From TELE.COM
September 20, 1999, Issue: 418
Section: Business
Little Guys Bulk Up -- CLECs And ISPs Come Together To Diversify
Tyya Turner
Service diversification is pretty hard to miss these days. A prime
example is AT&T's cable acquisitions and its related aim of
providing combined phone, cable and Internet services to
businesses and residences. But it is only a small part of a larger
trend that's seen big providers move into all sorts of new fields
through acquisitions and mergers. What may be less noticeable is
that diversification is no longer limited to just big players.
Providers of all sizes are joining the movement on the belief that
service variety is key to success. What may be more surprising,
however, is that over the past year, dozens of fledgling
competitive local exchange carriers (CLECs) and Internet service
providers (ISPs) have also started mixing up their service
menus-and they've done it by buying into each other so that
CLECs can push into the Internet and ISPs can add voice
services to their portfolios.
The chance to converge services isn't the only reason ISPs and
CLECs are hooking up. They're also gravitating to each other
because it is relatively easy to blend their technologies, blurring
the line between ISPs and CLECs. The synergies from
combining the two may force the issue even further, says
Douglas Hanson, chairman and chief executive officer at
multiservice provider RMI.Net Inc. (Denver). It may make that
line disappear altogether. "There won't be a distinction between
these companies like there is now," Hanson says. "CLECs,
ILECs, ISPs-they'll all be the same."
Hanson's company is a prime example. RMI.Net, formerly
known as Rocky Mountain Internet Inc., started out as an ISP,
providing access and Web hosting. The company recently
acquired IdealDial Corp. (Denver), a company that resells long
distance, in addition to offering calling cards, e-billing and other
services. Hanson considers the move a no-brainer. "My premise
is that CLECs and ISPs aren't in each other businesses," he says.
"They're the same business." To Hanson that means the
communications business.
That may be the case, but that doesn't mean running an ISP and
operating a CLEC are quite the same thing. Voice users have
come to expect uninterrupted dialtone, while Internet customers
are a little more forgiving of occasional networks outages. And
unlike ISPs, CLECs also have to be concerned about negotiating
interconnection agreements and pleasing state and federal
regulators.
Yet even with these differences, the synergies from joining these
types of providers offer any merger at least the promise of
substantial returns. Look at recent history. Incumbent carriers
have long realized the benefit of having Internet divisions.
Regional ISPs, in turn, are moving into voice services, which
puts them on a more equal competitive footing with incumbents.
Beyond this, having CLEC status enables ISPs to colocate
equipment with incumbents and maybe even receive reciprocal
compensation.
On a smaller level, acquiring an ISP lets a CLEC add access,
hosting and other services and gives the provider more options
for bundling. That's why competitive carrier Conectiv
Communications Inc. (Newark, Del.) decided to purchase iNet
Communications Consulting Inc. (Newark, Del.), an ISP that
also offers consulting services. Conectiv chose to buy rather than
build because it needed to move quickly, but decided it lacked
the in-house knowledge to construct its own service from
scratch.
"What we get as a CLEC is access to a customer base that the
ISP already has and the opportunity to offer those customers our
voice service," says Jody Watts, vice president of marketing at
Conectiv.
Time Warner Telecom LLC (Greenwood Village, Colo.), a
subsidiary of Time Warner Inc. (New York), is another CLEC
that took the ISP plunge and is happy with the results. When the
company purchased Internet Connect Inc. (Inc.Net, Salt Lake
City ) four months ago, the ISP only served three of Time
Warner Telecom's 21 markets. Today, Inc.Net serves 20 of
those markets and expects to move into the last one within a
month. For Time Warner Telecom, the purchase means it can
now not only offer another service, but also serve customers it
otherwise couldn't.
"We started out serving the Fortune 1,000 marketplace," says
John Blount, the CLEC's senior vice president of sales and
marketing. "But by bundling services, we can now justify serving
smaller customers that we wouldn't have served before."
Copyright ® 1999 CMP Media Inc.
=====================================================================
Rmi.net acquires Ideal Dial
By The Denver Post
June 15 - Rmi.net Inc. said Monday it acquired IdealDial, an
enhanced telecommunications services provider with nearly
20,000 customers, in a common stock transaction valued at $3
million. IdealDial has an expected revenue of $10 million for
fiscal year 1999. "IdealDial's nationwide business-customer
base will give us additional customers to up sell our enhanced
e-commerce products to,'' said Douglas H. Hanson, chairman
and CEO of RMI. |
