The proposed acquisition includes $2.5 billion in cash and stock for Savvis shareholders and $700 million in assumed net debt. Savvis shareholders will receive about $40 a share, comprising $30 in cash and $10 in CenturyLink stock. The deal represents an 11-premium from last night’s closing price. The new hosting business will be based in St. Louis, Mo., and led by Savvis CEO James Ousley. Following the closing of the transaction, CenturyLink will employ approximately 50,000 people based on the total number of CenturyLink and Savvis employees as of April 26, 2011.

After Verizon said in January that it planned to acquire Terremark, I spoke with Ousley, who essentially admitted his company was for sale to the highest bidder. Savvis is about twice the size of Terremark and has seen its stock price rise by more than 50 percent since the beginning of the year (and the Terremark deal). Together, the two companies will operate 48 data centers located in North America, Europe, and Asia with more than 1.9 million square feet of gross floor space, a national 207,000-route-mile fiber network and a 190,000-mile global access network.

CenturyLink got into the data center game when it acquired Qwest, which brought the rural telco provider 17 data centers as well as a burgeoning cloud services effort. Qwest had begun rolling out cloud offerings to its customers in 2010. Earlier this month, I spoke with Christopher Ancell, president of business markets at CenturyLink, who said the merger gives CenturyLink scale and larger free cash flow, which could boost its deal-making capabilities, adding that CenturyLink’s CEO Glen Post wasn’t afraid of doing deals. He also said CenturyLink was trying to figure out what customers want from Infrastructure-as-a-Service providers and what they want as Software-as-a-Service.

It appears those customer conversations led CenturyLink to pick up Savvis and attempt to jump into the big leagues. As the market for cloud services booms, telcos, and even cable companies (Time Warner Cable purchased NaviSite in February), have been angling to get into the space mostly dominated by hosting companies, Amazon and a few others. The biggest question of this deal becomes who will buy Rackspace. With ownership of the broadband pipes connecting data centers and their knowledge of a subscription-based billing model, telcos have plenty to offer cloud customers. Maybe they can even recreate the much-vaunted five nines that they offered with landlines.

Related research and analysis from GigaOM Pro:
Subscriber content. Sign up for a free trial.

• In Q3, Big Data Meant Big Dollars
• Cloud computing infrastructure: 2012 and beyond
• Infrastructure Q2: Big data and PaaS gain more momentum

In the last year, Qwest had tiptoed into the on-demand services market by providing application recovery and interactive voice recognition on demand, but it wasn’t as large a player as Verizon with its Compute-as-a-Service products. And in January, Verizon said it would purchase Terremark, a provider of private clouds and data centers in a deal valued at $1.4 billion, saying cloud services were a big growth area for the company. Ancell agrees, although when I asked about the likelihood of a CenturyLink acquisition in this space, he replied, “Glen [Post] is an acquirer and has been the CEO for 19 years and has a track record of acquiring companies, and I would expect that to continue.”

Ancell says the merger gives CenturyLink scale and larger free cash flow, which could boost its deal-making capabilities. The company is trying to figure out what customers want from Infrastructure-as-a-Service providers and what they want as software. Qwest had 17 data centers that it brings to CenturyLink, which as of the end of 2010, reported $172.94 million in cash and $2 billion in operating free cash flow. It does have more than $7 billion in debt, however, and none of that includes Qwest’s contribution.

Aside from a possible rush to the cloud, CenturyLink closes this deal with 190,000 miles of fiber, after adding 75,000 miles of Qwest local fiber and 30,000 miles of Qwest backbone fiber. As it seeks to serve businesses and data centers, the biggest constant is bandwidth demand continuing to grow. Ancell echoed what I had heard recently about larger corporations wanting to upgrade to 100 Gigabit access from 10 Gigabit pipes — completely skipping over the 40 Gigabit access. He cautioned that not everyone was skipping 40 Gigabit access, but that the awesome demand for video and other applications was causing companies to look hard at their upgrades. With 40 percent of network traffic being video, the demand is continuing to rise, he said. “People just need more and more bandwidth at rates that almost have us saying, ‘What is going on?’”Ancell said.

Image courtesy of Flickr user Torkildr.

Related research and analysis from GigaOM Pro:
Subscriber content. Sign up for a free trial.

