Q&A: Level 3 Communications

9:45 AM -- Recently, I discussed Ethernet business services market trends with Russell Shriver, Vice President of Product Management, IP & Data Services, Level 3 Communications Inc. (Nasdaq: LVLT). Russell is giving the opening service provider keynote at Ethernet Expo Americas 2009 in New York City today.

Level 3 has been recognized by Heavy Reading as having one of the strongest and broadest Ethernet service portfolios in the U.S., and also provides Ethernet services connectivity in 21 other countries. The company offers Ethernet over wavelengths, Ethernet private line, Ethernet virtual private line, and Ethernet virtual private LAN services within and between metro markets. Level 3 owns and operates ~54,000 intercity route miles and ~27,000 metro route miles and provides fiber network connectivity to 8,000 buildings and aggregation points in 125 metro markets in the U.S. and Europe.

Below are highlights from our conversation:

Heavy Reading: Level 3 publicly has talked about aggressively expanding its Ethernet service capabilities and reach to meet growing enterprise demand. Can you give us some perspective on the scope of your activities?

Russell Shriver: Carrier Ethernet can provide businesses with bandwidth that is more cost efficient and scalable; however, it is only an option when it is available where users need it. One of the primary focus areas of Level 3 Communications is to ensure that we can provide Ethernet in all of the right locations for our business users. We are continuing to invest in broadening our Ethernet footprint though continued network investment as well as through the establishment of interconnections with other providers. Our geographic expansion for enterprise customers is generally focused on North America right now.

We offer a wide range of speeds from 1 Mbit/s to 10 Gbit/s in our Ethernet portfolio, including 1-GigE connections with many fractional speeds. Level 3 is in the process of deploying new Ethernet edge switches that increase the efficiency of how we handle traffic on our network. These new switches will make it more economical to offer sub-50-Mbit/s services in a growing number of the 116 markets in North America where we have a local fiber presence.

HR: You mentioned interconnection. Can you elaborate on what that means for Level 3’s coverage?

RS: We’re doing a lot of work on footprint expansion within our own network and direct interconnections with other carriers, and now we have the emergence of Ethernet exchanges. We think that interconnections within an exchange will provide some great opportunities for us to expand service availability more rapidly. Traditionally, it has taken a considerable amount of time to set up interconnection arrangements with individual operators. With exchanges, we’ll be able to do much more with about the same amount of work.

HR: Can you comment on Ethernet’s flexibility and why that’s important to end-users?

RS: Much of the value of Carrier Ethernet is created from its flexibility. Ethernet as a protocol can be used to deliver almost any type of bandwidth, whether it’s transported over an MPLS packet network, a Sonet infrastructure, or directly over DWDM. Since Ethernet is the interface, the customer who touches it needs to be able to expose the unique benefits of whatever transport medium is used.

HR: Sometimes you’ll hear people talking about the "granularity" of Carrier Ethernet services. Can you explain what that means?

RS: What they are referring to is one of the most fundamental features of Carrier Ethernet: its scalability. The scalability of Carrier Ethernet comes from a service provider’s ability to provide discrete steps of bandwidth capacity -- that is, granularity. The more steps or the more granular the service, the easier it will be for end-users to purchase just the right amount of capacity for their application needs today, and adjust to the network capacity as those needs change.

Many customers expect Ethernet to be extremely flexible, so Level 3 provides a level of granularity that is greater than most of our competitors. We also offer speeds that match traditional Sonet speeds.

HR: How do you price your Ethernet services?

RS: We sell Ethernet in a couple of ways -- with usage-based and flat-rate billing. Many of our customers tend to buy the usage-based services. For a small commitment, they get into a service and then can burst up to a pre-determined speed that is equal to or less than the port speed, without having to contact us as their provider. Alternatively, they can go with a flat-rate commitment for a fixed speed, but then they would have to contact us to upgrade the service.

HR: How would you characterize the status of the carrier Ethernet business services market today?

RS: Carrier Ethernet is an ideal way to provide bandwidth for the evolving needs of the business world. With the on-going need to optimize their business processes, enterprises are increasingly turning to solutions like server virtualization, cloud computing, and software as a service. All of these solutions are designed to allow businesses to better utilize their resources, and all of these solutions rely heavily on the availability of cost-effective, scalable, high-capacity bandwidth.

For those customers that have growing bandwidth requirements, there’s not a better technology option than Ethernet.

HR: Thanks, Russell. I look forward to hearing your talk on Carrier Ethernet innovation at the Expo.

— Stan “EtherMan” Hubbard, Senior Analyst, Heavy Reading

Interested in learning more on this topic? Then come to Ethernet Expo Americas 2009, Light Reading’s ninth conference and exposition covering the hot topic of Carrier Ethernet network technologies and services in North America. To be staged in New York, November 3 & 4, admission is free for attendees meeting our prequalification criteria. For more information, or to register, click here.