Best Buy becomes ISP through Speakeasy purchase

From dial-up modems to wireless cards, computer retailers have long acted as important gateways for customers looking to get online. Partnerships to enroll a PC buyer with an online service at the point of sale are not uncommon. Best Buy, a major US computer and electronics retailer, is cutting out the middleman and entering the ISP business directly, as it revealed today that it will purchase independent DSL provider Speakeasy for $97 million.

Speakeasy is one of the few survivors of the third-party DSL market which emerged in the US during the late 1990s. During a window of regulation when the Federal Communications Commission mandated that local phone companies provide DSL network access to independent companies at attractive pricing, a number of companies sprang up virtually overnight, taking orders and installing lines. Many collapsed quickly under their own weight, while others were squeezed out as the telcos gradually rolled back regulation and cemented their hold over the last mile-incumbents such as AT&T and Verizon dominate DSL service in their markets. A few tried gamely to survive under larger corporate umbrellas, most notably Telocity, which sold out to satellite TV vendor DirecTV only to be shut down a short time later. The shakeout is not dissimilar to the evolution of DSL services in the UK, as stand-alone vendors such as Easynet, Bulldog, and Homechoice have been engulfed by larger organizations. Major firms including Sky, Pipex, and BT have moved to consolidate DSL users through acquisition over the years.

Speakeasy stood out in the US market in that without major brand support it had carved out a niche for itself among corporate users seeking personalized service, as well as hardcore computing enthusiasts who were willing to pay a premium to obtain reduced latency and greater flexibility over connections to and from their home LANs. Best Buy appears to see more value in the business side of its operations and announced it will put the Speakeasy organization under its Best Buy for Business label. The transaction is expected to close in May.