• In Q3, Big Data Meant Big Dollars
• Cloud computing infrastructure: 2012 and beyond
• Infrastructure Q2: Big data and PaaS gain more momentum

Qwest has partnered with Geminaire — the disaster recovery vendor — to supply this service, which will be hosted within a Qwest CyberCenter. The solution will protect email and databases and allow access to content in the event of a server or network disruption.

Currently DR in the cloud is mainly limited to either cloud storage (for example a business may chose to replicate data from their own data center onto cloud storage) or mail archiving (Google, for example, offers archiving and retention for email). The cloud is a natural place for DR to occur for a number of reasons:

1. The inherent flexibility of the cloud means that fundamental load spikes that business continuity services create can easily, and economically, be met.
2. Part of this benefit is seen from the ability to scale by use in the cloud: As disaster recovery is only needed in the event of a disaster, low level preparedness is a natural fit for the cloud.
3. A disaster recovery process that relies on one particular geographical location (an on-premise data center for example) is a risk in the event of a disaster. Having data in the cloud allows for geographical dispersion.

The Qwest offering comes as a DR package including failover, remote operations and real time testing. The key here, however, is a comparison between organizations making their own DR preparations in the cloud via standard storage and a fully packaged offering like this from Qwest. Because disaster recovery is very much an insurance policy, it’s important that it isn’t high cost. The very value that Qwest is offering — feature completeness — could well create a pricing barrier to adoption. At $550 per month on a 3-year contract, users could buy a significant amount of storage on Amazon S3, a bunch of email-archiving licenses, and still have change left over . Time will tell whether businesses consider there to be sufficient value offered by a package deal like Qwest’s. If the relative lack of SMB-focused DR offerings is anything to go buy, this is a very price conscious market.

Whether it’s via an all-in-one provider or from a home-baked storage service, cloud disaster recovery is an important service, having data and applications standing ready to switch on in the event of a disaster is important for business continuity, by providing a fully managed service to allow SMBs to access cloud DR, Qwest is trying to bring this service to a new class of customer.

Related content from GigaOM Pro (sub req’d): How to Thrive as a Hardware Vendor in a Cloud-Centric World

Ben Kepes is an independent consultant and contributing writer for GigaOM. Please see his disclosure statement in his bio.

The government has pumped billions of dollars into solar, including research, manufacturing and project development over the past year and half, and it’s reasonable to expect results from these hefty investments. However, the report raises some questions about what numbers and how those numbers are used to draw conclusions, as well as whether the recovery dollars will lead to big drop in solar electric rates.

The report specifically says that the stimulus could lead to the cost of generating solar power at homes to drop from about 20 cents per kilowatt-hour to 10 cents per kilowatt-hour by 2015. Technology breakthroughs could push the price down to 6 cents per kilowatt-hour by 2030, making it “cheaper than retail electricity from the grid,” the report said. The government’s analysis looks at the impact of the entire stimulus package over time, not just the spending allocated so far, said Jen Stutsman, a spokeswoman for the U.S. Department of Energy. It also doesn’t take into account state and local incentives.

A big issue with a report like this is that it paints an impression that solar electricity will fall by half by 2015 because of the stimulus dollars, and it doesn’t acknowledge the fact that competition and other market forces will play a bigger role in energy pricing. The issue of accuracy and the cause and effects of markets plagues private market research reports as well, where projections beyond a year could turn out to be incredibly inaccurate.

This happened last year, when solar panel makers and their suppliers first weathered demand freeze, layoffs and contract re-negotiations, leading to declines in the price of their goods by as much as 50 percent. Although they experienced an unexpected boom starting in second half of 2009 thanks to a huge demand from Germany (and government incentives), strong competition from low-cost manufacturers in Asia has kept the prices low, if not pushed them lower.

The White House report, of course, is meant to highlight the good work of the stimulus money and not meant to be a comprehensive market analysis. But it’s also targeting the general public, not those who understand the dynamics of the energy market. Tossing out numbers about how much consumers can expect to pay for solar electricity without more caveats and in-depth discussion doesn’t serve the public well.

