Where's Level 3 Business Markets?

August 31st, 2008 by · 13 Comments

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:

City State Enterprise Bldgs
Harrisburg PA 401
Burlington VT 361
Philadelphia PA 304
Jacksonville FL 249
Wichita KS 240
Nashville TN 226
Denver CO 207
Buffalo NY 203
Richmond VA 184
Louisville KY 163
Pittsburgh PA 158
New York NY 121
York PA 116
Charlottesville VA 112
Little Rock AR 111
Rome-Utica NY 111
Scranton PA 109
Washington DC 99
Jackson MS 84
Syracuse NY 75

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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Categories: CLEC · Metro fiber

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13 Comments So Far

  • Rob Powell says:

    I have made a correction to the above post. Level 3’s new interactive map strangely excludes one of their biggest markets: Burlington VT and the surrounding area. I dug up the old Telcove info and found some 375 on-net buildings there.

  • The interesting thing is Burlington has a large muni-fiber install that they compete with.

    I think the key takeaway from this data (nice job BTW) is that all connected buildings totals are not equal.

    A GAO report (see page 25) has a nice snapshot of connected buildings in some markets. Taking this data (if it was available for all markets) and overlaying it with a carriers per market footprint would yield a ‘market penetration’ number that would be useful.


  • One more note… the markets on this list account for 3634 buildings, roughly 1/2 of Level3’s connected building total.

  • Rob Powell says:

    Thanks Andrew. Another difficulty in comparing the data, however, is that people tend to define metro areas differently. Do you combine Tamp/St.Petersburg/Clearwater or not? How about San Francisco, San Jose, and Oakland? Even if I could get similar data from, say, TWTC, it wouldn’t be consistent due to different definitions.

    I wonder if it would be useful to do it by population figures. For instance, take the gross building numbers from your GAO report, get some averaged buildings/demand per 1000 people, calculate the approximate # of buildings for each metro, then use it to calculate penetration. It would be inaccurate I’m sure – just a broad look, but it might be interesting.

  • What really needs to happen is investors should demand metrics from the companies that help us understand the operating results. Retailers give same-store sales, etc.

    That would be an interesting discussion for the sharp readers of this site. Revenue/building and an equivalent rev/building that removes any new building adds (revenue trends among installed base).

    This would significant improve the ability of mushroom investors (in the dark . . ) like myself to benchmark network/customer quality.

  • Frank A. Coluccio says:

    Prior to Andrew’s first post above (No. 2 in this subthread), I had been contemplating expressing a similar observation concerning the relative sizes of buildings being taken into account. My thought was, any two large buildings in NYC or CHI might contain as much potential business (bandwidth consuming potential, if not actual consumption) as all the buildings in Topeka, say. Maybe that’s stretching it a bit, but hopefully you see where I’m coming from.

    More ‘meaningful’ data would probably include the number of sq. ft. served, if not also the number of personnel within those buildings served and, just as importantly, the types of businesses those buildings currently house.

    As for the seemingly amorphous boundaries of Metro areas and other criteria, maybe this is why Zip Codes (LATAs? Nah…) were invented, although who wants to step up to the plate and volunteer to get the industry to coalesce around such a convention?

  • From an accounting perspective it isn’t fair to ask companies for what revenue a particular building is capable of generating.

    I would like to have a full listing of connected buildings, per carrier. Then the market could do the analysis and make a determination of connected building quality (as well as uniqueness).

    In addition to this, the carrier could provide “same-building revenues” year over year, similar to same store sales.

    This would be a good start.

  • Rob Powell says:

    A few carriers do actually do give out their full on-net lists. RCN Metro has list of its on-net buildings on its networks, as do Zayo, AGL Networks, and others. Usually it is the big players (TWTC, LVLT, XO) which are stingy with this sort of information – probably because it is a bear to maintain after a while. LVLT’s data dump via that interactive map is the most they have given out since the pre-M&A days they had 900 on-net buildings and listed them all by address on their website. As for same-building revenues – I’d love to see it but I seriously doubt it.

  • Frank A. Coluccio says:

    Some additional insights might be gleaned by analyzing the breakdown of buildings served by AT&T’s TCG component and Verizon’s Worldcom component(s) during the DoJ action that caused them to divest those properties. As I recall, the granularity of those on-net buildings was high, although this may be attributed possibly to exhaustive analyses performed after the order was issued in order to prepare for the filings.

  • Greg says:

    My appologies if I am being dense, but I find no info on the various markets.. I can load a pdf file on the cities but no addresses or any usable info… is this operator error??
    If so please provide simple directions for my simple mind..


  • Rob Powell says:

    Well, there never were any addresses, presumably you could get those under an NDA.

    However, I see that Level 3 has remove the ‘enterprises’ category from the buildings they report on their interactive map. That’s disappointing if permanent…

  • I’m part of TW Telecom’s wholesale organization. We update our lit building list every month and I’ve got many customers that want a copy of that document every month. When you include our end-user buildings, POP’s, data centers and LSO’s that we are collocated in we have over 11,000 lit buildings at this time. As long as one of my customers signs an NDA, I can share that list with them.

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