Level 3: Dialup Not Dead
Carrier pays for dialup assets, no matter how
'mature,' in what must be a good sign for the ISP industry.
The battle for broadband continues. ISPs are
slashing monthly rates, increasing data transfer speeds and
unveiling new services such as audio and video streaming to
entice high-speed customers. Does that mean dialup is dead? Not
quite.
That's the message Level 3 Communications sent
last week by buying the wholesale dialup access business of ICG
Communications for $35 million.
Like Level 3, ICG provides wholesale dialup
access to some of the largest ISPs in North America, including
America Online, EarthLink, MSN, and United Online.
A Level 3 spokesman was not immediately
available, but in a statement CEO James Q. Crowe said the moves
makes sense from strategic and financial standpoints.
"While the dial access business is undoubtedly
maturing, it continues to generate very strong margins and cash
flow for our company, given the unique architecture and
efficiencies of our softswitch platform," Crowe said.
The pickup will put $35 million in new revenue
into Level 3's coffers this year. The Broomfield, Colo., company
will shift most of ICG's customer traffic onto its own network
infrastructure over the next six months. In addition, the
transaction allows Level 3 to expand into select secondary
markets it's not currently in.
For Denver's ICG, the sale is part of a larger
strategy to shed non-core assets and buttress its balance sheet.
Today's acquisition is not the first time, Level
3 has snapped up a dialup business. Last year, it purchased the
assets of Genuity for $137 million, in large part to gain access
to the bankrupt Woburn, Mass.-based company's managed modem
contracts with AOL and other ISPs.
While industry watchers agree that broadband will
eventually replace dialup, the older, slower technology won't
just vanish. For many users who have broadband at work, slower
home connections are just fine for e-mail and other
low-bandwidth activities.
A recent survey by Jupiter Research forecast said
there will be 46 million U.S. households with Internet
connections in 2008—half of which will connect via high-speed,
always-on technologies.
That's not to say that Level 3 is betting its
future on a technology who's days are numbered. In recent weeks,
the company has made a push to carry VoIP traffic.
Earlier this week, it announced that 8X8, a
broadband VoIP and video communications company, will use Level
3's network. The company also rolled out a channel partner
program that allows resellers to offer VoIP services using Level
3's infrastructure.
