CenturyLink steals AT&T’s Ethernet crown following Level 3 acquisition

CenturyLink has overtaken AT&T’s nearly 13-year reign as the top domestic Ethernet provider in the United States, a feat it achieved by completing its acquisition of Level 3 Communications.

The telco’s rank move, according to Vertical Systems Group’s year-end 2017 U.S. Ethernet LEADERBOARD, was also a function of continued growth in Ethernet ports for both companies. Earlier, Level 3 ranked second to AT&T and CenturyLink ranked fifth on the Mid-2017 U.S. Ethernet LEADERBOARD.

A key element of CenturyLink’s advance is the broader North American and international customer base as well as an expanded network footprint. By acquiring Level 3, CenturyLink gained an additional 200,000 route miles of fiber, including 64,000 route miles in 350 metropolitan areas and 33,000 subsea route miles connecting multiple continents.

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Rosemary Cochran, principal of Vertical Systems Group, told FierceTelecom that the Level 3 acquisition gives CenturyLink greater domestic and global reach.

Vertical Systems Group
Rosemary Cochran

“CenturyLink had previously been limited to domestic network topologies with most locations within its local access territories,” Cochran said. “The merger opens up global markets, particularly in Europe and Latin America, where Level 3 has significant network footprints.”

But the expanded network footprint is only one element of what drove CenturyLink’s Ethernet growth as well as solidified it for future patterns. With Level 3 in its pocket, CenturyLink can enhance not only its medium-sized business reach but also a broader base of multisite domestic and global enterprise customers.

“CenturyLink has historically been strong in the midmarket, so they certainly will have access to more of those companies,” Cochran said. “Another major opportunity is the ability to better compete for large enterprise business using the expanded reach and sophisticated platform from Level 3. The new CenturyLink has just come together organizationally, so now we expect an acceleration of technology advancement and the alignment of service offers, contracts and customers.”

CenturyLink is not the only Ethernet provider that is enhancing its market presence. Cable operators such as Comcast and Charter as well as Frontier and GTT are advancing their presence via acquisitions and organic growth strategies.

Vertical Systems Group

Comcast, Charter ramp up

Cable, which is the fastest growing segment in the Ethernet space, is taking a two-pronged approach to deliver Ethernet: building and expanding traditional fiber and leveraging existing HFC plant. The two cable operators that are clearly leading cable’s Ethernet charge are Charter’s Spectrum Enterprise and Comcast Business, which both reported favorable business services results during the fourth quarter.

Spectrum Enterprise's commercial fourth-quarter revenue in SMB and enterprise combined grew by 6% to $1.5 billion. Within Charter’s commercial sector, SMB revenues rose 4.5% year over year to $931 million, while Enterprise grew 8.3% to $570 million. While Spectrum Enterprise is not nearly the size of large incumbent telcos, it’s notable that the cable MSO is making more progress in the larger enterprise market at a time when the large telcos have seen declines in business service revenues.

No less compelling was Comcast Business. Comcast Business reported that in 2017 it saw a $6.5 billion revenue run rate for business services.

Comcast’s business services revenue rose 12.2% in the fourth quarter to $1.68 billion. The cable MSO said the revenue jump was related to increases in the number of customers receiving its small and medium-sized business services offerings. 

Cochran said that Comcast has been increasing its presence with larger businesses through its fiber and HFC facilities to offer Ethernet and even new services like SD-WAN.

“Comcast has approached the Ethernet market in stages and now is focusing on midmarket and larger enterprises,” Cochran said. “It has a nationwide fiber backbone and has been adding on-net buildings at a steady pace, however it does not have the massive build-out to on-net buildings like AT&T, Verizon and Spectrum Enterprise. So, in addition to fiber, Comcast is utilizing their extensive HFC plant to expand their Ethernet business.”

Frontier, GTT grow presence

Frontier and GTT, which come from different paths, are also making a bigger dent in the Ethernet market. Like CenturyLink, these companies bolstered their on-net Ethernet reach and service capabilities by making large acquisitions of other companies.

After purchasing Verizon’s California, Texas and Florida properties, Frontier advanced its on-net building reach to over 30,000. By having a greater number of on-net buildings connected to its network, the service provider can more readily address the higher speed needs of its larger business customers across its diverse footprint.

These fiber-based connections can also help Frontier differentiate itself from local CLECs that may rely on renting off-net circuits and cable operators that have eaten into the CTF markets after Verizon largely left them alone. This on-net footprint puts the telco in a good position to deepen customer penetration in those buildings above 20%. It will do this by selling customers a mix of higher Ethernet speeds and IP-based applications.

The service provider is also planning to leverage its fiber and copper network infrastructure as a platform to eventually release its SD-WAN service for business customers later this year.

GTT, which has been an aggressive market consolidator, gained a larger Ethernet footprint and greater network capabilities via its purchases of Hibernia and Global Capacity. By acquiring Hibernia, GTT became a facilities-based provider overnight with a set of owned and leased dark-fiber assets including five owned subsea cable and eight landing stations. The provider could leverage these assets to immediately address higher speed Ethernet services that complement its leased facilities.

No less important was GTT’s acquisition of Global Capacity. Through this acquisition, GTT scaled its last-mile connectivity reach to over 9.6 million U.S. commercial addresses and access to 41 data centers and 1,750 Central Office (CO) points of presence.

From an Ethernet perspective, the Global Capacity purchase also augmented managed SD-WAN service with diverse access options, including an extensive on-net Ethernet over Copper infrastructure. Before being purchased by GTT, Global Capacity equipped 830 COs to deliver service to an additional 230,000 new commercial addresses across 58 metro markets in 28 states. 

Cochran noted that “acquisitions did boost [Frontier and GTT] into the Challenge Tier.”