HSA May Unplug One-Way Systems

High Speed Access Corp. last week said it could begin halting cable- modem service to some affiliates that lack two-way system capacity.

The shutdowns — intended to trim costs and aimed at less than 4 percent of HSA's customer base — may come as soon as May 31.

The data-services provider said it's giving cable affiliates that serve one-way systems an option to restructure current "turnkey" contracts as network-services arrangements — which distribute costs more evenly between HSA and the affiliate — or to terminate the deals.

Because one-way systems are costly to equip and operate, HSA expects most affected affiliates to terminate their deals, a spokesman said.

A focus on the network- services model for two-way cable systems has "greater potential for both profit and growth," company CEO Dan O'Brien said in a press release.

In a move tied to that decision, HSA said it would lay off roughly 10 percent of its full-time staffers this month. HSA said it had 716 employees as of Dec. 31.

Most cuts will affect corporate and field positions linked to turnkey operations, a company spokesman said.

HSA said it made additional staff reductions earlier this year to bring its workforce in line with current operating requirements, but would not provide specific figures. Details are expected on May 8, when HSA discloses its first-quarter financial results.

Most cable-modem customers served by one-way systems make up less than 4 percent of HSA's customer base, the data provider said.

Including potential first-quarter subscriber growth, more than 5,000 subscribers could be affected. HSA counted about 100,000 subscribers on Dec. 31.

Overall, HSA's decision will affect 20 to 25 affiliates with about 50 systems.

HSA declined to disclose which systems or operators could be affected. A company spokesman said Charter Communications Inc., HSA's largest affiliate, would be unaffected.

Of the 6.6 million homes HSA had under contract by the end of 2000, 5.2 million use the new network-services model. The data-over-cable provider is reworking its network-services agreements with cable affiliates, regardless of whether their networks are one-way or two-way capable.

The network-services arrangement distributes costs more evenly between HSA and the cable operator, while the turnkey approach burdens HSA with more of the up-front costs. Such a business plan led to the demise of ISP Channel, a former HSA competitor.

One-way cable systems use a telephone line return path for high-speed services, so connectivity costs are nearly twice as high as in two-way systems, HSA said. Connectivity costs are magnified by extremely high T-1 costs in rural markets, where most HSA-contracted one-way systems are situated.

HSA officials said it would give customers 60 days notice before ceasing service, which would allow them to seek other alternatives. The company also will credit subscribers during the transition period.

The decision will not affect HSA's projections to end 2001 with 240,000 subscribers, a spokesman said.