With tw telecom firmly under its belt, Level 3 has maintained its lead over Verizon (NYSE: VZ) and a host of traditional competitive providers in the Ethernet race.
The service provider's movement was clearly reflected in its fourth quarter earnings where it reported that core network services (CNS) revenues rose 6 percent year-over-year to $1.94 billion from $1.89 billion. Within the CNS segment Enterprise was the clear star with revenues jumping 6 percent to $1.4 billion.
Rosemary Cochran, principal of Vertical Systems Group, told FierceTelecom that Level 3, which took the top spot on the research firm's 2015 U.S. Competitive Provider Ethernet Leaderboard, bolstered its position by acquiring tw telecom.
"Level 3 is the major player here and account for a great portion of that piece by virtue of its purchase of tw telecom," Cochran said. "It's pretty substantial."
In addition to bolstering its North American Ethernet reach, the service provider recently announced it expanded its metro Ethernet 2.0 services into 27 new European markets.
The business services-focused move is part of a broader expansion effort Level 3 has slated for the Europe, Middle East and Africa regions in 2016. Level 3 plans to expand Ethernet into an additional 15 EMEA locations later this year, all of which are connected to their network.
"Their goal is to have a consistent platform worldwide and their presence in Europe wasn't as strong as it was in South America and with the tw telecom acquisition they deepened their U.S. presence," Cochran said. "Now a lot of the U.S. based multinationals have an outlet as well with their ability to sell into that market."
Trailing Level 3 and XO Communications are Cogent Communications and Zayo Group, which took the third and fourth spots.
XO, which is in the process of selling its fiber network to Verizon, has held fast in the competitive Ethernet market by selling a mix of Ethernet over Copper and fiber-based Ethernet.
Prior to Verizon announcing its deal to acquire the company's fiber assets, XO launched an initiative in 2014 to invest up to $500 million to grow its nationwide network.
Under that plan, the service provider completed fiber construction projects into nearly 550 enterprise buildings across 25 regional markets. At the time Verizon announced its acquisition of the fiber network, XO had over 4,000 on-net fiber fed buildings.
"There aren't that many buildings, but there is a lot of metro fiber," Cochran said. "One of the issues XO faces is scale as most of their Ethernet connections are over copper so you max out at some point."
Meanwhile, Zayo has continued to ramp up its fiber and Ethernet connectivity in the U.S. and increasingly in Europe and Canada through targeted acquisitions.
These acquisitions make it challenging for Zayo in the near term as the company weaves those operations into its own.
"Zayo has one of the biggest fiber networks on the competitive side, but it's a lot of different companies," Cochran said.
Cochran added that Zayo's movement into Europe and Canada via acquisitions such as AboveNet and Allstream will make it more appealing to large multinational companies that need access outside of the United States.
"Some of their international acquisitions do affect the U.S. business because if you're a multinational company, the first step is Europe and Zayo didn't have the European presence that AT&T and Verizon has," Cochran said. "Being able to do non-U.S. connections is important."
With about 70 players competing against traditional incumbents, the competitive segment is one of the most diverse in the U.S. Ethernet market.
"This includes small regional companies, international companies like Telstra and Orange that are selling in the U.S. market so it's really the most diverse of the segments because they all focus on different types of things," Cochran said.
Unlike the ILECs and cable operators, Cochran said that all of the players use a large mix of access technologies, including copper and fiber technologies to deliver speeds up to 100 Gbps.
"One thing in particular is that you have some players that only use copper access and others using all fiber and everything in between in terms of what's being offered in one area," Cochran said.
- see this release
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