Copyright 2004 The Oregonian

The Oregonian

January 24, 2004 Saturday SUNRISE EDITION

Time Warner Telecom said Friday that it had acquired the 50 miles of fiber-optic cable in Portland that were the start of now-bankrupt Enron’s venture into the telecommunications industry.

Colorado-based Time Warner Telecom paid $750,000 for the Portland-area network, which will enable the company to provide telephone and Internet services to more businesses in the area, particularly on the city’s east side.

The Portland-area network acquired by Time Warner Telecom cost between $3 million and $5 million to construct, estimated David Leatherwood, who was vice president of network construction at Enron Broadband and vice president of operations at its predecessor, FirstPoint Communications. Time Warner Telecom’s fiber acquisition was FirstPoint’s original network.

“This particular purchase allows us to reach customers in the Lloyd Center business district,” said Bob Meldrum, a spokesman for Time Warner Telecom, whose investors include Advance Publications, parent company of The Oregonian. “This goes with our strategy of purchasing additional network where we can.”

Time Warner Telecom already leases some space on Enron’s network on the west side of Portland and in suburbs such as Beaverton and Hillsboro. By owning the fiber-optic lines, it can avoid paying maintenance fees to Enron, said Leatherwood, now president of Intelepoint, a telecommunications consulting firm.

U.S. Bankruptcy Court for Southern New York approved the sale, which closed Thursday.

After Enron acquired Portland General Electric in 1997, the Texas-based energy company began to expand FirstPoint Communications, then a tiny telecommunications subsidiary of PGE that was laying fiber-optic cable around the Portland area. PGE’s then-chief financial officer, Joseph Hirko, became chief executive of FirstPoint.

By 1999, the network had grown to 15,000 miles nationwide as companies, backed by eager investors, flocked to transport phone calls and Internet data. But in the next few years, the telecom industry slowed because of an oversupply of fiber-optic cable. And in 2001, Enron collapsed amid revelations of the nation’s largest accounting scandal. Enron Broadband laid off its 300 Portland employees and shut down.

Enron Broadband has been accused of padding its sales and earnings using questionable accounting and insider deals. Hirko, who left Enron in 2000, and six other former Enron Broadband executives were indicted in May on federal charges of conspiracy to commit wire and securities fraud. Hirko and the other executives pleaded not guilty and are awaiting trial.

Enron’s assets are being sold in bankruptcy court. Texas Pacific Group, a buyout firm, is attempting to gain court and regulatory approval to acquire PGE.

Enron representatives could not be reached for comment about the fiber-optic sale.