The 10 Most Bizarre and Annoying Causes of Fiber Cuts

Squirrels – who would ever think they could shut down your connectivity?

While we can try to reason with humans and publicize our underground cable, there is nothing we can do about our next biggest pain in the rear, and that’s squirrels!  Of all the animals in the whole world, almost all of our animal damage comes from this furry little nut eater.  Squirrel chews account for a whopping 17% of Level 3′s damages so far this year! But let me add that it is down from 28% just last year and it continues to decrease since they added cable guards to our plant.

Honestly,   I don’t understand what the big attraction is or why they feel compelled to gnaw through cables. The guys in the field have given this some thought and jokingly suspect the cable manufacturers of using peanut oil in the sheathing.

So besides Squirrels, what is the rest of the Top 10 Most Bizarre Fiber Cut Causes? Check out Level 3′s Blogpost here

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Level 3 and Global Crossing met with staff from the Wireline Competition Bureau, the Office of Strategic Planning and Policy Analysis, the International Bureau, and the Office of the General Counsel to discuss their proposed merger.  They said the merger will unite two complementary companies and networks, increasing both worldwide reach and the depth of on-network U.S. facilities beyond what either entity currently has on its own today. They claim this will enable the combined entity to compete even more vigorously with entities such as AT&T and Verizon, as well as many smaller players, in the provision of both Internet and telecommunications services.

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Level 3 Communications, Inc. (NASDAQ: LVLT) today announced that it has launched the Level 3 Wholesale Partner Program to better enable domestic and international wholesale carriers to resell Level 3′s services to their enterprise customers. The program is designed to make it easier for carriers to leverage the Level 3 network as a simple, cost-effective extension of their own network in order to serve enterprise customers in areas outside of their service region.

As carriers compete to serve enterprise customers, the ability to provide a holistic solution that reaches all of the enterprise customers’ locations is critical.  Level 3′s Wholesale Partner Program enables carriers to accomplish this in a simple, fast and seamless manner. The program offers:

• A dedicated Level 3 account team
• Flexible and easy-to-use quoting and ordering tools that lets partners choose how they want to work with Level 3
• Level 3′s extensive network coverage and connectivity to the vast majority of business demand in the U.S.
• Level 3′s commitment to provide industry-leading service delivery intervals

Partners can also take advantage of Level 3′s comprehensive enterprise solution portfolio, including VoIP-enabled unified communications, enterprise WANs, high-performing websites, data center networking, security solutions and adaptive cloud solutions.

“When a wholesale partner wants to deliver a solution to an enterprise, they don’t want to worry about cumbersome processes slowing them down,” said Andrew Crouch, president of Sales for Level 3. “Level 3′s Wholesale Partner Program enables carriers to leverage the Level 3 network quickly and easily to enhance their ability to win in the highly competitive enterprise market.”

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Level 3 has arranged to acquire fellow Tier 1 network operator Global Crossing in an all-stock deal worth $3 billion.

The deal will create an operator with fiber and other networks in around 50 countries throughout North America, Latin America and Europe, and subsea cable network connections to more than 70.

The combined company will operate a unique global services platform anchored by fiber optic networks on three continents, connected by extensive undersea facilities. The combined network will serve a worldwide customer set with owned network in more than 50 countries and connections to more than 70 countries. This transaction will create a company with pro forma combined 2010 revenues of $6.26 billion and pro forma combined 2010 Adjusted EBITDA of $1.27 billion before synergies and $1.57 billion after expected synergies.

Under the terms and subject to the conditions of the agreement, Global Crossing shareholders will receive 16 shares of Level 3 common stock for each share of Global Crossing common stock or preferred stock that is owned at closing. Based on Level 3’s closing stock price on April 8, 2011, the transaction is valued at $23.04 per Global Crossing common or preferred share, or approximately $3.0 billion, including the assumption of approximately $1.1 billion of net debt as of Dec. 31, 2010. Global Crossing has approximately 79 million basic and preferred shares outstanding and approximately 83 million shares outstanding on a fully diluted basis, giving effect to outstanding stock awards, but excluding performance-based stock grants.

The transaction will create a company with a unique capability to meet local, national and global customer requirements in a wide range of markets. By combining the strengths of each company, the new entity will offer enterprise, government, wholesale, content, and web-based customers a comprehensive portfolio of end-to-end data, video and voice solutions.

“This is a transformational combination that we believe will deliver significant value to the investors, customers and employees of both Level 3 and Global Crossing,” said Jim Crowe, chief executive officer of Level 3. “The complementary fit between the two companies’ networks, service portfolios and customers is compelling. By leveraging the respective strengths and extensive reach of both companies, we are creating a highly efficient and more extensive global platform that is well-positioned to meet the local and international needs of our customers.”

“This transaction will provide Global Crossing shareholders with an attractive premium and significant participation in the upside potential of a leading communications company with industry-leading scale and capabilities. The combined service capabilities, extensive network assets and talented employees of the two companies will create a stronger global communications competitor with compelling offerings in the marketplace,” said John Legere, chief executive officer of Global Crossing. “Each of our companies has a reputation for being nimble and flexible in meeting customers’ communications needs, and we expect that to continue – with the added benefit of offering customers significantly greater reach, products and services.”

“We’re looking forward to welcoming Singapore Technologies Telemedia, Global Crossing’s largest shareholder, as a significant investor,” said Crowe. “They are exceptionally sophisticated managers, with holdings in telecommunications and information companies in a number of countries. They know the technology and they know the industry. The breadth of their communications experience and their knowledge of international markets will be a great asset to us.”

“This strategic combination is an important milestone for both Global Crossing and Level 3, and a value-creating proposition for all stakeholders,” said Lee Theng Kiat, president and chief executive officer of Singapore Technologies Telemedia (ST Telemedia). “Going forward, we believe the combined strengths of the two companies will position it in a very favorable, competitive position to expand in the U.S. and compete globally.”

“We are committed to creating a high-performing combined business through a carefully managed integration plan executed by a select team from both companies,” said Jeff Storey, president and chief operating officer of Level 3. “We will begin integration planning immediately and bring an aggressive, disciplined approach to the process. After the closing, as we integrate the two operations and work to achieve our expected synergies, we will be dedicated to maintaining our focus on providing excellent customer service and growing our combined revenues.”

“The combination improves our balance sheet and credit profile immediately upon closing with further improvement as we achieve the benefits of integration. Additionally, the transaction accelerates the achievement of Level 3’s target leverage ratio of three to five times debt to Adjusted EBITDA,” said Sunit Patel, chief financial officer of Level 3. “Including the benefit of synergies and the cost of integration, we expect the transaction to be accretive to Level 3’s Free Cash Flow per share in 2013 and to give us the financial strength to capitalize on the many opportunities available in the global market.”

Benefits of the Transaction

Significant Synergy Opportunities

Through integration of the combined businesses, the transaction is expected to create substantial annualized Adjusted EBITDA synergies of approximately $300 million and annualized capital expenditure reduction of approximately $40 million. Level 3 expects to realize approximately two-thirds of the run rate Adjusted EBITDA synergies within 18 months of closing. The company estimates that the net present value of the potential synergies will be approximately $2.5 billion. Of the total expected synergies, approximately 39 percent are from network expense savings, approximately 49 percent from operating expense savings, and approximately 12 percent are from reductions in capital expenditures. The company expects to incur approximately $200 to $225 million of integration costs associated with this transaction. Approximately 55 percent of those costs are expected to be from operating expenses, and 45 percent are expected to be from capital expenditures to support integration activities.

Improved Financial Strength of Combined Business

Including the benefit of synergies and the cost of integration, the transaction is expected to be accretive to Level 3’s Free Cash Flow per share in 2013. As a result of potential revenue growth and synergies, over the longer term, Level 3 expects to have significant Free Cash Flow available for investment in high-return opportunities, including U.S. and international network expansions, and potential repurchase of the company’s securities.

Improvement to Level 3’s Credit Profile

The transaction is expected to improve Level 3’s credit profile as well as significantly strengthen the company’s balance sheet. On a pro forma basis and including the benefit of expected synergies, the ratio of net debt (including capital leases) to Adjusted EBITDA is expected to improve from 6.8x to 4.4x as of Dec. 31, 2010.

Expanded Global Footprint

Existing customers will benefit from expanded geographic reach and a combination of intercity networks and metro networks throughout North America, Latin America and Europe connected by extensive global subsea networks. The combined business will leverage Global Crossing’s long-term IRU’s on the PC1 and EAC cable systems, focusing on telecom operators based in Asia. The combined network will serve a worldwide customer set with owned network in more than 50 countries and reach to more than 70 countries.

Enhanced and Expanded Service Portfolio

The combined business will offer an extensive portfolio of transport, IP and data solutions, content delivery, data center, colocation and voice services, delivered globally. Global Crossing will bring important additions to Level 3’s service portfolio, including managed services, collaboration services and inter-continental virtual private networking capability. The combined service portfolio and distribution channels will allow Level 3 to better address the needs of enterprises, content providers, carriers and governments throughout North America, Latin America and Europe.

Expanded Enterprise Service Capabilities

Global Crossing’s enterprise service portfolio and proven sales expertise together with the improved cost structure and performance achievable by combining the extensive international, intercity and metro networks will enable opportunities for improved growth by giving enterprises better options to meet their local, national and international communications needs.

