One Buy Ups EarthLink Business Value for Agents

EarthLink Inc.s announcement Monday that it intends to buy CLEC One Communications Corp.  is getting praise from the indirect sales channel for boosting the ISPs business services strategy, but its too early to tell how it will impact partner programs for the newly minted EarthLink Business.

Once the transaction closes, One Communications will join Deltacom and New Edge Networks as part of EarthLink Business, a new subsidiary formed Dec. 8 following the acquisition of Deltacom, another troubled CLEC. New Edge Networks, an access aggregator and MPLS network provider, was bought by the ISP back in 2005.

With One Communications, EarthLink Business will operate a nationwide IP network with underlying fiber assets in 30 of the countrys top 50 MSAs. Its fiber network will span 27 states with 923 colocations. And, it will employ almost 3,500 people.

One Communications enables EarthLink Business to expand in the Northeast, Midwest and Mid-Atlantic while Deltacoms eight-state region covers much of the Southeastern United States.

Indirect sales agents representing the company were mostly positive about the rollup strategy and the rebranding.

Taking that brand and the network [EarthLink CEO Rolla Huff] is acquiring and then the developers he has access to, I think he is definitely on to something,” said Steve Braverman, CEO of X4 Solutions, a Chicago-based master agency that represents One Communications, New Edge Networks and Deltacom. Braverman said that vision is not unlike the Apple iPhone ecosystem model, but for business-grade networks and applications. There may be some credence to this idea; EarthLinks then only business-targeted unit, New Edge Networks, launched a business applications exchange, New Edge AX,  in early 2010.

I have a suspicion that its not the end [of the acquisitions],” said Braverman. He will create some things and buy the rest. And, he has a lot of cash to do it.”

Other agents are less clear on the synergies between the New Edge Networks and the two CLECs: The combination of Deltacom and One does make New Edge look like the odd man out,” said Josh Anderson, CEO of  Telephony Partners LLC, a master agency also representing both CLECs and New Edge Networks. New Edge doesnt have any network assets to my knowledge, and their MPLS offering is not so much an engineering marvel as a smart collection of agreements and interconnections.  Their AX offering in particular is novel more in its marketability than in its technology.  Not to sell short the difficulty of putting together that kind of nationwide network, but it seems to be a very different business than operating a facilities-based CLEC (or two).”

That said Anderson is upbeat about the prospects for the CLEC combo. The challenge of doing two integrations and a rebranding essentially simultaneously is definitely ambitious, but if they pull it off its not an altogether bad CLEC footprint,” he said. Its a shame they didnt pick up Cavalier they could have touted that they cover the entire East Coast.”

Cavalier, a CLEC serving the Mid-Atlantic, Midwest and Southeastern United States, was snapped up by PAETEC; the transaction closed coincidentally on the same day as EarthLinks deal with Deltacom. (PAETEC also was rumored to be considering an offer for One Communications.)

On a more practical front, some agents see EarthLink as playing the part of rescuer to another failing CLEC. Of the $370 million EarthLink will pay for One Communications, $285 million s for its debt.

I think this will also have a positive impact for agents selling One Communications,” said Doug Turpin, CEO at master agency Venture Group Enterprises Inc. The specter of their being forced into bankruptcy caused agents and customers to be leery of them. Removing this cloud will be very helpful to them.  We are happy to see this transaction occurring.” 

Adam Edwards, president of master agency Telarus Inc., which represents One and New Edge, also noted the deal as salve to One Communications financial woes. We’re pleased to see that they’ll go to EarthLink and be a part of a national CLEC, rather than be taken over by creditors or some alternative to that,” he said.

Emmet Tydings, president of AB&T Telecom, a master agency for One Communications, said deal is fundamentally very good news” and makes the combined company a far more serious player, which we would be more inclined than ever to push in our channel.” 

Presently there is no word on how the integration of the channels at the two CLECs and New Edge might shake out. Our hope is that the channel friendly cultures of New Edge and One Communications will continue at EarthLink [Business],” Edwards said.

While New Edge and One Communications have been regarded as channel-friendly,” Deltacom has been criticized for cutting agent contracts in December 2009, a move some suspected at the time was positioning the company for sale.

This article includes reporting by Kelly Teal.