Level 3 Deploys New Provider Edge Platform to Support Converged L2/L3 Services

| Sep 12, 2008 | Business Network Services - U.S. | Competitive Intelligence Report

| Analyst: David Hold

Current Perspective: Positive
Vendor Importance: High
Market Impact: Moderate

Event Summary

September 10, 2008 -- Level 3 Communications' Business Markets Group has rebuilt its Enterprise data network architecture, re-launching an MPLS-based wide area network platform supporting three MPLS solutions on a single platform. The new architecture enables delivery of Ethernet virtual private line (EVPL), virtual private LAN service (VPLS) and Internet protocol virtual private network (IP VPN) services across a single platform.

Analytical Summary

• Current Perspective: Positive on Level 3’s new enterprise data network architecture, which is spearheaded by the deployment of a new edge router, because the new platform can support multiple MPLS-based VPN service types at both Layer 2 and Layer 3, and because the new platform will operate under a common OSS known as project Unity. In addition, Level 3 has also upgraded the capabilities of its online customer portal, so that customers can now enter trouble tickets, check order status and view network reporting online. These advances suggest that Level 3 may be finally solving the network management and provisioning problems that have plagued its efforts to integrate the networks that it has acquired over the past several years.

• Vendor Importance: High to Level 3, since the company has experienced significant issues trying to integrate the products and services of its multiple acquired carrier networks. These integration issues have negatively impacted revenues and made it difficult for the company to realize the full benefit of synergies from the acquisitions. The new ability to provision multiple VPN services from a common platform that spans the legacy networks and is integrated into the Unity OSS project marks a great leap forward for Level 3 in its efforts to expand its enterprise data services portfolio and efficiently serve customers.

• Market Impact: Moderate on the national market for enterprise data services, because Level 3 is still primarily a wholesale provider of high bandwidth transport services to other carriers and very large enterprise networks that have the operating characteristics of a carrier. However, as the company continues to pull together its various acquired networks with the ability to offer nationwide VPN services, it will begin to emerge as a more formidable player in the enterprise market.

Recommended Competitor Actions

• Competitors operating in the same markets can note that Level 3 is taking a more expensive approach of deploying a high capacity multiservice edge router as its basic VPN provisioning platform. Competitors can compete effectively on price by using less expensive Layer 2 switches offering basic Ethernet connectivity to customer locations in a metro area.

• Cable MSOs could view Level 3 as a competitor, but they should also consider the carrier as a potential partner offering long haul VPN services for larger enterprise customers with out of footprint locations. The partnership could work in the reverse direction, with cable operators offering local connectivity where Level 3 lacks the necessary metro fiber connections to customer buildings.

Recommended End User Actions

• Enterprise networks looking for VPN services at either Layer 2 or Layer 3 should evaluate Level 3’s new data architecture and footprint to see if it matches their locations. For those that want to maintain control of routing and looking for Layer 2 connectivity among all locations, Level 3’s VPLS service should be on the short list of carriers that currently offer this capability.

CLIENTS ONLY

Current Perspective

Competitive Positives and Concerns

Recommended Vendor Actions

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