New Edge
Networks, a competitive local exchange carrier so successful it hasn’t
felt the need to go public with an initial public offering, has opened the
doors to the competition.
As part of its Tuesday announcement to expand the reciprocal reselling
agreement it shares with NorthPoint Communications Group, New
Edge also announced the equity investment by the aforementioned company as
part of last week’s third round of private funding.
The round, led by GS Capital Partners III, L.P. and Affiliates, the
investment arm of Goldman, Sachs & Co., netted a total of $76.9 million in
private equity investments, it was announced Oct. 18. That’s the company’s
third funding round in 15 months, garnering more than $300 million altogether.
It’s unclear how much was invested by either GS Capital or NorthPoint
, and no one is disclosing that information,
either. However, GS Capital did pony up enough to gain a seat on New
Edge’s board of directors.
NorthPoint did not make as much of an investment, and will not have someone
representing its interests on the board. But its stake in New Edge is a
point of concern, as Verizon is in the process of acquiring Northpoint by
mid-2001, and would therefore gain New Edge ownership in the process.
It’s the start of what seems a trend. In addition to Verizon’s acquisition
of NorthPoint and possible ownership in New Edge, SBC Communications took a
six percent piece of Covad Communications valued at $150 million in September.
Some critics see the acquisitions as a reversal of the Telecommunications
Act of 1996, which opened up the industry to competition. The doors opened
up by opportunity can just as easily be closed by acquisitions, critics
maintain.
Sal Cinquegrani, New Edge spokesperson, said the agreement has nothing to
do with Verizon and everything to do with NorthPoint.
“Our agreement is with NorthPoint, and our focus is to expand our reach
national reach with them,” said Cinquegrani. “The merger between Verizon
and NorthPoint is still in the review process. If and when the two merge,
we will look at it then.
“What’s important here is that the strategic alliance bodes well for the
consumers,” Cinquegrani continued. “With one phone call, we’ll be able to
provide coverage for the customer, whether they are in our coverage area or
in NorthPoint country.”
It’s a great deal for NorthPoint, and maybe Verizon down the road. A vast
majority of CLECs are pouring time and resources to capture DSL subscribers
in the densely-populated big cities like Los Angeles, New York and the like.
New Edge has taken a different approach, installing DSL Access Multiplexers
in the central offices of smaller, secondary and rural cities in
America. To date, it has nearly 400 DSLAMs operational in 250 cities and
20 states. Almost another 200 are installed and waiting to go “live.”
The agreement gives NorthPoint a foot in the door to the smaller markets,
while New Edge has an immediate presence in the larger cities throughout
the nation. Together the two will have a combined access to more than
4,000 central offices.
Liz Fetter, NorthPoint president and chief executive officer, said the
agreement not only gives her company a foot in the door, but Northpoint
partners also.
“Speed to market continues to be a major driver in the broadband services
market and this agreement gives NorthPoint, New Edge Networks and our
respective wholesale customers what we believe is the largest national
geographic market reach spanning major urban areas and underserved smaller
markets,” Fetter said. “With this agreement, we offer NorthPoint customers
such as RadioShack, Microsoft, Verizon Online, Genuity and others extended
reach into
untapped markets where demand is as strong as it is in major
cities.”
