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Optical/IP

Level 3 Eyes Return to Euro VOIP

Level 3 Communications Inc. (Nasdaq: LVLT) is considering a return to the European voice-over-IP scene, two years after it abandoned that market.

Business and prospects are picking up in Europe for the wholesale player, and the operator announced new deals in Germany today (see Level 3 Expands in Germany), coming on the heels of its other recent announcements in the region (see Level 3 Expands in Scandinavia and NetCologne Picks Level 3). The carrier's European VP of marketing, Floris van den Broek, says there are two particular hot areas in Europe at present -- VOIP and the overall German market.

Broek says the carrier is currently assessing the various VOIP services it could offer other service providers and enterprises, such as VPN (virtual private network) voice, and is examining the business case for each. "We are used to offering high-margin services, and, depending on the type of voice services offered, the margins can be low," he asserts, adding that Level 3 should be making some announcements in the near future. "This is a very hot topic."

The fact that Level 3 is considering the move shows how things have changed in the past two years. The carrier launched VOIP services in 2000 in Europe but quickly abandoned the sector because of the lack of volume and margins (see ...and Becomes a Cash Cow for Level 3). This means, at least, that Level 3 has the systems in place to offer VOIP as and when it decides the time is right.

The carrier currently has a thriving VOIP business in North America, where it handles up to 20 billion VOIP minutes per month and has recently launched a VOIP centrex service (see Level 3 Launches VOIP Centrex Service ). It does, however, have concerns about the impact of regulation on that business as it plans its launch of residential VOIP services (see Level 3 Wary of VOIP Regulation).

As for Germany's potential, Broek says market growth is being driven by DSL uptake and the business plans of newly privatized cable companies. Both the German cable market and VOIP were recently identified as sectors with great investment potential by senior executives from private equity outfit The Carlyle Group (see Europe's Hot, Say Carlyle Bigwigs). DSL growth in Germany has been particularly strong in the past six to eight months, says the Level 3 man, and today's announcement of new customers in Leipzig has been driven by strong demand for Internet access by cable customers and the need for cable firms to redistribute packages of TV channel signals to smaller local cable service providers.

— Ray Le Maistre, International Editor, Boardwatch

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