Committed Financing

Level 3 Financing, Inc., a wholly owned subsidiary of Level 3, has received committed financing for $1.75 billion in connection with this acquisition.

Voting Agreement and Stockholder Rights Agreement

In conjunction with this transaction, Level 3 has signed a Voting Agreement with ST Telemedia, the company which owns approximately 60 percent of Global Crossing’s stock, whereby ST Telemedia has agreed to vote its shares in favor of the transaction, subject to certain terms and conditions. Level 3 and ST Telemedia have also signed a Stockholder Rights Agreement, which becomes effective upon closing and which allows ST Telemedia to designate members to the Level 3 board of directors, proportionate to their stock ownership. In addition, the Stockholder Rights Agreement contains a standstill provision which imposes limitations on ST Telemedia’s ability to purchase or sell Level 3 common stock.

Approvals and Timing of Transaction

In addition to customary closing conditions, the transaction is subject to regulatory approvals relating to competition law, licensing, financing, and foreign ownership, including approvals by the U.S. Department of Justice, the U.S. Federal Communications Commission and other regulatory agencies in the U.S. and in countries where the companies do business. The transaction is also subject to the approval of the stockholders of each company. The transaction is expected to close before the end of this year.

Stockholder Rights Plan

Level 3 also announced separately today that it is adopting a Stockholder Rights Plan (Rights Plan). The Rights Plan is designed to protect Level 3’s federal Net Operating Losses (NOLs) from the effect of Internal Revenue Code Section 382, which can restrict the use of NOLs. The completion of the business combination with Global Crossing would move Level 3 significantly closer to the 50 percent ownership change outlined in Section 382, and increase the likelihood of a loss of Level 3’s valuable NOLs. The rights under the Rights Plan will expire under the circumstances described in the separate release announcing its adoption. In addition, Level 3’s board of directors intends, from time to time (and in particular upon the closing of the transaction), to consider whether maintaining the Rights Plan continues to be in the best interests of Level 3.

Advisors

BofA Merrill Lynch, Citi and Morgan Stanley acted as advisors to Level 3, and Rothschild provided a fairness opinion. Willkie Farr & Gallagher LLP acted as legal counsel to Level 3. Goldman, Sachs & Co. acted as financial advisor and Latham & Watkins acted as legal counsel to Global Crossing. Credit Suisse Securities (USA) LLC acted as financial advisor to ST Telemedia.

See http://networkedworld.com/ for more information.

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Level 3 Communications, Inc. (NASDAQ: LVLT) has received the ATLANTIC-ACM 2011 Global Wholesale Best in Class Award for Provisioning and the Best in Class Award for Network Quality. The awards recognize Level 3′s leadership in delivering data network and voice services to meet the wholesale communications needs of global carriers.

“Our survey results reflect customers’ recognition of Level 3’s commitment to delivering a positive customer experience and advanced network services,” said Fedor Smith, president of ATLANTIC-ACM. “Level 3’s year-over-year improvement across all service categories indicates that their continued efforts to be a leader in customer service are paying off in the eyes of customers.”

The award is based on the ATLANTIC-ACM 2011 Global Wholesale Report Card study, which compiles wholesale customer feedback via online surveys. Customers evaluate the performance of their carriers based on a number of operational categories. Customers also rate voice and data service offerings for both quality and price. The Provisioning and Network Quality awards are based on the combined average score for quality and price across all data services.

“Level 3 has put a tremendous amount of work into creating the kind of customer experience carriers need and want, and we take a lot of pride in what our hard work has achieved,” said Andrew Crouch, president of Sales for Level 3. “These Best in Class recognitions are testaments to the relentless work of our employees to deliver the data network capabilities and connect global carriers in the most effective, efficient way possible. We thank our customers for such a high honor.”

ATLANTIC-ACM will present the Global Wholesale Best in Class awards on Jan. 19 at the Pacific Telecommunications Council conference in Honolulu, Hawaii.

About ATLANTIC-ACM
Boston-based ATLANTIC-ACM is a leading provider of strategic research and consulting services serving the telecommunications and information industries. In addition to producing the industry’s principal benchmarking, sizing and opportunity studies, the company assists clients in evaluating telecommunications opportunities for successful investment, market entry and long-term planning. For more information, visit ATLANTIC-ACM’s website at www.atlantic-acm.com

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Level 3 Communications, Inc. (NASDAQ: LVLT) today announced that it has signed an agreement with Callx Communications, a communications services provider for voice over Internet Protocol (VoIP) solutions, to enhance that company’s voice capabilities using Level 3’s voice termination services.

Level 3’s domestic and international voice termination services will enable Callx to improve the quality and network reach of its voice services. Based in Scarsdale, N.Y., Callx offers voice broadcasting, prepaid calling cards, wholesale voice termination and telecom platform consulting and will use Level 3’s voice termination services to supply their customers with first-rate VoIP solutions.

“Callx is dedicated to providing its customers with a superior experience in voice services, and Level 3’s network and voice termination services enable us to do just that,” said Noel Garside, CEO for Callx. “Level 3’s quality in voice services is a key market differentiator, and we are pleased to work with them to offer our customers premium voice solutions.”

“Leveraging advanced fiber-optic cable and an extensive footprint, our efficient IP network provides an excellent backbone for next-generation voice solutions,” said Andrew Crouch, president of Sales for Level 3. “Reliable voice termination is a distinguishing feature for Level 3 and an essential building block to providing high-quality VoIP services. Level 3 was chosen due to its reliable and efficient network, voice quality and superior cost structure, and we are delighted that Callx is able to use our voice solutions to enhance its portfolio of services.”

Level 3 leverages its extensive fiber-optic network, metro assets and a locally focused sales and sales support organization to deliver world-class services to enterprise customers and service providers throughout the United States.

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Level 3 and Comcast have been in a disagreement over Comcast’s announced intention to demand an ongoing payment from Level 3 and others for delivering content to Comcast, such as movies, that Comcast’s subscribers have requested. Comcast has said repeatedly that “this is just a good old fashioned peering dispute” and that Level 3 is just trying to gain “an unfair advantage over its competitors by gaining enormous capacity at no cost to itself.” Comcast’s characterization could not be more misleading. What is truly at stake is whether consumers should have unfettered access to all the content on the Internet without regard to whether that content happens to be owned or packaged by Comcast.

The purpose of these “Frequently Asked Questions” is to explain in plain and straightforward terms why regulators, policy makers and consumers have a vital interest in preventing Comcast from discriminating against Internet content which is not owned by Comcast.

1. Q: What is the Internet?

A: The Internet is a communications system that is often referred to as a network of networks. It is useful to think of the Internet as being composed of three distinct pathways: (1) the very high-capacity, local “pipes” connecting large data centers (where content and applications like movies and software are stored) to the Internet backbone, (2) the Internet backbone itself, composed of the interconnected networks of a number of national and global Internet backbone providers, and (3) the local access networks connecting individual consumers and businesses to the Internet backbone. When a consumer downloads a movie, the movie exits the data center where it is stored and travels over these three segments until it reaches the computer or television where it is viewed.

2. Q: Explain more about the role Level 3 and Comcast play in connecting consumers to the Internet.

A: Level 3 has its roots in providing connections to content and applications providers and in Internet backbone services. Level 3 also offers high-speed access to larger enterprises. These services are generally provided over fiber optic networks Level 3 owns. For a number of years, industry analysts have ranked Level 3 as one of the top two global Internet backbones in the world.
Comcast started as a residential cable TV provider and also uses its network to offer local broadband Internet access to consumers. More recently, Comcast has begun offering local broadband Internet access to smaller businesses as well as Internet backbone services.

3. Q: Are the segments of the Internet competitive?

A: This is a critical question since a central pillar of Comcast’s argument is that competition exists throughout the Internet. This is not true. There is vigorous and active competition among Internet backbone providers. It is very easy for one Internet backbone to send its traffic across any number of other Internet backbones. It’s a little like driving across the U.S. There are many routes you can choose to get from one city to another.

Unlike the Internet backbone, there is limited competition when it comes to Internet access at the home or business. The local access connections are generally dominated by two providers: the local phone company and the local cable company. Both sets of companies generally developed their dominant positions by virtue of exclusive government franchises that protected them from competition. While Comcast and others talk about theoretical competition from broadband cellular or broadband over power line, for almost all Americans, broadband to the home means service from either the cable or phone company. Anyone who believes that broadband wireless is a substitute for the broadband access services provided by cable and phone companies should try connecting their cell phone to their TV to try to watch an online movie or TV show.

4. Q: Is the disagreement between Level 3 and Comcast “just a good old fashion peering dispute”?

A: No. The dispute between Level 3 and Comcast is not a peering dispute, which relates to connection of Internet backbone networks. At issue is a fundamental interconnection disagreement between Comcast, as a provider of local high speed Internet access to consumers who pay Comcast for access to content, and Level 3, which delivers content to residential broadband access providers like Comcast in response to consumer requests. Unlike “peering” in the Internet backbone, where competition abounds and prices have been declining steadily, Internet carriers that have content requested by Comcast subscribers have no choice but to exchange traffic with Comcast. Comcast is using this dominant position to demand payment for traffic delivered at its customers’ requests. You simply cannot “route around” Comcast to provide requested content to Comcast’s subscribers.

