XO targets Level 3 wholesale business

XO Communications today said it has turned up a national inter-city network, and is taking dead-aim at Level 3 Communications in providing a national IP backbone.

The competitive carrier owns 18 dark fiber strands on the Level 3 network, and made it known earlier this year that it had every intention of lighting those fibers. With today’s announcement, XO is targeting the wholesale market with a combination of lightwave services and dark fiber offerings, said Ernie Ortega, president of XO’s Carrier Sales. The company is able to now combine its metro fiber facilities with long-haul capabilities to provide and end-to-end connection.

Initially, the company will be able to deliver up to 100 gigabits of capacity on major segments of the inter-city long-haul network, using Infinera optical switches. XO said it will later be able to offer 400 Gigabits per second between any two cities on the network.

XO’s move is timed to address an expanding demand for high-capacity networks that has turned the conventional wisdom of a fiber glut on its head, Ortega said.

“The ability to acquire dark fiber is a little bit harder than it used to be.” Ortega said. “And we are seeing new demand, from cable companies and from carriers wanting diversity, who are affected by consolidation. We think our timing is impeccable.”

XO is prepared to offer carriers either a dark fiber option or to light the fiber and sell a service, said Don McNeil, vice president of XO’s carrier group.

“Many [companies] are going through the business case – trying to assess what is the right amount of nodes to add to the network, is the bandwidth really increasing as much as they think it will,” he said. “The jury is still out for many of them. We are prepared to give them a hybrid scenario – solid scalable pricing in the near term for bandwidth, and the ability to migrate to ownership in the future.”

With consolidation, some service providers who thought they had redundancy in wholesale networks are finding that has evaporated, Ortega said. XO is also connecting major carrier hotels to serve large companies with significant distribution needs, such as software as service strategies.

XO intends to compete aggressively with Level 3, Ortega said, and to play on what it views as its advantages.

“This is the same fiber network, the same gear on that network, so we aer starting off at the same cost basis,” he said. “Because we didn’t light our network up until just recently, we don’t have a lot of legacy gear that we have to take into account when we set our pricing. Also, with all of the L3 acquisitions, they are going through a lot of integration – all we are trying to do is sell long-haul.”

XO continues to sell to small and mid-sized businesses on its retail side, but the two units operate separately, to avoid conflict, Ortega said.

The move into national long-haul service is also intended to position XO in a different competitive space from companies such as Global Crossing and Broadwing, he added.

:"They don't have the combination of long-haul facilities and metro access that we can provide," Ortega said.