(UPDATE) Upstart Covad Scores Investments From AT&T, McCaw's Nextlink
Dow Jones Online News, Tuesday, January 05, 1999 at 15:59
NEW YORK -(Dow Jones)- Covad Communications Group Inc., a
digital-communications start-up that plans to go public, has attracted
two more key investors: AT&T Corp. and Nextlink Communications Inc.
In return, Covad agreed to provide its DSL, or digital subscriber
line, technology to AT&T (T) and Nextlink (NXLK). Nextlink, a
competitive local exchange carrier, or CLEC, founded by
cellular-phone-industry pioneer Craig McCaw, will become the preferred
provider of local-phone service to Covad.
Santa Clara, Calif.-based Covad provides superfast Internet
connections to homes and businesses using DSL, an emerging technology
that operates over ordinary copper telephone lines. Since DSL networks
also can handle telephone service, firms like Covad are recognized as
CLECs as well.
By using extremely efficient transmission schemes, DSL is able to
send data at speeds ranging from 128 kilobits per second to 1.5 megabits
per second - between two and 27 times faster than conventional modems.
But in order for DSL to work, firms like Covad must install special
networking equipment in the field offices of local telephone companies.
As it builds its network, Covad has squabbled with local carriers over
access to this "last mile" of copper line to U.S. homes and businesses.
Covad's latest investors have their own battles with the incumbent
local exchange carriers, or ILECs, such as the Baby Bells.
Late Monday, Covad said it will receive a $25 million equity
investment from AT&T's (T) AT&T Ventures. Nextlink (NXLK) Tuesday
confirmed that it will invest $20 million in Covad.
AT&T is in the process of merging with cable-television giant
Tele-Communications Inc. (TCOMA, TCOMB). AT&T intends to use TCI's cable
lines to provide local telephone and high-speed Internet service to as
many as 22 million American homes, circumventing the Bell company lines
that AT&T currently relies on.
Nextlink is fighting the Bells for customers as well as access to the
last mile. Nextlink is controlled by McCaw, who also controls
wireless-telecom company Nextel Communications Inc. (NXTL). McCaw, who
sold his cellular business to AT&T in 1994, has stakes in a number of
communications firms, including Level 3 Communications Inc. (LVLT),
which is racing to build the first global fiber-optic local and
long-distance telephone network using Internet protocol, or IP.
Covad, whose name is a contraction of Copper Value Added, has set its
pending initial public offering at 7.5 million shares with a price range
of $12 to $15 per share. The company counts computer-chip titan Intel
Corp. (INTC) among its other investors.
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