5. Q: What is the difference between peering and interconnection?

A. Peering is one among many forms of interconnection between two Internet backbone networks. Traditionally, many peering agreements within the Internet backbone called for the exchange of traffic between communications networks without charge. Interconnection is a general term that applies when two communications networks exchange traffic, regardless of the commercial terms that are agreed. Since no network provider owns network everywhere or connects to every customer, interconnection is vital to all networks – including the telephone network, the cellular networks and to the Internet. Impaired interconnection means impaired service.
There have been periodic disputes about backbone peering that have been publicly disclosed. Level 3 was involved in one such dispute with Cogent Communications in 2005. Despite these disputes, Internet backbone traffic exchange has worked relatively well, with significant annual price declines over the past decade.

In contrast to peering, interconnection disputes have been common, very public, and usually have significant implications for both the communications industry and for its customers. This point is further explained in Question 15.

6. Q: Comcast states that the dispute is over peering and that “these agreements have existed for over a decade,” implying that Level 3 wants to change well settled commercial arrangements. Is that true?

A: No. It is Comcast that wants to change the rules of the game. Comcast wants to use its local access network dominance as leverage to force Level 3 to pay for traffic requested by Comcast customers that already pay Comcast for access to that same content. Having sold broadband access services to its customers, Comcast wants to sell the same service again to Level 3 and other networks connected to Comcast. If the dispute were simply “commercial,” the dispute would have already been settled or would never have arisen in the first place. Comcast’s status as the nation’s largest provider of consumer broadband service enables Comcast to force Level 3 to pay the “toll” Comcast has demanded.

7. Q: Comcast contends that the fees it charges are commonplace and standard and it was surprised by Level 3’s resistance. Is this correct?

A: No other broadband access provider in the U.S. is now charging Level 3 the type of fees that Comcast is charging. It is Comcast that seeks to change the common approach, changing the rules of the game in an unreasonable and discriminatory manner.

8. Q: Comcast says that Level 3 sends it 5 times the traffic that Comcast sends Level 3. Is that true? If it is true, why shouldn’t Level 3 pay for the traffic it sends to Comcast?

A: It is true, and not surprising, that the traffic going to Comcast subscribers is much greater than the traffic coming from Comcast subscribers. It is also totally irrelevant to the issue of whether a broadband access provider like Comcast is entitled to payment of a toll.
Comcast is attempting to transform the dispute with Level 3 into a peering dispute because, if it is successful in re-casting the debate, one of the traditional criteria for peering – balance of traffic sent versus traffic received – could be used to turn even the largest Internet backbone providers into paying customers of Comcast. Why? Because the vast majority of the traffic on Comcast’s consumer broadband access network is requested by and flows to Comcast residential subscribers. This means that all of the traffic on Comcast’s consumer access networks is and will be decidedly “out of balance” (meaning more traffic flows to Comcast than flows away from Comcast). This is true of any network that provides residential Internet access to consumers. When a Comcast subscriber, for example, wants to view a television show, sporting event or movie, the subscriber “sends” a very small request (in terms of bandwidth used), and receives back a very large amount of content. In fact, Comcast’s service guarantees that Comcast will remain “out of balance.” Comcast’s offering provides residential subscribers with as much as 5 times the “download” speed (traffic going to subscribers) as “upload” speed (traffic coming from subscribers).

Thus, Comcast knows that if it can apply a traditional backbone “peering” concept to this dispute – that traffic must stay in balance – Comcast stands to make many millions of dollars from Internet backbone carriers that bring requested content to Comcast for delivery to Comcast’s subscribers.

9. Q: Comcast says that Level 3 wants to gain “an unfair advantage over its competitors by gaining enormous additional capacity at no expense to itself.” Are they right?

A: Absolutely not. In fact, it is Comcast that is seeking an enormous, unfair advantage by using its dominance to get paid twice for the same capacity. For example, a Comcast customer might pay approximately $45 per month for 15 megabits per second of download and 3 megabits of upload capability. Comcast states that “Our customers get access to all the online video they want, along with any other Internet content, application, or service they choose — regardless of its source. “ Comcast’s Network Management Policy states that “Use of the Service in excess of 250GB per month is excessive use and is a violation of the Policy” and reserves the right for Comcast to terminate service if this total is exceeded. If Comcast believes that the monthly payment is inadequate, Comcast can either lower the cap or charge more for higher usage as many other broadband access providers have already done. It is important to remember that Comcast’s subscribers have requested the content delivered by Level 3, and that Level 3 must also add capacity as these requests increase. We try to charge our customers a fair price for the expense associated with meeting requests from Comcast’s customers. We do not understand why Comcast cannot do the same, especially when caps and bandwidth limits are already in place.

10. Q: Comcast says that it is charging other companies that deliver video content to it for its subscribers. Comcast says that it is just treating Level 3 the same. Why should Level 3 get a special deal?

A: Level 3 can’t confirm what arrangements Comcast has with other companies. But, as we all learned long ago, two wrongs don’t make a right.

Level 3 does not seek a special deal, but as in any interconnection between large networks, the terms and conditions of the interconnection must be tailored to the size and scale of the networks exchanging traffic. For example, it would be unfair to Comcast for Level 3 to interconnect with Comcast in only one location, forcing Comcast to carry large volumes of traffic around the U.S. for termination to its customers.

But it is equally unfair, and far more disconcerting given Comcast’s market power over its subscribers, for Comcast to demand that Level 3 buy service from Comcast on terms and at prices dictated solely by Comcast.

11. Q: What’s wrong with Comcast trying to make more money?

A: Nothing, as long as the attempt is made in a competitive market. As pointed out above, Comcast is trying to use its dominance over residential broadband access to extract payments from companies like Level 3 that do operate in a competitive market, and that have no choice when responding to requests for content made by Comcast’s customers but to route that traffic through Comcast.

12. Q: What reasons would Comcast have for taking this action?

A: Comcast is a cable TV service provider. In addition to simply extracting monopoly profits, Comcast also has a strong motive to discourage competition with its cable TV service. Online distribution of movies, TV shows and other content threatens Comcast’s traditional “closed” video distribution model. While Comcast disputes that the threat exists, press reports highlighting “cable cord cutting” (terminating cable television subscriptions and instead getting entertainment content online) confirm it is real. One industry analyst reports that about half of the content consumed by 18 to 24 year olds is downloaded over the Internet and is not delivered by cable or broadcast TV. Many parents with teenagers are intimately familiar with this trend.

13. Q: Comcast says this is all about Level 3’s contract with Netflix. Comcast says that Level 3 bid too low expecting to get free interconnection, and now that Comcast has refused Level 3 is trying to salvage the deal. Is this only about money Level 3 might lose?

A: No. And it’s not about Netflix or our agreement with Netflix. Rather, it is about preserving a free and open Internet.

What Level 3 is concerned about is the precedent that Comcast’s actions set, and about the longer-term implications on Internet openness and innovation. If, as Comcast seems to contend, there is no limitation on the terms and conditions that Comcast can demand for delivering content to their residential Internet access subscribers, then the terms simply become a tool to reduce competitive content available on the Internet. Development of new, innovative Internet applications, faced with an unknown and unpredictable toll that could be assessed or increased by any residential Internet access provider, would be chilled.

14. Q: Comcast claims that its subscribers still have access to all content on the Internet, and that it does not discriminate between types of content. How does charging Level 3 to deliver content disadvantage online providers of content including movies and TV shows?

A: Many customers already pay online providers for the right to stream or download video content including movies and TV shows. Comcast’s customers also pay Comcast for a certain amount of bandwidth. If Comcast is able to use its dominance in local access to raise the price of competing content either directly or through Level 3, it can gain a relative price advantage for its own cable TV and online content. Comcast maintains that it does not “block” any lawful content. That statement is like asserting that a toll booth doesn’t “block” traffic on a highway. Comcast seems to argue that imposing a “tax” on content – in an amount determined by Comcast – does not matter. As U.S. Supreme Court Chief Justice John Marshall famously said, “The power to tax is the power to destroy.” Or, as one prominent industry executive has observed to Level 3, “If they can charge for access today, they can block access tomorrow.”

15. Q: Comcast says that they know of no precedent for government intervention in a “peering dispute.” Is this an accurate observation?

A: As explained above, Comcast’s mischaracterization of this disagreement as a “peering dispute” is incorrect. In reality, this is a fundamental interconnection dispute between Level 3 and Comcast. The history of communications is filled with examples of regulators and the courts forcing dominant current or former government-sanctioned monopolies to interconnect with other communications networks on fair terms. Appendix A provides a brief summary of a number of examples of these important actions. More recently, when a local telephone company blocked broadband subscribers from accessing Internet telephone service that competed with its own telephone service, the FCC swiftly and properly acted to stop the practice. This action ultimately establishing the precedent for the FCC’s Network Neutrality Policy Statement. It is not an exaggeration to say that absent forced interconnection on fair terms, traditional telephone competition, cellular competition and the Internet itself would not exist.

16. Q: Is the dispute part of the larger Net Neutrality Issue?

A: Of course it is, especially the FCC’s policy that local access providers cannot discriminate against different kinds of content. As pointed out above, Comcast is using its local broadband access dominance to charge extra for content competitive with its cable TV and online offerings, even though the content is expressly requested by Comcast’s own customers, using capacity the customers already paid for in accordance with Comcast’s terms and conditions.

