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On the LevelOn the Level

Channel Partners

October 1, 2007

8 Min Read
On the Level

Kevin O’Hara
Photo by Susan Goddard

Level 3 Communications Inc. has been in the spotlight lately because of its two-year acquisition spree a roll-up strategy that is an integration challenge that can confound the best of operations. On top of that, the company has acquired its way into the enterprise business, making its wholesale-only approach a strategy of the past. The new enterprise focus comes primarily as a result of its CLEC buys, namely ICG Communications Inc., Telcove Inc. and Broadwing Corp. With that comes integration of not only operations but sales forces, including indirect channels.

On this front, Level 3 is 0 for 1, having shuttered a channel program for a hosted VoIP product for businesses in 2003. With its retail acquisitions in tow, the company is giving it another go. Although Level 3s current agent program is relatively new, the companys approach has been lauded from rollout and execution to product and support. Its executives are intent on adopting best practices from successful distribution models found in the data-centric world to make Level 3s program a standout in the carrier world.

In my 14 years of experience in this industry, I have never seen better execution of the roll out of a channel program, says Vince Bradley, president and CEO of master agency World Telecom Group. From doing a survey for best practices before rolling it out and having an advisory board prep call to one of the best go-to-market planning sessions we just had, these guys do a fantastic job. He adds that the companys national support structure is also one of the best we have ever seen.

Level 3 launched its program in fall 2006, before finalizing the Broadwing acquisition, which came with a mature agent program. Former top Broadwing agents told PHONE+ in late summer they are pleased so far with Level 3s approach to combining the organizations, which is headed by Craig Schlagbaum, vice president of indirect sales.

To find out more about the companys plans for the channel, PHONE+ interviewed Kevin OHara, president and COO of Level 3. OHara is responsible for the day-to-day operations of the communications business and is a likely candidate to succeed CEO James Crowe when he retires. He has a long history with the company and the telecom industry. Prior to joining Level 3, he was president and CEO of MFS Global Network Services. Earlier, he also served as president of MFS Development, and vice president of network services for MFS Telecom. Prior to MFS, OHara spent nine years in management positions with Peter Kiewit Sons Inc., the company that formed both MFS and Level 3 (with different names) in the 80s under its Kiewit Diversified Group subsidiary.

Q: Can you summarize the companys positioning as a result of its recent acquisitions?

Because of the acquisitions, we are stronger financially and have a more attractive service portfolio. We are one of the few if not the only true nationwide facilities-based alternative service providers. We have strengthened our traditional market-leading wholesale business, and we are now well positioned to address the needs of the enterprise community. With networks in 116 North America metro markets, a leading backbone connecting all of these markets together, one of the largest IP networks in the world, and an aggregate of approximately 6,800 traffic aggregation points and buildings in North America directly connected to our network, we believe that we are the company best positioned to meet the evolving technical and service requirements of our target customers.

Level 3s M&A Activity

Oct. 2005

WilTel Communications Group LLC

$680 million

March 2006

Progress Telecom LLC

$137 million

April 2006

ICG Communications Inc.

$163 million

May 2006

TelCove Inc.

$1.24 billion

June 2006

Looking Glass Networks Inc.

$165 million

Oct. 2006

Broadwing Corp.

$1.4 billion

Jan. 2007

SAVVIS content delivery network services business

$135.2 million

July 2007

Servecast Ltd.

$45 million

Q: How does this positioning square with the companys view of the future of this business?

We believe that the future belongs to companies that own their facilities and that can leverage the evolutions and revolutions in technology and services for the benefit of their customers. Specifically, due to overall industry consolidation and the strong demand for enterprise services, todays market presents many opportunities for Level 3 and its business collaborators or partners. As more enterprise companies demand solutions to support bandwidth-intensive applications, Level 3 and its business partners are well positioned to solve business challenges with next-generation IP/Data solutions. We are enabling customers to migrate from legacy technologies such as frame relay, ATM and private line services to IP and VPN services, including Ethernet technologies. We are also a key enabler of the industry trend to replace circuit switched voice with VoIP services. These solutions require the right network, the right services and consultation with experts like our business partners who can help customers grow with these types of solutions.

Q: What is the status of the acquisition integrations overall and as it concerns the channel programs where applicable, e.g., integrating Broadwings program?

We have made a lot of progress in our integration efforts and overall we remain on track. Specifically relating to our Business Partner Program we have standardized all order forms and processes across the acquired companies and networks into one standard form. This will provide better quality and reduce complexity resulting in a more efficient order process. We are currently integrating the billing systems from the seven acquired companies and moving to a single Level 3 standard billing system. With respect to quoting and ordering, we have simplified the quoting process by decentralizing it to our Partner Sales Managers, which is designed to enable faster turnaround.

While we are pleased with the progress that we have made, we recognize that much more work needs to be done in order to efficiently support the high level of demand that our business partners are experiencing in the market, as well as the service requirements that their customers are expecting. As a result of these ongoing activities, participants in our Business Partner program should expect to see further operational improvements during the balance of 2007 and throughout 2008.

Q: Level 3 has one failed experience in the agent channel and is readdressing it to positive response. Why is the company embracing the channel? Whats different this time?

In the past, Level 3 was primarily a wholesale service provider that had a few services that were also attractive to the enterprise community. However, being successful in the enterprise market and partner business requires much more than a few interesting services. Since our earlier entry into the agent business we have grown our internal capabilities in channel development and management, added the needed support capabilities, broadened our service portfolio, embraced the power of a successful business partner organization, and recognized the need to invest in this channel in order for it to be successful.

As a result, Level 3s Business Partner Program is now a comprehensive program that offers a more complete set of enterprise services. The acquisitions of ICG, Telcove, Progress, Looking Glass and Broadwing augmented Level 3s service portfolio and brought additional expertise that enabled us to create a robust agent program. We believe our indirect channels of agents and value-added resellers, or VARs, will enable us to obtain desirable customer relationships and that this model will help us grow our market share more quickly than we could on our own. We view this as an attractive alternative to our direct sales channel for many market segments.

Q: How involved is the leadership in the channel strategy and execution? What are your goals for the channel?

Our goal is to make the Business Partner Program one of the leading indirect telecom channel programs for IP, VoIP and data services. We want to provide business opportunities for the participants in our Business Partner Program while enabling Level 3 services to further penetrate the enterprise market. Level 3s leadership, up to the CEO level, is involved in the channel and expects indirect sales to be a significant contribution to our Business Markets Groups overall revenue and growth.

Q: What advice could you give partners about their role in the future you described earlier for the industry?

We are looking for business partners who are becoming more consultative in their approach with existing and new customers and are looking to solve their business problems. As customers increasingly generate, store and distribute digital information, the demand for Level 3 services and solutions is growing and partners can capitalize on their prospective customers business needs.

To provide complete business solutions, successful participants in this program should invest in training in areas such as next generation technologies Ethernet, MPLS VPN and horizontal solutions, and understand how the telecommunications pieces fit into the overall solution of hardware, software and services.

Participants in this program should also look at the traditional VAR model, which is highly consultative in nature and places importance on owning the end-user business. This approach allows VARs to more directly influence their customers purchasing decisions.

With regard to Level 3 specifically, our acquisitions have created tremendous enthusiasm from both potential program participants and customers. This increase in demand is encouraging, but it creates some operational challenges and complexities while we work our way through the remaining integration efforts. We would like our business partners to recognize that these complexities exist, but also recognize our commitment to address them. As our business partners work with us to provide a positive experience for the ultimate customer, both Level 3 and our business partners should expect to be rewarded with the results of those efforts.


Level 3 Communications www.level3.com

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