Broadwing/Corvis union: Year One

All-optical IP network offers advantages that have yet to fully pay off, experts say.

Broadwing has no debt, one of the newest national networks and only a small portion of its revenue stems from traditional voice services. Yet as with most service providers, the company's long-term success is not set in stone.

A year ago this week, Cequel III and Corvis announced plans to acquire Broadwing for $91 million. The deal also let Broadwing eliminate more than $2 billion in debt.

In November, Corvis, a maker of optical network gear and a majority owner of management company Cequel III, took 97% control of Broadwing, a move that might just save Corvis.

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Broadwing has no debt, one of the newest national networks and only a small portion of its revenue stems from traditional voice services. Yet as with most service providers, the company's long-term success is not set in stone.

A year ago this week, Cequel III and Corvis announced plans to acquire Broadwing for $91 million. The deal also let Broadwing eliminate more than $2 billion in debt.

In November, Corvis, a maker of optical network gear and a majority owner of management company Cequel III, took 97% control of Broadwing, a move that might just save Corvis.

It's unusual for an equipment vendor to own a service provider, but with nearly all of Corvis' revenue coming from Broadwing, it seems Corvis' position as a gear vendor is taking a back seat.

Corvis reported fourth-quarter revenue of $142.5 million earlier this month. The equipment company only brought in $2.1 million while Broadwing generated $140.4 million.

But as Broadwing's nationwide, all-optical network is based almost exclusively on Corvis technology, it's the equipment vendor's prime example of a large-scale deployment. It is also Broadwing's biggest asset, says J.P. Gownder, an analyst at The Yankee Group. The network is not saddled with the overhead that companies with multiple legacy networks are dealing with, he says.

AT&T, MCI and Sprint are consolidating their voice and data networks onto a single IP core, the network Broadwing built four years ago.

It's also the asset that CEO Mark Spagnolo is hanging his hat on. Broadwing offers enterprise customers a "unique experience because of our all-optical network. We have the last network built so we have advantages," he says.

"You hear a lot in the industry about . . . quarter-over-quarter revenue declines" for AT&T and MCI, Spagnolo says.

Spagnolo says Broadwing can offer unmatched price advantages.

"We renewed a three-year deal last month that was 10% lower than that customer's prices two years ago," he says. "That's pretty good."

Mazda North American Operations has used Broadwing's MultiConnect private-line and MultiConnect Redirect disaster-recovery services since early last year. Broadwing provides a dedicated T-3 line to its main office that's divided into 28 T-1s used to connect Mazda offices throughout the country with its U.S. headquarters in Irvine, Calif.

"The service has run smoothly with excellent quality for [the past] 13 months," says Michael Swancutt, a systems manager in the company's IT department. "There hasn't been any detectable change since Corvis bought the company."