One of the top competitive ISPs in the U.S. acquires a powerful Wall Street connection.

by Alex Goldman ISP-Planet Managing Editor [December 19, 2005]

At ISP-Planet, we continue to recommend (see Editorial: ISPs Can Survive) that ISPs look to the business market for growth, because the residential market is cluttered with too many large corporations selling bundles in which Internet access is a loss leader and because regulation is hostile to independent ISPs.

ISPs clearly agree. Last week, EarthLink announced that it will acquire rural business services provider New Edge Networks (see EarthLink Means Business) to acquire business services skills. Earlier this year, Covad acquired WISP NextWeb to reach more business customers (see Covad's Acquisition of NextWeb Makes Sense).

Also in December, Herndon, Va.-based competitive cable provider RCN announced that it will acquire alternative fiber provider Con Edison Communications (CEC), a subsidiary of New York City's utility. CEC is based near Wall Street. The parent company has a history that dates back to the inventor of alternating current.

The announcement followed an agreement with McLean, Va.-based First Avenue Networks, a business class fixed wireless broadband provider that bills itself as a provider of backhaul and fiber extensions.

The message was clear: RCN wants more business class connections.

Aggressive and optimistic
"RCN is a leader in the residential cable modem market," says the aggressively optimistic Todd Narwid, president of RCN business solutions. The business unit has piggybacked on the consumer backbone, providing business revenue in two key business verticals that purchase cable TV along with Internet access: education (schools) and hospitality (hotels).

CEC brings another vertical. "CEC has significant penetration into the financial vertical," says Narwid. "They're running fiber over a unique conduit system. They have a world class back office. They invested heavily in their NOC and suite of business services. Historically, RCN did not have managed services. On the other hand, CEC recently invested in upgrading the core to deliver MPLS."

Because CEC was a subsidiary of the local power utility, it was able to run fiber over the rights of way of the power utility. That allows it to offer an alternative path to Verizon's Empire City Subway.

So much to invest in
At ISPCON, ISPs with only a single small data center were telling us that they were spending money on gigabit Ethernet and faster Ethernet equipment. RCN is doing the same. It's required if you're delivering business services to customers.

"We believe this investment makes sense from the enterprise-wide perspective," says Narwid. "I don't think anyone can argue that there's no demand for fast metro connections. We're seeing a transition from FRAME and ATM to Ethernet. Metro connections are now as fast or even faster than data center connections. RCN Business Solutions, with CEC, has no problem with delivering a 10 Gbps connection."

Narwid says that disaster recovery and storage are driving demand for faster connections. With new regulations, some companies need to store years of e-mails. Rather than manage these directories themselves, a customer can hire an ISP expert to do it all for them.

RCN expects the sale to close in the first quarter of 2006, after approval by the relevant regulators.

—End