NextWeb Grows Inside Covad

By Alex Goldman

November 22, 2006

One year after the acquisition of the WISP, here are the details on why the buy made sense for the national CLEC.

Last year, Covad acquired NextWeb (see Covad's Acquisition of NextWeb Makes Sense), a move that we feel was driven by regulatory uncertainty in the wired broadband space. At the time, ISP-Planet concluded, "if $24.7 million is the price tag on survival itself, Covad got a bargain."

Equipment

We were most interested in learning what equipment Covad is using. "We're using a pre-WiMAX solution from Axxcelera," said David Williams, vice president of products and systems at Covad, speaking to ISP-Planet after his session at ISPCON. "We use 5.8 GHz for the last mile."

"Are you seeing more noise there than in the past?"

"Yes, but it's better than 2.4 GHz, for several reasons. Because 5.8 GHz does not propagate as well as 2.4 GHz, there are fewer potential sources of interference. In addition, we do not compete for spectrum with hotspots, municipal deployments, and home WLANs."

For backbone, the company uses microwave spectrum at 18 GHz and up, primarily Ceragon equipment. Williams says Covad gets from 45 Mbps to 300 Mbps throughput on most backhaul links.

Covad is leasing some spectrum from NextLink XO, which he says is an XO subsidiary formed to monetize the company's unused spectrum portfolio.

A Good Business

As enterprise customers become more comfortable with using wireless, Covad is seeing more of the top ARPU customers. "We used to sell quite a few 10 Mbps links each year. Now we sell quite a few each month," Williams says.

He says that Covad competes with landline DS-3s when it sells its biggest wireless links. They are sometimes used as fiber backup and sometimes they replace the wired link. "We're charging a similar price but we can deploy faster, we can deploy where fiber is not available, and we are the only solution that can provide path diversity. We sell a service to the customer. We do not compete on price."

What about CPE? Williams says the company owns its CPE and replaces the CPE when necessary.

"We're not selling wireless. We're selling communications. We need to have a product. W have a strong management team with a broad base of experience. We have a reliable product. We have strong marketing and great sales people but we also have good word of mouth."

Has Covad provided NextWeb with anything it didn't do before? "Covad wireless now sells integrated voice and data services," says Williams. "Covad is in 44 states and is a market leader in voice services."

Growth

The company plans to build out its wireless footprint, making acquisitions only in exceptional circumstances. Shortly before ISPCON, Covad acquired Dataflo, a local Chicago-based WISP.

Williams explains how Dataflo was unusually suited to be part of Covad. "We were attracted to Dataflo because we use the same equipment vendors (but not throughout—we use only Cisco routers at the core, so we'll have some upgrade costs there). Their network was very well engineered. Although Covad is strong in Chicago, this is our first launch [of wireless services] outside the West Coast."

So expect Covad to grow its wireless, urban footprint. Don't expect to be an acquisition target unless you're in an urban area. And if you are, it's likely that Covad already knows you because you just might be a Covad customer.

Story courtesy of ISP-Planet.



Comment and Contribute
(Maximum characters: 1200). You have
characters left.