* Level 3's acquisition of WilTel could make it a strong second-tier player behind AT&T/SBC and Verizon/MCI
Level 3 Communications finalized its acquisition of WilTel Communications Group in late December, creating a service provider that could become a strong second-tier player behind mammoths AT&T/SBC and Verizon/MCI.
Level 3 and WilTel are providers of wholesale communications services to other service providers. Level 3 bought WilTel for its network assets.
“The transaction will significantly increase the size of Level 3’s communications business by increasing the scale of the company’s transport, IP and voice business,” Level 3 President and COO Kevin O’Hara said in a statement. “In addition, broadening our network capabilities will facilitate increased network reach by adding 3000 additional route miles, access to 50 new markets and improved responsiveness on high demand routes.”
Level 3 sells a range of IP services including IP VPNs and VoIP to systems integrators and resellers, which offer them to enterprise customers. WilTel, however, had a fledgling business selling MPLS, Ethernet and storage services direct to enterprise customers.
It’s unclear how the combined company will approach the enterprise market. Level 3 officials won’t provide details yet about their enterprise marketing plans. However, analysts say Level 3/WilTel could find a niche in the enterprise market.
“There will be lots of opportunities for second-tier players that own capacity like Level 3 or Global Crossing given the expected distraction of the top tier carriers involved with major mergers and acquisitions,” says Brownlee Thomas, a principal analyst for telecom and networking with Forrester Research.
Thomas says Level 3/WilTel would be a good secondary provider for applications such data centers, call centers, contact centers and VoIP.
“Backup between data centers is a good proposition for them,” Thomas says. “If you have one primary data center and regional data centers, between the data centers is your core WAN. You need a lot of resiliency, but you don’t necessarily want to pay the full price of an AT&T solution. Someone like me would say to the enterprise that it shall not single source. So if you’re going to dual source, you might choose AT&T as your primary and Level 3 as your back-up provider.”
Thomas says another good option for the new Level 3 is to provide access to virtual network operators (VNO), which offer managed network services to enterprise customers but don’t own their own networks.
“There will be opportunity for bandwidth owners and operators to hit the middle ground and sell to consultancies and VNOs,” Thomas says.
Thomas says the Level 3/WilTel combination “makes a lot of sense.” But she points out that the combined service provider is still significantly smaller than the AT&T/SBC and MCI/Verizon combinations. “There’s a big gap between AT&T and Verizon and everybody else,” she adds.
More about the Level 3/WilTel acquisition closing can be found here.