Let me point to this government report from June 2008, before the government was in the throes of the stimulus package. It said, “Both residential and commercial systems will be less expensive [than] grid electricity by 2010, assuming that the 4.7% annual growth rate continues.”  The 4.7 percent growth referred to inflationary rate. The chart on page 6 showed that the cost of producing solar electricity for homeowners could reach 10 cents per kilowatt-hour (factoring in the federal incentives at that time) by 2015. The same cut in solar pricing as is now being attributed to the stimulus. The report noted that the forecast was conservative, and didn’t take into account any recent changes in supply-and-demand.

It’s not easy to make a strong case that federal spending will play a pivotal role in halving the cost of solar power. Certainly, public money that makes it possible to build large-scale solar power projects and factories should help. But it’s always a good idea to view numbers and forecasts with a critical eye.

The report also failed to address the potentially negative effect of taking away $3.5 billion from the $6 billion renewable energy loan guarantee program that’s supposed to accomplish a great deal for manufacturers and power project developers. Congress first took $2 billion from the $6 billion budget to fund the Cash for Clunkers program last year, and it took $1.5 billion away from the program recently to help stop teachers and other public employees from losing their jobs.

“The raiding of the loan guarantee is definitely a setback for us. One of our priorities is to get that funding back,” said Jared Blanton, a spokesman for the Solar Energy Industries Association.

Granted, the loan guarantee program provides for not only solar, but also other renewable energy projects, as well as companies in electric grid transmission, electric vehicles, energy efficiency and even coal. The program is making it possible for some large-scale projects to line up financing at time when investors aren’t willing to make that kind of big bets. The report highlighted loan guarantees that have made it possible for Solyndra to secure a $535 million loan to build a factory and BrightSource Energy to line up $1.37 billion for a solar energy project in California. Though not mentioned in the report, the DOE also has approved loan guarantees of $1.4 billion for Abengoa Solar’s power plant project in Arizona and $400 million for Abound Solar to expanding manufacturing of cadmium-telluride solar panels.

The report mentioned $2 billion in loan guarantee spending. Would consumers see cheaper solar electricity even sooner if the full $6 billion of allocation is taken into account?

To learn more about clean tech financing deals see GigaOM Pro (subscription required):

How EV Battery Startups Can Cross the Valley of Death

Report: Cleantech Financing Trends: 2010 and Beyond

The combined Qwest and CenturyTel will have 5 million broadband customers, 17 million access lines, 1.4 million video subscribers and 850,000 wireless consumers (through a Qwest partnership with Verizon). For reference, AT&T has 17.5 million broadband customers (16 million are wireline), 4.5 million video subscribers and 26.6 million voice subscribers. The consolidation in the landline market is driven by a few factors, many of which spell bad news for consumer subscribers unless the winners of this consolidation fest are prepared to spend like mad.

The demand for wireline telephone and DSL services is on the wane, but at the same time, the need to spend money to maintain old lines and invest in new technologies like fiber is on the rise. Unlike Verizon and AT&T, CenturyTel and Qwest don’t have a corresponding wireless business to offset the losses and increased infrastructure costs. AT&T, for example, saw its wireline business provided just 24 percent of its fiscal first-quarter sales, down 3 percent from the year before, but 45 percent came from its wireless business — a business that also provided operating margins of 45 percent.

In addition to the wireline squeeze, these businesses are also located in areas where the population is spread out, making it more costly to maintain and invest in network upgrades. Verizon for example, has been selling its rural lines where it can and it doesn’t currently have plans to continue extending its FiOS fiber-to- the-home buildout to more of its subscribers, most of whom are located in less populated areas.

There’s also the competition with cable, which can deliver faster speeds with a simple DOCSIS 3.0 upgrade that can cost a few hundred dollars per home, as compared to the higher cost of delivering fiber.

Adding to this grim mix is the coming reform of the Universal Service Fund, a government subsidy program aimed at offsetting the costs of providing rural telephone service. The program is being shifted away from telephone subsidies and toward paying for broadband expansions. The Federal Communications Commission is also trying to rein in some of the waste associated with the program. Within five years the FCC hopes to stop paying companies like CenturyTel for voice lines with USF money. Some of that loss will be made up through new USF broadband subsidies, however, so this deal may be a way for CenturyLink to reap a larger portion of those fees.

CenturyLink executives emphasized the potential for stronger business relationships that it will win thanks to its acquisition of Qwest (it serves 95 percent of the Fortune 500), rather than the consumers. Qwest also has an emerging cloud computing product, which leads me to wonder if CenturyLink might eventually split the consumer and enterprise businesses further down the road. On the conference call executives said they may keep the Qwest name for business and use CenturyLink for the consumer markets.

Historically, these telecom consolidation deals have been a loss for consumers and even the firms who make them. Verizon has sold many of its rural assets, leaving its purchasers to file for bankruptcy. Taking on the burden of costly assets and a lot of debt doesn’t seem to be a winning strategy for telephone companies, but maybe the hope is to become something that’s just too big to fail. Given the government’s current focus on boosting broadband, perhaps such a strategy isn’t such a bad idea.

Featured image courtesy of Flickr user etohaholic

Qwest Plows Millions Into ZillionTV; telco has invested $10 million in startup ZillionTV in return for exclusive rights to offer the IP-delivered video-on-demand service in the telco’s footprint. (Multichannel News)

Water-Cooler Effect: Internet Can Be TV’s Friend; Blogs and social Web sites like Facebook and Twitter enable an online water-cooler conversation, encouraging people to split their time between the computer screen and the big-screen TV. (NY Times)

WGAW Signs 33rd Online Content Company; Emmy-nominated production company Big Fantastic (Prom Queen, Sorority Forever) has signed on as a signatory to the Writer’s Guild of America, West. (press release)

The TV Numbers Game; Vizio is now the best-selling LCD brand in the United States, but Samsung sells more LCD and plasma sets together than anyone else. (NY Times)

Brightcove Announces Major Customer Wins & Partnerships in Spain; the online video platform signed major new Spanish customers Tuenti, Grupo Vocento, Sony Music Spain, Conde Nast Digital Spain, Grupo V, GEC, GX Magazine and TQMadrid. (press release)

Like ISP email addresses, how many people really will use such a service on a regular basis? Based on an admittedly unscientific poll of our readers a month ago, only 10 percent of readers wanted storage services from their ISP. Here is Comcast’s pricing for backup:

• 2 GB free with broadband subscription
• 50 GB for $4.99 a month or $49.99 per year
• 200 GB for$9.99 a month or $99.99 per year

Comcast helpfully tells people that with 2 GB of storage, a person could store one of the following: 200 high-resolution photos, 480 music files, one standard definition movie file or 10,000 average MS Word documents. Readers, what’s your take?

Related GigaOM Pro content (sub req’d):

Who Owns Your Data in the Cloud?

Image courtesy of Flickr User MarcinMoga

Online storage, anitvirus, Wi-Fi, better upstream speeds and even special content — such as Verizon delivering ESPN360 — are now offered to customers with regularity. Of course, if your provider is still in the broadband dark ages like mine is, you’re not getting any of these options. Readers, please check out our poll, and tell us what do you expect from your provider, and what do you get?

Related research and analysis from GigaOM Pro:
Subscriber content. Sign up for a free trial.

• Q4 Wrap-up: SOPA and the future of digital content
• Connected Consumer 2012: A year of consolidation and integration
• In Q3, E-books and White Spaces Ruled

Cisco announced today that Swisscom is deploying the Cisco ASR 9000 Series Aggregation Services Router as the edge platform to support the rollout of high-bandwidth fiber-to-the-home (FTTH) services to every household in Switzerland. Swisscom announced FTTH customer trials in April 2009, offering triple-play service bundles, which allow the simultaneous use of up to three high-definition television (HDTV) channels, Internet connections of 50 megabits per second downstream and 5 Mbps upstream, and telephone services.

That’s pretty cool, but even cooler is how Swisscom got to that point. Like AT&T and Qwest it began with a fiber-to-the-node strategy, but has since expanded its efforts to a fiber to the premise plan. As it has done this, Swisscom has taken steps to lay more fiber strands during its buildout so competitors can use the network as well. For those interested in how regulatory policy may affect network build out, a presentation (PDF) by Swisscom back in 2008 shows how the cost models differ if there is a regulatory incentive to share pipes at the passive infrastructure, network and transport layers.

Thumbnail image courtesy of Flickr user Tambeko the Jaguar

Related research and analysis from GigaOM Pro:
Subscriber content. Sign up for a free trial.

• Threats Loom Large for Microsoft’s Email and Collaboration Platforms
• A near-term outlook for big data
• Web startups: How to guard against security breaches