DarkStrand, a three-year-old startup that won the right to offer commercial businesses access to the federally created National LambdaRail in June, will offer Fortune 500 companies access to fat pipes and compete with some of the larger companies. The goal of offering businesses their own fiber transport is nothing new, but still it adds another new player to the wholesale bandwidth market.
When it bid for the contract to offer commercial access to the federal fiber network, Dark Strand competed against telecommunications providers like Qwest (s Q), Level 3 (s LVLT) and AT&T (s T) that were also seeking to use the network for IP transport.
Mike Stein, DarkStrand’s CEO, is convinced his startup won the bidding process because it wanted to help with commercialization efforts, in addition to providing access to the bandwidth. It’s a neat idea on the surface, but it’s an odd combination of services that I’m not sure make a lot of sense, beyond its ability to get DarkStrand the contract to lease out capacity on the LambdaRail.
DarkStrand has exclusive rights to the network of 10-gigabit fiber pipes (soon to be 40-gigabit) connecting federally funded labs in 30 cities. It has so far raised $12 million from angels and has already committed about $5 million to pay for the LambdaRail access and maintenance for the coming year. Under the terms of its contract, it will need to pay about $2 million to $3 million a year in maintenance, as well as $24 million in capital payments.
Stein says the company is raising money to continue fulfilling its capital payments, and it is close to signing deals with companies seeking to use the LambdaRail’s pipes. DarkStrand will charge about $100,000 per month or $1 million per year for companies seeking to lease their own fiber. Dark Strand has 80, 10-gigabit slots available on the network, but so far, no paying customers. In part, this may be because Stein has just started selling access in anticipation of service operation beginning in January.
Stein says the combined commercialization and transport business will work, because many of the companies buying access to the pipes will also need to find ways of dealing with the large amounts of data they are trying to send — from fat media files to 3-D imaging. DarkStrand is also working to sign contracts with various labs to shorten the commercialization time frame from several months to six weeks.
He cites the example of Disney (s DSNY) using the network to send digital TV content from live events in New York to production studios in Los Angeles. This makes sense. However, he also thinks that because Disney owns Pixar, which is already working with Oak Ridge National Lab on an algorithm to make it cheaper to produce animated films, the Mouse House might also sign a contract with DarkStrand to get access to more intellectual property from federal labs.
In theory, it’s neat. But DarkStrand doesn’t have an exclusive agreement to get technology out of national labs, and the idea of it as a pre-vetted commercialization partner doesn’t mean much when the actual commercialization gets under way. Many companies have existing development efforts at national labs, and there are many other venture capitalists and IP brokers who also offer similar services. Unlike transport, which can be automated, commercialization is still a relationship-driven effort. Even if DarkStrand can build those relationships, the combination is really more odd than functional.