By Colin C. Haley

October 5, 2005

DSL provider Covad will acquire fixed-wireless broadband firm NextWeb for $23 million in cash and stock in order to lure more small and medium business (SMB) customers.

The deal should close by year’s end and will give Covad nearly 3,000 SMB customers in Los Angeles, San Francisco and Las Vegas, plus an advanced network built on the emerging WiMAX standard.

“Wireless broadband is a perfect complement, not a replacement, to our nationwide DSL network and certainly helps enhance shareholder value,” Charles Hoffman, Covad’s president and CEO, said in a statement.

NextWeb, which is coming off an acquisition of its own, decided to sell to extend its reach. Following the acquisition, CEO Graham Barnes will stay on with Covad to run the wireless business as a senior vice president and general manager.

Even before its NextWeb play, the San Jose, Calif., company was exploring fixed-wireless broadband as a way to be more competitive with its telecom and cable rivals.

Covad said it is conducting pre-WiMAX technical trials focused on SMBs in the San Francisco area. The company is achieving links up to five miles from the wireless base station at symmetrical speeds as high as 5Mbps.

Fixed-wireless broadband providers offer an alternative to business DSL or T-1 services from regional telecoms, stressing cost, customer service and reliability.

Another company in the space includes TowerStream, which has been expanding into new markets over the last year and recently partnered with Voice over IP giant Vonage.

Pavel Radda, a Covad spokesman, told internetnews.com that the company’s near-term focus is to maximize revenue and profit within its footprint. He added, however, that the company will not rule out expanding its use of the technology.

“We will continue to look at opportunities to grow in the wireless broadband space either through [new] deployments or acquisitions if it fits into company strategy and our commitment to be [earnings] positive by mid-year 2006,” Radda said.

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