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Nargiz Umayeva Kevin Port Torrey DiCiro Remy Magnier Anthony Li

Nargiz Umayeva Kevin Port Torrey DiCiro Remy Magnier Anthony Li. BEGINNING OF LEVEL 3. Roots as Kiewit Diversified Group (1985) Construction Coal Mining Pennsylvania CLEC Hired James Crowe from World Com CEO, COO, and Exec-VP team all departed. 1997 WITH JAMES CROWE.

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Nargiz Umayeva Kevin Port Torrey DiCiro Remy Magnier Anthony Li

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  1. Nargiz Umayeva Kevin Port Torrey DiCiro Remy Magnier Anthony Li

  2. BEGINNING OF LEVEL 3 • Roots as Kiewit Diversified Group (1985) • Construction • Coal Mining • Pennsylvania CLEC • Hired James Crowe from World Com • CEO, COO, and Exec-VP team all departed

  3. 1997 WITH JAMES CROWE • 4 years as CEO of MFS Communications (CLEC) • Bought UUNet early in the year to make one of the largest Internet Service Providers • Later in the year, acquired by WorldCom • Subsequent culture clash with WorldCom, then departure to Kiewit.

  4. 1998 TO PRESENT • KDG agreed with business model – Spun off communications division– Level 3 stock • Built IP network from scratch in two years – US, Asia, Europe • Currently #9 World bandwidth provider. • UUNet still #1 – Crowe credited for outstanding vision

  5. PRODUCTS • Data Transport & VPN • VoIP innovator on all IP network • Consulting – E-commerce – Web Hosting • Co–Location Facilities (3 million sf) • Managed Dial-up • Dark Fiber Sales

  6. STRENGTHS • No circuit switching infrastructure • Construction affiliate • Experienced Management Team • Targets High bandwidth consumers • Expandable network • Funded for construction for current network plans • Largest Revenue Growth in Segment (120%)

  7. WEAKNESS • Reliant of VoIP new technology • Reliant on growth of last mile baseband • (1.46), (4.36), (6.76), (6.39), (4.98), (2.19) 99 00 01 02 03 04 • Price Wars to gain Market Share • Future equipment cost uncertain

  8. OPPORTUNITIES • 300x Increase in bandwidth demand – 8 years • DSL, Cable, LMDS, MMDS • Napster • Video-on-Demand • Video Conferencing • First Mover in Co-location facilities • Dark Fiber sales can increase cash flow

  9. THREATS • Mergers or Aquisitions • Price Wars to gain Market Share • Other entrance to market

  10. Company Market Cap. Cap. Change YTD Net PP&E Adj. Revenue Y/Y Sales Growth Colocation Space (sf) Total Cash Current Ratio Global Crossing 12.454B -65% 7.909B 1.226B 39% None found 2,295M 0.85 Level 3 11.428B -54% 7.042B 0.234B 120.8% 3 million 6,405M 3.61 360 Networks 10.579B -28% since IPO 2.454B 0.158B 94.8% Planned 1,529M 2.09 Williams Comm. Group 6.375B -52% 3.511B 0.515B 3.23% 2 million 327.8M 1.22 COMPETITION

  11. GLOBAL CROSSING • 101,000 route miles, serving more than five continents, 27 countries, and over 200 cities • Began life in 1997, laying undersea cables • Exploring new frontiers • Ixnet • IPC • GlobalCenter

  12. Williams Communications Group(WCG) • 33,000 route miles by year-end • Business Structure • Network • Solutions • Strategic Investments • Financial strength questionable • Inexperienced Management

  13. 360 Networks (TSIX) • Formerly known as Worldwide Fiber • Began life in 1987 as the telecom division of Ledcor Industries • By the middle of 2002, fiber optic network will measure approximately 88,000 miles • Vision drives their business strategy

  14. TECHNOLOGY Comparison of IP-over-ATM and IP-over-SONET • Interconnecting faster the ISPs backbones routers • SONET is a physical layer technology • SONET ring provides point-to-point connections between routers through the use of PPP • ATM as a link layer technology, connection-oriented transport mechanism • IP-over-ATM: ATM as the underlying data transport technology while still using existing IP applications

  15. IP-over-ATM vs. SONET • Protocol Overheads ATM < SONET • Bandwidth Management ATM > SONET • Quality of Service ATM > SONET • Addressing & Routing ATM > SONET • Flow Control ATM > SONET • Multiprotocol Encapsulation ATM = SONET • Fault Tolerance ATM = SONET

  16. IP-over-ATM vs. SONET • IP is rapidly becoming the network layer technology of choice for building packet networks • SONET is being widely deployed by carriers and is likely to be the physical infrastructure for interconnecting routers over the wide-area network • SpeedIP-over-SONET • Flexibility in bandwidth management, quality of service and network engineering is importantIP-over-ATM • Will it be ATM or PPP between IP and SONET?

  17. DEMAND SCENARIOS • Prices fall • Cable and DSL overcome the last mile • LMDS and MMDS overcome the lack of copper infrastructure • 1% Price droprevenue or demand will increase by 2% because of highly fixed and low variable costs (Deutsche Bank) • CNET forecasts a 300-fold increase in demand of bandwidth by 2010

  18. DEPLOYMENT SCENARIOS • ISP backbones IP/SONET & IP/ATM • Corporate intranets IP/ATM • Campus backbones TAXI, STP, UTP Cat-5 & IP/ATM • Carrier networks IP/SONET, ATM/SONET, IP/ATM

  19. STRATEGY • Price policy • Crossroads' model: keeping as much traffic on Level(3)'s network gives a 20% fees reduction • DSB: Destination Sensitive Billing • Level(3) #1 for the wholesale market (ISP) • Lower prices to gain market share and satisfy the investment community

  20. STRATEGY • Bandwidth builders cooperation • High-cost construction: share the costs and risks • Co-digging • Duct sharing • Facilities sharing • Save time, crucial in Europe’s booming Net market

  21. STRATEGY • Focus on dark fiber deals • Expanding via internal efforts rather than through M&A • Structural excess of capacity (10 to 12 pipes) • The CoreExpress deal(extranet services provider) • Level(3) fiber as its national backbone network • 20-year deal to use the 23,000 miles of fiber • Cost of lighting its own equipment < leasing

  22. STRATEGY • The move to packet • Marketing tool • World’s first end-to-end network for IP technology • Packet switching technology allows multiple transmissions to share the same line • More information to be transmitted at the same time • At a far lower cost than traditional circuit switch

  23. STRATEGY • Preserved from M&A • Leases much of its network from other carriers • Small number of customers (wholesale model) • Wholesale emphasis brings customers to them • Rather than forcing them to “purchase customers” through M&A

  24. CONCLUSION • Broad array of products will increase customer switching costs • Competitors are following same strategy • Wholesale model enables to gain market share faster than competitors and satisfy the investors

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