Last month, Level 3 Communications (NYSE:LVLT, news, filings) announced that it had quintupled the Ethernet switches in its core network. After discussions with the company it is clear that what was just phase 1 of an Ethernet offensive that is now well into phase 2, which entails offering Ethernet Switched Access (ESA) via new equipment that is being deployed across its entire network footprint. By being able to offer ESA, Level 3 can offer more flexible products and pricing to the enterprise market.
ESA is a shared service, meaning that the access link can be used by other streams of data when the capacity isn't in use. Ethernet links are sold end-to-end, but they are built out of three pieces: an access link on each end and a core link in the middle. Often, carriers will sell a switched Ethernet service that is made up of a switched core link but with more expensive dedicated access links. With this additional expansion, Level 3 will be able to offer both dedicated and shared services contiguously from one customer location to another. Thus they will be able to price such products more competitively and increase their addressable market.
It is no coincidence that Level 3 is making such a move just as Ethernet exchanges like those of CENX and Equinix are beginning to flower. By extending their next generation of Ethernet offerings to their entire on-net footprint, they will be able to take full advantage of all those end points available through both exchanges and direct NNI's to other carriers that they are still adding. Likewise, they will be able to present their entire, unified on-net footprint of over 8000 lit buildings to other participants in the increasingly interconnected Carrier Ethernet world.
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