By Peter Henderson and Jim Christie
SAN FRANCISCO (Reuters) - Bankrupt high-speed Internet provider ExciteAtHome Corp (ATHMQ.OB). shut its network to 850,000 AT&T Corp. (NYSE:T - news) customers on Saturday but said it was still in talks with other cable companies on a new service deal.
In a game of brinkmanship, AT&T, which also wants to buy Excite, said it had already moved about 10 percent of its AtHome customers to its own Broadband service and had no set plan to resume talks on a new service deal.
Some AT&T users would be without service for up to 10 days.
Excite, which says it needs a new deal to make a profit and could also use an agreement as leverage in sales negotiations, continued talks with other cable companies who serve the rest of the 3.7 million AtHome network customers in North America.
``After determining that it would not be able to reach agreement with AT&T, the company terminated service to AT&T,'' Excite said.
Confused AtHome subscribers found their way on the Internet, including some bitter AT&T customers. One from Sammamish, Washington wrote on the DSLReports.com broadband Web site that AT&T would not cancel a one-year contract without penalties.
``They, AT&T, should be held accountable. Who do they think they are?'' the subscriber wrote.
WANTS TO BUY EXCITE
AT&T Corp has been in talks to buy the 77 percent of Excite it does not own at the same time as its AT&T Broadband unit and other cable companies have been negotiating a new Excite service deal, which would raise the value of Excite.
Some analysts have said this made AT&T Broadband less willing to sign a new agreement.
Other cable companies also may be more eager to reach a deal with Excite because they have no fallback that would be ready soon, while AT&T has been building a backup network.
A spokeswoman for Cox Communications Inc (NYSE:COX - news). one of the other AtHome cable providers, said talks with Excite resumed around 1 p.m. EST (1800 GMT) on Saturday.
``I think they're going well. We're still up and running. If the talks weren't going well, if they felt we weren't negotiating in good faith, that wouldn't be the case,'' she said.
But an attorney for Excite bondholders said talks were moving slowly. ``Money cures all problems. The problems aren't cured yet,'' said William Weintraub. ``From the bondholders' perspective, things have to happen very quickly.''
Judge Thomas Carlson of the U.S. Bankruptcy Court in San Francisco paved the way for the shutdown, ruling on Friday that bankrupt ExciteAtHome, in order to renegotiate a better deal, could unplug customers.
EXCITE LOSING MONEY
Excite says it is losing money providing the service at current rates. It gets an estimated $16 of the roughly $46 monthly fee subscribers pay to partner cable companies.
AT&T owns about 23 percent of Excite and wants to buy the remaining 77 percent for $307 million, which bondholders say is not enough to pay off more than $1 billion in Excite debt.
Excite has about 45 percent of the cable modem users in North America, and other high-speed services have begun offering deals to defectors.
AT&T said it had already migrated some 86,000 customers in Oregon and Washington to an AT&T Broadband service and would move remaining customers within 10 days.
``We're deeply concerned what this impact might have on our existing customer base and on potential customers,'' said AT&T Broadband spokesman Andrew Johnson. But ``certainly it can't be lost that we are doing our best efforts to try and restore the service as quickly as possible.''
There was still a chance for new talks but nothing had been lined up, he said. ``We don't have anything formally scheduled at the moment, but we continue to keep the door open to talk with them.''
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