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AFN Quiet, But Not Dead

Channel Partners

June 17, 2002

3 Min Read
AFN Quiet, But Not Dead

AFN Communications Inc., a utility-backed regional wholesale carrier, has been very quiet ever since its former chief executive left the company last year for another job.

But AFN (www.afncommunications.com) is not dead. In fact, the Tulsa, Okla.-based company recently inked interconnection agreements with three carriers to extend its 8,000-route-mile network at a nominal cost through many parts of the country, said spokeswoman Teresa Hilligoss. The fiber-optic network AFN owns weaves through smaller towns and cities most Americans rarely visit such as Johnson City, N.Y. and State College, Penn.

AFN has leaked a few newsbytes to the public since former CEO Gordon Martin left the carrier to lead the global wholesale unit of Qwest Communications International Inc. (www.quest.com). Said Yankee Group (www.yankeegroup.com) analyst Seth Libby: AFN has nearly “fallen off the radar screen.

It was not always so.

In 2000 six energy and telecommunications companies formed America’s Fiber Network. AEP Communications, a subsidiary of American Electric Power, owns the largest stake in the company, 47 percent. With Martin at the helm, AFN fired off a barrage of news releases, promoting a regional network that was developed to provide bandwidth-starved businesses high-speed capacity.

But AFN began marketing its wholesale services in the fall of 2000, right around the time competitive carriers started buckling under cutthroat competition and heavy debt. Then energy wholesale merchants and retail utility companies began cutting back capital expenditures on their telecom operations and even divesting such assets.

“I think the utilicom industry right now is really quiet,” said Frost & Sullivan (www.frost.com) analyst Rod Woodward.

Still, not all the nation’s utilities have called it quits in the telecom sector. Hilligoss said AFN’s utility parents are still behind the telecom carrier. “I have heard nothing but full support” from the parent companies,” she said. “We just unfortunately are in the midst of a bad time in the industry.”

The privately held company declined to discuss its earnings or customer base. Industry analysts reckon the regional wholesale carrier is struggling to make it through the recession just like its peers.

A few positives: AFN owns a unique footprint penetrating underserved markets in the Northeast, and the company recently signed three separate interconnection agreements that will extend its network to the Northwest as far as Duluth, Minn., to the Southwest as far as St. Louis,; and to the South as far as Memphis and Chattanooga, Tenn. A similar agreement that will allow AFN to extend its network into Washington D.C. and New York at a low rate is pending, Hilligoss said.

It is still uncertain whether the carrier’s parents are dedicated completely to the telecom industry for the long haul. American Electric Power (www.aep.com), AFN’s largest stakeholder and a 100 percent owner in a separate wholesale carrier, Austin-based C3 Networks (www.c3net.com), has said in regulatory filings it is considering possible divestiture of its telecommunications assets. “We are reviewing options for telecom assets but we review options for a lot of things,” said AEP spokesman Pat Hemlepp.

AEP executives declined further comment. No financial information could be divulged. The energy company does not separately break down earnings in AFN and C3 Networks. FirstEnergy Corp.( www.firstenergycorp.com), the second largest stakeholder in AFN at 31 percent, did not return a phone call seeking comment.

For now AFN is plunging ahead and expanding its footprint in select markets through a series of interconnection agreements. Hilligoss concedes the company is keeping a watchful eye on its budget. But that is not unusual in Tulsa.

Beleaguered Internet and long-distance giant WorldCom Inc. (www.worldcom.com) has a major presence there. Tulsa also is the home to bankrupt long-haul carrier Williams Communications Group Inc. (www.williamscommunications.com), where Martin first recruited executives to lead a new startup – AFN.

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