It has now been one year since Level 3 began its 'go local' initiative, decentralizing resources and decision making power in order to better address the mid-market enterprise segment and finally unlock the value in their 27,000 route mile metro footprint. The company is now seeing the benefits of this new approach materialize as this portion of its business has stabilized and appears ready at last to contribute to the company's growth. Is this the final piece of the puzzle that the company needs to put the past few years behind them at last? Telecom Ramblings had the opportunity recently to talk with Level 3's CEO James Crowe:
TR: Qualitatively, what responsibilities have been moved out from the center? How much more autonomy does the local general manager have than in the past?
JC: The responsibilities that were moved to a more localized model include the hiring of a General Manager and the alignment of Sales, Sales Engineering, Provisioning, Customer Care and Field Operations along a geographic axis. The goal is to better serve those enterprises that make the decision to purchase locally or regionally.
TR: How did you choose which markets to focus on and how to group them?
JC: We choose locations that were smaller to mid-size and where we could leverage our existing on net buildings, fiber plant reach, and low cost off-net access network. After the success of the first group of converted territories, we moved into additional locations where we have existing network assets.
TR: During the Q1/10 earnings call, the local markets initiative was described as substantially complete. Does that mean you have extended it to all the intended markets, or that the structure of the decentralization has been finalized?
JC: During the first quarter 2010 earnings call we mentioned that we have converted to a localized model in substantially all of our targeted territories. In the future, we may choose to add additional markets if we expand our network to additional areas.
TR: What determines the success or failure of this initiative in each market?
JC: As always, providing an excellent customer experience is very important to us. Combined with increased sales and revenue growth, that would mean success.
TR: Should having vibrant regional markets and distributed local focus help your wholesale and content groups better leverage your metro footprint as well?
JC: Our wholesale group has been utilizing our metro footprint for many years. However, we do think additional local awareness will be useful in both assessing network expansion opportunities and detecting additional opportunities to better serve our wholesale customers.
TR: Prior to this initiative, did the lack of local knowledge and decision-making power contribute to the challenges faced by the wholesale group over the past year or two as well?
JC: No, the challenges that faced our Wholesale group in 2009 were mainly from the difficult economy and deferral of purchases by large customers.
TR: How does Level 3's improved local presence affect its approach to Fiber-to-the-Tower opportunities? Have you seen more tower activity in these markets?
JC: Fiber to the tower opportunities generally fall under our Wholesale Group. That said, with our additional local presence and an expansion of our metro footprint we will likely have the ability to reach a greater number of towers. However, our overall strategy is to continue adding many types of high bandwidth locations to our network, not just towers.
TR: M&A activity in the metro sector has increased thus far in 2010. Has Level 3's experience with such assets since buying Progress, Telcove, Looking Glass, and ICG in 2006 changed the way it views such purchases?
JC: These acquisitions were designed to significantly increase the amount of metro facilities that Level 3 owned to strengthen our end-to-end service offerings. The benefit of owning metro facilities is still apparent, and we believe that further consolidation is probable. We expect to be an active participant.
TR:Thank you for talking with Telecom Ramblings!