Wholesale: Deals Energize Carrier's Carriers

Posted: 10/2000

Evolution Networks Bets on Wholesale Demand
By Ken Branson

Eric Ensor thinks a lot about places like Albany, N.Y., and Valdosta, Ga., these days. Cities like those–not necessarily those cities–are where Ensor and his colleagues expect to lead Evolution Networks Inc.
(www.evnetworks.com) to profitability.

Evolution Networks will offer wholesale services in second-, third- and fourth-tier markets in the eastern United States. Ensor, the CEO, says he expects to begin service in the first quarter. He says he believes the demand for broadband services in places like Valdosta will be as heavy, proportionately, as it is in Atlanta, and that such markets are underserved.

“Typically, they have some voice, not a lot of data, not a lot of fiber, one or two players, high prices,” Ensor says.

Evolution Networks, like nearly all wholesale providers, expects to provide CLECs, ILECs and ISPs with value-added services and the usual wholesale services, like dark fiber and lit capacity. The company also will offer data center services in 25 data centers.

Evolution Networks will build 3,000 route miles of fiber and establish 125 PoPs by the end of 2001. Ensor says he and his colleagues have picked six target cities and the routes connecting them. He declined to name them, however.

Ensor estimates the total network build will cost about $500 million. Many new carriers use the verb “to build” loosely, but Ensor says Evolution Networks literally will tear up the countryside and lay in fiber along most of its routes, because there simply isn’t a choice on most of them.

Likewise, most cities Evolution Networks is targeting will not have much in the way of metropolitan fiber, which means the company may have to build it.

Finally, data centers are usually tenants in telecom hotels, and many of Evolution Networks’ target routes and cities don’t have telecom hotels. That means Ensor and his colleagues will have to lease buildings and contract to have the data centers built.

Evolution Networks has $19.5 million in venture capital from four backers: Centennial Ventures
(www.centennial.com), First Union Capital Partners
(www.firstunion.com), Questar InfoComm (www.questarinfo.com) and Weiss, Peck & Greer Venture Partners
(www.wpgvp.com).

“That’s just to get us started,” Ensor says. “That just opens the office, helps us do some hiring, gets us negotiating some lease agreements [for data centers].”

This month, Ensor expects to have secured $250 million in private equity–of which two-thirds was in place at press time.

The business of attracting private equity usually is accomplished with the aid of an investment banker, but Ensor says Evolution Networks is doing its own equity hunt, with the aid of its venture capitalists.

Evolution Networks is negotiating with utilities for rights of way, but it also intends to get whatever rights of way it can.

“We believe we can use a good amount of secondary highway right of way that goes into these smaller cities,” Ensor says. “The state governments have become much better at processing right-of-way applications.

“The downside is you have to apply on a route-by-route, system-by-system basis, typically. … We want to get a bulk right of way done with highway folks. We have fairly in-depth conversations with utilities … also with a couple of railroads. So we’ll end up choosing a bit from this pot and a bit from that pot to try to piece together the appropriate right of way depending on the route.

“We’ve got a guy who’s been doing a lot of right of way for 30 years, and you’re right, it requires a lot of detail,” Ensor says.