescue the company, which came under fire late last week as a result of massive consumer complaints. But the company also suffers from over-burdening a weak infrastructure, as Flashcom back-office functions could not efficiently collect fees due services rendered.

Flashcom may be punch-drunk, but the DSL reseller remains standing. Its inability to collect subscriber fees, mass customer flight, and failed third round of financing has Flashcom teetering on the rim of ruination.

Grumble around the clock
Although customers are still having difficulties reaching anybody in support, Flashcom officials asserted this they are working around the clock to resolve the growing number of complaints flooding its phone banks.

The company was the focus of considerable customer ire Monday when its two main support lines hung up on customers seeking assistance. Steve Fowler, Flashcom vice president of customer care, said they are open for business and that any phone problems customers might have experienced yesterday were unintentional.

"We're clearly open for business," Fowler said. "Perhaps we had a phone call problem that inadvertently cut off our customers. We're not intentionally trying to hang up on the customer. Our lines have been swamped with hundreds of phone calls, and rather than have our customers wait in queue for an extended period of time, they might have been directed to call back."

Reports indicate the company lost a database containing its customer credit card information, adding to an already overburdened support demand. While Fowler denies the reports as false, he did say the company has been in the process of upgrading its billing system.

Enduring support
For now, the short-term goal at Flashcom is to catch up on the pending support issues. To do that, Fowler said, some aspects of the company's business will need to be adjusted.

"Right now, we're de-emphasizing our sales in the short term to address the support issue," Fowler said. "Right now, we're working together as a team, we have everyone throughout the company answering taking phone calls."

The privately-held company currently runs its operations out of offices in southern California and Boston, and employs more than 400 employees.

Because the company is privately owned, officials are not required to release the number of customer issues pending, saying only they hope to catch up sometime in the near future.

— End    

Related articles:
	[Oct. 18, 2000]	Delinquent ISPs Cause Covad 3Q Pain
	[Aug. 10, 2000]	Verizon Grabs NorthPoint