Level 3 says small cell backhaul poses greater potential than towers

Level 3 took the road less traveled in the wireless backhaul race by not aggressively pursuing selling wireless backhaul services to wireless operators' towers. However, it sees greater potential in the emerging small cell market.

Speaking at the recent Citi 2016 Internet, Media and Telecommunications Conference, Sunit Patel, executive vice president and CFO for Level 3, said the wireless community's roll out of small cells particularly in dense areas could be an opportunity to sell fiber-based wholesale services.

"I would say we're more excited about the small cell opportunity over the next five years than what we saw in the tower opportunity, which we thought was not as financially attractive for us given where our network was and where the towers were in general," Patel said. "I think for dense urban areas where increasingly residential and businesses exist like Chicago, New York City, San Francisco or parts of Los Angeles, we think we will be a beneficiary of the small cell movement, which is definitely happening as more people see the need for Wi-Fi clouds over cities."

There are a few things that the service provider has going for it that would make it a logical provider of backhaul for small cells.

One is the density of Level 3's metro fiber network and building penetration.

Level 3 currently has 64,000 route fiber miles. It has also installed fiber in more than 40,000 buildings in the United States, a number that it continues to ramp up as it expands its Ethernet service presence. It could leverage that existing fiber to backhaul small cell traffic.

While not revealing any specific small cell deals with wireless operators, Patel said Level 3 will be able to address the opportunity on two fronts: providing fiber to small cells placed in buildings and even in large cities where service providers are reconfiguring outdated phone booths to be Wi-Fi hot spots.

"We have 40,000 buildings on-net so the top of any of those buildings could be a spot for a Wi-Fi cloud and fiber is already there so chances are we could have that opportunity," Patel said.

In markets like Manhattan, Level 3 could also be a backhaul purveyor for the emerging municipal Wi-Fi movement. A recent CBS News report revealed that the first of an estimated 7,500 planned hotspots will go live early next year in Manhattan, offering free Wi-Fi service, new street phones with free calling, and device charging ports.

New York City overall, according to estimates collected by CBS News, has 8,200 payphone booths, but 37 percent of them aren't in operation.

"If you look at Manhattan there could be a Wi-Fi cloud on every block with telephone boxes being replaced by towers," Patel said. "Our fiber together with others is crossing the streets. We think that opportunity will grow because the growth of wireless data will drive two things: a need for more and more Wi-Fi clouds and micro cell sites and a need for more fiber in the metro and we should see some benefit."

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