PSINet, one of the oldest commercial internet service providers, yesterday signed a strategic alliance with Austin, Texas-based IXC Communications Inc that should make its network future-proof for a fairly long time. For a 20% stake in PSINet worth up to $240m, IXC has given the ISP a 20-year lease on 10,000 miles of fiber optic cable running at OC-48 speed, equivalent to 2.4bn bits per second. Most ISPs use T3 speed for their backbones, which is 45.0m bits per second. Thew two companies have also signed an extensive marketing agreement, whereby IXC can offer all of PSINet’s service as a value-added reseller (VAR). IXC and its resellers will act as VARs to its long distance and other telephone customers throughout the country. When the transaction closes, which is expected to be in about 120 days, IXC will receive about 20% of existing PSINet stock which if, a year from the transaction are not worth $240m, PSINet will make up the difference in cash and/or additional stock. PSINet doesn’t appear to have issued any new shares for this transaction, but the company couldn’t confirm this despite repeated calls yesterday. Under the terms of the deal PSINet is not permitted to sell private line or long distance services over this particular cable. PSINet expects to have all the bandwidth for its use within two years of the deal closing, which should be by mid- November. Meanwhile, it transpires that the deal that fell through between PSINet and New York investment firm Chatterjee Fund Management Co to build a European network was to be worth $100m, according to the Washington Post. Chatterjee is associated with Hungarian billionaire investor George Soros. The Post says PSINet is now looking to other investors to supplement its own money to continue building the network.
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