17. Q: Is Level 3 asking the FCC or other governmental bodies to regulate the Internet?

A: Level 3 is not asking the government to regulate the Internet. We are simply asking appropriate government bodies to require Comcast, in its capacity as a residential broadband Internet access provider, to comply with the nondiscriminatory procedures that Comcast has historically complied with and is required to follow.

18. Q: Comcast says Level 3 surprised it by going public in a last-minute effort solely to obtain commercial leverage over Comcast. Is that accurate?

A: No. When Comcast first made its demand for payment of a toll, Level 3 clearly communicated its objections. Level 3 also made it clear, in written communication to Comcast executives, that if Comcast persisted in its position, Comcast was leaving Level 3 no choice but to take steps to assure that the public and policymakers were fully aware of the issue. At the same time, Level 3 advised Comcast that Level 3 was willing to negotiate fair and equitable economic and technical terms to achieve a balanced interconnection arrangement, including offering to use the Level 3 fiber optic network to alleviate any potential congestion on Comcast’s network. When Comcast said that it had limited amounts of equipment needed to provide the requested capacity, Level 3 offered to provide Comcast with this equipment. Rather than engage in an open dialogue, Comcast demanded that Level 3 execute its service order on a “take it or leave it” basis and said that if the contract was not signed within two days, the capacity would no longer be available.

19. Q: Why is the outcome of this dispute important to regulators, policy makers and most especially American citizens?

A: The Internet is almost universally regarded as an enormous engine of innovation that continues to generate fundamental improvements in social interaction, commerce, education and even politics. It has created whole new industries employing large numbers of Americans.

The potential of the Internet can also be very uncomfortable and even threatening for those following older business models that have or will be displaced by the “creative destruction” spurred by innovative people at companies large and small. But this change is essential to maintaining our nation’s long term competiveness. If incumbent owners of dominant local access networks are allowed to unilaterally impose additional “tolls” on content or applications requested by their subscribers over the Internet, it is not the current, established companies who are most at risk but rather the next great ideas which lead to the great companies of tomorrow.

Appendix A

From the earliest days of telecommunications, persons receiving service from one company have sought to communicate with persons receiving service from another provider. In such a case, the receiving party’s provider is always subject to the temptation to block the communication, or to exact a discriminatory charge.

In the years after the original Bell telephone patents expired, denial of interconnection to “independent” telephone companies was one of the Bell System’s principal weapons to protect their networks from competition. It took the threat of antitrust enforcement to produce the Kingsbury Commitment of 1913, in which AT&T was compelled to agree to connect its long distance network with all independent local networks.

In 1968, FCC regulators had to intervene again when the Bell System tried to prevent a mobile communications system, the Carterfone, from connecting to telephone lines. That decision established the principle that customers could connect any lawful device to the telephone network, even to offer a competing service. In the mid 1970’s, emerging long distance competitors like MCI and Sprint faced the same tactic of denying interconnection, which regulators quashed, followed by a series of efforts by the Bell System phone companies to escalate the costs of interconnection as an indirect means of excluding competition. These battles resulted in epic antitrust litigation and eventually the 1982 breakup of the Bell System.

The same thing happened in more recent years as local telephone service once again began to face competition. In 1994–before Congress passed comprehensive legislation expressly requiring telephone companies to accept traffic from other companies, Ameritech–one of the Bell monopoly companies–refused to allow a competing telephone company to complete calls to its customers. The Illinois state regulatory commission promptly ended that practice, establishing a precedent leading to the now well established interconnection principles enacted in the 1996 Telecom Act.

—————————————–

Comcast’s view on this issue can be read here.

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Level 3 Communications, Inc. (NASDAQ: LVLT) issued the following statement, which can be attributed to Thomas Stortz, Chief Legal Officer of Level 3:

“On November 19, 2010, Comcast informed Level 3 that, for the first time, it will demand a recurring fee from Level 3 to transmit Internet online movies and other content to Comcast’s customers who request such content. By taking this action, Comcast is effectively putting up a toll booth at the borders of its broadband Internet access network, enabling it to unilaterally decide how much to charge for content which competes with its own cable TV and Xfinity delivered content. This action by Comcast threatens the open Internet and is a clear abuse of the dominant control that Comcast exerts in broadband access markets as the nation’s largest cable provider.

“On November 22, after being informed by Comcast that its demand for payment was ‘take it or leave it,’ Level 3 agreed to the terms, under protest, in order to ensure customers did not experience any disruptions.

“Level 3 operates one of several broadband backbone networks, which are part of the Internet and which independent providers of online content use to transmit movies, sports, games and other entertainment to consumers. When a Comcast customer requests such content, for example an online movie or game, Level 3 transmits the content to Comcast for delivery to consumers.

“Level 3 believes Comcast’s current position violates the spirit and letter of the FCC’s proposed Internet Policy principles and other regulations and statutes, as well as Comcast’s previous public statements about favoring an open Internet.

“While the network neutrality debate in Washington has focused on what actions a broadband access provider might take to filter, prioritize or manage content requested by its subscribers, Comcast’s decision goes well beyond this. With this action, Comcast is preventing competing content from ever being delivered to Comcast’s subscribers at all, unless Comcast’s unilaterally-determined toll is paid – even though Comcast’s subscribers requested the content. With this action, Comcast demonstrates the risk of a ‘closed’ Internet, where a retail broadband Internet access provider decides whether and how their subscribers interact with content.

“It is our hope that Comcast’s senior management, for whom we have great respect, will closely consider their position on this issue and adopt an approach that will better serve Comcast and Comcast’s customers.

“While Comcast’s position is regrettable, Level 3 remains open and willing to work through these issues with Comcast. However, Level 3 does not seek any ‘special deals’ or arrangements not generally available to other Internet backbone companies.

“Given Comcast’s currently stated position, we are approaching regulators and policy makers and asking them to take quick action to ensure that a fair, open and innovative Internet does not become a closed network controlled by a few institutions with dominant market power that have the means, motive and opportunity to economically discriminate between favored and disfavored content.“

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Level 3 Communications, Inc. (NASDAQ: LVLT) has signed an agreement with RestorePoint, Inc., a provider of disaster recovery and data protection solutions, to enhance that company’s data transmission rate with Level 3’s dedicated Internet access (DIA) service.

Based in Alpharetta, Ga., RestorePoint offers data back-up and recovery solutions for enterprises requiring operational resiliency. The company will use Level 3’s Internet access service to improve the transmission rate of large amounts of data, consequently lowering operational costs and increasing customer productivity. RestorePoint selected Level 3 due to its service support and network performance.

“Network connection and efficiency are integral to the value we offer our enterprise customers,” said Jeff Brathall, president of RestorePoint. “We have seen increasing demand for high-quality solutions in disaster recovery, and working with Level 3 improves our ability to offer efficient, cost-effective solutions.”

“With the growing reliance on digital systems for critical business applications, enterprises require reliable, high-speed access to their organizations’ vital data at all times – particularly in times of crisis,” said Andrew Crouch, president of Sales for Level 3. “We are pleased to work with RestorePoint to enable their enterprise customers to benefit from more efficient disaster recovery solutions.”

Level 3 leverages its extensive fiber-optic network, metro assets and a locally focused sales and sales support organization to deliver world-class services to enterprise customers and service providers throughout the United States.

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Level 3 Communications, Inc. (NASDAQ: LVLT) today announced that it has launched a new referral program in a select group of Latin American markets that have seen a steady increase in demand for international bandwidth and a growing need for global enterprise solutions. Working with approved referral providers through the program, Latin American carriers will be able to extend their in-region networks by contracting directly with Level 3 to leverage its Internet and data services offered in North America and Europe.

The program – first introduced in Asia in September of 2010, generating a number of successful deals in that region – is currently being rolled out to select markets in Latin America, with a focus on Brazil, Mexico, Argentina, Chile, Peru, Colombia, Venezuela and Panama.

Referral providers in the program will market access to Level 3’s U.S. and European network to Latin American carriers by assessing carriers’ service needs and making recommendations for suitable Level 3 services. Carriers will then contract directly with Level 3 for service. Available services to these carriers include high-speed Internet Protocol (HSIP), transport and Ethernet services, giving carriers access to one of the world’s leading fiber-optic Internet networks.

“The growing demand for data and the increasing need to connect customers all over the world make Latin America a significant market opportunity for Level 3, and this program represents a meaningful step toward growing our presence in the region,” said Andrew Crouch, president of Sales for Level 3. “Through this referral program, Latin American carriers can solve their international connectivity challenges and extend their reach via Level 3’s leading HSIP service and next-generation network.”

Level 3’s extensive North American landing station connectivity; relationships with submarine cable operators; and comprehensive portfolio of transport, Ethernet and HSIP services create a significant opportunity for referral providers to drive commerce with carriers and enterprises in Latin America.

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Level 3 Communications, Inc. (NASDAQ: LVLT) today announced that it has been selected to serve as a primary content delivery network (CDN) provider for Netflix, Inc. to support the company’s streaming functionality and to support storage for the entire Netflix library of content.

As a result of the deal, Level 3 has accelerated plans to further invest in its CDN capacity. Level 3 will double its storage capacity and add 2.9 Terabits per second (Tbps) of globally available CDN capacity, which is in addition to the 1.65 Tbps that was deployed in the third quarter of 2010.

