Ethernet services

Verizon Backs CENX With Cash

CENX Inc. , the Carrier Ethernet exchange founded by industry veteran Nan Chen, has raised US$9.5 million in a fresh round of funding led by Verizon Investments LLC, a subsidiary of Verizon Communications Inc. (NYSE: VZ), and Mesirow Financial Private Equity, Inc.

The new round, in which existing investors DCM - Doll Capital Management , Highland Capital Partners and Wasatch (Cross Creek Capital) also participated, was needed to maintain the momentum CENX now has, according to Chen, who is the company's president.

When asked if the fresh funds were essential to the company's survival, Chen said he would "have to agree with that. We need the money to keep growing. We are dealing with a lot of the big [service providers], the Tier 1s, and we need the money to keep up with the opportunities they are putting in front of us. It would be possible to survive without it but we needed the money to grow" as operators seek ways to connect to mobile cell sites and enterprises outside their existing markets. (See CENX Boasts Backhaul Offer.)

Other than that CENX isn't providing much detail. It won't say who its revenue-generating customers are beyond Verizon, although Chen says the total number is fewer than 10. It also won't say how much money the company has raised so far, how many staff it has (although Chen suggests it's between 30 and 50) or whether its annual revenues have reached the double-digit millions mark. (See Verizon Boosts Biz With CENX Connection.)

Chen did say that CENX expects this to be the final round of funding it will need to get it to a cashflow-positive position. The new money will go towards adding further R&D, engineering and customer support staff.

CENX was unveiled in November 2009, when, after years of waiting, the Ethernet services market found itself with at least two exchanges that offered to manage the interconnections between multiple network operators. Within months there were four rival exchanges. (See Ethernet Gets a CENX View, EENY: Exchange Heat, Neutral Tandem Takes on Ethernet Peering and Telx Adds an Ethernet Exchange.)

But the market didn't take off as quickly as many had hoped, with many of the major Carrier Ethernet services players having already set up their own one-to-one interconnections with the partners they needed to reach their target markets and with technical specifications still being pinned down. (See MEF Makes Progress on Ethernet Interconnection, Ethernet Exchanges Attracting Mostly Sellers and Larger SPs Still Browsing Ethernet Exchanges.)

Now, though, Chen says CENX is finding its feet with a greater focus on the Service Provider Information Technology (SPIT) capabilities needed to hook up the various service providers and its team has developed capabilities that enable the exchange to act as a mediation layer that can translate between the OSS systems of the various connecting operators.

Chen says there are two sides to an exchange; the physical connections; and the OSS interconnections which "provide a greater value-add. It's the SPIT stuff [Light Reading] has been talking about. When operators migrate from TDM to Ethernet, the longest pole in the tent is the OSS transformation and the big value for us is being able to interconnect the OSS systems. We figure out what is possible for the customers when they make their enquiries and then we do the provisioning and performance monitoring for the customers." (See The SPIT Manifesto 2.0.)

The new injection of cash, then, is to help CENX "grow faster and capture the opportunities we have" from service providers wanting to backhaul from additional wireless towers and deliver Carrier Ethernet services to more business users. "The enterprise Ethernet market is taking off significantly in North America right now," states Chen.

— Ray Le Maistre, International Managing Editor, Light Reading

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