Neos is tying its U.K.-based network into Level 3's backbone in order to offer ISPs a Europe-to-New York link at guaranteed rates (see Neos Delivers Level 3 IP). Level 3 says the nonexclusive agreement is one of many alliances it's forged (mostly unannounced, it seems) and plans to forge worldwide to reach ISPs that are out of its target range.
Neither Neos nor Level 3 had much to say on the deal at press time, despite repeated requests for information. Still, several points stand out in favor of the partnership:
- Key market. Metro Ethernet services are a big telecom opportunity (see IDC Predicts Metro Ethernet Boom and Metro Ethernet), and the European market is said to be second only to Asia/Pacific in supporting Ethernet services. Any partnership that enhances service offerings here is likely to stimulate this growth.
- Cost-effective. The move means both Neos and Level 3 can extend influence in their respective markets, without spending big bucks to build out more infrastructure. For its part, Neos gains European ISP customers, attracted by the ability to offer faster Internet backbone links. Level 3, despite the fact that it has its own suite of Ethernet services (see Level 3 Launches Ethernet), has carefully targeted a top-tier clientele, what it calls the "top 300 consumers of bandwidth." Those ISPs apparently aren't included in the ones Neos is concerned about.
- Level 3 retains focus. Level 3 needs to keep its ducks in order right now, as it plans its merger with Genuity Inc. (Nasdaq: GENU) and sizes up the coming market challenges in light of ongoing concerns about its financials (see Level 3 President Sheds Shares). Having a shortcut to a hot market will enable the carriers' carrier to save time and money at a crucial juncture, without lessening its primary focus.
- Growing Technologies. The alliance could serve to showcase the provisioning capabilities of Multiprotocol Label Switching (MPLS), which Level 3 has championed at standards bodies (see Juniper/Cisco Duke It Out Over MPLS). What's more, it's a chance for key vendors adopted by each carrier to showcase their wares -- Laurel Networks Inc. for Level 3, and Riverstone Networks Inc. (Nasdaq: RSTN) for Neos.
- Proving ground for SLAs. A key feature of the agreement, according to Neos, is the U.K. provider's ability to offer customers "packet loss of less than 1% and target latency of 30ms to Europe and 40ms to New York." SLA claims have become the focus of much research lately (see Is Five 9s Reliability Really Reliable?), and Light Reading will hold a Webinar on the topic of "five 9s" reliability on January 23. SLAs like Neos's provide a means of examining what's doable and what remains to be done in terms of carrier guarantees.
On the downside, it remains to be seen whether Level 3 and Neos can sustain their viability in the challenging Ethernet market. Competition will only grow in the Ethernet services space. Level 3 faces an uphill climb as an established player with much on its plate. Neos must maintain its edge; it hasn't yet offered 10-Gbit/s services in Europe, for instance. At least one of its suppliers, Hitachi Ltd. (NYSE: HIT; Paris: PHA), was supposed to have updated its gear to support that speed by the end of 2002. (Inquiries went unanswered at press time.)
— Mary Jander, Senior Editor, Light Reading