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Reports that High Speed Access Corp. has been courted by network operators for buyout are more than greatly exaggerated, according to president and CEO Dan O'Brien. In fact, it's quite the opposite-HSA may take advantage of the bankruptcy and buyout frenzy in the competitive digital subscriber line market to gain a foothold in the technology.
The calls to the Denver-based high-speed network operator have indeed picked up in the past six months, as casualties mount among competitive DSL players.
"We have had 15 companies come to us and ask us to buy them," O'Brien says. "We are not shopping the company by any means. As a public company, if somebody makes a great offer you have to pay attention to it. We're not in that mode at all."
Though the names are not available, they are typically in their second or third year of operation, he adds. After gathering funding to buy and install their DSL equipment in incumbent carriers central offices (COs), they tried to build a wholesale business-only to find depending on smaller ISPs for revenue was not such a great idea.
O'Brien says HSA's sudden popularity among these companies may stem from its connection to Paul Allen.
"There's a whole bunch of them that are either in bankruptcy or close to it," he says. "People who are running companies in broadband have a tendency to think that since HSA's majority owner is Vulcan Ventures that it's a money tree. So we get calls all of the time."
At the same time, cable-modem oriented HSA has been looking to get into the DSL business. With these DSL failures, there comes an opportunity to buy up now-dormant equipment at fire sale prices.
"There's a tremendous amount of assets," he says. "There's over 50 percent of the DSLAM (DSL Access Multiplexers) from the DSL industry in COs that are passing no traffic. Now all these assets are on the market in bankruptcy court or near bankruptcy court at somewhere in the pennies to the 40 cents on the dollar range."
If HSA does decide to buy from this DSL equipment or subscriber base, it will use its stock, not cash, O'Brien says. Though the company's own stock has also undergone a drop in the past six months, he thinks sellers will like HSA because its stock has the potential to rise.
But "bankruptcy is not a quick garage sale," he cautions. "So you go in, you talk to folks, you look at footprint, you look at what assets are still there and then you determine whether there's a price and a time frame that makes sense to go forward."
So far, HSA has not purchased any such equipment through a failing competitive DSL provider. It did put a bid in for equipment belonging to Jato Corp. but the status of that process is uncertain, O'Brien says.
For now, the company will continue to look at the possibilities created by all-too frequent DSL failures.
"I think it's absolutely on a case-by-case basis," O'Brien says. "As these assets come up, we will look at them and determine if anything makes sense, and if it does at the right price and you can get a deal done, then great."
Rumors are many major telecom carriers and Baby Bells are interested in the same assets to extend their footprint outside of their market. But O'Brien cautions that "we hear all of those things, and you don't know if those are real or if those are the sellers just trying to get a competitive bidding process in place."
Buying the equipment and taking over existing customer base may seem an advantage for carriers, but O'Brien says that isn't always the case. If the COs are controlling relatively few customers, they are largely unprofitable, so a carrier risks inheriting the same network red ink.
"So you'd rather not have any customers in that case, because you'd rather start out with a smaller number of COs, get them to break even and then move forward," O'Brien says. "Intuitively you would say, 'I'd rather have customers than not,' but if the cost of maintaining those customers is greater than the benefit than you can derive because you are not at break-even in any of those COs, then you are better off without them."
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