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Qwest invests $15 million in Covad

The new-age carrier invests $15 million in Covad Communications and plans to market high-speed Internet service to businesses and consumers through the company.

Qwest Communications International today invested $15 million in Covad Communications and will, for the first time, market high-speed Internet service through the company.

The investment gives Qwest Communications, one of a new breed of carriers building an IP-based fiber optic network, a high-speed Internet service offering for its customers.

Using Covad's digital subscriber line (DSL) service, Qwest will offer DSL in 22 major metropolitan markets by the end of the year. DSL is a technology that allows high-speed data transfers over standard copper telephone wires.

Qwest, which is building an 18,500-mile fiber network, intends to offer data services to corporate customers and long distance voice services to consumers and businesses.

"This is our first step toward local Internet service," said spokesman Mike Tarpey.

The partnership gives Qwest access to the coveted "last mile" networks into homes or businesses.

"They have an ISP now, and they have the backbone...but until this point in time they didn't have a portion of the network that connects to the customer, the local loop or last mile," said Claudia Bacco, senior DSL analyst for communications consulting firm TeleChoice. "It could allow them to provide the complete solution."

Covad, a competitive local exchange carrier (CLEC), provides DSL to Internet service providers (ISPs) and corporate customers. The company received similar investments earlier this month from AT&T and Nextlink Communications.

"In my mind this potentially positions Covad to offer more than just DSL," Bacco said.

To be survive long-term, CLECs such as Covad need to offer virtual private networks (VPNs), IP faxing, or video-conferencing in addition to DSL, she said.

The companies also announced a "multimillion-dollar, multi-year" deal under which Covad will buy network capacity from Qwest. Further details were not disclosed.