New Edge avoids market's wrath

VANCOUVER, WASH. - New Edge Networks is emerging as an up-and-coming competitive service provider ... that isn't all that new.

The company was founded three years ago as a  competitive local exchange carrier (CLEC) offering DSL services to small U.S. cities. New Edge quickly realized that its DSL-only strategy should be modified, a decision that has contributed to the company's subsequent success, says Kathie Hackler, a Gartner vice president.

"New Edge has held on because it is more interested in the application than the transport medium," Hackler says. The company's focus on business users, Tier 2 and Tier 3 markets and its diversified services, including T-1, frame relay, ATM and DSL are reasons why the company is still around, she says.

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VANCOUVER, WASH. - New Edge Networks is emerging as an up-and-coming competitive service provider ... that isn't all that new.

The company was founded three years ago as a  competitive local exchange carrier (CLEC) offering DSL services to small U.S. cities. New Edge quickly realized that its DSL-only strategy should be modified, a decision that has contributed to the company's subsequent success, says Kathie Hackler, a Gartner vice president.

"New Edge has held on because it is more interested in the application than the transport medium," Hackler says. The company's focus on business users, Tier 2 and Tier 3 markets and its diversified services, including T-1, frame relay, ATM and DSL are reasons why the company is still around, she says.

New Edge has attracted $383 million in venture funding while only carrying $35 million in debt.

The company is making efforts to take advantage of their struggling competitors by buying customers and networks. New Edge recently announced it is acquiring some Cable & Wireless data service customers. As many as 1,500 customers could move over to New Edge's network and bring with them $45 million in revenue.

"These will be profitable customers for us," says New Edge CEO Dan Moffat. "The distinction [between New Edge and C&W] is that we have network facilities in the nonmetropolitan areas where customers are today."

The company acquired @Home Network's business division @Work in February for $1.5 million, a deal that not only included 1,000 customers but also @Work points-of-presence in 33 cities.

New Edge has built a national ATM backbone that connects its local networks.

"We have access presence in 350 markets in 32 states with 600 carrier-class switches," Moffat says. "We serve everyone from a [small-office/home-office] user up through Fortune 50 users. Our opportunity is to offer better business broadband."

While the company buys transport services from several providers including AT&T, New Edge owns its own network equipment.

New Edge can keep expenses lower than competitors by selling its service primarily through agents and value-added resellers, Moffat says, noting that 85% of the company's sales are from wholesale deals. The company maintains a sales staff that is much smaller than it would be if the company focused on direct sales.

While New Edge's competitors such as Covad Communications, NorthPoint Communications and Rhythms NetConnections also worked primarily with an indirect sales model, its approach differed enough to keep it afloat during the collapse of the  DSL CLEC market. These competitors only offered DSL services to business and residential customers in larger cities, Hackler says. "New Edge, early on, decided to diversify."

Now Covad is the only one of the other three still standing, and it, too, has diversified its offerings to include T-1 service and soon voice services for businesses.

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