NorthEast Optic Network, Inc. Wednesday announced two major agreements -- one with Consolidated Edison Communications, Inc. (CEC), a wholly owned subsidiary of Consolidated Edison, Inc., and the other with Exelon, a wholly owned subsidiary of PECO Energy (NYSE: PE). The agreements will position NEON as one of the nation's largest, broadband "super-regional carriers' carrier." The combination of the territories of NEON, CEC and Exelon consists of three Tier 1 cities -- Boston, New York and Philadelphia, and will interconnect two more Tier 1 cities -- Baltimore and Washington, DC. The entire integrated network will cover the Northeast and expand into the Mid- Atlantic Region, extending from Portland, Maine to Washington, DC.
NEON will provide network transport and carrier services among the service areas of NEON, CEC and Exelon. At the same time, NEON, CEC and Exelon will each provide connectivity from the NEON backbone system to their respective local loops, and each will manage their local distribution into their respective end-users' locations. The communications network will operate under the NEON brand.
CEC's coverage area mirrors Consolidated Edison's area, which includes New York City and Westchester, Orange and Rockland Counties, as well as portions of Putnam and Dutchess Counties. Exelon's coverage area includes PECO's service territory, which includes metropolitan Philadelphia and four surrounding suburban counties as well as portions of two New Jersey counties. NEON's, current coverage area includes five New England States and White Plains to New York City, passing POPs, tandem switches and central offices serving more than 18 million people. NEON's new expanded footprint will serve a total market opportunity and coverage area of 30 million people, nearly 1 million businesses, and includes 19 million access lines.
As the agreement with Consolidated Edison Communications is implemented, CEC will obtain 10.75% of NEON, and will nominate one member to the NEON Board of Directors.
As the agreement with Exelon is implemented, Exelon will obtain 9.25% of NEON, under a separate agreement, and will nominate one member to the NEON Board. NEON will develop, operate and market the combined communications infrastructure created by the two agreements.
The agreements are subject to regulatory approvals, which are expected in the Spring of 2000.
"These strategic agreements establish NEON in a pre-eminent position as a leading `carriers' carrier' in the Northeastern and Mid-Atlantic United States," said Vincent Bisceglia, Chairman and CEO of NEON. "By building upon the combined expertise of each company, we will optimize our market position to better meet our customers' needs. These alliances establish powerful relationships with the two largest utilities in the U.S. An optical broadband network that covers the largest bandwidth corridor in the country is now at hand."
CEC, under its agreement, will install a new NEON Point-of-Presence (POP) in Manhattan, convey to NEON 4,220 fiber miles in the New York metropolitan market, and will provide high-capacity Synchronous Optical Network (SONET) based transport services linking 26 key carrier sites. The key sites include inter-exchange carrier POPs, Internet Service Provider nodes, collocation "hotels," local serving offices (LSO's) and other high traffic building sites. CEC will also contribute to operating, sales and marketing expenses.
"The agreement between our company and NEON enhances our market presence and provides expanded scope within which to realize our shared vision," said Peter Rust, President and CEO of Consolidated Edison Communications, Inc. "Our alliance with NEON extends our reach beyond that critical `first mile' and complements our network deployment plans."
Exelon, under its agreement, will install a new NEON Point-of-Presence (POP) in Philadelphia and convey to NEON 4,750 miles of fiber optic cable from New York City to Washington, DC through Philadelphia and Baltimore. Exelon will also provide connectivity to 40 carrier sites in metropolitan Philadelphia, and connect one site each in Baltimore and Washington, DC.
Exelon President, Greg Cucchi stated, "Exelon's contributions will significantly expand NEON's reach and allow it to deliver metropolitan traffic along the New York City to Washington, DC corridor. This combination creates a compelling value proposition for competitive communications companies serving the nation's most densely populated communications corridor. Our alliance with NEON will also complement the other businesses in our communications portfolio."
NorthEast Optic Network, Inc. (www.neoninc.com) of Westborough, MA is a facilities-based "carriers' carrier," that provides high bandwidth fiber optic capacity for lease to carriers on its interstate, intrastate and local loops in five New England States and New York. Prior to this announcement, the NEON Network consisted of 1,000 route miles between Portland, ME and New York City. These agreements expand NEON's reach to approximately 1400 route miles.
NEON uses SONET ring architecture and Dense Wave Division Multiplexing (DWDM) technology to provide reliability, geographic diversity and high transport capacity.
Consolidated Edison Communications, Inc. (CEC) (www.electricfiber.com) of New York City is a wholly owned subsidiary of Consolidated Edison, Inc. CEC has announced plans to install and operate a state-of-the-art, fiber optic network in the New York City metropolitan area connecting approximately 1,000 buildings by year-end 2003. CEC will offer managed transport services, leased capacity services and plans to offer in-building optical distribution and riser cable management services to multiple classes of customers, including long distance carriers, competitive local phone exchange carriers and Internet, cable, wireless and video companies. Consolidated Edison recently announced its planned acquisition of Northeast Utilities, subject to regulatory approval. When completed, Consolidated Edison will own about 30% of NEON.
Exelon (www.exeloncorp.com) is a wholly owned subsidiary of Philadelphia- based PECO Energy Company, one of the largest electric and natural gas utilities in the nation. Exelon Capital Partners (www.exeloncapitalpartners.com), PECO Energy's venture fund, will provide funding for Exelon's contributions to NEON. Exelon manages PECO Energy's unregulated communications and infrastructure investments. These include Exelon Infrastructure Services, Inc., the AT&T Wireless PCS of Philadelphia Joint Venture, PECO-Hyperion Communications, Inc. (PHC), and Extant, Inc. PHC provides competitive local exchange carrier (CLEC) services to commercial customers over its own 27,000 miles of fiber optic lines in Southeastern Pennsylvania.
Extant Inc. is a global facilities-based, neutral third-party clearinghouse for CLEC's, Internet service providers, and other integrated communications providers in the wholesale marketplace that connects customers over its national ATM backbone.
NorthEast Optic Network, Inc. was advised on this transaction by Credit Suisse First Boston.
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