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Level 3: Wireless Key Driver of Wholesale Growth

COMPTEL PLUS As more smartphone users download videos and other Internet content, wireless operators face increasing demands on their networks. Thats good news for Level 3 Communications, which provides network communications services to mobile operators.

It should come as no surprise that Level 3s Lisa Miller senior vice president of wholesale markets has identified wireless as one of three important areas of growth in the companys wholesale business.

Wholesale services comprised a big chunk of Level 3s annual revenues ($3.65 billion) last year.

Of Level 3s Core Network Service annual revenues ($2.827 billion), the company generated $1.375 billion in “wholesale” revenues.  The latter figure excludes wholesale voice revenues of $650 million, which Level 3 reports in a separate category.  

Content Network Delivery

In an interview this week at the COMPTEL PLUS Spring 2011 Convention & Expo in Las Vegas, Miller noted that Level 3 also is poised for growth in its Content Delivery Network (CDN) business.

She said the CDN business allows Internet service providers such as a mobile operator to move stored content like NCAA basketball scores and highlights closer to end users. This can reduce a service provider’s costs to deliver the content since it is residing locally, Miller said.   

CDN,” Level 3 stated in its annual report filed with the Securities and Exchange Commission, describes a system of computers networked together across the Internet to provide content to users in the most efficient manner to enable an optimal user experience. In a CDN, nodes or groups of computers are deployed in multiple locations closer to the end user and cooperate with each other to satisfy requests for content by end users ”

Level 3 moved into this business four years ago through the January 2007 acquisition of Savviss CDN operations and the subsequent acquisition of Dublin, Ireland-based Servecast Ltd. The company considers Akamai Technologies and Limelight Networks to be its key CDN competitors.

Broomfield, Colo.-based Level 3 is hopeful that its CDN business will drive significant growth, but the company cautioned in the risk-factors section of its annual report that it could encounter several potential difficulties. 

Those challenges include customer support system development issues, intellectual property matters, technological issues, increasing capacity on our network to meet our customers’ demands in a timely manner, developmental constraints and other problems that we may not anticipate.”

Resellers

Miller identified a third area of growth in the wholesale market that she described as Level 3s reseller” business: supporting carriers in North America and worldwide by enabling them to offer services, such as virtual private networks, to businesses in locations where Level 3s carrier customers may not operate a network.

Multinational corporations and other large institutions may be located in cities throughout the world, but even the largest global telecommunications providers dont have facilities in every city and building.

Miller said Level 3 strives to deliver a service, such as a VPN, that looks and acts the same as the offering that its wholesale customer provides in areas where it does operate facilities. In other words, the multinational corporation thinks the service provider with whom it has contracted is providing the service  not Level 3.


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