What are the defining factors of a Tier 1 provider vs. a Tier 2 provider? That was a question posed to me by a regular reader of this newsletter.

The reader wrote: "Many Tier 2 providers nowadays have their own IP backbone running at OC speeds with full redundancy and peering points, both private and public. For example, is SBC, which spans the majority of the U.S., a Tier 1 provider or a Tier 2 provider?"

I contacted Brownlee Thomas, principal analyst for Global Telecom Services at Forrester Research to get the latest insight into how to differentiate between Tier 1 and Tier 2 providers. She explains that identifying a Tier 1 provider for a particular corporate telecom buyer depends on the geographical layout of that buyer's network.

"Who is a Tier 1 carrier depends on who is the buyer," Thomas says. "If you need a regional service that SBC can provide, then SBC would be a regional Tier 1 provider for you. If you need a national provider, then Sprint would be a national Tier 1 provider because it owns or controls a sufficient amount of the underlying network infrastructure to be a Tier 1 provider. But Sprint wouldn't be a global Tier 1 provider because it only operate in 20 countries.''

Thomas says that to be considered Tier 1, a carrier must own or control sufficient portions of its underlying network infrastructure to be able to meet market-leading service level agreements.

A Tier 1 provider is "able to offer market-leading SLAs and in addition either owns or controls the substantial portion of the underlying network infrastructure to connect 90% of its customers," she says.

That's why many carriers are Tier 1 in particular locations, but not globally. For example, NTT is a Tier 1 provider in Japan but not in the U.S. or Europe.

Thomas identifies five global Tier 1 service providers: AT&T, British Telecom, Equant, InfoNet and MCI. She considers Sprint to be just below this mark because it only operates in 20 countries. To be a global Tier 1 provider, she says the carriers must operate in all the key countries and cities in the U.S., Europe and Asia.

To be considered Tier 1, carriers also must be organizationally stable and financially viable, Thomas says. That's why she says neither Global Crossing nor XO Communications would qualify as Tier 1 carriers. However, she considers MCI to be a Tier 1 provider because its bankruptcy proceedings were caused by fraud rather than the company' business performance.