Called “multiprotocol label switching over DSL,” the service New Edge is unveiling today was developed at a cost of millions of dollars. It would not have been possible without the Vancouver firm’s network and EarthLink’s cash, said Greg Griffiths, New Edge vice president of marketing.

MPLS over DSL builds on a widely available existing technology that is priced too high for many smaller businesses. Multiprotocol label switching allows companies with complex data networks to give priority to some programs over others, so that when dozens or hundreds of people use the same line the important tasks go first.

A voice over Internet protocol phone call, for example, might be labeled higher priority than Web surfing, so that a VOIP sales call does not get choppy when someone else in the office decides to watch a YouTube video.

“It’s the traffic cop for the multi-site network,” Griffiths said.

In the past, this has only been available for businesses with high-speed T1 line Internet access, which often costs $500 or more each month.

New Edge charges $100 per month to add MPLS to its DSL-based network, which averages about $140 per month, resulting in a total cost of less than half what a T1 line costs.

Bridging a gap
As a result, New Edge is bridging a major gap that could appeal to thousands of businesses, said Bojan Simic, a network management analyst with the Boston-based research and consulting firm the Aberdeen Group.

“In surveys we have found that the top two obstacles to achieving optimal performance at a branch office are limited bandwidth, for 31 percent of businesses, and inability to justify the business cost, for 29 percent,” Simic said. “This effectively addresses those top two obstacles.”

New Edge’s product will have a broad appeal that goes beyond its traditional customer base of small to medium retail sites, Simic said.

“A lot of large organizations are still on DSL,” he said. “This addresses their needs. Senior level executives who care more about costs and revenues than anything else can see the value in this.”

Key to growth
Now EarthLink hopes that business IT departments share Simic’s enthusiasm, so that the Georgia-based company’s investment in New Edge will pay off.

EarthLink’s net income has fallen fast in recent years. Its traditional customers — residential Internet users — have jumped ship for competitors, and a foray into municipal wireless networks was abandoned last year.

In 2005, the company’s profit was $142.8 million. In 2006, the year EarthLink bought New Edge for $144.8 million, its profit was $5 million. In 2007, EarthLink lost $135 million. The company cut 900 jobs last year and has been trimming costs elsewhere to improve its outlook.

Staffing shift
New Edge also has trimmed staff, and is now down to 315 across the division with 250 in Vancouver, from nearly 400 two years ago.

Although New Edge’s revenues are high, the cost of running the subsidiary are also high. EarthLink’s business services segment, which since 2006 has included New Edge, saw revenues climb 170 percent from 2005 to 2007, at the same time as operating income after expenses fell 71 percent to $13.8 million.

In EarthLink’s 2007 annual report, executives targeted New Edge as a key area for growth. “We believe this is a growth market and we will continue to differentiate ourselves by providing customers with choices for our business services.”

COURTNEY SHERWOOD covers high-tech businesses. Reach her at 360-735-4553 or courtney.sherwood@columbian.com.