Jato Communications: Denver's Best Kept Secret?

Just south of Denver, you will find a typical small town menagerie featuring the natural splendor of the area. It's just about the last place you would expect to find a national broadband service provider, a mid-sized company looking for ISP partners across the US — especially ISPs with good sales forces.

by Patricia Fusco
of internetnews.com

Jato Communications, Inc. is nestled in Englewood, Colorado. Its corporate birth date goes back to 1998, but Jato's digital subscriber line buildout really started in the third quarter of 1999. By the first of the year, Jato had fired up its DSL services to three markets in six cities.

Six months later, the firm has deployed IDSL and SDSL lines to 27 markets in about 38 cities, including Denver, Boulder, Albuquerque, Santa Fe and Salt Lake City, to name a few. By the end of the year the firm has plans to be in more than 120 markets nationwide.

The money came
Jato assembled its high-speed network through a series of alliances that involved a few hefty equity investments from top industry players. It secured a line of credit from Lucent Technologies, Inc. and partnered with Qwest Communications International Inc. in a $10 million equity deal. Jato pocketed another $5 million from an investment made by Global Crossing and picked up $10 million from Microsoft Corp. Additional private investments from venture capital firms rounded out Jato's coffers to the tune of $84 million.

As of March the company has been granted CLEC certification in 47 states. Jato has entered into interconnection agreements with Ameritech, Bell Atlantic, Bell South, GTE, PacBell, Southwestern Bell, Sprint, and US West.

In addition to offering high-speed data and voice communications services to small and medium sized businesses in tier two and three markets, Jato struck a deal with NorthPoint Communications to deploy broadband services in tier one markets.

SMB
A lot of companies target the small and medium sized business market, but the definition of the segment changes with the size of the company. For Jato, the SMB market is its bread and butter, and it's built both direct and indirect sales channels to meet the demand for communications services.

According to Mark Nixon, Jato vice president of corporate communications, the firm defines the SMB market as companies that have about 100 employees, but the firm is not afraid to pick-up marquee accounts.

"The small to medium sized business market has tremendous segmentation," Nixon said. "Generally speaking, our services target companies with about 100 employees, but that does not mean we do not serve big accounts. We just picked up the State of New Mexico as a client because the government body demanded broadband access as a teleworking solution."

Nixon said Jato has 25 to 30 people working its telesales division and more than 125 "feet on the street" selling its DSL services to businesses.

Partnerships with ISPs
Tom Hall, Jato president of indirect sales, is in charge of the 10-member team that resells its LAN-based DSL services through Internet service providers. Hall said Jato's ISP partners range from single market ISPs to super-regional and national players, like Qwest and Global Crossing. Hall said the company's criteria for reselling partnerships varies with the capabilities of the ISP.

"Our ideal ISP partner profile provides services to tier two and three markets," Hall said. "We want an ISP partner to be financially reliable, have a solid sales force, and be respected in the markets it serves."

Hall added that ideally, an ISP partner would be capable of reselling 1,000 lines each year. But if a small ISP operated in a market that was of interest to Jato, Hall said it would work with the service provider to strike a deal.

For the time being, Jato remains privately held. Its initial public offering was nixed on May 10, when the dot.com market went south. The company is currently completing a second round of private financing to maintain its current growth rate.

In the near future, Jato intends to add dial-up services to its product portfolio. Jato also intends to broaden its business services as an application service provider, as part of Microsoft's investment in the company requires. It plans to distribute both dial-up connectivity and software through its direct and indirect sales channels to leverage its national backbone.

Jato's modular installation process and alliance with Lucent allows the company to quickly add DSLAMs across the nation. Jato assembles the boxes, ships the units to a telecom, where Lucent engineers complete the installation in the central office (CO).

DLEC origins
Jato started out as a data competitive local exchange carrier (DLEC), but its primary focus is to be a single-source solution for businesses demanding high-speed services. Nixon said Jato differentiates its DSL services from other providers because of its intense focus on turning broadband technology into a competitive edge for its customers.

"We can provide high-speed connectivity to the Internet, or office-to-office," Nixon said. "And we are constantly looking for enhancements and applications that let our customer find superior business solutions directly through Jato or an ISP partner."

Jato offers six DSL service plans ranging from 144 kilobits to 1.5 megabits per second. Customers may adjust their transfer rates at any time.

Jato is actively seeking quality ISP Partners throughout its U.S. service area. ISPs interested in partnering with Jato are welcome to contact the company to receive a detailed description its partnership program.

It's estimated that the majority of the 40 million personal computers in the U.S. currently connect to the Internet or a corporate LAN by low-speed dial-up analog modems. As a result, pent-up demand for high-speed access is growing. Jato wholly intends to meet the demand with DSL services in tier two and three markets.

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