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Reliant Extends Covad Contract

"Better the devil you know, than the one you don't" is a popular saying Reliant Energy Communications is taking to heart after signing a one-year agreement extension with Covad Communications Monday.

Looking for a national digital subscriber line provider with clout to package its business-class services, Reliant president and chief operating officer Mark Slaughter said he had looked to them all.

"Ultimately, Covad has the superior product and was the best choice," Slaughter said. "We looked at them all; Rhythms, NorthPoint and Covad. Our relationship with Covad was always good and we decided to stay with them."

The deal calls for Reliant to resell Covad's business-class "TeleSpeed" service outside it current network, located primarily in the Houston area. It's an extension of an agreement first signed by Insync, an Internet service provider owned by Reliant.

Reliant Communications, a subsidiary of Texas-based utilities company, Reliant Inc., bought its own Internet service provider, Insync, which specializes in business-class connections and services, last March. The utility gained instant Internet clout in the south, offering local businesses everything from dial-up and T-1 connections to co-location and Web hosting services.

Hoping to flesh out its DSL network coverage statewide, Insync penned the deal with Covad several years ago. It's a strategy Slaughter said will continue, and is not part of a desire to expand operations outside of state lines.

"We are definitely not going out of Texas with this right now," Slaughter said. "If it proves successful, we might try to take this regional down the road, but for right now, we want to provide out-of-network services for customers outside Insync's footprint."

According to Slaughter, the agreement is based on a typical wholesale arrangement, with Reliant getting better DSL rate pricing, dependent on the volume of lines sold.

The agreement is a testament to Covad's ability to sign partners despite financial difficulties that have left the company's future in doubt.

Reliant decided to sign the deal with Covad, even though the data competitive local exchange carrier's future remains uncertain. Although Covad is the largest independent DSL provider in the nation, it finds itself in dire financial straits.

With roughly 274,000 aggregated DSL lines in service, Covad has failed to collect on revenues from about 92,000 of them. Independent ISPs unable to pay for the lines ordered from Covad are to blame, company officials maintain. Several of negligent ISPs, including Flashcom, Zyan Communications and FastPoint, have filed for Chapter 11 bankruptcy protection.

But the data CLEC picture doesn't look better elsewhere. Case in point: NorthPoint Communications, one of the three largest independent DSL providers with Covad, filed for bankruptcy last week.

Rich Wong, Covad's vice president of marketing, said the deal is proof positive of Covad's viability in the DSL market, and the still-apparent need for broadband connectivity.

"Working with Reliant is an example of how we're expanding and strengthening our distribution channels to fulfill the demand for broadband services," Wong said. "This relationship offers Covad a tremendous opportunity to tap into a strong business customer base and enable Reliant to continue to provide its customers with business-class broadband services from a national DSL provider."