A Big WISP Merger

By Alex Goldman

February 26, 2004

Two companies claim that, combined, they'll be the biggest business WISP in the United States.

This week, two California WISPs announced a merger that will create what the companies claim is the largest business-oriented WISP in the world. The acquisition of Camarillo-based SkyPipeline by Fremont-based NextWeb will create a business serving over 2,000 businesses in the wealthiest areas of California. Graham Barnes, CEO of NextWeb, will be president and CEO of the combined company.

NextWeb has been building a wave: This is the company's fourth acquisition in almost two years. In April of 2002, the company acquired San Jose-based WISP Innetix. In September of 2002, NextWeb acquired publicly traded Orange-based World Wide Wireless Networks out of chapter 11. In December of 2003, NextWeb acquired Oakland-based Libritas.

Before the merger, NextWeb's coverage map showed strong coverage in Silicon Valley and in southern Los Angeles, both of which are business corridors and high tech research hubs.

SkyPipeline brings coverage in central and northern Los Angeles, extending outside Los Angeles along the coast past Santa Barbara.

We spoke with David Williams, NextWeb vice president of marketing and business development, and a veteran of the ISP business. Williams was co-founder and COO of the Whole Earth Networks, the ISP side of the famous network known colloquially as the WELL (for Whole Earth 'Lectronic Link), which itself grew out of the liberal magazine Whole Earth Review (which appears to be on the verge of bankruptcy).

He admitted that buying a financially viable WISP is a new experience for NextWeb. "This is our first transaction with a solid and successful provider," says Williams. "SkyPipeline was number two in California and has lots of success."

In the past, the company has gotten some bargains. "We took advantage of the economic times and picked up struggling players that were strong but lacked management or finances," explains Williams.

Exact terms of the current deal were not disclosed, but NextWeb says it is "valued at $25 million," which is a lot of cash in this growing industry still filled with small companies.

NextWeb is backed by traditional venture capital, and it has the added advantage of an investor that also owns a lot of real estate, Oakland-based nonprofit health industry giant Kaiser Permanente.

"Not everybody knows this, but Kaiser is the second largest private commercial real estate owner in California," says Williams. "They own a tremendous amount of real estate assets that we have exclusive access rights to."

With Tenet Healthcare and ACPI (a health care REIT), both of which were introduced to NextWeb by Kaiser, Nextweb has access to about 500 buildings in key business areas in California, plus 500 more buildings in 43 states, should it choose to expand beyond California.

This is probably not the last of NextWeb's acquisitions. "We're looking for further acquisition opportunities," says Williams. "We welcome strong regional players to talk to us."

Reprinted from ISP-Planet.

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