Based on its recent analysis of the wholesale synchronous optical network (SONET) services market, Frost & Sullivan recognizes Level 3 with the 2009 North American Frost & Sullivan Award for Market Penetration Leadership for its significant market share gains in the past two years.
From a revenue share of 7.9 percent in the base year 2007, the company increased its presence to 14 percent in 2008. At the same time, the company moved up in the rankings, from 4th place among all carriers in revenue market share in 2007 to 3rd in 2008. Further, the 44 percent increase in share came at a time when the total wholesale SONET services market grew at around 3.4 percent, indicating that Level 3 was able to capture market share from its competitors.
While it was expected that the introduction of Ethernet services would send SONET revenues into a free-fall decline, the popularity of Ethernet has actually served to bolster revenues. Wholesale SONET services not only continue to generate healthy demand from carriers that value its reliability, but in many cases, carriers use SONET as the underlying transport technology for the Ethernet services they sell to enterprises. Wireless providers depend on SONET to provide highest quality voice services, and they are not willing to sacrifice voice quality by moving that traffic to an IP based network.
However, as newer, alternative technologies catch up in their quality and reliability, SONET revenue will eventually take a hit. In particular, as Ethernet services (particularly long haul) evolve, they will become more reliable and carriers will structure strong, SONET-like service level agreements for them, thus whittling away at SONET revenues. Similarly, in the wireless arena, as next-gen 3G and 4G services gain deeper penetration into markets, Frost & Sullivan expects a significant migration toward wavelength services.
Despite these factors, Level 3 has adapted and continued to grow, gaining share during the last year, even as its higher-ranked competitors slightly lost revenue share. With a strong reputation as a wholesale provider, Level 3 has leveraged its relationships with carriers to maintain a steady share of the IXC, RLEC/CLEC and wireless provider markets. It has further benefited from the reluctance of its two largest competitors to do business with one another.
"Level 3's extensive fiber metro and long-haul networks have enabled it to serve carriers who are looking to deploy Ethernet over SONET services to their customers," says Frost & Sullivan Research Analyst Lynda Stadtmueller. "The reliability of the SONET network is also suitable for video transport. In addition, the company's SONET services garner a share of the rapidly growing market for wireless services, as providers seek additional bandwidth to back-haul their traffic, particularly voice, as well as access to cell towers."
Level 3 has expanded its portfolio of SONET services. For instance, the recently launched Extended On-Net service leverages the company's extensive fiber network by opening gateways along fiber routes that run through rural areas, allowing regional carriers to provide high-bandwidth connectivity to rural customers. The company reports solid sales for the service, and expects to gain further traction from the federal government's Rural Broadband Initiative.
"While some carriers have stopped selling SONET services at the higher speeds (i.e., OC48 and OC192), instead substituting wavelength services, Level 3's portfolio includes both wavelength and high-speed SONET," notes Stadtmueller. "This allows it to meet the needs of a strong base of international carriers, which often prefer fully provided service such as SONET to a more labor-intense ‘do-it-yourself' option such as wavelength services."
Overall, Level 3 continues to thrive in the wholesale SONET services market and Frost & Sullivan has chosen it as the worthy recipient of the 2009 North American Frost & Sullivan Award for Market Penetration Leadership. Each year, Frost & Sullivan presents this award to the company that has demonstrated excellence in capturing the fastest measured rate of change of market share within its industry. This award recognizes how fast a company increases its penetration of a market, in terms of revenues or units as specified.
Frost & Sullivan's Best Practices Awards recognize companies in a variety of regional and global markets for demonstrating outstanding achievement and superior performance in areas such as leadership, technological innovation, customer service, and strategic product development. Industry analysts compare market participants and measure performance through in-depth interviews, analysis, and extensive secondary research in order to identify best practices in the industry.
About Level 3
Level 3 Communications, Inc. (NASDAQ: LVLT) is a leading international provider of fiber-based communications services. Enterprise, content, wholesale and government customers rely on Level 3 to deliver services with an industry-leading combination of scalability and value over an end-to-end fiber network. Level 3 (Level3.com) offers a portfolio of metro and long-haul services, including transport, data, Internet, content delivery and voice.
About Frost & Sullivan
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