WSNet, faced with a Feb. 28 shutdown of its services, sold some assets to EchoStar Communications Corp. last week for about $1.9 million.
And while the sale appears to end most of WSNet's problems, the troubles for some small cable operators who had relied on WSNet's services to compete with direct-broadcast satellite appear to be just beginning.
EchoStar, the No. 2 U.S. DBS provider, bought the WSNet assets via a Colorado holding company called WS Acquisition Corp. on Feb. 27, according to documents filed in U.S. Bankruptcy Court for the Western District of Texas last Monday.
EchoStar declined comment. But Michael Kelly, senior vice president of EchoStar's Dish Network Service Corp., was listed in bankruptcy court documents involving the sale as a vice president of WS Acquisition.
Dish Network Service oversees the national installation of EchoStar's DBS service.
WS Acquisition was one of three bidders for the WSNet assets. Last Monday one of those bidders — Satellite Management Services Inc., a Tempe, Ariz.-based provider of cable service to apartment buildings — tried to block the sale, claiming the closing came in too late.
SMS, which had bid $1.825 million for the assets, had argued that WS Acquisition was supposed to close the sale on Feb. 28, but instead didn't finalize the deal until March 3. However, U.S. Bankruptcy Court Judge Frank Monroe ruled March 4 that although the actual wire transfer of the money was not completed until March 3, the closing was made as soon as practicable and denied the SMS motion.
WS Acquisition purchased certain contracts from WSNet for the delivery of programming services, its customer lists, headend digital overlay programming from the G4-R satellite, all billing systems and software and all customer-account information.
Though EchoStar is expected to continue to offer service to cable operators, WSNet's biggest business was through MDUs.
According to bankruptcy court documents, WSNet had about 650,000 customers in multiple-dwelling units. Although figures were not released in the bankruptcy-court documents, most industry observers estimated that WSNet provided service to only about 40,000 cable customers.
Charter uses WSNet
Charter Communications Inc. made up the bulk of those cable customers, with about 13,000 of its subscribers receiving the WSNet service, mainly in rural areas. Charter would not comment on what would happen to those customers.
"We'll report any first-quarter customer losses, including WSNet, during our first-quarter 2003 conference call," Charter spokesman Dave Andersen said in an e-mail response. Charter has not yet set a date for that conference call.
Other small cable operators are taking different tacks in addressing the changes that the WSNet sale brings, ranging from moving to upgrade its systems to shutting them down.
Buford Cable president Ben Hooks, who used WSNet service for about 500 subscribers in Arkansas, said he is using Comcast Corp.'s Headend In The Sky service to boost his 270 Megahertz plant to about 100 channels. But the plan is to eventually upgrade that plant to at least 450 Megahertz, which will give him the channel capacity to compete effectively with satellite, he said.
"We are providing an interim product that will carry us through to finish our rebuild," Hooks said. Although he said the rebuild is costing him more money than he spent on the WSNet product, he declined to reveal his total investment.
One source close to WS Acquisition said the intention is to continue to provide service to small cable operators, mainly through EchoStar's commercial-services division. That source added that letters have been sent out to several cable operators explaining that service will continue via EchoStar.
But Hooks said he has received no such letter.
"I have not been contacted," Hooks said.
Hooks has about another 6,500 subscribers in Arkansas that will not be affected by the WSNet sale.
Other small operators are throwing in the towel.
"We're going to turn it off and go home," Ashe County Cable owner Jeff Smith said of his 120-subscriber WSNet system in West Jefferson, N.C. Ashe County has other small operations with between 300 and 400 subscribers that were not a WSNet customer that will continue.
According to Smith, WSNet's T-6 satellite went dark on Feb. 28. While the G4-R satellite is still operating, it was the T-6 that was most important because it provided programming like ESPN and WGN-TV, the Chicago superstation. The G4-R provided mainly digital networks.
Smith said he had invested about $64,000 in WSNet equipment for the system, but now that EchoStar has his customer list, it makes little sense to try to find an alternative provider.