ISP Profile: Broadwing

How did this local bell ILEC morph into a fiber-optic-and-wireless company? Is it an ILEC or a CLEC, a telco or a data services company? Is Broadwing really all that different from plain old Cincinnati Bell? Read on.

by Jim Wagner [June 14, 2000]

For the first six months of this year, newly fledged Broadwing, Inc. (NYSE: BRW) has been busy establishing its identity in the broadband backbone market and, at the same time, differentiating itself from industry big birds Qwest, Global Crossing, and Level 3 Communications. The company’s market offerings, which take advantage of nearly 17,000 miles in fiber optics, and its 45-day provisioning guarantee — the best in the business — give it momentum on both fronts.

How did the former Bell become a major fiber player? Only last year, it was two companies: Cincinnati Bell, an Ohio Bell, and IXC Communications, a fiber network company in Austin, Texas.

Going on a Company Diet
The Bell company has spent the past three years on a company diet, getting out of non-core businesses as it focused on data communications, morphing from telco to a telco/CLEC hybrid.

In 1998, it spun off billing services into a billing services provider, Convergys. Convergys was a massive operation — at the time it was spun off, Convergys was half of the company, in market capitalization.

In 2000, the company sold Cincinnati Bell Supply to its managers.

What remained was the Bell.

Buy to Build
Then Cincinnati Bell got FCC approval to buy out IXC Communications in late October, 1999. The company issued 80 million shares of common stock to foot the bill for the $3 billion acquisition, which included $1 billion in debt. In January of 2000, ValueLine commented on the purchase by saying, "IXC brings higher growth potential as well as increased risk" (p. 743).

The combined company chose to call itself Broadwing, after a bird of prey that has appeared in a high profile ad campaign and, as a mascot, at shareholder meetings.

How IXC became prey
IXC Communications had announced, in December, 1998, plans to lay 13,000 miles of fiber for its Next Generation Internet, a government-sponsored initiative to free up expected bottlenecks in bandwidth. NGI was similar to Internet 2, a consortium of more than 100 universities that included IXC competitor Qwest.

Lower-than-expected revenue growth put them in the hot seat, prompting IXC to broker a deal with PSINet. In exchange for 10.3 millions shares of PSINet's common stock and a seat on the board of directors, IXC opened up 10,000 miles of OC-48 capacity network to PSINet.

In retrospect, this deal looks very nice. PSINet (NASDAQ: PSIX), a recognized leader in acquisitions and providing connectivity to businesses, today sits comfortably at $32 a share.

Broadwing retained PSINet stock, and maintains a strong connection with PSINet.

The ILEC/CLEC Hybrid
Broadwing has been busy making deals with other technology companies. For example, it will be the first telecommunications company to deploy Lucent's Distinctive Remote Module. This deployment lets Broadwing act as a CLEC, offering voice and data services in Kentucky, Indiana and Ohio.

The company also has a marketing and equipment arrangement with Cisco, with Cisco providing CPE (Customer Premises Equipment) and Broadwing providing the space and webhosting services at Broadwing's eight data centers.

Go to Page 2: Broadwing's Parts