Dismantling Of NorthPoint Is Nearly Complete

How the potentially mighty have fallen. The once-promising future of digital subscriber line wholesaler NorthPoint Communications Inc. is just about history. Just seven months removed from being on top of the DSL world, NorthPoint, which is under Chapter 11 bankruptcy protection, watched helplessly as AT&T on Thursday snatched up basically all of its physical assets for a bargain-basement price of $135 million.

AT&T will get NorthPoint's co-locations facilities nationwide, as well as most of its network equipment, systems and support software, and other assets, including two leased buildings in Emeryville, Calif. An AT&T spokesman says the company plans to focus on retail DSL service and thus has no interest in taking on NorthPoint's base of service-provider customers. The acquisition, which is subject to regulatory approval and is expected to close within 60 days, signals a sad ending for a company that not long ago was poised to become a major telecommunications player.

In August, when Verizon Communications Inc. agreed to pay NorthPoint $800 million to take over the former's DSL business, NorthPoint appeared to be positioned to become a DSL giant. As service-related troubles clouded the DSL industry, however, the glow surrounding NorthPoint and rival Covad Communications Co. faded, and Verizon pulled out of the deal.

But NorthPoint's misfortune has turned into a stroke of luck for AT&T, which gets the beginnings of a DSL service infrastructure for one-sixth of what Verizon once was prepared to pay NorthPoint merely to service its DSL customer base. Independent telecom analyst Jeffrey Kagan says the acquisition could mark the beginning of a turnaround for AT&T's struggling consumer business. Kagan says the biggest question was how AT&T was going to provide DSL service. Getting NorthPoint's assets may have answered that question.