Successful peering agreements and their inner workings usually don’t get their own press releases, but not so today’s settlement-free peering agreement between Level 3 Communications (NYSE:LVLT, news, filings) and TW Telecom (NASDAQ:TWTC, news, filings). But while it hasn’t been in the news lately, Level 3 has been on the warpath regarding the way such agreements ought to be designed ever since the dispute with Comcast a couple years back.
In this agreement, tw telecom and Level 3 publicly agreed to a bit-mile model that sounds a lot like the one Level 3 has been pushing. It measures both the volume of traffic exchanged and the average distance that traffic is carried, and strives to balance the product of the two. Unlike the increasingly silly ‘traffic ratio’ metrics that are often seen, this one has a much more readily understood relationship to the underlying cost structure.
For Level 3, the benefit here is gaining a public ally for its proposed model. If bit-mile peering becomes the norm, it would make it easier for carriers to manage their traffic relationships as video traffic dwarfs everything else on the backbone. Since Level 3 owns the largest CDN of any carrier, it’s something they care about a lot. The dispute with Comcast was never fully resolved, and could easily flare up again in some form.
On the other side, tw telecom gets an upgraded peering agreement for its IP backbone, which has never been the company’s focus and according to Wikipedia had a paid peering relationship with Level 3 before now. tw telecom has always viewed IP transit as something that makes its metro fiber more valuable, and not so much the other way around. Their IP backbone may not be their main business, but it is nevertheless an important part of the company’s cost structure.
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Does anyone even really care about LVLT anymore? At 18/share obviously the market doesn’t.
I don’t know anyone who is a fan of L3, but that’s different than not “caring.” They are a major player that has to be reckoned with, like it or not.
And from what we know of Time Warner Telecom, the only way they entered into this agreement was if they had already measured and analyzed the snot out of it and knew it would be fine for them. They are about as conservative as they come with the dollars.
The real victory for L3 would come in signing on someone who might actually have something to lose, like say Cogent. I know back in the day L3 and Cogent went at it because basically Cogent was using L3’s backbone as a transit for their own private services and selling it dirt cheap – all while calling themselves a “peer”… which is laugh out loud funny, but they got away with it when all the torrent stealers and porn companies went dark during an L3 de-peering war. They complained loud enough and got a couple cableco’s on their side, and L3 lost the PR battle once again.
Maybe if they weren’t such @#$% with an awful track record they would garner more sympathy for what I think is a very legitimate gripe.
can you elaborate on Level 3’s awful track record. I do not know much about them.
Simple…look at their 5 or 10 year chart. Better yet, Google LVLT and ‘stubbed toe’ and that will help summarize their pathetic existence.
You might be better served by Googling, “LVLT is too hard to figure,” or “you will have to go that one alone,” son. If you come up with the correct answer to the “author” of such prescient advice, you will win a “free” ticket–similar to the historical settlement free “schemes encumbering “great builders” like Walter Scott–to Omaha, NE in order to attend The Oracle’s ASM. That was a good slam though, I’ll give you that! 🙂
Please, PLEASE! Could one more person complain about Level 3? I don’t think this page could be complete without another one.
I think these sort of people have nothing better to do than bitch about things that really don’t matter. Perhaps your time would be better spent doing something constructive.
Relax. Most of us are doing plenty constructive.
One of those things is to have an open and honest debate about our industry so that information and opinion is shared with as many people as possible.
If your tin ears don’t think that critique is “constructive,” you should spend your time not reading this blog.
I suppose we could go back to XO bashing instead. *rolls eyes*
Rarely do the commentators have anything useful to say about Level 3 or XO and should really just stop talking.
0MG, THERE’S A LEVEL 3 (OR XO) ARTICLE!! I HAVE TO GO THERE AND COMPLAIN ABOUT THEM BECAUSE I WAS FIRED DURING X CONSOLIDATION!!!
Got a chuckle and can’t say I disagree with that! Some of the critique is disgruntled exers, but thats not the same as saying there isn’t legitimate critique of those two firms. I wasn’t part of either company or their layoffs, but I know a pattern when I see one.
Since time warner telecom’s exit strategy, continues to be the constant drum beat of selling themselves while they avoid more aggressive acquisitions on their own, this certainly changes the calculus of any would be “Acquiror.”
Most importantly, that would include Century Tel(CTL), one would think.
Rob, when you weigh the Metro Market Factors including on and off ramps by CTL, does this make an acquisition of twtc by them more or less plausible while following the “distance formula” for determining equal freight exchange?
It’s tw telecom NOT Time Warner Telecom you would think you all could get it right, they have not been time warner for like 4 years. geezzzz. twtc wants nothing to do with Time Warner’s crazy MSO.
Ha, good call. I even still see press releases (not from them obviously) get it wrong. It’s like when L3 (the defense contractor) and Level 3 (the telco) get mixed up too. I think there was a CEO death a few years ago that was mis-reported as being the Level 3 CEO, and their stock tanked before Motley Fool and others could correct the ticker symbols in their articles.
This isn’t really all that surprising of a move for TW Telecom. If you think about the size and scope of L3’s network and your expanding as rapidly as TW Telecom is you need fill in gaps for AS prefix reachability and AS Cone customer relationship association.
CAIDA has done a nice job showing the relationship b/w AS rankings and prefix, cone reachability: