Changes afoot for Genuity customers

BROOMFIELD, COLO. - Some Genuity customers soon will experience significant changes that will affect where or even if they remain on the network now that Level 3 Communications officially has acquired the troubled ISP.

Level 3 announced the deal was final last week when it revealed year-end financial results. The carrier outlined its integration plans, which include job cuts, network consolidation and dropped customers.

Although Level 3 announced in November that it would pay $242 million for Genuity, the carrier was able to acquire the bankrupt ISP for only $137 million. Level 3 says the lower price is attributed to the timing of the deal's closing and additional negotiations regarding Genuity's operating expenses.

The bargain-basement price stands in sharp contrast to the $616 million that a pre-Bell Atlantic-merger GTE paid for Genuity (then BBN Planet) in 1997.

Level 3 says it will operate the ISP as a separate business unit under the name Genuity Managed Services.

While Level 3 is buying the majority of Genuity, it is leaving some assets behind. The carrier has not acquired any of Genuity's international assets. Because of this, Level 3 will only hold on to customer contracts that have connectivity in Europe, where the carrier has connectivity. Customers that have Genuity services going to other areas overseas will have to look for a new provider.

The carrier also says it will eliminate customer contracts that are "not profitable." Level 3 did not say exactly how many customers would be cut or when they would be migrated off the network. The carrier says it will contact all Genuity customers within 72 hours of its announcement to ensure they are smoothly migrated to the ISP's new parent or notified that they need to look for a new network home.

"It was a surprise to hear that Level 3 was eliminating some customers, but it's probably a good idea as they try to turn Genuity around," says Courtney Munroe, an analyst at IDC. "[Level 3] wants to solely focus Genuity on the high-end, high-margin managed services portion of the business, which means divesting itself of transport-only Genuity customers."

Level 3 also says it is reducing the number of Genuity data centers and points of presence from eight to two and from 70 to 10, respectively. This means that most customers that the carrier doesn't cut off will need to be migrated to new POPs or data centers.

The geographic location of servers at a data center should not affect existing hosting customers, Munroe says. As long as Level 3 handles the transitions well, users should not see a change in service quality, he says.

Paul Gudonis, who was CEO at Genuity since 1994, is staying onboard as an executive vice president at Level 3. Gudonis initially will work with senior management at the carrier on the integration, according to a written statement by Level 3's CEO James Crowe. Gudonis' future role was not defined during the company's press conference.