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ATG bankruptcy creates hardships

Some local businesses didn't receive the phone lines they contracted for, and others lost Internet and e-mail service

Mail Tribune

Real Estate broker Gordon Smith feared the worst when he discovered that the Advanced TelCom Group Inc. saleswoman who assured a seamless phone line transfer for his new office was no longer with the company.

Another ATG customer, Roland Buck, president of Hale Signs, lost his phone lines, Internet and e-mail service last Thursday. All incoming calls are now being forward to cell phones.

While ATG executive chairman Gary Cuccio says there is no connection between ATG's imminent break-up and last weekend's dial-tone woes, it demonstrates potential hazards awaiting 35,000 small- and medium-sized business customers.

The privately held Santa Rosa, Calif.-based company, which provides telephone, data and Internet services, filed for Chapter 11 bankruptcy on May 2. ATG's offices in New York and Connecticut were shut down two months ago and its Virginia-Maryland unit was sold to Cavalier Telephone of Richmond, Va., for $1.45 million.

The remaining parts of the business, divided into seven lots, were to be auctioned off today. But the auction was postponed until Tuesday by federal bankruptcy Judge Alan Jaroslovsky, who will make final determinations on June 6.

"Like many companies, ATG was over-leveraged and had way too much debt for our size of business," said Cuccio, a retired communications executive who joined the company in January. "Part of it was the Internet stock market run-up. We had more debt than we could pay for and we were unable to modify that debt and bring in additional investment."

Both Smith and Buck figure they've made substantial investments in emergency replacement phone service they didn't expect.

GJ Smith Realty's move around the corner from 908 E. Jackson St. to 205 Crater Lake Ave., might as well have been to the other side of the planet.

"We really had no problems in the past with ATG, but now they're a nightmare," says Smith "We were working with a customer representative who promised on a stack of Bibles that everything would be perfect."

A day before the transfer date, Smith called to see if everything was in place.

"After a long time a woman came on and said the girl we had been working with is not here any more. She said 'Who are you,' I told her and she said 'I don't know anything about that; we're filing Chapter 11.'

"My heart fell out of my throat when that happened," Smith recalls. "In a real estate office, if the phone doesn't ring, I'm dead."

Thanks to some quick shuffling by Best Tel, a local telephone and voice mail systems hardware provider, and Qwest, Smith managed to get minimal service for last weekend. Only after the fact did he discover that ATG couldn't do what was promised because Qwest owned the lines.

"They had no right to promise what they did," the broker says.

The problem for Hale Signs began when it delayed its move from 519 N. Front St. to 542 Parsons Drive earlier this month

"We were scheduled to move May 10 and things just were not ready and we thought 'Why move prematurely?' " Buck says. "Everything was to be switched on the 18th and at — p.m. on May 9 our phone system went totally dead. Qwest had thrown the switch to our new system."

On May 10, Buck says service returned at the Front Street location, but ATG gave a July 10 due date for service on Parsons Drive. In the mean time, Buck has been operating by cell phone and hooked up with Oregon Telecom for his e-mail and phone service.

"We don't have fax or e-mail and we live and breathe on e-mail." he says. "ATG hasn't been real responsive; everyone is trying to blame someone else. We're waiting for someone to step up to the plate, because all the wire and loops are in.

"It's a hardship on our business. If callers can't reach us, I'm sure they'll pick up phone and call another sign company. Even with the phones transferring, they're not ringing like they should this time of the year. They're usually ringing pretty much non-stop and it's surprisingly quiet. That's frightening to me."

ATG moved into the Medford market in July of 1999 when it acquired Shared Communications, a Salem firm, that had customers in Oregon, Washington and Nevada. In December, ATG closed a deal for FairPoint Communications Solutions Corp., which also had customers in Medford.

ATG was formed in 1998 after the Telecommunications Act of 1996, which encouraged independent telephone companies to challenge regional Baby Bells. More than 250 independents attracted billions of investment dollars before demand and investment dried up. Nearly a quarter of the companies have filed for bankruptcy. ATG raised $560 million - $280 million in equity ownership capital from a consortium of 14 financial institutions headed by North Carolina-based Wachovia Securities, as well as a $280 million line of credit from First Union National Bank, General Electric Capital Corp. and J.P. Morgan Securities Inc. Court documents show ATG spent $218 million building its networks and amassed $203 million in debt.

The seven auction lots are: The Oregon and Washington operations; Santa Rosa/Bay Area operations; other California operations; Reno, Nev. operations; real estate in Bend and Salem; a telecom equipment testing lab; and back-office systems.

The auction is expected to raise $23 million, according to the bankruptcy documents.

"We've had several letters of intent from larger companies," Cuccio says. "There is interest in smaller pieces of company, but I think the greatest value is keeping them together."

Reach reporter Greg Stiles at 776-4463 or e-mail

ATG bankruptcy creates hardships