RCN Corp. purchases Erol's Internet Inc. Move seen as intensifying competition in Northeast

January 24, 1998|By Mark Ribbing | Mark Ribbing,SUN STAFF

Erol's Internet Inc., the Washington area's most popular Internet service provider, has been bought by RCN Corp., one of the Northeast's most aggressive and unusual telephone companies.

The purchase could intensify competition in telecommunications throughout the Northeast, including Baltimore.

RCN announced its $83.5 million cash and stock purchase of the Springfield, Va.-based Erol's on Wednesday. RCN, of Princeton, N.J., aims to offer the entire bundle of telecommunications products -- long-distance and local phone service, Internet access, cable television -- to customers in the crowded and heavily wired Northeast.

Lee H. Allen, president of Boston-based Allen Financial Advisors Inc. and an analyst of RCN, said, "I don't think there's any doubt that they're going to go after the whole Northeast corridor."

"I think they're very opportunistic and very quick," Allen said of RCN, which spun off from its parent company last year. "They don't fool around."

Nor does RCN play by the typical rules.

As a means of busting into markets, the company has taken the unusual step of joining forces with electric companies, such as ,, Potomac Electric Power Co. in Washington, D.C. Allen said RCN might seek to form an alliance with Baltimore Gas and Electric Co. to help it expand into Baltimore.

RCN's new jewel, Erol's, also has a colorful profile. It began in 1963 as a television and radio repair shop.

In 1980, Erol's began a video club that it sold to Blockbuster 11 years later. In 1995, the private company became an Internet service provider and has since garnered 295,000 customers from Massachusetts to Virginia.

When RCN bought Erol's, it also absorbed UltraNet Communications Inc., Boston's largest ISP, for $27 million in cash and stock.

RCN spokesman Jim Maiella said the purchase of Erol's and UltraNet "really solidifies our Internet product and expertise." He said the two acquired companies will continue to operate under their own names but will be folded into the RCN name.

RCN's stock has risen nearly 8 percent since the close of the Nasdaq market on Tuesday, the last day before the announcement of its acquisitions. It closed at $39.13 yesterday.

Pub Date: 1/24/98

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