The CenturyLink and Level3 merger finally went through yesterday, November 1, 2017. Right out of the gate, the combined company is the second-largest enterprise network provider in the country, behind only AT&T.
Here are two reasons why “better together” might actually be better from our friends at The Motley Fool:
1 – Combined, Complementary Networks and Services
While Level 3 and CenturyLink do have some overlap, their networks are mainly complementary. CenturyLink, based in Louisiana, has its roots in the South and Midwest, and has also branched out to the western states with its acquisition of Qwest in 2011. With Level 3’s 200,000 miles of network fiber, the company will have a Tier 1 network that covers virtually all of the major cities in the U.S. Level 3 also brings along an international business with connections to over 60 countries, and Level 3 has enterprise clients in both Latin America and EMEA.
Moreover, the two companies will be able to leverage their different products over the combined customer base. Between the two companies, there are network connections for enterprise and consumers, content delivery networks, cloud services, consulting services, and others. Combined, the companies can effectively be a “one-stop shop” and have the flexibility to provide the right products for its diverse customer base.
Another compelling data point is that both companies seem to have been falling behind the speed race. According to PC Magazine, in 2016, CenturyLink was not even in the top 10 fastest ISPs in the country, and only cracked the top 10 in a single region — the Northwest — where it placed fourth. Level 3 also had reason for concern. While it had been at the top of the speed rankings for business ISPs each of the last three years, and boosted its speeds again in 2016, it still wasn’t enough. Five other ISPs leap-frogged the company in 2016! If a merger can help the combined entity spend more efficiently on beefing up speeds where it needs to, that is another plus.
2 – Increased Scale
Level 3 CEO Jeff Story said “scale matters,” numerous times on a recent merger conference call. This matters not only for reduced peering fees, but it also allows for an easier customer experience.
For instance, when a company wants its own virtual network to secure a remote computer or location, being a smaller provider means you often have to connect through another company’s network. If one owned the entire network, however, the company could more seamlessly connect elements in the network and reduce wholesale fees at the same time.
CenturyLink and Level 3 should get several benefits from the deal. And it looks like these benefits are sorely needed.
In telecommunications, it’s easy to become jaded since “better together” is often not better. Here at ATC, we spackle and sand every carrier’s rough edges (they all have them) when there’s a good fit for our clients. If “better together” is indeed better for our clients, then we are all for combined networks and increased scale, but we’ll be sure to still bring the spackling.