Level 3 Communications is using its industrial-strength network infrastructure to beef up the content distribution network (CDN) technology it acquired from Savvis in January, and will launch the new service at Streaming Media East in New York next week.
The CDN offering fills out Level 3's offerings in the content distribution business, and will be a key element of its efforts to build business among emerging Web 2.0 companies in the video, gaming, SaaS and rich media advertising sectors.
Level 3 operates one of the primary Internet backbones, and has used its platform to create a CDN infrastructure focused on existing web traffic patterns. "We're creating fewer, larger clusters that are strategically located," said Lisa Guillaume, vice president of CDN product development for Level 3. "We have visibility into where all the eyeballs are, and we have the ability to scale very quickly, because we operate the network."
That approach differs slightly from the CDN infrastructure of the current market leader, Akamai Technologies, which emphasizes a widely distributed network to move the content as close to the user as possible. Guillaume said Level 3's 10 Gigabit Ethernet network is backed by a flexible infrastructure. "We own the colo facilities and can build the infrastructure around, right down to power and cooling, so we can scale very quickly," she said.
While Level 3 has made inroads into the Web 2.0 sector with its bandwidth deals with video portal YouTube and the Second Life virtual world, it is likely to find some of its best sales opportunities among existing customers.
"Many of our customers buy CDN today, and buy it from more than one provider," said Bill Wohnoutka, VP of Business Development for Level 3's Content Markets Group. The group's customers include Internet portals, major broadcasters, sports leagues, movie studios and major advertising agencies, many of whom likely use Akamai or Limelight Networks for their CDN needs.
Level 3 bought Savvis' CDN business for $135 million. The technology was initially developed by Sandpiper Networks, and subsequently owned by Digital Island and Cable & Wireless before Savvis. Guillaume said Level 3 acquired the business primarily for its intellectual property and architecture. Under terms of the agreement, some of the customers were assumed by Level 3, while other continued with Savvis.
While Level 3 is best known in the telecom and network services industries, it sees tremendous opportunity in the Web 2.0 economy. "I think we're going to see a lot of growth in online gaming, and also software as a service," said Wohnoutka. "There's also a pretty decent size set of video ASPs, and interesting opportunities in the digital advertising space."
Wohnoutka said Level 3 has tracked the development of emerging Web 2.0 services by "carefully researching what was happening in the venture capital community," participating in Always On and sponsoring events like O'Reilly Media's Web 2.0 Summit last fall in San Francisco.
Wohnoutka says Level 3's CDN offering, combined with its broader platform of network services, is well positioned to solve some of the scalability challenges faced by fast-growing social media and SaaS services. "Many of them do the same thing: they get to a certain point in scale, and then realize the carriers they are working with don't have the capacity to allow them to grow anymore," said Wohnoutka. "Leveraging our backbone gives us a scalability advantage that others simply can't match."