A Smaller Colocation Provider Survives

As debt-laden telecommunications giants continue to sink, surely companies that pursued frugal, debt-free fiscal policies will find the market to their liking? Meet MeridianTelesis, a small, successful colocation company that just bagged a big contract from Broadwing.

by ISP-Planet Staff [August 6, 2002]

Founded in 1998, MeridianTelesis has been a carrier neutral colocation provider since it opened its first facility in Philadelphia, Pa. in October 2000. The word "meridian" means "high point" and "telesis" means, as far as we can tell, "achievement through careful planning" so the company's name describes heights reached through careful planning.

Recently, the company announced the completion of a blockbuster agreement with Broadwing (NYSE: BRW), the broadband incarnation of regional Bell operating company (RBOC) Cincinnati Bell Telephone, to operate three of Broadwing's data centers. The data centers are in New York, Dallas and Santa Clara, Calif.

During the years of the telco buildout, MeridianTelesis remained in its colocation facility in Philadelphia, building a work ethic enshrined in the company's artistic Code of Competence.

Explains Robert Gionesi, executive vice president of sales and marketing, "we focus on colocation and because we run a simple operation, we don't need to hire staff to manage added services. We're not the cheapest, but we're competitive."

Gionesi adds, "we have a commitment to providing 24/7 staffed data centers. That's not just access, it mean having knowledgeable staff on the premises at all times. Since we don't provide any additional services ourselves, our customers are not held hostage to vertical sales."

MeridianTelesis provides the basic colocation service, and customers can choose any ASP or other service providers they wish. The company does have referral agreements, of course, but every customer is free to choose. In each data center, the company, in part through its alliance with Internap and also through relationships with metro Ethernet providers Cogent and Yipes, tries to provide as many backbone options as possible.

Asked how MeridianTelesis closed the agreement with Broadwing, Dave Taffet, MeridianTelesis founder and president, said, "they recognized the necessity of focusing on their core competence, which is Cincinnati Bell telcore services. Their network depends upon a presence in the three facilities. They needed a partner that would allow them to grow, that would respect them, but would also be able to manage facilities for them."

It's a great opportunity for a small, fiscally responsible telecommunications provider. In the current market, data centers are selling for less than the value of the equipment inside them. It's an opportunity to buy others' builds, but it means that few new facilities will be built in the near future.

Taffet said that the financial obstacles to building a data center are insurmountable at the moment. "In the current economic environment, carriers are not willing to come in, power utilities are not allocating circuits, and vendors will not extend a line of credit for equipment without firm customer orders for service."

However, in some markets there are data centers that cannot be bought because of mechanics' liens. Some companies cut back very quickly, halted work in progress, and stopped payment to contractors on partially completed installations. The contractor's only legal recourse in this situation is to place a lien on the partially installed equipment for the dollar amount of the rest of the contract. If the original company filed for bankruptcy, the lien can still be attached to the data center even if the company that built the data center no longer exists. Any company that wishes to use the data center or the particular equipment with a lien must first pay off the lien before they can be legally able to use the equipment.

Taffet aims to grow slowly and carefully. "We'll grow through the organic growth of our enterprise clients, our modest sales force that relies upon existing relationships plus some cold calling, our friends at Text 100 Public Relations, providers in related industries like Broadwing and Internap, and our channel partners."

Taffet says the company has been consistently EBITDA positive, but has not yet achieved profitability. It will still take a lot of careful planning, but it looks like someone will reach the heights.

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