Price drop puts Level 3 in CDN spotlight

* Level 3 takes aim at content delivery market with new pricing model

Who doesn’t like a bargain?

In an effort to boost uptake of its content delivery network (CDN) service, Level 3 Communications is drawing on the appeal of a good deal. The service provider has said it will offer its CDN service for the same rate as basic Internet access service, rather than charging a premium for CDN features.

The new pricing structure is aimed at enticing customers with large-file, large-volume needs, such as those that have to deal with software downloads, live-events and video file distribution. It’s also a sign Level 3 is serious about managed services and ready to challenge market veterans like Akamai Technologies and Limelight Networks

Amy Larsen DeCarlo, a principal analyst at research firm Current Analysis, said the new pricing model is a positive move for Level 3 (a relative newcomer to the CDN market) as well as IT buyers.

“Level 3’s pricing gambit is a boon for customers – and a challenge to every competitor in the space,” DeCarlo wrote in a research brief. “Level 3 read the market perfectly and responded with the best maneuver it could make to elevate its own status in the CDN space overnight in a battleground dominated by price.”

The service makes use of Level 3’s existing long-haul network and collocation assets as well as CDN assets the company gained in its $135 million acquisition of Savvis’ CDN business

The Savvis deal, completed in January, is among seven acquisitions Level 3 has made in two years. It acquired Broadwing for $1.4 billion and WilTel for $700 million -- two deals that helped Level 3 quickly gain business customers, business service offerings, and network assets. It also bought Progressive Telecom for about $68.5 million and ICG Communications for $163 million.

With Level 3’s $1.2 billion TelCove acquisition, the service provider gained 22,000 route miles of local and long-haul fiber. Lastly, Level 3 acquired Servecast in July for $45 million (and expects to complete the full integration of the video management platform it gained as part of that acquisition of in the first quarter of 2008).

Level 3 says its new CDN pricing structure is one element in a continuing rollout of services and features. In May, Level 3 announced the availability of caching and downloading features. Looking ahead, the company plans to introduce streaming services supporting all major formats by the end of 2007.

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