Optical/IP Networks

Level 3 Sweetens Wholesale Video Offer

CHICAGO -- The Cable Show -- Mention Level 3 Communications Inc. (NYSE: LVLT) here and what immediately comes to mind is its notoriety as the CDN for Netflix Inc. (Nasdaq: NFLX) and the company taking on Comcast Corp. (Nasdaq: CMCSA, CMCSK) in a peering/net neutrality dispute.

But Level 3 is also trying to broaden its wholesale business in support of cable and other video service providers, tying together its resources in a service that is both complete and modular.

That means linking its Vyvx video delivery service, most often used to capture video at live venues such as sporting events, with its CDN, and adding things such as video preparation and usage analytics to offer content acquisition, preparation, publishing, delivery, consumption and post-consumption analytics.

"We are offering everything from creation to consumption, for a TV Everywhere strategy," says Amanda Tierney, Level 3's VP of wholesale market management. "And it's modular, so video service providers can pick and choose the pieces they want to buy from us."

The strategy is explained here in a corporate video.

Key to this strategy for Level 3 is proving how it can make delivering video to any device a simpler and more cost-effective business strategy for its wholesale customers, says Wade Clark, media solutions analyst for Level 3.

That includes encoding the content to match the device to which it is delivered and storing that content in the most appropriate place, whether that is in one of Level 3's supermodes or in edge storage locations on the CDN. "Where the content is stored is, as always, based on requests for that content," Clark says. "We will deliver it off the optimal CDN edge -- typically but not always the closest edge to the customer."

The post-consumption analytics are intended to show the video service provider how many consumers are viewing what type of content, over what type of device. They aren't intended to be a ratings system, per se, although Level 3's wholesale customers can use those as they see fit, including to prove to advertisers how often sponsored content is being viewed, Clark says.

"Cable companies want to remain compelling to their subscribers, who have a lot more video choices now," Tierney comments. "That's where analytical tools which help them understand the behavior of consumers, can be helpful. "

Different service providers will take different approaches to delivering video to TVs, PCs and mobile devices, and the ability to detect and analyze new consumer viewing patterns will inform the way those approaches are designed, she says.

"However they decide to go, we believe we can help them optimize their business case," says Tierney. "We think this is a unique end-to-end offering."

— Carol Wilson, Chief Editor, Events, Light Reading

fanfare 12/5/2012 | 5:01:33 PM
re: Level 3 Sweetens Wholesale Video Offer

Nice to see an article on this. LVLT has come through a long period of transition and has emerged as a leader in this explosive area. Content over IP has been predicted as a windfall event ever since the general public gained access to the internet. Par for the course, the ideas and anticipation got ahead of itself and tech/transport stocks went through the roof during the late 90's then imploded when investors realized that all the dreams for the internet were not going to happen overnight, and basically not until residential broadband pipes and online apps at least caught up with the dreams.  LVLT had a great plan to capitalize on the implosion by aggregating a lot of the new networks that were built for huge $$ amounts in 2000. Unfortunately, the time was still not right for the internet to become the content giant that would eventually be inevitable.  Finance, integration, and timing issues halted LVLT's strategy for a time.  But now the long awaited potential of internet applications has come full circle and LVLT is in the right place at the right time with the assets to lead the charge into the next decade of fat pipes (into the homes) and fat, bandwidth hungry applications on the service side.

While the company's stock has popped over the last month, this is likely only the beginning for LVLT. It amazes me how the masses will flock to a compelling story and overbuy the stock to dizzy-ing heights (e.g. Netflix) while overlooking other companies that will benefit from the same "sector-specific" growth.  Not only will LVLT capitalize and grow on the Netflix story, but it will continue to benefit from other OTT video strategies that are coming to compete with Netflix (not to mention other online apps in other areas). There has been a lot of talk about Content creators, content distributors, content aggregators, etc. all getting ready to attempt to "unseat" the Netflix model. This may or may not happen, yet investors seem to have overlooked the fact that whoever comes out on top during the next 3-5 years, whichever content over IP strategy wins whether it be Netflix, Hulu, Youtube, Google, Apple, individual sites, or some other company that aggregates content online, LVLT ultimately stands to benefit from the disruptive changes that are occuring right before everyone's eyes in this arena.  While Netflix stock soars on anticipation of this future, I'd expect investors to begin to realize that while the Netflix model might hold, the LVLT model will win no matter what the outcome.

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