Thursday, June 14, 2007

Is Networx Being Undersold?

Posted on Thu, Jun 14, 2007 at 4:00 AM

Who wouldn't buy Memphis Networx? For the low, low price of $11-milion, you get a state-of-the-art, disaster-proofed data center. But that's not all. If you're the lucky buyer, MLGW and Memphis Broadband, LLC will throw in -- at no additional cost -- untold miles of hot, virtually unused optical fiber! As sweet deals go, the one struck between MLGW and Boulder, Colorado-based Communications Infrastructure Investments smells like Dutch chocolate.

Communications Infrastructure Investments isn’t just the name of an organization: It's a no-nonsense description of what the new, telecom-savvy holding company does. CII is a $200-Million venture created by a handful of telecom executives and backed by investment firms like Columbia Capital, M/C Venture Partners, Oak Investment Partners, Battery Ventures, and Centennial Ventures. Before coming to Memphis, the fledgling group entered into an agreement with Pennsylvania Power & Light to buy PPL-Telecom, a Networx-like subsidiary of the Allentown, Pennsylvania-based utility. According to The Daily Camera, of Boulder, the Allentown deal is valued at $60-million. Yes, $60-million.

So what's Allentown, PA -- pop 106,632 -- got over the Bluff City? Maybe a lot. But does anybody in Memphis fully grasp what we're about to lose in this deal in addition to the initial $29-million investment?

Memphis Networx's selling price barely covers the company's existing debt. Out of $11.5-million, Networx's private investors split a paltry $2-million. That leaves $994,000 for MLGW. That’s beans -- and without even the pretense of being magical.

It's too easy to focus on Networx inability to turn a profit, let alone recover any investments. How much would the city of Memphis have saved already by utilizing Networx's data center to consolidate and streamline its vast IT networks? Yes, there are other ways to make the venture pay for itself. Always have been.

It's tempting to describe MLGW's foray into the telecom biz as visionary. Well, except for that whole dot-com bubble thing and the great telecom meltdown of 2001. In fact, the timing couldn't have been worse. Either way, it would appear that MLGW, and Memphis' civic leadership lacks either the vision or the desire to understand and use what they’ve got. On the other hand, Communications Infrastructure Investments knows exactly what they're buying from Memphis' taxpayers. For $11-million.

Today there are three things you can count on: death, taxes, and a steady expansion of broadband services. Data security issues, magnified by the incredible information loss resulting from Hurricane Katrina have made "Thin Client" technologies and off-site data management look increasingly attractive. That requires high-speed fiber, and that's what Networx is all about.

So who wants data security and offices that are free of cumbersome PC networks and telephone systems? These services can all be managed from a data center for one low, low monthly bill. How low will that bill be? Well that depends, at least in part, on who owns the infrastructure.

by Chris Davis


Subscribe to this thread:

Add a comment

© 1996-2017

Contemporary Media
460 Tennessee Street, 2nd Floor | Memphis, TN 38103
Visit our other sites: Memphis Magazine | Memphis Parent | Inside Memphis Business
Powered by Foundation