CEO: MegaPath/Covad to add managed services to wholesale pitch

Yesterday’s merger of Covad and MegaPath will result in a company that aims to be a bigger force than ever in the wholesale carrier market, offering not only network services but a new slate of managed services that carrier’s can resell to their customers.

The two companies are still working out details of their combination – not to mention waiting on necessary regulatory approval – but the new company expects to continue to serve the wholesale carrier market with a business unit operating under the Covad name, D. Craig Young, CEO of MegaPath and the executive chairman of the new company, told Connected Planet in an interview. (The new company will also have separate unit selling managed services directly to businesses. The ultimate name of the combined companies is still under consideration; it may be MegaPath or a completely new name, Young said).

“From the Covad standpoint, [the merger] will allow their existing customers, their wholesale partners, to have expanded offerings they can now sell to their customers,” Young said. “That will allow us to have a stickier and longer-term relationship with those [carrier customers].”

With MegaPath in the business of selling managed services to enterprise users directly, there will inevitably be some channel conflicts. But Young downplayed them, noting that MegaPath today sells SSL services through large service provider customers including AT&T, Verizon and BT, while also selling SSL services directly to enterprises. That approach will serve as a model for offering other managed services for resale via carrier partners, he said.

“As long as you treat [carrier channel partners] equally in terms of service and product offerings and price you can coexist very well. It’s not hard to manage,” said Young, counting VoIP, managed security and other services among the offerings MegaPath/Covad plans to offer to carrier wholesale customers. “I doubt that the larger carriers will come to us to buy hosted VoIP services, but smaller regional players and CLECs that want to offer it outside of their reach, Covad is a great fit.”

In the bigger picture, Young said both sides of the new combined company will benefit from the capabilities of the other, creating what he claimed will ultimately be the “largest pure-play, facilities-based managed services company in the U.S.,” possibly taking the combined company public in the future.

Building that company won’t stop with this week’s merger. The new company will aggressively look to take on more acquisitions. “There will be more consolidation in this market and we’ll be one of the main consolidators,” Young said, adding that its focus will be on pure-play IP managed services opportunities exclusively.

“I don’t know of any other company able to offer the range of managed services we can offer on a nationwide basis,” he said.