Microsoft Corp took a $30m equity stake in Rhythms Netconnections Inc earlier this week, as part of a Digital Subscriber Line alliance. The two plan to offer services to Rhythms’ high-speed local access networking customers via a co-branded portal site due to debut this summer. Through the deal, Rhythms’ enterprise teleworker and small business customers will have access to Microsoft’s MSN Hotmail email services from the portal, which will also contain Microsoft Passport, MSN Search and Windows Media technologies. The two are also planning multimedia communications capabilities for business and teleworker portals.
Englewood, Colorado-based Rhythms, a data-focused competitive local exchange carrier, provides DSL services in California, Chicago, Boston and New York and gets its telecommunications services from Accelerated Connections Inc, a wholly-owned subsidiary of Rhythms. It offers network access at speeds ranging from 128kbps to 7.1Mbps, and resells DSL services through internet service providers. Rhythms is preparing for its initial public offering over the next few weeks.
Microsoft’s interest in DSL conflicts somewhat with its interests in competing cable technologies. Microsoft joined together with Compaq Computer Corp last year to buy a 20% stake in Time Warner Inc’s and US West Media Group Inc’s internet access over cable venture Roadrunner. It also holds major stakes in cable companies Comcast Corp and NTL Inc, as well as communications outfits UUNet Technologies Inc and @Home Networks Inc. Microsoft justifies its move by saying it’s interested in any broadband technology that its internet technology can take advantage of. Last year, along with Compaq and Intel Corp, Microsoft took part in putting their weight behind a new high speed internet access effort using standard telephone lines, backed by GTE Corp and the Baby Bells.
Competitive CLECs offering DSL services include King of Prussia, Pennsylvania-based Covad Communications Inc, currently operating in California, New York, Boston, Washington DC, Philadelphia and Seattle, and with plans in place to plans to deploy its networks in 51 metropolitan statistical areas in the US. Covad filed for its initial public offering on the Nasdaq Exchange at the beginning of this year. It recently won a $25m investment from AT&T Co’s AT&T Ventures arm and $20m from Craig McCaw’s Nextlink Communications Inc. San Francisco, California-based NorthPoint Communications Inc, currently providing services in 12 US metropolitan areas, says it plans to cover 28 by the end of this year. Also in the process of going public, NorthPoint has received investments from Intel and @Work, the business-focused division of @Home.
