Prodigy sells network

The first online service to operate a nationwide consumer online network sells its network to SplitRock Services.

Dawn Kawamoto Former Staff writer, CNET News
Dawn Kawamoto covered enterprise security and financial news relating to technology for CNET News.
Dawn Kawamoto
2 min read
Prodigy 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, Wallace said.

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 membership growth.

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.