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In what has to be seen as a notable merger in the competitive communications business, Speakeasy (News - Alert), a Best Buy company is combining its business with Covad Communications and MegaPath (News - Alert) Inc. in a deal that the partners say 'will create the first managed services local exchange carrier able to provide a full range of IP voice, security, VPN and Internet services nationwide.'

 As is clear in other parts of the communications business, consolidation is both expected and necessary as virtually every part of the 'access' business is under revenue pressure and companies need more scale to introduce new services at the application layer.   The new company also emerges with three key customer segments: enterprise, small business and wholesale.

 The transaction is expected to close in the third quarter of 2010, contingent upon closing of the previously announced transaction between MegaPath and Covad (News - Alert).

 This transaction will combine Speakeasy's small business voice and data services emphasis with MegaPath's services for distributed enterprises over Covad's nationwide broadband network. The merger also creates a company with a few different customer segments, retail and wholesale.

 The combined company will have both direct sales and a national network of more than 8,000 IT consultant partners contributed largely by Speakeasy.

 Prior to the close of this transaction, the companies will continue to be led by their respective management teams. Upon closing, the companies plan to continue to serve the market through two divisions: a wholesale operating division and a direct, commercial division. 

 Craig Young, current CEO of MegaPath, will become executive chairman of the combined businesses; reporting to Craig will be Pat Bennett who will continue as CEO of Covad Communications, and Bruce Chatterley (News - Alert), current CEO of Speakeasy, will be president of the commercial unit, in charge of all non-wholesale customer sales and marketing division.

 Among the synergies is the ability to funnel traffic over owned facilities rather than buying circuits. Covad operates a network with presence in more than 4,400 COs, broadband services in 45 states and 240 metropolitan statistical areas. That means 11 million businesses--about 60 percent of all US businesses--could buy from the new company, and use Covad facilities.

 It isn't immediately clear which retail names will survive the merger.