EarthLink’s $50M to Extend Voice

EarthLink announced plans to invest $50 million in Covad, expanding
its partnership with the DSL provider into eight metro areas and doubling
the reach of its DSL and home phone service bundle.

In the agreement, EarthLink will help Covad finance extending its
line-powered voice network into Atlanta, Chicago, Los Angeles, Miami,
New York City, Philadelphia, San Diego and Washington, D.C.

Last year,
EarthLink launched the data-voice bundle with Covad in Dallas, San
Francisco, San Jose and Seattle.

The build-out, expected to cover 14 million homes, will occur
throughout 2006, but could be available in some markets as early as five
months, according to Steve Howe, EarthLink’s vice president for voice.
The bundle will be $70 per month.

The move redefines EarthLink’s position in the voice market from data only to voice and data. “Voice
is 10 times that of the access business,” Howe told
internetnews.com.

Covad, which is attempting to reach residential users, sees the
agreement as proof that its strategy of forming alliances is working.

By
offering line-powered voice, EarthLink customers can make calls during a
power outage and use enhanced 911. These features are unavailable to VoIP, which
routes calls over the Internet, according to the companies. So far,
EarthLink is the only company using the line-powered voice option,
according to Covad.

Line-powered voice “opens up a much larger addressable market to
Covad through consumer-focused partners,” said a Covad spokesperson.

In exchange for the funding, EarthLink gets $10 million in stock and
$40 million in convertible debt. The deal is expected to close March 31.

While the Covad deal is aimed at the residential market, EarthLink
actively seeks business subscribers.

In December, EarthLink acquired New Edge Networks, a local exchange carrier (CLEC) offering virtual
private networks along with T1 access.

Residential VoIP customers more than tripled in 2005 to 4.2 million, according to the Telecommunications Industry
Association. That figure could hit 18 million by 2009, according to the
industry group.

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