The CDN augment will provide the headroom needed to meet demand requirements from Netflix now and to accommodate future growth. Netflix says its subscriber base will exceed 19 million in North America by the end of this year and that they expect more growth and international expansion in future years.

“Level 3’s track record for delivery and network scalability were critical factors in our decision to work with Level 3 on a long-term basis,” said Andrew Rendich, chief service and DVD operations officer with Netflix. “We’ve been impressed with their speed and consistency, and we feel confident in their ability to quickly scale to meet demand as more and more Netflix members watch instantly.”

In addition to supporting Netflix for streaming movies and TV shows, Level 3 will store the entire Netflix streaming library of more than 20,000 titles. Over the course of November and December, the two companies will move the library to storage with Level 3 in preparation for serving traffic beginning Jan. 1, 2011.

“One of the primary advantages of owning our network is the agility it affords – we’re able to scale, augment and, ultimately, better control the performance of our CDN,” said Mark Taylor, vice president of Content and Media. “We’re committed to ensuring that our performance consistently exceeds our customers’ expectations, and we look forward to working with Netflix to serve their millions of streaming customers for years to come.”

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Third Quarter Financial Highlights

• Consolidated revenue increased sequentially to $912 million
• Core Network Services revenue grew 1 percent sequentially and 1 percent year-over-year; 2 percent year-over-year growth on a constant currency basis
• Strong Communications Gross Margin and Communications Adjusted EBITDA Margin performance
• Consolidated Adjusted EBITDA grew to $218 million from $209 million in the prior quarter and $213 million in the year-ago quarter
• Capital spending increased as company continues to invest to support sales

Level 3 Communications, Inc. (NASDAQ: LVLT) reported solid third quarter 2010 results, highlighted by Core Network Services revenue growth, margin expansion and Consolidated Adjusted EBITDA growth. Consolidated revenue was $912 million for the third quarter 2010, compared to Consolidated revenue of $908 million for the second quarter 2010 and $916 million for the third quarter 2009.

The net loss for the third quarter 2010 decreased to $163 million, or $0.10 per share, compared to a net loss of $169 million, or $0.10 per share, for the second quarter 2010. The net loss for the third quarter 2009 was $170 million, or $0.10 per share.

Consolidated Adjusted EBITDA was $218 million in the third quarter 2010, compared to $209 million in the second quarter 2010 and $213 million in the third quarter 2009.

“Our dedication to customer service excellence has improved our customers’ experience and was reflected in our results this quarter, with sequential and year-over-year growth in Core Network Services revenue,” said James Crowe, CEO of Level 3. “At the same time, we continued our disciplined approach to managing costs and improving margins during the quarter. With our investments in the business in 2010, we have good momentum as we look to 2011.”

Financial Results

1. See schedule of non-GAAP metrics for definitions and reconciliation to GAAP measures.

Communications Business

Revenue

Communications revenue for the third quarter 2010 increased to $895 million from $892 million for the second quarter 2010. Communications revenue for the third quarter 2009 was $901 million.

Core Network Services

Core Network Services revenue was $707 million in the third quarter 2010, an increase of 1 percent from $699 million in the second quarter 2010, and an increase of 1 percent from $700 million in the third quarter 2009. European revenue grew 3 percent sequentially, on a constant currency basis.

“We were pleased with the performance across each of our customer groups this quarter, which contributed to 1 percent sequential growth and 2 percent year-over-year growth in Core Network Services revenue on a constant currency basis,” said Sunit Patel, executive vice president and CFO of Level 3. “Additionally, Communications revenue grew sequentially from $892 million in the second quarter to $895 million in the third quarter 2010.”

Deferred Revenue

The communications deferred revenue balance was $890 million at the end of the third quarter 2010, compared to $865 million at the end of the second quarter 2010 and $880 million at the end of the third quarter 2009.

Cost of Revenue

Communications cost of revenue declined to $353 million in the third quarter 2010 from $358 million in the second quarter 2010. Communications cost of revenue was $369 million in the third quarter 2009. Cost of revenue decreased as a result of an improvement in revenue mix with higher on-net revenue during the quarter, a decline in lower margin enterprise voice and private line services, lower Wholesale Voice Services revenue, and continued network optimization.

Communications gross margin was 60.6 percent for the third quarter 2010, an increase from 59.9 percent in the second quarter 2010. Communications gross margin was 59.0 percent in the third quarter 2009.

Selling, General and Administrative Expenses (SG&A)

Excluding non-cash compensation expense, Communications SG&A was $325 million in the third quarter 2010, compared to $324 million in the second quarter 2010 and $316 million in the third quarter 2009.

Communications SG&A expenses, including non-cash compensation expense, was $345 million for the third quarter 2010, compared to $338 million for the second quarter 2010. Communications SG&A expenses were $326 million for the third quarter 2009. Non-cash compensation expense was $20 million, $14 million and $10 million for the third quarter 2010, second quarter 2010 and third quarter 2009, respectively.

“While we did see the expected seasonal increase in utilities expenses, we partially offset that increase with reductions in facilities-based expenses, bad debt expense and property tax expense,” said Patel.

Adjusted EBITDA

Communications Adjusted EBITDA increased to $216 million in the third quarter 2010, compared to $209 million for the second quarter 2010. Third quarter 2009 Communications Adjusted EBITDA was $215 million.

Communications Adjusted EBITDA margin was 24.1 percent for the third quarter 2010, an increase from 23.4 percent for the second quarter 2010 and 23.9 percent in the third quarter 2009.

Communications Adjusted EBITDA excludes non-cash compensation expense and includes restructuring charges. Restructuring charges were $1 million for each period presented.

Consolidated Cash Flow and Liquidity

During the third quarter 2010, Unlevered Cash Flow was $89 million, versus $102 million in the second quarter 2010 and $152 million for the third quarter 2009.

Consolidated Free Cash Flow was negative $61 million for the third quarter 2010, compared to negative $19 million for the second quarter 2010. Consolidated Free Cash Flow was positive $9 million in the third quarter 2009.

“The sequential increase in the use of cash came from an expected $29 million increase in net cash interest expense due to timing of interest payments and a $29 million increase in capital spending to support sales,” said Patel. “Specifically, we increased capacity on our CDN network and deployed a new wavelength platform given strong sales and installations in these areas. We also increased spending to support supply chain improvements and to add more buildings onto our network.”

During the quarter, the company repaid, at maturity, the remaining $38 million aggregate principal amount of its 2.875% Convertible Senior Notes. The company also completed the offering of $175 million aggregate principal amount of its 6.5% Convertible Senior Notes due 2016. In October 2010, in connection with the underwriters’ exercise of the over-allotment option, the company issued an additional $26.25 million aggregate principal amount of these notes.

As of September 30, 2010, the company had cash and cash equivalents of approximately $518 million, or $544 million pro forma for the exercise of the underwriters’ over-allotment option.

Business Outlook

“Given our strong sales, churn and installation results this year, we are comfortable with our previous outlook and expect Core Network Services revenue to grow sequentially in the fourth quarter 2010,” said Patel. “We also expect to see growth in Communications Adjusted EBITDA. Given our typical working capital fluctuations and lower net cash interest expense, combined with CNS revenue growth, we also expect to generate positive Free Cash Flow in the fourth quarter.”

The company continues to expect full year 2010 net cash interest expense of approximately $525 million.

Summary

“Our business is well-positioned to continue to grow revenue based on the investments we have made this year in our network and capabilities, including expansion of our CDN and wavelength platforms, and our Ethernet service portfolio,” said Crowe. “Combined with the ongoing demand for wireless broadband, online video and enterprise Internet applications, we are optimistic about the opportunities in front of us.”

Conference Call and Web Site Information

Level 3 will hold a conference call to discuss the company’s second quarter results at 10 a.m. ET today. To join the call, please dial 800-289-0508 or 913-312-0694, access code 6344426. A live broadcast of the call can also be heard on Level 3’s website at http://lvlt.client.shareholder.com. During the call, the company will review an earnings presentation that summarizes the financial results of the quarter. This presentation may be accessed at http://lvlt.client.shareholder.com/results.cfm.

An audio replay of the call will be available until 11:59 p.m. ET on Saturday, Nov. 6, 2010, by dialing 888-203-1112 or 719-457-0820, access code 6344426. The archived webcast of the first quarter conference call together with the press release, financial statements, earnings presentation and non-GAAP reconciliations may also be accessed at http://lvlt.client.shareholder.com.

For additional information, please call 720-888-2502.

About Level 3 Communications
Level 3 Communications, Inc. (NASDAQ: LVLT) is a leading international provider of fiber-based communications services. Enterprise, content, wholesale and government customers rely on Level 3 to deliver services with an industry-leading combination of scalability and value over an end-to-end fiber network. Level 3 offers a portfolio of metro and long-haul services, including transport, data, Internet, content delivery and voice. For more information, visit www.Level3.com.

© Level 3 Communications, LLC. All Rights Reserved. Level 3, Level 3 Communications and the Level 3 Communications Logo are either registered service marks or service marks of Level 3 Communications, LLC and/or one of its Affiliates in the United States and/or other countries.  Level 3 services are provided by wholly owned subsidiaries of Level 3 Communications, Inc.  Any other service names, product names, company names or logos included herein are the trademarks or service marks of their respective owners.

