So Earthlink is buying New Edge Networks for $144m (lots of references, but this should give you the basics). Most people have heard of Earthlink, once a dialup provider who has been trying to get a solid high speed strategy since about 2000. But many haven’t heard of New Edge. Let’s take a look at what we know about both players.
I know them because when I was CTO of Oso Grande in New Mexico, we were a New Edge “partner” (really reseller). Basically we had a DS3 to New Edge’s Layer-2 ATM/DSL network and we received the VCCs carrying DSL traffic and routed the associated traffic to the Internet. It was common practice back in the days when the US still believed that there could be some kind of competition or open market for DSL service. ISPs used to be able to share the unused frequencies on analog voice lines to provide competitive DSL service. In fact, where I live, we would not have ever received either DSL or cable modem service without the competition provided by a local ISP.The FCC has since “fixed” this situation for us so that competition is suitably reduced.
But New Edge found a niche–providing services targeted at businesses located outside of tier-1, larger cities. New Edge, based in Vancouver, WA (just across the river and the state line from Portland, OR), provided services not only in places like Albuquerque (population over 500K), but also in Santa Fe and Farmington, NM. They ended up with DSL services available in almost 12K Central Offices. That’s a lot. With a focus on business needs and a niche in smaller markets, New Edge was able to survive the telecom collapse without declaring bankruptcy or going under. Impressive. But clearly, with a sale price of only $144m, it wasn’t extraordinarily profitable.
It may surprise some readers to know that from the perspective of core Internet routing, neither of these players is actually all that large. Earthlink may have a lot of users (they say around 5m and that doesn’t seem surprising), but they don’t generate a very large footprint on the Internet. That’s not a slam against Earthlink at all. It’s a statement about how big the Internet really is, and what a large, mostly dialup provider looks like on it.
Let’s review some of the routing facts about Earthlink. They have at least three Autonomous Systems: AS11683, AS3703, AS4355. AS3703 is registered but hasn’t shown up in routing for a long time. So we’ll ignore that. AS11683 shows up as single-homed to Level (3) AS3356. We might assume that that is related to dialup services, since (3) is well-known for providing a huge-footprint dialup outsourcing offering. AS4355 is the one, with transit to AS3111 (Internet Direct, Inc., which appears to be owned by Earthlink, but hard to tell). AS4355 has transit to a bunch of other people, but they massively prefer two carriers:
- Cogent Communications [AS 174]; 56.31%
- 3 Communications, LLC [AS 3356]; 43.68%
Level (3) is not surprising given the previously mentioned dialup relationship and Cogent is not surprising given their large footprint and well-known low prices.
What about New Edge? I know them as AS19029 but was surprised to see another AS: AS6172. Again, that’s another registered-but-not-routed AS. When the Internet runs out of AS Numbers we’ll ask these guys to give this one back. :-).
AS19029 is a decent-sized network. In fact, from a routing perspective it’s much larger than Earthlink. They have about 75 BGP-speaking customers, some of the largest of whom include:
- Z-Technology Inc. [AS 3733]: 9 networks since 9 Dec 2002; 13.85%
- Adams Telephone [AS 12033]: 6 networks since 8 Mar 2004; 10.75%
- APAC Customer Services [AS 12281]: 7 networks since 8 Jan 2003; 9.61%
- Alaska Fiberstar [AS 14608]: 4 networks since 9 Apr 2003; 7.85%
- Internet Doorway, Inc. [AS 4574]: 3 networks since 26 Jul 2005; 6.78%
- Mikrotec Internet Services, Inc. [AS 3801]: 20 networks since 12 Feb 2003; 6.35%
- CityNet LLC [AS 32459]: 10 networks since 11 May 2004; 6.27%
- Monterey Bay Internet [AS 5670]: 1 network since 24 Feb 2004; 4.77%
- TAG International [AS 20082]: 16 networks since 3 Jan 2002; 4.37%
- Big River Telephone [AS 27419]: 2 networks since 26 Aug 2004; 3.31%
- Integrity Networks [AS 11681]: 7 networks since 15 Jun 2005; 2.71%
Moreover, they have nine BGP-speaking customers who appear to rely on New Edge for virtually all of their Internet connectivity:
- CityNet LLC [AS 32459]; since 11 May 2004
- Monterey Bay Internet [AS 5670]; since 24 Feb 2004
- ZONE One Network Exchange [AS 2927]; since 3 Sep 2004
- Gower Computer Support, Inc [AS 6624]; since 1 May 2003
- Core Services [AS 16818]; since 26 Feb 2002
- TELE-TECH CO. INC. [AS 10340]; since 6 Feb 2003
- Marco Business Products [AS 32442]; since 30 Jun 2004
- Dayco Products [AS 14748]; since 7 Jan 2003
- INSURANCE BENEFIT SPOT CHECK INC [AS 27173]; since 10 Feb 2003
For providers, New Edge uses some of the traditional, large service providers:
- Level 3 Communications, LLC [AS 3356]; 52.07%
- Savvis[AS 3561]; 45.28%
- AT&T WorldNet Services [AS 7018]; 2.64%
So at least with the Level (3) provider, there’s an overlap between the two.
But based on the routing data and on the business data, this might be a very, very good fit for Earthlink. Like AOL before them, Earthlink built a business on large, cheap, heavily-marketed, mostly-outsourced dialup. But the world has long since started the inexorable move to faster connections. While Earthlink has had a partnership with Covad (for whom this purchase is probably really bad news), and done some other DSL stuff, this will certainly give them a significant leg-up. New Edge might give Earthlink two things it probably needs: first, a large, owned, broadband footprint that it could choose to leverage to market to consumers; second, a sizable business customer base to diversify revenues and increase margins.
We should check back on this situation in 18 months or so after the networks have been merged (or not) and the business plans have been realigned (or not).