NorthPoint Communications Inc., the bankrupt digital subscriber line provider, informed customers that it was forced to shut down its DSL network due to a lack of funding. NorthPoint advised its customers to expect network outages and immediate termination of DSL services.

NorthPoint failed to receive funding from its Internet service provider customers, which it planned to use to maintain interim operations on its network until the ISPs were able to transition their DSL subscribers to other carriers. AT&T's consumer business agreed to buy nearly all of NorthPoint's assets for $135 million last Thursday, excluding NorthPoint's wholesale DSL subscriber business. If the deal is completed within 60 days, AT&T plans to market NorthPoint's DSL services to residential consumers, which leaves NorthPoint's current ISP customers on their own to find alternative DSL carriers.

Excite@Home, Microsoft, Verio, and Telocity, customers of NorthPoint, are trying to help customers with the transition by offering to help them pay for dial-up or cable-modem Internet access, or agreeing to subsidize one month of DSL service with a new provider. But some of NorthPoint's customers are rethinking their investment in DSL. Excite@Home, which relied solely upon NorthPoint as its DSL carrier, is delaying any aggressive plans to market DSL to its customers. "DSL is a small part of our division representing only 10% of our revenue," says an Excite@Home spokeswoman. After evaluating the future of the DSL market in January, Excite decided to continue offering Internet access to its 2,000 DSL customers for now, but will re-evaluate in a few months whether it will continue to develop its DSL offerings.

Market research firms, including Cahners In-Stat, have scaled back forecasts for the growth of DSL from last year. Telecom companies aren't going after DSL customers with the same fervor, says Daryl Schoolar, an ISP analyst with Cahners In-Stat. "Telecom companies spent a lot of money building out their networks, but it's taking too long to recoup the cost," he says. As a result, telecos such as SBC are raising DSL service prices and cutting back on its number of subscribers.

The demise of NorthPoint and the struggles that former competitor Covad Communications is now facing in the market does not signal doom for the DSL market, Schoolar says. There will still be tremendous growth in this area, because "once you go broadband you never go back to dial-up." He suspects scorned NorthPoint subscribers "will migrate to some other form of broadband."