Forward-Looking Statement
Some of the statements made in this press release are forward looking in nature. These statements are based on management’s current expectations or beliefs. These forward looking statements are not a guarantee of performance and are subject to a number of uncertainties and other factors, many of which are outside Level 3’s control, which could cause actual events to differ materially from those expressed or implied by the statements. The most important factors that could prevent Level 3 from achieving its stated goals include, but are not limited to, the current uncertainty in the global financial markets and the global economy; disruptions in the financial markets that could affect Level 3’s ability to obtain additional financing; as well as the company’s ability to: increase and maintain the volume of traffic on the network; successfully integrate acquisitions; develop effective business support systems; defend intellectual property and proprietary rights; manage system and network failures or disruptions; develop new services that meet customer demands and generate acceptable margins; adapt to rapid technological changes that lead to further competition; attract and retain qualified management and other personnel; and meet all of the terms and conditions of debt obligations. Additional information concerning these and other important factors can be found within Level 3’s filings with the Securities and Exchange Commission. Statements in this press release should be evaluated in light of these important factors. Level 3 is under no obligation to, and expressly disclaims any such obligation to, update or alter its forward-looking statements, whether as a result of new information, future events, or otherwise.

Non-GAAP Metrics

Pursuant to Regulation G, the company is hereby providing a reconciliation of non-GAAP financial metrics to the most directly comparable GAAP measure.

The following describes and reconciles those financial measures as reported under accounting principles generally accepted in the United States (GAAP) with those financial measures as adjusted by the items detailed below and presented in the accompanying news release. These calculations are not prepared in accordance with GAAP and should not be viewed as alternatives to GAAP. In keeping with its historical financial reporting practices, the company believes that the supplemental presentation of these calculations provides meaningful non-GAAP financial measures to help investors understand and compare business trends among different reporting periods on a consistent basis, independently of regularly reported non-cash charges and infrequent or unusual events.

Consolidated Revenue is defined as total revenue from the Consolidated Statements of Operations.

Communications Revenue is defined as communications revenue from the Consolidated Statements of Operations.

Core Network Services Revenue includes revenue from transport, infrastructure, data and local and enterprise voice communications services.

Communications Gross Margin ($) is defined as communications revenue less communications cost of revenue from the Consolidated Statements of Operations.

Communications Gross Margin (%) is defined as communications gross margin ($) divided by communications revenue. Management believes that gross margin is a relevant metric to provide to investors, as it is a metric that management uses to measure the margin available to the company after it pays third party network services costs; in essence, a measure of the efficiency of the company’s network.

Adjusted EBITDA is defined as net income (loss) from the Consolidated Statements of Operations before income taxes, total other income (expense), non-cash impairment charges, depreciation and amortization and non-cash stock compensation expense.

Adjusted EBITDA Margin is defined as Adjusted EBITDA divided by total revenue.

Management believes that Adjusted EBITDA and Adjusted EBITDA Margin are relevant and useful metrics to provide to investors, as they are an important part of the company’s internal reporting and are key measures used by Management to evaluate profitability and operating performance of the company and to make resource allocation decisions. Management believes such measures are especially important in a capital-intensive industry such as telecommunications. Management also uses Adjusted EBITDA and Adjusted EBITDA Margin to compare the company’s performance to that of its competitors and to eliminate certain non-cash and non-operating items in order to consistently measure from period to period its ability to fund capital expenditures, fund growth, service debt and determine bonuses. Adjusted EBITDA excludes non-cash impairment charges and non-cash stock compensation expense because of the non-cash nature of these items. Adjusted EBITDA also excludes interest income, interest expense and income taxes because these items are associated with the company’s capitalization and tax structures. Adjusted EBITDA also excludes depreciation and amortization expense because these non-cash expenses reflect the impact of capital investments which management believes should be evaluated through free cash flow. Adjusted EBITDA excludes the gain (or loss) on extinguishment of debt and other, net because these items are not related to the primary operations of the company.

There are limitations to using non-GAAP financial measures, including the difficulty associated with comparing companies that use similar performance measures whose calculations may differ from the company’s calculations. Additionally, this financial measure does not include certain significant items such as interest income, interest expense, income taxes, depreciation and amortization, non-cash impairment charges, non-cash stock compensation expense, the gain (or loss) on extinguishment of debt and net other income (expense). Adjusted EBITDA and Adjusted EBITDA Margin should not be considered a substitute for other measures of financial performance reported in accordance with GAAP.

Unlevered Cash Flow is defined as net cash provided by (used in) operating activities less capital expenditures, plus cash interest paid and less interest income all as disclosed in the Consolidated Statements of Cash Flows or the Consolidated Statements of Operations. Management believes that Unlevered Cash Flow is a relevant metric to provide to investors, as it is an indicator of the operational strength and performance of the company and, measured over time, provides management and investors with a sense of the growth pattern of the business.

There are material limitations to using Unlevered Cash Flow to measure the company against some of its competitors as it excludes certain material items such as payments on and repurchases of long-term debt, interest income and cash interest expense. Level 3 does not currently pay a significant amount of income taxes due to net operating losses, and therefore, generates higher cash flow than a comparable business that does pay income taxes. Additionally, this financial measure is subject to variability quarter over quarter as a result of the timing of payments related to accounts receivable and accounts payable and capital expenditures. Unlevered Cash Flow should not be used as a substitute for net change in cash and cash equivalents on the Consolidated Statements of Cash Flows.

Free Cash Flow is defined as net cash provided by (used in) operating activities less capital expenditures as disclosed in the Consolidated Statements of Cash Flows. Management believes that Free Cash Flow is a relevant metric to provide to investors, as it is an indicator of the company’s ability to generate cash to service its debt. Free Cash Flow excludes cash used for acquisitions and principal repayments.

There are material limitations to using Free Cash Flow to measure the company against some of its competitors as Level 3 does not currently pay a significant amount of income taxes due to net operating losses, and therefore, generates higher cash flow than a comparable business that does pay income taxes. Additionally, this financial measure is subject to variability quarter over quarter as a result of the timing of payments related to accounts receivable and accounts payable and capital expenditures. This financial measure should not be used as a substitute for net change in cash and cash equivalents on the Consolidated Statements of Cash Flows.

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Level 3 Communications, Inc. (NASDAQ: LVLT) has signed an agreement with the Social Security Administration (SSA) to provide wavelength services under the Networx Enterprise contract program.

Under the terms of the agreement, Level 3 will provide the SSA with multiple 10 Gigabit per second (Gbps) wavelength solutions to connect several of the SSA’s data center locations with the potential to expand to additional sites in the future. Level 3’s solution is designed not only to be a cost-effective offering, but to also meet SSA’s stringent network performance, scale, capacity and usability requirements.

“Level 3 is optimally positioned to offer government agencies critical communication services, given the high availability of our geographically diverse optical network paths and our custom-build network solutions,” said Edward Morche, senior vice president of Level 3’s Federal Markets. “This award from the SSA clearly demonstrates our ability to provide high-quality services that meet the government’s growing need for reliable connectivity and security.”

With approximately 54,000 long-haul fiber route miles and 27,000 metro fiber miles spanning 190 markets in 22 countries, Level 3 offers a broad portfolio of telecommunications services, including voice over internet protocol (VoIP), enterprise wide area network (WAN), metro and long-haul transport, data, collocation, and content delivery.

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Level 3 Communications, Inc. (NASDAQ: LVLT) today announced the availability of direct connectivity into global financial markets technology company BATS Europe, operator of a European Multilateral Trading Facility (MTF). This will give Level 3’s European financial services customers access to Level 3’s international Tier 1 backbone and low-latency trading execution from Europe to North America.

The new offering includes options for metro and inter-city connectivity as well as direct connection to Level 3’s low-latency, trans-Atlantic routes with diverse landing stations to better facilitate security and business continuity.

BATS Europe, launched on the 31 October 2008, is one of the leading pan-European markets, with market share of 8-10 percent in the FTSE 100, 7 percent of the SMI and 5-6 percent across the 15 European markets in which it operates.

“The tremendous growth of BATS Europe is a result of our forward-thinking approach to technology and understanding of the importance of fast, reliable global connectivity,” said Paul O’Donnell, chief operating officer at BATS Europe. “We’re committed to providing communications access solutions to market participants that meet the rigorous demands of the financial trading industry. We’re pleased to include Level 3 among the providers from which our participants may choose to connect to BATS Europe.”

Level 3 offers a number of customizable solutions for the financial industry, as well as low-latency network services to select trading venues throughout Europe and North America, including 15 financial exchanges, 14 electronic communications networks and seven market data centers.

With approximately 54,000 long-haul fibre miles and 27,000 metro fibre miles spanning 190 markets in 22 countries, Level 3 operates one of the most extensive and diverse network footprints in the market. As a result, Level 3 offers multiple low-latency options on a number of routes.

“At Level 3, we understand that when it comes to financial transactions, fractions of a second matter, and we’ve designed our services for this industry to meet the needs of the most sophisticated and demanding of customers,” said James Heard, president of European Markets at Level 3. “BATS Europe’s participants will now have access to solutions that nine of the top ten commercial banks rely on every day, including low-latency trading, highly scalable high-speed connections and secure transport of financial data that complies with major industry standards.”

