is out of the plumbing business.
The company, which was the first to operate a nationwide consumer online
network, has sold its network to SplitRock Services, said Carol Wallace, a
Prodigy spokeswoman. The company previously characterized the arrangement
with SplitRock as an "outsourcing" arrangement.
"This frees us up to concentrate on developing new technologies," Wallace
said. The company plans to focus on developing new tools based on Internet
standards and plans to begin offering them to its members and other Web
sites in the next couple of months. Prodigy, whose customers run
the range of consumers, Web site operators, and other businesses, is also
looking at developing more content and services for its online service,
Terms of the deal were not disclosed.
But Wallace said Prodigy was looking at the potential cost savings from
shedding the network and was willing to part with its network for a
"small" purchase price.
"This move is something we've been considering for a few months," Wallace
said. "We'll have several long-term benefits. We don't have to spend
millions of dollars to upgrade the network constantly and SplitRock has
given us a cap on what we pay for usage."
With the cap, Prodigy, in essence, is leasing back some of its former
pipeline and will not have to pay additional money to SplitRock if Prodigy
members' usage exceeds the level stipulated in the agreement.
Along with the pipeline, SplitRock will pick up the 50 former Prodigy
employees who were working on the network, Wallace said, adding that this
will also further reduce operating costs.
That is expected to bode well for Prodigy, which is hoping to launch an
initial public offering next year.
Wallace declined to comment on the company's sales, profitability and
SplitRock, meanwhile, is looking to build out its network and should find
the Prodigy network acquisition a profitable venture, Wallace said. Another
Prodigy spokesman had previously said that some companies are building
networks and can do it more "cheaply."
SplitRock officials were not available for immediate comment.
Although some industry watchers have
predicted that market leader America
Online will eventually get out of the access business, AOL
executives have said that, at least for the time being, they won't be
changing their access arrangements.
And although AOL was interested in purchasing CompuServe's network services, it was
found that the division was too closely intertwined with the online
operations. Extracting CompuServe's online service from its
network services division was too complex a task, a source familiar with the talks
told CNET's NEWS.COM several months ago.