Level 3 has had a new interactive map of their USA network assets available on their website for some time now, and it has a wealth of information. If you click on each city, they break down how many of each type of on-net building they have in that city. Or to be more specific that they had at the time of the map's creation - nobody updates these things in real time of course. So this presents a busybody (me) on a long weekend with the chance to actually go city by city and run some numbers. Want to know just where Level 3 has an enterprise business and where it doesn't?
Well, I did, so I checked - and I got results I didn't really expect. Well, in hindsight I should have - but I simply hadn't thought about it. Here are Level 3's top 20 markets for 'End User Buildings' only:
The first thing to notice is what isn't there, by which I mean the places Level 3 is traditionally very strong in wholesale and has longstanding and deep metro fiber. San Francisco, Los Angeles, Dallas, Seattle, Atlanta, and Chicago are all somewhere off the bottom of the list. Philadelphia is #3, Denver makes #7, New York is #12, Washington DC is #18. Dominating this scant group of Tier-1 cities on the list we have powerhouses like Harrisburg, Burlington, Wichita, Jacksonville, Nashville, Richmond, etc.
Obviously this is because Level 3's Business Markets footprint comes from Telcove and ICG, which chose not to fight in the big cities. But it lets us say something about Level 3's strategy from here to grow its enterprise business. Level 3 has fantastic fiber footprints in some huge markets where their enterprise presence is still very small. To maximize growth they need to leverage the successes in Harrisburg and Jacksonville in markets like NYC, Miami, San Francisco, Dallas, LA, etc - virgin markets to them for enterprise where they should have advantages of scale at their fingertips. If they can get 400+ buildings in the Harrisburg area (pop 600K), there should be thousands available in the Chicago area (pop 9.7M) - so growth is probably easiest in the largest cities now for Level 3 whereas Telcove and ICG lacked the resources to attack those markets. In targeting these places, Level 3 will probably de-emphasize selling to the enterprise in smaller markets where they don't have a big presence or any realadvantage, places like Okahoma City, Portland, Indianapolis, etc.
Of course, there are other factors, uniqueness of the fiber footprints, competition levels, etc, but I think this geographical shift in focus is probably the biggest one for Level 3 right now. What I'm getting at, albeit slowly, is that it takes more than solid integration of the existing assets for Level 3 to make its Business Markets group ready to take on the world. After integration, they must shift assets around in order to attack the right new places, and this will take time and effort. Hence, it would be smart to look at growth from Level 3's wholesale and content revenue to show up later this year moreso than enterprise revenue.
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