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Level 3 Communications, Inc. (NASDAQ: LVLT) today issued a statement in response to the Verizon-Google Legislative Framework Proposal. The following statement can be attributed to John M. Ryan, assistant chief legal officer and head of Regulatory Affairs for Level 3 Communications:

“We are encouraged that two companies with diverse business interests in the broadband Internet have been able to come to agreement on an issue as controversial as network neutrality. Like both companies, Level 3 believes that the government has a role to play in assuring an open, dynamic, improving and ubiquitous broadband Internet for U.S. citizens. We share their view that government must preserve innovation, advance policies that encourage accelerated investment in broadband infrastructure, and protect competition within all portions of the Internet market.

’”While there is much to praise in the Verizon-Google statement, there are also areas that require more attention. Allowing last-mile access network owners to create a “paid priority” data service raises a number of concerns, especially since most consumers have a choice of only two wired broadband Internet suppliers, and since contention for limited capacity seems inevitable because consumers’ demand for broadband is greater than the existing networks’ capacity.

”While we have concerns about some aspects of the proposal, we are encouraged by the progress made by Verizon and Google, and look forward to working with the industry and with the government to advance policies that encourage innovation, investment and competition within the broadband Internet market.”

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Equinix, Inc. (Nasdaq: EQIX), a provider of global data center services, and Level 3 Communications, Inc. (NASDAQ: LVLT)  announced the opening of a new access node in Equinix’s International Business Exchange™ (IBX®) London 4/London5 (LD4/5) data center campus located on the outskirts of London. The access node will link the Equinix LD4/5 IBX campus directly with three of Level 3’s transatlantic routes to New York, improving diversity and lowering the latency on the route between the UK and North America.

Level 3’s new access node will offer customers in the Equinix LD4/5 campus direct connectivity to three transatlantic routes; Yellow, AC-1 and Apollo North, as well as provide access to its extensive North American footprint via the Level 3 facilities in New York. In addition, alongside the community of networks, content and digital media companies, enterprises and financial service providers already operating within Equinix’s LD4/5 campus, Level 3’s customers will benefit from a new route that bypasses central London. By locating the access node on the outskirts of London, Level 3 has improved the resilience and speed of connection between London and the U.S.

“We live in an increasingly connected world where the speed and reliability with which information travels – particularly for financial firms – is critical to successful business operations,” said James Heard, president of European Markets at Level 3. “Our collaboration with Equinix is the latest example of Level 3’s commitment to expanding its low-latency offerings across the Atlantic, enabling more options for transatlantic connectivity independent of central London, and providing top-quality solutions for the most demanding of international enterprise customers.”

Level 3 currently serves 20 European countries and operates an extensive and diverse network footprint across North America and Europe. The new direct transatlantic routes and on-net connectivity will also provide customers in Equinix’s LD4/5 campus greater flexibility to scale bandwidth directly connected to the Level 3 transatlantic network as their demand increases.

“Equinix provides state-of-the-art colocation, interconnection and exchange services that securely connect the world’s networks, enterprises, cloud providers and financial institutions,” said Russell Poole, General Manager, Equinix UK. “The availability of Level 3’s new service at our LD4/5 IBX campus is a valuable addition to our offering and presents an attractive value proposition for customers operating within our ecosystems.”

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Level 3 Communications, Inc. (NASDAQ:  LVLT) today announced it has upgraded its ultra-low-latency fiber-optic network connection from London to Frankfurt. The upgrade significantly improves latency on this route as well as the Frankfurt-to-New York and Frankfurt-to-Chicago routes, enabling higher-speed transaction rates with very low transmission delays for financial exchanges and other trading venues.

“Latency remains a highly-sensitive issue in the financial industry, and Level 3′s improvement of its Frankfurt to London ultra-low-latency route (and the subsequent benefit to its other routes as a result) positions the company well in this area, particularly among international enterprise and financial service providers,” said Roopashree Honnachari, senior industry analyst with Frost & Sullivan. “Combined with the company’s latency guarantees and network scalability, this offering could be a real competitive differentiator for Level 3.”

If you are interested in this route, please contact 10gea.org

Effective today, Level 3 will offer customers two grades of performance for ultra-low-latency routes, with access to circuit speeds of up to 10 Gigabits per second.

These two grades, Premier and Advanced, will allow customers to choose between two latency route speeds based on their specific requirements. Premier customers will have access to the faster ultra-low-latency route. Both of these levels are then backed by Level 3′s latency service level agreement (SLA).

“Similar to our ultra-low-latency route from New York to Chicago, this upgrade demonstrates Level 3′s commitment to supporting our financial services customers, especially as ultra-low-latency and transaction cycle times are critical to this sector,” said James Heard, president of European Markets at Level 3. “It also reinforces our commitment to continually enhance our ultra-low-latency service offering which, when combined with our network scale and reliability, deepens our commitment to the financial services community.”

The Level 3 network today spans 22 countries, with services offered in approximately 190 markets in Europe and North America. The company operates approximately 54,000 long-haul fiber miles and 27,000 metro fiber miles, making it one of the most extensive and diverse network footprints in the market.

Leveraging this footprint, Level 3 offers multiple low-latency options for any given route and a direct connection to low latency, trans-Atlantic routes with diverse landing stations to better enable network security and business continuity.

To learn more about Level 3′s European capabilities, please click here.

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Level 3 Communications, Inc. (NASDAQ: LVLT) today announced that it has been selected again by VERSUS, the exclusive television home of the Tour de France in the U.S., to be the online and mobile content delivery provider for the 2010 edition of the race. This year marks the second consecutive year that Level 3 will partner with VERSUS to stream live Tour de France content to online audiences via the Tour Tracker on www.VERSUS.com and the first year the content is available via iPhone.

The Tour de France begins on Saturday, July 3, and live streaming content will be available to U.S. and Canadian viewers in high-definition (HD) for live and on-demand online and iPhone viewing on a subscription basis.

Throughout all 21 phases of the three-week race, Level 3 will downlink the live Tour de France signal to one of its teleports in the U.S. Level 3 will then immediately backhaul that signal to several drop points around the country where it will be simultaneously encoded into multiple streaming delivery formats. Once encoded, the live streams will be pushed to the Level 3 CDN for delivery in real-time to cycling fans in the U.S. and Canada who subscribe to the Tour Tracker on www.VERSUS.com.

With the Tour Tracker race fans will see live, commercial-free HD video of the race as well as real-time GPS tracking of the peloton and break-aways during each stage of the race. Subscribers will also have access to daily updates with standings for each classification and complete, uncut stage videos and photos from each stage.

“At Level 3, we understand that successful online event delivery is about far more than carrying a video feed to a website, and our continued relationship with VERSUS is a direct result of that understanding,” said Peter Neill, senior vice president of Content Markets at Level 3. “We provide end-to-end delivery solutions that manage the signal from creation to consumption, which allows us to optimize the process every step of the way and provide a seamless experience for both the broadcaster and the end-user.”

By providing services specifically designed to manage the process of live event delivery effectively, Level 3 makes it easier for broadcasters and other content providers to share event content via the Web or connected devices with new audiences. For more information on Level 3’s media delivery services, visit www.Level3delivers.com.

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First Quarter Financial Highlights

• Continued sequential improvement in sales and churn
• Consolidated Revenue of $910 million
• Consolidated Adjusted EBITDA of $200 million

Level 3 Communications, Inc. (NASDAQ: LVLT) reported consolidated revenue of $910 million for the first quarter 2010, compared to consolidated revenue of $924 million for the fourth quarter 2009 and $980 million for the first quarter 2009.

The net loss for the first quarter 2010 was $238 million, or $0.14 per share. Excluding a loss of $54 million, or $0.03 per share on the extinguishment of debt, the net loss was $184 million, or $0.11 per share. The net loss for the fourth quarter 2009 was $182 million, or $0.11 per share, and $132 million or $0.08 per share for the first quarter 2009.

Consolidated Adjusted EBITDA was $200 million in the first quarter 2010, compared to $217 million in the fourth quarter 2009 and $250 million in the first quarter 2009.

“We are encouraged by the positive improvement we’ve seen this year for both sales and churn” said James Crowe, CEO of Level 3. “Ongoing broadband demand is providing sales opportunities across the company.  And our continued improvements in customer experience are paying off, contributing to a decline in disconnects.  We remain focused on execution, and will continue our disciplined approach to increasing our investments to take advantage of these market opportunities.”

Financial Results

1. See schedule of non-GAAP metrics for definition and reconciliation to GAAP measures.

Communications Business

Revenue

Total Communications Revenue for the first quarter 2010 was $900 million, compared to $906 million for the fourth quarter 2009. Total Communications Revenue for the first quarter 2009 was $962 million.

Core Network Services

Core Network Services revenue was $701 million in the first quarter 2010, a decline of approximately 1 percent compared to $706 million in the fourth quarter 2009.

“We were particularly encouraged by the growth in Large Enterprise and Federal revenues,” said Sunit Patel, executive vice president and CFO of Level 3.  “Mid-market revenues, which have been declining since 2007, are now stabilizing.

“We were pleased to see a return to sequential revenue growth on a constant currency basis for our European business. While European revenues declined on an as-reported basis, assuming constant currency, European revenues increased 3 percent.

