Level 3 Slashes CDN Prices

The company says content delivery will be priced the same as high-speed IP services UPDATED 10/5, 12:30 AM

October 4, 2007

2 Min Read
Level 3 Slashes CDN Prices

Level 3 Communications Inc. (NYSE: LVLT) is lowering prices for content delivery network (CDN) services to match the same price customers pay for high-speed IP transport.

By matching transport prices, Level 3 is doing away with any premium it charges for caching and downloading online content, and is setting prices at a point it hopes its competitors can't match.

Lisa Guillaume, VP of CDN Product Development for Level 3, says CDN services are usually carry a 20 to 30 percent premium over the cost of transport.

Level 3 claims it can do this because it owns the backhaul network its content is delivered on. In contrast, it says competitors such as Akamai Technologies Inc. (Nasdaq: AKAM) or Limelight Networks Inc. (Nasdaq: LLNW) depend on Level 3 and other carriers for transport services.

"We have a significant advantage here," says Guillaume. "We provide underlying services for what is our direct competition. What this means for them is that we're able to offer CDN services at the same price that they're able to buy only one component to offer CDN services."

Level 3's lowered pricing comes on top of heavy discounting already reported in the CDN marketplace. Over the past several months, Akamai and Limelight have seen shares fall due to disappointing earnings in light of discounting and other pricing pressures. (See CDNs See 3 Price Pressures, More CDN Pressures Ahead, and Analysts: Akamai Was Too High.)

The new pricing marks the latest in a series of aggressive moves Level 3 has made to target the content delivery market since acquiring Savvis's CDN assets earlier this year. (See Level 3 Spends $135M on Savvis CDN, Level 3 Completes Buy, and Level 3 Looks for Big CDN Push.)

Since then, Level 3 announced the availability of caching and downloading services in May, and purchased the assets of European streaming media provider ServeCast in August.(See Level 3 Enhances Platform and Level 3 Buys Servecast.)

For now, the lower prices are for caching and downloading only. Level 3 hopes to have its streaming services ready by mid-November. That will allow the company to compete with Akamai, Limelight, and others not just for static and progressive media downloads, but for rich media streaming as well.

In addition to integrating ServeCast's streaming functionality into its service portfolio, Level 3 hopes to incorporate ServeCast's end-to-end video management platform by the first quarter of next year.

While Level 3's pricing will certainly get customers' attention, representatives say it's the company's service portfolio that really sets it apart from the competition.

Graham Williams, director of caching and downloading services for Level 3, says the company's CDN story is "not just about trying to lead with price. It's about giving customers business models, and passing on cost savings with an end-to-end service."

— Ryan Lawler, Reporter, Light Reading

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