MegaPath, Covad Pen Co-Branding Deal

In a departure from its modus operandi, broadband Internet service provider MegaPath Networks announced a deal Thursday to co-brand its digital subscriber line service to small- and medium-sized businesses with Covad Communications Group.

It’s a brave move for the broadband provider, which has been chiefly a growth-through-acquisition company that’s expanded its business DSL operations from its headquarters in Pleasanton, CA, to nationwide coverage in a couple of years.

Many ISPs have been reluctant to sign deals with the data competitive local exchange carrier (DLEC) after seeing Covad use its “Safety Net” to draw customers away from smaller ISPs who defaulted on line charges. While legal, it left a sour aftertaste to providers who felt they were cheated out of their customers.

John McDevitt, Covad executive vice president of marketing and sales, said his company is still the smart choice for providing DSL, because of its commitment to the end-user.

“Given today’s market condition, it is important for companies seeking a nationwide broadband services provider to know they are getting DSL from a dependable source, like Covad, that cares about the end-user experience,” McDevitt said.

From the start, MegaPath has been a business DSL provider, shunning the residential DSL community in favor of the more lucrative business contracts it could net in large cities.

It’s a policy the broadband ISP has kept to a fault, namely with last year’s acquisition of Phoenix Networks, a business and residential DSL provider. The acquisition was one of several made by MegaPath in 2000.

While it successfully transferred Phoenix Networks business customers, residential services quickly deteriorated as MegaPath looked for another provider to take over the consumer accounts. In many cases, residential customers were shut out of the support loop, and had to look for a new provider on their own.

Regardless, the company enjoys a fairly high level of customer approval, a rarity in today’s world of inconsistent provisioning and suspect support.

Covad was eager to sign with a national provider like MegaPath, which isn’t likely to go under anytime soon. The company secured $10 million in January from investors to fund more acquisitions this year to increase its coverage.

Harry Taxin, MegaPath president and chief executive officer, said the agreement with Covad is part of the company’s efforts to expand its presence throughout the U.S.

“Covad’s strong industry position, nationwide broadband network and ability to quickly deliver broadband services are all key factors in our ability to successfully fulfill the demand for our broadband services,” Taxin said. “As part of our efforts for geographic expansion, improved scalability and risk mitigation, this is an important relationship for us.”

This isn’t the first time MegaPath has taken a step off its chosen path and ventured into deals with other broadband providers.

Last year, the ISP penned a deal with Telocity, a residential DSL provider, to refer customers to each other in areas served by both. Telocity was later bought out by Hughes Electronics Corp., a division of General Motors Corp.

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