In an interesting announcement this morning, Open Range Communication will be leveraging the extended on-net services of Level 3 Communications (NYSE:LVLT, news, filings) to provide WiMAX to rural communities. Open Range has a bundle of funding ready to go, $100M from JP Morgan and another $267M in subsidized government loans. Level 3 will be providing the networking infrastructure for their effort to hook up 500 communities in 17 states. WiMAX has always seemed to me to have the clearest potential where its wide range comes into play, in other words for rural areas it seems like a no-brainer.
One might ask, as I did at first, just where is Level 3 getting this rural infrastructure? Well, actually they’ve always had it – they just haven’t used it. All those amplification and regeneration huts along their 42,000 route miles that fall between their Tier 1, 2, and 3 cities add up, and this deal attempts to leverage them. They do that, I would guess, by leveraging the latent capabilities of the gear from Infinera (NASDAQ:INFN, news, filings). From the beginning, Infinera’s gear has promised to make it both less costly *and* less complex to add/drop more frequently between major nodes. All-optical ROADM works great as long as you don’t need quite so many of them in a row – then it starts to get rather complicated. Well, at least that’s my guess as to the technical magic behind this project – corrections or clarifications are welcome.
This is a rather creative way for Level 3 to get more use out of its existing infrastructure without hurting its efforts at maximizing cash flow. The whole idea probably wouldn’t be viable without government money backing Open Range, but this particular money seems to be pre-stimulus. Level 3 has now positioned itself to partner with others looking at similar plans for getting a piece of the broadband stimulus. Perhaps they might also leverage some of that unused LMDS spectrum from Telcove for backhaul?
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Categories: Internet Backbones · Wireless
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Thanks Rob. I think the interesting question it raises is now, what will Level 3 seek in govt money. With the media reporting that AT&T & Verizon not going after it there would be less hungry telecom mouths. Thinking about this creative deal with open range, the potential of low cost capital for a company with a high cost of capital it would seem to present an oppty for Level 3 to participate.
One might ask, as I did at first, just where is Level 3 getting this rural infrastructure? Well, actually they’ve always had it – they just haven’t used it. All those amplification and regeneration huts along their 42,000 route miles that fall between their Tier 1, 2, and 3 cities add up, and this deal attempts to leverage them. They do that, I would guess, by leveraging the latent capabilities of the gear from Infinera (INFN: chart, news). From the beginning, Infinera’s gear has promised to make it both less costly *and* less complex to add/drop more frequently between major nodes. All-optical ROADM works great as long as you don’t need quite so many of them in a row – then it starts to get rather complicated. Well, at least that’s my guess as to the technical magic behind this project – corrections or clarifications are welcome.”””””
i think thats a great guess. that said, how do they get the data to the hut? do they use a wireless backhaul tower strategy and then run fiber to one hut? interest stuff
According to a Wall Street Journal report, Qwest Communications (NYSE:Q) is debating the sale of its long-haul communications network, which has an estimated market value of anywhere between $2 and $3 billion. The article said potential bidders include AT&T (NYSE:T), Verizon Communications (NYSE:VZ) and Level 3 Communications (NASDAQ:LVLT). The company declined to comment.
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Level 3’s $800M in cash doesn’t get them near this purchase price however when they brought on Jeff Storey from Leucaida you had to know that Leucaida could play a bigger role if needed in any strategic transaction. This would obviously qualify.
I think VZ, T, and TWTC are the ideal bidders but despite LVLT’s share price – they/Leucaida/Longleaf/Fairfax have the means.