“Our Wholesale revenues declined this quarter due to expected seasonality in the Vyvx broadcast business and a decline in inter-carrier compensation, partially offset by an asset sale of approximately $7 million.

“On a normalized basis, accounting for seasonality, inter-carrier compensation, the effects of foreign exchange, and the asset sale during the quarter, our Core Network Services revenue was down slightly, which represents a much improved performance from a year ago.”

Deferred Revenue

The communications deferred revenue balance was $880 million at the end of the first quarter 2010, compared to $902 million at the end of the fourth quarter 2009 and $868 million at the end of the first quarter 2009.

Cost of Revenue

Communications cost of revenue increased to $371 million in the first quarter 2010, from $361 million in the fourth quarter 2009, largely due to favorable vendor discounts and settlements in the fourth quarter 2009 and the revenue mix shift in the current quarter.  Communications cost of revenue was $390 million in the first quarter 2009.

Communications gross margin was 58.8 percent for the first quarter 2010, compared to 60.2 percent in the fourth quarter 2009. Communications gross margin was 59.5 percent in the first quarter 2009.

Selling, General and Administrative Expenses (SG&A)

Excluding non-cash compensation expense, Communications SG&A was $327 million in the first quarter 2010, compared to $328 million in the fourth quarter 2009 and $322 million in the first quarter 2009.

Communications SG&A expenses, including non-cash compensation expense declined to $343 million for the first quarter 2010, from $352 million for the fourth quarter 2009. SG&A expenses were $338 million for the first quarter 2009.  Non-cash compensation expense was $16 million, $24 million, and $16 million for the first quarter 2010, fourth quarter 2009, and first quarter 2009, respectively.

Adjusted EBITDA

Communications Adjusted EBITDA was $202 million for the first quarter 2010, compared to $216 million for the fourth quarter 2009.  First quarter 2009 Communications Adjusted EBITDA was $249 million.

Communications Adjusted EBITDA margin was 22.4 percent for the first quarter 2010, compared to 23.8 percent for the fourth quarter 2009 and 25.9 percent in the first quarter 2009.

Communications Adjusted EBITDA excludes non-cash compensation expense and includes restructuring charges. For the first quarter 2010, the company incurred less than $1 million of restructuring charges. For the fourth quarter and first quarter 2009, restructuring charges were $1 million.

Consolidated Cash Flow and Liquidity

During the first quarter 2010, Unlevered Cash Flow was $51 million, versus $218 million in the fourth quarter 2009, and $43 million for the first quarter 2009.

Consolidated Free Cash Flow was negative $90 million for the first quarter 2010, or $63 million, excluding approximately $27 million related to a settlement and other payments for previously discontinued operations not associated with the Communications business.

During the quarter, the company repaid, at maturity, the remaining $111 million aggregate principal amount of its 6% Convertible Subordinated Notes due 2010 and repurchased approximately $8 million of debt due in 2010 and 2011.

As previously disclosed, Level 3 Financing, Inc. issued $640 million aggregate principal amount of its 10% Senior Notes due 2018, and retired its 12.25% Senior Notes due 2013 during the first quarter 2010. As a result, the company recorded a $54 million loss on the extinguishment of debt during the first quarter 2010.

On April 27, 2010, the company issued a notice to redeem the remaining $172 million aggregate principal amount of its 10% Convertible Senior Notes due 2011.  These notes will be redeemed effective May 27, 2010.  As a result, the company expects to recognize a $4 million loss on extinguishment of debt in the second quarter 2010.

The company continues to expect Net Cash Interest Expense of approximately $525 million and GAAP Cash Interest Expense of $585 million for the full year 2010.

As of March 31, 2010, the company had cash and cash equivalents of approximately $639 million.

Business Outlook

“We saw several positive signs in the overall health of our business this quarter,” said Patel.  “Our Core Network Services sales orders were up by more than 15 percent in the first quarter compared to the fourth quarter. We believe that churn will continue to show improvement for the rest of the year.  Backing out the $7 million asset sale in the first quarter, we expect Core Network Services revenue to grow sequentially for the rest of 2010.

“With the exception of typical utility cost fluctuations, we expect SG&A to remain relatively flat for the remainder of the year.  Based on the opportunities we see now to profitably grow our revenues, as we mentioned last quarter, we are expecting capital expenditures to increase in 2010 compared to 2009.  Given that, we expect to be Free Cash Flow negative for the full year 2010.  Consistent with prior years, we expect Free Cash Flow performance to improve for the remainder of the year.

Summary

“We are beginning to see both the benefit of improvements we have made in our customer experience over the last couple of years and the recovering economy,” said Crowe. “Our sales and churn are improving and we expect to translate that into improving revenue growth.”

Conference Call and Web Site Information

Level 3 will hold a conference call to discuss its first quarter 2010 results today at 11:00 a.m. EDT. You may access the call at 888-211-7449 or 913-312-0677 passcode 8481809. The call also will be broadcast live on Level 3′s Web site at http://lvlt.client.shareholder.com/.

During the call, the company will review an earnings presentation that summarizes the results of the quarter. The company has also provided a supplemental schedule with historical financial results. The presentation and supplemental schedule may be accessed at http://lvlt.client.shareholder.com/results.cfm.

The call will be archived and available live on Level 3′s Web site at http://lvlt.client.shareholder.com/ or you may access an audio replay until 12 a.m. EDT on Saturday, May 15, by dialing 888-203-1112 or 719-457-0820, access code 8481809.

For additional information please call 720-888-2502.

About Level 3 Communications
Level 3 Communications, Inc. (NASDAQ: LVLT) is a leading international provider of fiber-based communications services. Enterprise, content, wholesale and government customers rely on Level 3 to deliver services with an industry-leading combination of scalability and value over an end-to-end fiber network. Level 3 offers a portfolio of metro and long-haul services, including transport, data, Internet, content delivery and voice. For more information, visit www.Level3.com.

Forward-Looking Statement
Some of the statements made in this press release are forward looking in nature. These statements are based on management’s current expectations or beliefs. These forward-looking statements are not a guarantee of performance and are subject to a number of uncertainties and other factors, many of which are outside Level 3′s control, which could cause actual events to differ materially from those expressed or implied by the statements. The most important factors that could prevent Level 3 from achieving its stated goals include, but are not limited to, the current uncertainty in the global financial markets and the global economy; disruptions in the financial markets that could affect Level 3′s ability to obtain additional financing; as well as the company’s ability to: successfully integrate acquisitions; increase the volume of traffic on the network; defend intellectual property and proprietary rights; develop effective business support systems; manage system and network failures or disruptions; develop new services that meet customer demands and generate acceptable margins; attract and retain qualified management and other personnel; and meet all of the terms and conditions of debt obligations. Additional information concerning these and other important factors can be found within Level 3′s filings with the Securities and Exchange Commission. Statements in this press release should be evaluated in light of these important factors. Level 3 is under no obligation to, and expressly disclaims any such obligation to, update or alter its forward-looking statements, whether as a result of new information, future events or otherwise.

Non-GAAP Metrics

Pursuant to Regulation G, the company is hereby providing a reconciliation of non-GAAP financial metrics to the most directly comparable GAAP measure.

The following describes and reconciles those financial measures as reported under accounting principles generally accepted in the United States (GAAP) with those financial measures as adjusted by the items detailed below and presented in the accompanying news release. These calculations are not prepared in accordance with GAAP and should not be viewed as alternatives to GAAP. In keeping with its historical financial reporting practices, the company believes that the supplemental presentation of these calculations provides meaningful non-GAAP financial measures to help investors understand and compare business trends among different reporting periods on a consistent basis, independently of regularly reported non-cash charges and infrequent or unusual events.

Consolidated Revenue is defined as total revenue from the Consolidated Statements of Operations.

Communications Revenue is defined as communications revenue from the Consolidated Statements

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Level 3 Communications, Inc. (NASDAQ: LVLT) today announced that it has been selected to deliver voice services to VIP Communications, which provides prepaid long-distance service in the U.S. and more than 30 countries worldwide.

Under the contract, Level 3 will provide international voice termination (IVT) services to VIP. Level 3′s IVT service is designed to deliver a high-quality, cost-effective solution for service providers with significant voice traffic by delivering real-time reporting and routing as well as real-time pricing.

“VIP is constantly on the lookout for cost-effective network solutions, and Level 3′s network provided the reach and efficiency we were looking for,” said Pete Rogers, senior vice president of Business Operations & Development for VIP Communications. “With our constantly growing call volume, we also needed a network that provides the flexibility to adapt to our changing business needs, and Level 3 delivered on that front as well.”

Ashburn, Va.-based VIP Communications Inc. provides long-distance and international calling services that enable customers to stay in touch with family and friends and business contacts, worldwide. VIP’s calling services are available from both land lines and cell phones at competitive rates.

“Delivering solutions that take advantage of the reach, flexibility and efficiency of our network represents the heart of Level 3′s value proposition,” said William Ganey, Level 3′s general manager for Washington, D.C. “And we pride ourselves on combining our extensive fiber footprint with a local customer support team to deliver an unmatched customer experience.”

Level 3′s Business Markets Group leverages the power of the company’s extensive fiber-optic network, metro assets, and locally focused sales and sales support organization to deliver world-class services to enterprise customers and service providers throughout the United States.

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