Public/private collaboration brings more fiber to the city of Memphis

July 1, 2002


Memphis, TN, doesn't appear on the route maps of many fiber-optic networks. However, Memphis Networx, a collaboration between Memphis-area investors and local utility Memphis Light, Gas & Water (MLGW), hopes to change that with the inauguration of a metro fiber-optic network on which it will provide wholesale transmission services. The firm is off to a good start with the signing of Kentucky Data Link as its first customer.
While it is hoped that Memphis Networx will attract businesses to the city of Memphis, CEO Mark Ivie says "success will be measured heavily on how profitable we are."

Founded in late 1999, Memphis Networx began installing its network last September, after surviving two years of regulatory and certification procedures. The delay, at least in part, was due to objections raised by such local service providers as Time Warner, which offers services through both Time Warner Cable and Time Warner Telecom in the city, concerning possible unfair advantages the new entity would have through MLGW's status as a public utility.

However, Mark Ivie, CEO of Memphis Networx, says the hatchet has been buried. "We've worked very well with BellSouth to this point and see no reason that won't continue," he says, pointing out that Memphis Networx is currently collocated in nine BellSouth central offices. "The same thing with Time Warner Telecom. Again, because we are neutral, we're really not a threat to these folks from an end-user perspective, although Time Warner Telecom does have a pretty good wholesale business themselves. But it's more of a 'let see how we can work together' relationship at this point, as opposed to outright head-to-head competition."

Current investors in the project include MLGW; the Memphis Angels, an investment group that comprises such local Memphis luminaries as Fred Smith, CEO of FedEx Corp., and Pitt Hyde, founder and former chairman of AutoZone Inc.; local real estate companies Belz Enterprises and the Boyle Investment Co.; and Memphis Telecom LLC, a group of minority investors.

"They believe it's a good investment," says Ivie of the local backers. "But they also want to show their support for this entity and how it affects the local economy. Obviously, by having this fiber infrastructure in place, it puts Memphis at par with tier one cities so that they can attract businesses to the area."

Yet, while Ivie isn't shy about touting the public benefits his company hopes to provide, it's clear that altruism isn't the rationale behind the company's incorporation. "Without making a profit, the company doesn't exist," he asserts. "So certainly, the success will be measured heavily on how profitable we are. We were created as a private entity-we just happen to have some public money through the municipal utility invested in us. But their goals are the same as the private side, and that is to build a profitable business."

That business will revolve around the provision of lit fiber services-including wave length-based services-collocation, and business access. Through an agreement with the two real estate investors and a third company, Highwoods Properties, Memphis Networx can offer easy access to nearly 50% of the Class A commercial real estate in town. "We've shortened the time frame it would take to gain access to a building," Ivie explains. "But being very frugal with capital, we are building into buildings as our customers require us to."

The company plans to offer dark fiber only in limited circumstances. "Obviously, we don't want to sell fiber to a company that's going to turn around and provide the same type of services that we'll provide," Ivie explains. Similarly, while the company will help enterprises set up private networks, it doesn't plan to offer telecommunications services directly to end users. "They can come to Memphis Networx and ask for an end-to-end solution, and while we may not brand it, we can put that end-to-end solution together through the arrangements that we have here in town or other entities that we're working with on a national basis," Ivie says.

The current network, completed in May, encompasses 95 route-mi of SMF-28 fiber from CommScope, lit with OPTera Metro equipment from Nortel Networks. Most of the network uses aerial cable strung along MLGW's poles; however, some underground cables are used in the downtown area.

In choosing its networking vendor, Ivies reports that Memphis Networx initially sent requests for proposal to eight companies. That list was whittled to three, with the survivors asked to provide network designs using their respective equipment. The final decision came down to who could provide most of what the management of Memphis Networx wanted to accomplish within the constraints of their budget, Ivie says.

Ivie doesn't see the current downturn in the communications market as a sign of doom for his fledgling carrier's carrier. The Memphis area is not tied to high tech as closely as cities on the coasts of the United States, and therefore its economy has been fairly stable over the recent cycles of boom and bust. Ivies says more than 20 customers are currently looking at using the Memphis Networx infrastructure to service Memphis businesses, primarily with data-centric offerings.

Memphis Networx' current charter doesn't extend beyond MLGW's service area, which includes Memphis and surrounding Shelby County. (Ivie foresees the network stretching to 110 mi and 13 BellSouth central offices.) However, Ivie plans to spread the Memphis Networx idea to other municipalities through joint ventures if his company proves to be a success.

"We have been able to get people who had at one point not looked at Memphis to take a second look and identify that because it has been passed over so much; there really is some opportunity here for them to come in and provide services," Ivie concludes. "So we feel very good about the opportunity right now."