Competitive access startups spotlight smaller markets

Jan. 1, 1995

Competitive access startups spotlight smaller markets

Fred A. Joyce Joyce Telecom Group

To gain a foothold in the local access arena, small startup competitive access providers are targeting second- and third-tier markets, which have been overlooked to date by the large national competitive access provider companies, such as MFS Communications and Teleport Communications Group. This strategy has allowed the startups to cultivate the small markets that have not yet seen competition for fiber-optic-based local access services.

A telephone company competitor

Formed in the late 1993 by several co-founders of MFS, American Communications Services Inc. in Oak Brook, IL, has focused its marketing efforts primarily in the 13 states within the territories of two regional Bell operating companies--Bell South and SBC Communications (formerly Southwestern Bell).

To that end, American Communications Services has deployed a fiber-based competitive access provider network in Louisville, KY, linking business and government end-customers with long-distance carriers. According to Steve Hudson, American Communications Services vice president of business development, the company is meeting its goal of having by the end of 1994 fiber networks either under development or in service in five markets.

American Communications Services has completed a $15.5 million private placement of the company`s convertible preferred stock. In a separate transaction, the company entered into a debt financing agreement with AT&T Capital Corp. to obtain approximately $4 million to assist in financing American Communications Service`s Louisville subsidiary. AT&T has also agreed to provide as much as $31 million in additional financing for other American Communications Services network deployments.

Based in the St. Louis suburb of Town and Country, MI, Brooks Fiber Properties has aggressively approached the competitive access provider business in various second- and third-tier markets from coast to coast. Via acquisition of existing competitive access provider firms in Springfield, MA, Sacramento, CA, and San Jose, CA, this well-funded company has also built competitive access fiber networks in Hartford, CT, and Providence, RI.

Other deployments of fiber-based competitive access provider networks include Oklahoma City, Little Rock, AK and Knoxville, TN.

The company plans to maintain its intensive expansion plans throughout 1995, with the addition of 10 new cities via a combination of acquisition and new fiber network deployments.

Brooks was formed in 1993 via equity and debit capitalization of $100 million, and it expects to have competitive access provider networks in at least 20 cities by the end of this year. The company estimates the combined annualized revenues of the newly acquired companies exceeded $11 million last year.

Japanese financing

Based in Vancouver, WA, start-up GST Telecom Inc. has received $100 million in debt financing from investors that include Greenstar Telecommunications Inc. and Tomen America Inc., a wholly owned subsidiary of the Japanese trading company Tomen Corp. of Tokyo. GST Telecom is currently a subsidiary of Greenstar Telecommunications Inc.

A GST subsidiary, Pacific Lightwave Inc. is constructing a 48-mile fiber ring network linking the California cities of San Bernardino, Riverside, Bloomington, Rialto, Colton and Fontana. Other competitive access provider networks are planned in Palm Springs and Ontario, CA, and Tucson, AZ.

GST has reportedly obtained an essential right-of-way agreement with Southern California Edison for the deployment of its Southern California network.

Fred A. Joyce is president of Joyce Telecom Group in Colorado Springs, CO.

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