with Jack Waters, CTO at Level 3
Now that Level 3 has completed its acquisition of tw telecom, the next phase of the deal comes as the service provider begins integrating the former's operations into its own fold. Unlike its acquisition of Global Crossing, the tw telecom assets will deepen Level 3's metro fiber and Ethernet footprint, particularly in the U.S. In addition to the last mile assets, the acquisition of tw telecom will help the company enhance its use and adoption of software-defined networking (SDN) and network functions virtualization (NFV) to put network functions out in its network. Sean Buckley, senior editor of FierceTelecom, recently caught up with Jack Waters, CTO of Level 3, about the value the tw telecom assets bring to his company.
FierceTelecom: Now that you have completed the acquisition of tw telecom, what are the next steps for Level 3?
Waters: I think the next phase is integration. We've been planning for integration in earnest since the announcement and there are lots of things you can get done pre-close and then there's a lot more detailed planning you can get post-close. In the next handful of months is when we really get after the network integration and the back office integration and all of that.
FierceTelecom: You have been involved in various large acquisitions during your tenure at Level 3. Is there anything unique about tw telecom assets vs. Global Crossing?
Waters: Obviously, tw telecom's assets are all here in the U.S. They have a deep metro footprint, which was different than Global Crossing. There was less long-haul footprint so the assets themselves are different. The tw telecom assets and the Level 3 assets are extremely complementary so we're excited that the combined footprint grows substantially from both companies.
FierceTelecom: What does tw telecom bring to the table for Level 3 in terms of services? Is it on-net buildings, a deeper Ethernet footprint, or all the above?
Waters: Yes, strength in Ethernet, strength in number of on-net buildings, and also complementary markets. If you overlaid the markets that tw telecom was in and compared it to the markets Level 3 was in, you'd see nice complement as compared to just overlap. Both companies are extremely focused on Ethernet and enterprise services so all that is very positive.
FierceTelecom: Level 3 has traditionally been known for wholesale services, but in recent years enterprise is becoming a larger part of the pie. Can you talk about that?
Waters: About seven to eight years ago, we would have been 35 percent enterprise and 65 percent wholesale. Today, it's been flipped that, even prior to tw telecom, Level 3 was probably 64 percent enterprise and 36 wholesale and then tw telecom helps us concentrate even more on the enterprise side. Enterprise expands even more from where we were pre-acquisition.
FierceTelecom: Before the deal was closed, tw telecom was expanding its own network presence into new markets. Do those expansions help as you begin the integration work?
Waters: The nice thing about metro markets is as you build loops and add markets, the next building you add becomes less and less expensive on a add basis because your capillarity is growing. If you build a sub loop in a place where you did not have service before, or if you wanted to add a building prior to that sub loop, you'd have to build all the way to that building. Now you have the capillarity in the sub loop to get to a building at a whole lot less construction miles, or construction feet, than you would have prior. Anything that helps extend out the fabric is extremely positive and tw telecom brings a ton of that to the table. The combination together--and we'll talk about our companies as one going forward--has great capillarity and an unparalleled fiber footprint in the U.S.
FierceTelecom: On top of the network you now have, do you see more network buildouts in the U.S. market going forward?
Waters: We've always had a strong capital plan. We sometimes expand prospectively, but mostly on a success-based nature where when we have customer demand we spend the capital to get to that customer and that's going to continue. When you think about the scale we have now, not just in the U.S. but then add on the entire global network along with that, that's something that tw telecom customers can take advantage of in very short order. We continue to invest money in Europe, in Latin America, and the subsea cables we have along with continuing to expand in the U.S.
FierceTelecom: Are you seeing more demands from your international customers looking to deepen their U.S. network presence?
Waters: Absolutely. Our network did not go everywhere in the U.S. and now it goes even more places. That extended footprint isn't just for customers in the U.S., it's also for folks outside of the U.S. wanting to get to other locations inside the U.S.
FierceTelecom: Are there other elements that the tw telecom brings in terms of technology and services to Level 3?
Waters: There's an intense focus on Ethernet, which we always had but it just gets amplified. Both companies were headed down the path of leveraging technologies like SDN and NFV. On the SDN side it was more for configuration, automation and improved provisioning times. On the NFV side it's all about putting network functions out in our network. The interesting thing is that we believe that in the long run the infrastructure that we built out for content delivery networks (CDNs) will be able to be leveraged for putting network functions out in our network. Today, we have 15,000 servers in our network and tomorrow we believe that we're going to leverage a lot of that infrastructure to put network functions in our network.
FierceTelecom: You mentioned SDN and NFV. Where is Level 3 in its evaluation of those technologies and do you see them playing a larger role in your network?
Waters: I think it's all pretty early. The combined company has done a number of network trials. With respect to SDN, we're in the development phase around a few NFV betas so it's early but we have use cases up and running already. The combined company is laser focused on how to leverage the technology really to help build a network abstraction layer for things like provisioning, configuration management, and provisioning automation is something we think will be great for us and our customers.
FierceTelecom: In terms of network automation, tw telecom had built a mechanism for bandwidth on demand for its enterprise and wholesale customers, for example. Are you planning on integrating those functions into the combined company?
Waters: They had done a lot of great work we're going to be able to leverage. They did a lot of work around dynamic bandwidth, dynamic configuration and that's something the combined company will leverage going forward.