The deal provides Frontier with local access to business customers in several large metropolitan markets and gives NorthPoint a phone carrier partner with a state-of-the-art fiber optic network--a key component the startup company has lacked.
Under the terms of the investment--made by Frontier's recently formed Frontier Internet Ventures---NorthPoint will become Frontier's primary provider of digital subscriber lines (DSL). The equity stake is the first by Frontier's new venture capital arm, which is expected to invest up to $30 million in various deals over the next year-and-a-half.
NorthPoint leases phone lines from the regional Bells companies to offer broadband data services to businesses via DSL, a technology that allows for simultaneous transmission of voice and data traffic over a single standard phone wire. The company currently offers DSL service in 15 markets and expects to roll out the high-speed service in 28 markets by the end of 1999.
Some analysts had been critical of NorthPoint, which is slated to go public in a $125 million initial stock offering next month, because it had not yet landed a major backbone network carrier partner.
Rhythms, which is set to go public tomorrow, has a $30 million investment from MCI WorldCom. Qwest Communications International has taken a $15 million stake in Covad. Last week, Covad announced it would use Qwest's network, and that of fellow investor AT&T, to offer a nationwide remote access service via DSL.
Frontier, which is being acquired by transatlantic carrier Global Crossing, has committed to resell a certain number of DSL lines under the deal. The alliance also gives the companies an opportunity to explore local voice and voice-over-Internet Protocol options, Frontier executives said.
"This is going to give us one more mechanism to reach out and touch the small to mid-sized business customer," said Jon Russo, vice president of Internet product management for Frontier GlobalCenter, the company's Web hosting business unit.
Last week, Verio, a business-focused network service provider, increased its investment in NorthPoint to $10 million from $5.6 million. The company is expected to price its IPO during the week of May 3.