Stimulus Stories: Level 3’s rare carrier win all about extending the middle mile

Count Level 3 as one of the few established telecom service providers to apply for – and this week win – federal broadband stimulus funding, with a pragmatic goal not of opening up broad new fiber vistas but rather extending its existing network and services where it makes business sense.

That kind of practical approach to applying for stimulus funds may be a bit rare. Indeed, some stimulus watchers have made a point of noting the “pie-in-the-sky” nature of many of the 2200 Round 1 funding applications.

But it demonstrates how an established service provider, and not just new broadband entrants, can take advantage of stimulus funding to both move forward laudable goals of serving rural or other remote areas while also advancing their core business strategy.

“What we submitted was something that could help achieve the goals of the federal stimulus plan but also made sense for Level 3 as a business,” said Paul Savill, senior vice president of product management for Level 3, in an interview. “It didn’t drag us into a whole new type of business and it was something that fit within our core competency and leveraged assets we already had deployed in the field.”

The proposal that Level 3 submitted, and for which it ultimately won $13.7 million in NTIA funding (which it will match with $4.2 million of its own funds), will be used to build 47 new access points to its existing nationwide broadband network in six states: California, Florida, Georgia, Kansas, Tennessee and Texas. The middle mile project will open up access points to other carriers and users at speeds starting at 50 Mbps on up to 40 Gbps.

For Level 3, its efforts to bring access to its network to more remote regions actually began several years ago. “We’d run into cable companies, small MSOs, rural LECs and wireless companies all the time that would be operating way from major metro areas,” said Level 3s Savill. “They’d know we had fiber running through part of their region, their field operations could see it in the right of ways. But they had no way to access it – they couldn’t afford to buy high-speed access circuits [like an OC3 or OC12] and in many cases couldn’t support high-speed services like SONET.”

To serve those types of customers, Level 3 developed a solution called Extended On Net, or EON for short. “We’d break out our capacity and sell it in rural areas,” Savill said. Breaking out those drops was expensive, he said, “and while we had opened up 80 of these sites, there were still a lot of locations we couldn’t justify.”

To drive EON deeper into remote areas, Level 3 decided to turn to stimulus funding. When it began evaluating new access points, not every possible location made the cut. “Even if the government paid 100% of reaching certain locations, we’d still have to operate that portion of the network and provide those services” – and the operational costs couldn’t be justified.

Level 3’s pragmatic approach to this middle mile project will ultimately end up adding 47 access points to its networks – drops it might have otherwise not have been able to build, Savill said.

Savill believes the primary reason Level 3 won its bid was “we addressed a problem, middle mile backhaul, in a way that was very efficient from a capital expenditure standpoint,” he said. In one of the states it will serve with its stimulus funding, another applicant proposed building an entirely new fiber route. “That’s a big expenditure; our proposal [in the same area] leveraged existing Level 3 fiber plant. It was a good bang for the buck.”

Due to targeting six different states, Level 3 chose to file six different stimulus applications. In that way, if any one spot was denied the whole project wouldn’t have been lost, Savill said. Overall, it was awarded funds for 47 of the 52 access points it proposed.

With a Round 1 win in its pocket, Level 3 is not planning to bid for Round 2 direct funding. The carrier is, however, much more involved than it was in the first round in terms of helping other bidders – such as research and education institutions – put together their network infrastructure bids. If those bidder’s win their funding, Level 3 stands to win business helping those applicants ultimately deploy their networks.

As for building its new access points, Level 3 is aiming to get that work done in a two year time-frame, “hopefully much sooner,” Savill said. “Level 3 is a four billion dollar company; this is not a revenue game changer for us. But we see a common level of interest in helping us reach more customers and helping the federal government achieve the goals it has set out. This fits right down the middle of the kind of stuff Level 3 does every day.”