AT&T, along with rival cable companies Comcast and Cox Communications, relies on Excite@Home to provide its cable subscribers with high-speed internet access.
However, Excite won a court case on Friday allowing it to close if it did not negotiate more favourable terms with its three cable partners.
Excite said on Saturday that it had terminated its contract with AT&T after it failed to reach agreement with the telecoms giant. The ISP is still in talks with Comcast and Cox.
AT&T is currently said to be trying to find an alternative broadband service to provide to its customers. It is understood to have made a £215m bid for Excite@Home but has been told by creditors that it must raise its bid to £706m in order to cover the ISP's debts.
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