DALLAS - Allegiance Telecom's recent acquisition of Intermedia's Internet assets from WorldCom gives the growing competitive local exchange carrier its own IP backbone, which should reduce its costs.
Having its own backbone could also help Allegiance offer new IP services, says spokesman Jerry Ostergaard.
"We're still in the process of reviewing what this will mean for us," he says.
More importantly, notes Kate Gerwig, a Current Analysis analyst, the purchase includes Intermedia's peering arrangement with other carriers.
"This could really help launch Allegiance into the Tier-1 ISP status," she says.
Allegiance's purchase includes "essentially all" of Intermedia's assets, but not Intermedia's debt, according to a company statement. Additional terms of the deal were not disclosed.
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WorldCom was forced to sell Intermedia's assets as part of an agreement made with the U.S. Department of Justice when WorldCom and Intermedia merged last year. The only assets WorldCom could keep were Intermedia's controlling interest in hosting provider Digex and Intermedia's frame relay network.
The agreement with the justice department gave WorldCom six months to get rid of Intermedia's IP assets, and that deadline was quickly approaching. There had been speculation that CLEC McLeodUSA was interested in the assets last year, but that talk died off as McLeodUSA struggled under a heavy debt load.
Gerwig says there likely weren't many CLECs that could afford to bid for the Intermedia assets."My guess is Allegiance got them for a song," she says.
Allegiance offers local and long-distance phone services, data connections and Web-hosting services in 36 markets across the U.S. Intermedia's backbone reaches 40 markets, so it should touch the majority of Allegiance's service area, Ostergaard says.
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