Lights out at Urban Media

Building local exchange carrier Urban Media has quietly gone out of business.

Though management was unavailable for confirmation, the company's Web site is no longer accessible and its phones go unanswered.

Tom August, president and CEO of commercial realtor Prentiss Properties, which worked with and invested in Urban Media, confirmed the BLEC's demise during a quarterly conference call earlier this month.

“As of today [Feb. 8], Urban Media is pretty much out of business,” he said. “They've run out of money and laid off virtually all of their employees.”

Judging by August's statements, the company was hurt by its rush to be the first provider to serve its building customers, a common practice among BLECs.

“Urban Media has wired between 10 million and 11 million square feet of our space,” August said. “However, they've only recently begun an active marketing program to get our tenants to sign up, so their penetration with our tenants was less than a million square feet.”

Instead of taking part in a land-grab, Urban Media should have focused on sales as it entered a building, according to Jeff Moore, senior analyst at Current Analysis. “Ultimately, it's all about sales and marketing, it's all about customer acquisition,” he said. “Network strategy should follow customer-acquisition strategy, not the other way around.”

In addition, Urban Media's strategy of offering free high-speed data services to customers who pay for value-added services may not have been a viable business plan, said Dana Tardelli, research analyst with The Aberdeen Group.

“When you're targeting those small to medium-sized enterprises… their first need is bandwidth,” Tardelli said. “Eventually, far down the road, bandwidth will enable the services that will add true value. But right now I feel [the bandwidth market] is just at an immature stage.”

Especially surprising about the downfall of Urban Media is the company's apparent lack of cash. In mid-December, the carrier announced it raised $57 million in new venture capital funding. But Moore speculates Urban Media never received the money, believing the company could not have had such a high burn rate to go through that much cash in just a few weeks.

In any case, Urban Media's goal is now to sell itself or its assets, according to August.

Potential buyers are not limited to other BLECs, said Current Analysis' Tardelli. “There's more than enough service providers that are eyeballing the small to medium-sized enterprise market as a play,” he said. “I wouldn't say it's just the [multi-dwelling unit] players.”

As of early February, Urban Media had not found a buyer. Many potential purchasers also are in debt and are unwilling to add any more to their balance sheets, August said.