Cavalier Telephone to run Dominion Telecom network

The long-haul wholesale fiber network of Dominion Telecom will be run by one of its customers, competitive local exchange carrier (CLEC) Cavalier Telephone, after it is sold to a holding company formed by Cavalier investors.

Energy firm Dominion Resources has sold all the assets of its telecom subsidiary, Dominion Telecom, to a holding company called Elantic Networks, formed by Cavalier Telephone investors MC Venture Partners, Bank of America Capital Investors and BB&T Capital Partners. (The name Elantic was taken from Elantic Communications, the proposed name of the super-regional CLEC that would have resulted from a merger between Cavalier Telephone, Florida Digital Networks and Conversent Communications that was announced in June 2000 but never came to pass.)

Details of the asset sale were not disclosed.

Cavalier Telephone--whose CEO, Brad Evans, is also the president of Elantic Networks--has an agreement with Elantic to manage and operate the 8,000-route-mile Dominion Telecom network, which runs along the East Coast and across the upper Midwest.

A Cavalier spokesman said it "has yet to be determined" how Cavalier’s use of the network for its own transport needs will be governed. Cavalier Telephone will not be able to transport its traffic across Dominion’s network for free, he said; rather, Cavalier will be treated like any other paying customer of Dominion’s wholesale services "at this time." However, the spokesman also acknowledged the synergies between the two networks.

"Dominion had an incredibly extensive city-to-city network," he said. "Cavalier has that last-mile piece that Dominion did not have. If you look at the synergies, what can be offered now is to get to those large enterprise accounts that need last-mile connectivity between, say, Chicago and D.C. Now you’ve got the ability to deliver facilities to the enterprise, whereas before what you had was just long-haul capacity. That’s really the big win."

Cavalier has its own 1500- to 2000-route-mile fiber network between Norfolk, Va. and southern New Jersey. Dominion’s network runs from Chicago, through Cincinnati and Cleveland to New York as well as second-tier towns such as Indianapolis, Pittsburgh and Dayton. Most of the Dominion network south of Virginia is dark fiber, and most of the network north of Virginia is lit, the Cavalier spokesman said.

Dominion Telecom was created from the assets of a Virginia Power subsidiary in August 2000, a time when many energy firms were attempting to enter the booming telecom market. Many of those energy firms have since backed out of the telecom industry, as Dominion did in September 2003 when it announced its intention to sell its telecom subsidiary, citing pricing pressure caused by a fiber capacity glut. Dominion Telecom now has five or six sales people on staff, the Cavalier spokesman said.

Elantic expects the transaction to close in the second quarter pending FCC approval.