Level 3 says interconnection issues can be a disadvantage to consumers

Level 3 continues to make progress in making new interconnection agreements with a number of carriers, but it contends the real beneficiaries are the consumers that want to access over-the-top video and other content.

Speaking to investors during its third-quarter earnings call, Jeff Storey, CEO of Level 3, said that service providers that won't sign interconnection agreements or cause issues cause a ripple effect for its wholesale customers that is passed down to their consumers.

"We see disadvantages to consumers and to the marketplace when companies refuse to interconnect," Storey said. "When companies refuse to interconnect with Level 3 their customers that want to download video suffer."

Storey added that the benefit of interconnection agreements are not necessarily for Level 3, but rather to ensure their content provider customers can provide a good experience for their customer base.

"As we go out and talk to our peers what we focus on is that it's not the benefit for Level 3, but for their customers because we deliver content that their customers want, customers request and have paid for," Storey said. "The better job that we do of interconnecting with them recognizing we're not asking anyone to build a network on our behalf, but we're trying to help them deliver a better service to their customers."

Level 3 has continued to establish agreements with the large incumbent telcos and cable operators, including Verizon (NYSE: VZ), AT&T (NYSE: T) and Comcast (NASDAQ: CMCSA). These agreements enable service providers to traffic delivery improvements. 

"We have reached agreements with many of the large incumbents and cable companies in the U.S., but we still have one or two holdouts in North America we're working with to reach interconnection agreements with," Storey said. "We still have issues in other parts of the world as we try to interconnect with PTTs and others out there."

Getting to this point had been anything but easy.

In May, Level 3 accused five unnamed U.S. ISPs and one European ISP of abusing their market power to effectively put a limit on the amount of traffic the transit provider can route over these ISPs' last mile networks. 

Like fellow Internet transit provider Cogent, which has signed similar interconnection agreements, Level 3 has advocated that the FCC apply its net neutrality rules to service provider interconnect points.

Following the passage of the FCC's new net neutrality rules, Level 3 cited concerns that ISPs could still manipulate the size of the gates coming into their networks, so that traffic from video-heavy platforms like Netflix (NASDAQ: NFLX) and YouTube would be downgraded unless companies like Level 3 pay a toll.

For more:
- listen to the earnings webcast (reg req.)

Related articles:
Level 3's Storey: Lock-up agreements are stalling company's growth
Level 3, Google strike interconnection pact to improve CDN access
Level 3, AT&T establish network interconnection agreement
Verizon, Level 3 make nice with interconnection agreement
Level 3, Comcast sign new network interconnection agreement