HSA Disconnects DSL Service Plans


A week after receiving an unsolicited bid from Charter Communications Inc., High Speed Access Corp. said Thursday that it's discontinued its digital subscriber line plans and is putting its Web hosting and management firm up for sale.

Discussing the company's quarterly results with analysts and reporters, CEO Dan O'Brien said HSA's current goals are to conserve cash and to scale back or completely exit those businesses with no immediate or short-term profit potential.

HSA's most recent DSL strategy was to snap up dormant equipment for pennies on the dollar and collaborate with operators to sell the service directly to businesses and homes without access to cable-modem technology. Today, HSA is in the process of selling off its existing DSL assets.

To further reduce its cash burn, O'Brien said HSA is trying to sell Digital Chainsaw, a Web-hosting and design firm it bought in October 2000. Until a sale is finalized, Digital Chainsaw will close down its Web-development activities, but will continue to offer Web hosting services.

Charter has offered to buy a portion of HSA's assets and MSO contracts for roughly $73 million in cash and assumed debt. That portion only includes HSA assets that support Charter systems.

Charter and Vulcan Ventures Inc. — Charter chairman Paul Allen's investment vehicle — are already substantial investors in HSA.

HSA has formed a special committee to explore strategic options and has hired Lehman Bros. and Weil Gotshal Manges, two companies not affiliated with Charter or Vulcan Ventures, for financial and legal advice, O'Brien said.

O'Brien reiterated that HSA plans to scrap remaining "turn-key" contracts with cable operators. At the end of July, about 500,000 of HSA's homes passed were non-Charter systems. They accounted for roughly 20,000 cable-modem service subscribers.

Insight Communications Co.'s system in Columbus, Ohio, represents the only non-Charter HSA affiliate that's not operating under a turn-key model — a cost and revenue-sharing structure that has proved to be inequitable for cable ISPs and one that eventually led to the demise of SoftNet Systems' ISP Channel unit.

HSA is also moving forward on its three-year infrastructure consulting deal with Kabel NRW in Germany, which covers items such as network design, service provisioning and Web hosting. The company also is awaiting regulatory approval for its third-party ISP agreement with Time Warner Cable, O'Brien said.

HSA also disclosed that it had $56.5 million in cash and short-term investments as of June 30 — enough to keep it running through 2002, but not enough to fully fund its business plan through to profitability.

For the second quarter, HSA reported net revenue of $9.3 million, up 237 percent versus the same year period. The company finished the quarter with a net loss of $34 million, or 58 cents per share, and 176,000 subscribers, up 26 percent from the previous quarter.