HarvardNet gets $70m from Allen, Denver investor
By Peter J. Howe, Globe Staff, 12/14/99
Microsoft Corp. cofounder Paul Allen and a Denver telecommunications investor are putting $70 million into Charlestown-based HarvardNet, a growing competitor to Bell Atlantic offering digital subscriber line fast Internet access.
The investment will cover HarvardNet's cash needs for six to nine months as it continues to build a DSL network throughout Bell Atlantic territory. It has helped the company hold off an initial public offering planned in August before the market for technology stocks briefly soured.
DSL technology exploits unused capacity on standard copper telephone wires to allow Internet access 50 to 200 times faster than dial-up modems, without requiring expensive new wiring. Bell Atlantic has said it will have the service available throughout Eastern Massachusetts by month's end, but has faced scattered complaints of bureaucratic delays and installation headaches.
HarvardNet sells to small and medium-size businesses. It has rolled out service in more than 100 New England communities and recently became the first DSL provider on Cape Cod. It has 700 customers to date and expects thousands within months.
Allen, who has been a bullish investor in both DSL and cable modem technology for fast Net access, and Denver-based Donald L. Sturm of Sturm Group will invest $70 million in the firm and take three seats on the company's board of directors.
'We're in the fortunate position of picking who we want to invest,' HarvardNet president Mark Washburn said yesterday. While 'more than a handful' of parties wanted to take a stake in the company, he said, 'We picked the investors that were more than just money.'
Allen's Vulcan Ventures Inc. in Bellevue, Wash., has stakes in a host of Internet content and delivery companies, number four US cable television company Charter Communications, and telecommunications firms such as NorthPoint Communications and Allegiance Telecom.
Sturm, as a top executive with Nebraska construction company Peter Kiewit Sons Inc., led the company's efforts to invest in MFS Communications, a fiber-optic carrier that MCI WorldCom bought in 1996 for $14.4 billion. Sturm is a top investor in MCI WorldCom and Level 3 Communications Inc.
While working to add DSL equipment to all 630 Bell Atlantic central offices from Maine to Virginia, HarvardNet also is building four Web-hosting sites, the first of which has opened in Charlestown, where HarvardNet rents equipment and services for companies to maintain a World Wide Web page. Three more are planned in New York, Philadelphia and Washington, D.C.
Washburn said the company will have equipment in 129 central offices by the end of the month. 'As of today our focus is [only] on Bell Atlantic territory' from Maine to West Virginia, Washburn said.
Washburn said the company still needs about $200 million of the $300 million he estimates it will cost to finish its planned northeastern network. Company spokeswoman Susan Shelby said the company withdrew its planned $125 million IPO in September, but plans to reapply to sell shares sometime next year.
One current limitation to DSL is that subscribers must be within three miles of a phone company central office that Bell Atlantic, HarvardNet or another company has outfitted with the necessary equipment. Even then, some subscribers within three miles of a central office cannot get the service because of limitations in the Bell Atlantic network.
Other investors backing HarvardNet, which does not expect to become profitable for some time, include Fidelity Investments' venture arm, Osborn Capital, and Media/Communications Partners of Boston.
As part of the $70 million investment, Sturm and colleague Eric Grabli and Vulcan's Dino Vendetti will join HarvardNet's board of directors.
This story ran on page C01 of the Boston Globe on 12/14/99.
Good story, have to do some DD.
Jack |
