Adelphia Strikes a Deal For Level 3 Connections

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Seeking a more cost-effective and quicker way to connect its existing cable and competitive local-exchange carrier markets in the Western United States, Adelphia Communications Corp. last week struck a deal to grab access to wavelengths supplied by Level 3 Communications Inc.

Adelphia said it will leverage Level 3's (3) Global Wavelength service to enhance its commercial and residential high-speed services in North America and to tap into intercity wavelength routes that connect Chicago; Denver; Los Angeles; Philadelphia; Phoenix; San Francisco; San Jose, Calif.; and Seattle.

The deal will likely provide the most benefit to Adelphia Business Solutions Inc., the company's competitive local-exchange carrier. Today, the CLEC's footprint mostly covers such Eastern states as Vermont, New Hampshire, New York, New Jersey, Massachusetts, Connecticut and the Carolinas. Overall, Adelphia Business Solutions serves customers in more than 50 markets.

Late last year, Adelphia Business Solutions trimmed its original expansion plans. It now plans to reach between 175 to 200 markets by the end of 2001.

The revamped plans calls for the CLEC to serve about 75 cities by the end of this year. As a result, the company cut about 8 percent of its staff in January.

For the second quarter, Adelphia Business Solutions reported record consolidated revenues of $116.9 million, and posted a net loss of $82.2 million, or 61 cents per share.

The company also ended the quarter with 10,142 local route miles, 8,214 long-haul route miles and 312 central offices connected to its network. Adelphia Business Solutions also reported an average monthly revenue per customer of $988 and 42,370 total subscribers.

"This [deal] gives us an opportunity to develop a presence in the West in a cost-effective way," an Adelphia spokeswoman said. Level 3's technology will also boost the speed and reliability of Adelphia's high-speed data products, she added.

The Level 3 agreement "allows us to build on the synergy between our cable and telecommunications networks without the substantial capital expenditure typically associated with a project of this magnitude," Adelphia Business Solutions CEO James Rigas said in a press release.

Though financial terms of the contract were not disclosed, operators that build out a national presence via Level 3's approach generally save about 85 percent of the capital costs associated with traditional do-it-yourself methods, said Level 3 vice president of global strategic markets Phil Jackson.

Traditional approaches call for an operator to expand its network with dark fiber, and then spend the large sums of money to test, activate and maintain the plant.

Level 3's approach also significantly narrows time-to-market, Jackson said. "The difference is that we can turn this up in days and weeks, rather than months and years," he said.

While some of the Adelphia-Level 3 segments are already lit up, Jackson anticipated that the final links will be completed by mid-September.

"[Adelphia] wants to expand their network in new markets as soon as possible," Jackson said.

In June, Level 3 struck a similar deal with Littleton, Colo.-based Time Warner Telecom. Jackson said Level 3 is working on deals with "a couple" of other companies associated with MSOs, but declined to name them.

"We're aggressively pursuing [the cable] marketplace and we're absolutely determined to create the type of infrastructure able companies can leverage moving forward," Jackson said.

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