Paetec Buys Allworx

Paetec is acquiring Allworx Corp., a provider of IP-based PBX and key systems aimed at the small and medium business user. The transaction makes more sense in light of Paetec's recent merger with McLeod, whose customer base is largely anchored on smaller businesses use a single T1 connection at most sites. Paetec's historic customer base is a mid-market firm. So Allworx will make sense as a favored solution for McLeod customers more than for Paetec's historic base.

Based in East Rochester, N.Y., Allworx primarily uses Value Added Resellers as its sales channel. Paetec says it will continue to use VARs, as well as its extensive agent network, to introduce both Allworx services to Paetec customers while cross-selling Paetec connectivity services into the Allworx base.

The acquisition, set at $25 million, is interesting as it is not common to see communications "footprint" providers buying "application" providers. But more providers seem to be putting their money where their views are, as "moving up the stack" now is seen as necessary.

Level 3 has been buying content delivery assets, not simply termination assets or access assets, for example. That isn't to say all providers think this is the right strategy. Some continue to launch or extend Layer 2 connectivity businesses that deiberately remain focused on access to end user sites and transport within a metro area or region.