New Edge Networks, a wholesale DSL and broadband access provider focusing on small and medium-sized markets, announced it has raise $77.5 million private equity and debt financing.

The equity portion of the funding, about $40 million, comes from previous investors GS Capital Partners III and related investment partnerships of Goldman Sachs & Co.; Crosspoint Venture Partners; Greylock and Accel Partners. The remaining funding comes in the form of a term loan and revolving credit facility from First Union National Bank, a first-time investor in New Edge.

According to the company, the money will finance its existing business plan fully, bringing it to the point of self-sufficiency during 2002.

That business plan, however, has been scaled back in light of the economic downturn. Last November, the company reduced plans for its network build from 1200 to 600 central offices and laid off about one-third of its work force.

In an April interview that occurred while the company was in the fund raising process, New Edge President and CEO Dan Moffat said the cutbacks improved the company’s odds of getting the funding it needed.

“I think we absolutely made the right decisions in terms of aggressively managing our footprint and our headcount,” he said. “The reason I know is that we have investors who are willing to talk to us about covering our funding gap.”

The announcement is a welcomed change for the DLEC sector, which has experienced some of the worst carnage of the current downturn.

According to Jeff Moore, network services analyst with Current Analysis, the funding indicates strength both in New Edge and in the remaining competitive DSL providers that are expanding their portfolios.

“I think that a couple of things makes [New Edge] stand out,” said Jeff Moore, a network services analyst with Current Analysis. “First, they are competing in markets where there’s very little competition, small-town America, where they have very few broadband competitors. Second, New Edge Networks and other competitive DSL players such as Covad are defining themselves much more broadly than just being high-speed Internet players. They’re looking to sell voice, VPNs.”