Wholesale Channel - Dominion Raises $516 Million for Fiber Network

Posted: 06/2001

Wholesale Channel

Dominion Raises $516 Million for Fiber Network

Energy giant Dominion has created a joint venture and raised $516 million in financing to bolster fiber optic network development through private investment.

The funding will help Dominion Telecom, a former wholly owned subsidiary of Richmond, Va.-based Dominion, expand its fiber optic network. The cash derived from the investment also will reduce the dilution of earnings at Dominion, according to Edgar M. Roach Jr., director and CEO of Dominion Telecom.

Dominion Telecom (www.dominiontel.com) now becomes a subsidiary of the joint venture, Dominion Fiber Ventures LLC. Dominion and a third-party investment trust own the new venture. Dominion said it would retain managing interest in the venture, and personnel at Dominion Telecom will continue to run the day-to-day operations of the telecommunications business.

The investment supports the carrier’s strategy to build long-haul networks in the Northeast and mid-Atlantic and selected markets in the Southeast, said Tom Kazas, a spokesman for Dominion Telecom. The funding also will boost development of metropolitan rings in roughly 30 to 40 Tier 2 and 3 markets, where the carrier concentrates, he added.

Dominion Telecom–an interexchange carrier delivering private line, wavelengths, dark fiber, Internet access and collocation to wholesale customers–also holds a presence in

large cities such as Boston, Chicago and Washington, D.C. The carrier has recently announced fiber optic expansion in additional regions of the Northeast and Southeast.

In January, Dominion Telecom entered

a 20-year agreement with Level 3 Com-munications Inc. (www.level3.com) to use optical fibers in the Northeast and Canada. On Feb. 13, the carrier expanded its fiber network through western and southwestern Virginia and into Greensboro, N.C. and Johnson City, Tenn.

And in late February, Dominion Telecom announced that it was operating its fiber network in core markets throughout the Northeast. The network stretches from Cleveland to Buffalo, Rochester, Syracuse, Schenectady, Troy and Albany, New York; Worcester, Mass.; Boston and New York City. The network also serves Baltimore; the greater Washington D.C. area; and other locations throughout Virginia, the Carolinas and Georgia.

Some analysts believe the carrier’s strategy to operate in secondary markets–where fewer service providers are operating–is a prudent decision.

“The Yankee Group
(www.yankeegroup.com) believes that DT’s decision to build in non-Tier 1 markets gives them route diversity not offered by some of the larger carriers,” the consulting firm said in research notes.

Dominion Telecom is deploying 80-channel DWDM and SONET technology throughout the network. The expanded network will total more than 9,000 route miles.

The carrier also holds a 25 percent stake in CFN FiberNet (www.cfnnetwork.com), Kazas said. The CFN Network penetrates Arkansas, Alabama, Florida, Georgia, Kentucky, Louisiana, Mississippi, North Carolina, Ohio, Pennsylvania, South Carolina, Tennessee, Texas, Virginia and West Virginia.