Allen’s Vulcan Ventures Pumps $1.65 Billion Into RCN

Microsoft co-founder Paul Allen has continued his push to combine Internet content with state-of-the-art delivery networks by investing $1.65 billion (US$) in RCN (Nasdaq: RCNC), a Princeton, New Jersey-based telecommunications company.

With the investment, Allen’s Vulcan Ventures has raised its stake in RCN from four to 27 percent. The transaction was made in the form of convertible preferred stock, which can be converted to common stock after seven years.

An investor in dozens of Internet companies, Allen will now be able to bind his network more closely together and tap into 500,000 Internet subscribers along the congested Washington-Boston corridor. RCN will also give Allen access to a growing fiber optic network that is expanding on the West Coast.

Broadband Portal Joint Venture

Vulcan Ventures also announced today that it is forming a joint venture with RCN, Go2Net (Nasdaq: GNET), Charter Communications and High Speed Access (Nasdaq: HSAC) to provide broadband portal services to customers of RCN and Charter.

The new company will be called Broadband Partners and will be majority-owned by Vulcan Ventures.

“This venture marks another step forward in our execution of Paul Allen’s worldwide strategy,” said William Savoy, president of Vulcan Ventures. “Cable companies are uniquely positioned to deliver the next generation of advanced data and transactional services. By linking four of our key investment companies and combining their expertise in various aspects of cable and new media, we are aiming to create a comprehensive broadband portal for the delivery of new products and services.”

Allen’s company owns Charter Communications and has significant stakes in Go2Net and High Speed Access.

RCN Viewed as Up and Comer

RCN is challenging the major telecommunications companies along the East Coast of the United States and is viewed as an innovator in the industry. It is the seventh-largest ISP in the country and the largest in the Northeast. The company claims that its lines can feed data 1000 times faster than conventional phone lines and five times faster than a cable modem.

Not content with wiring the East Coast, RCN is currently building a network along the San Francisco-San Diego corridor and recently opened its West Coast headquarters in San Mateo, California. In the first six months of this year, RCN added 800 miles of fiber optic wiring, bringing its nationwide total to 2,200 miles.

The company posted second quarter revenues of $81.3 million and losses of $27.4 million. Prior to Allen’s investment, it claimed to be armed with over $2 billion of cash and availability to fund its network expansion.