Level 3 Communications (NASDAQ: LVLT) today issued the following statement in response to inquires it has received concerning its discontinued peering relationship with Cogent Communications. The following comments can be attributed to Sureel Choksi, executive vice president of Level 3 Communications.
"Free peering, also referred to as settlement-free peering, is a contractual relationship under which two companies exchange Internet traffic without charging each other. In order for free peering to be fair to both parties, the cost and benefit that parties contribute and receive should be roughly the same. The previous arrangement with Cogent was a contractual agreement that, when entered into, met that criteria.
"Over the last six months, our operating subsidiary has assessed all of our relationships to determine whether or not settlement-free peering is still appropriate. We determined that the agreement that we had with Cogent was not equitable to Level 3. There are a number of factors that determine whether a peering relationship is mutually beneficial. For example, Cogent was sending far more traffic to the Level 3 network than Level 3 was sending to Cogent's network. It is important to keep in mind that traffic received by Level 3 in a peering relationship must be moved across Level 3's network at considerable expense. Simply put, this means that, without paying, Cogent was using far more of Level 3's network, far more of the time, than the reverse. Following our review, we decided that it was unfair for us to be subsidizing Cogent's business.
"The arrangement with Cogent was terminable on 60 days' notice. On July 18, we sent Cogent a letter informing them of our intent to terminate the agreement and stop the free exchange of Internet traffic. On August 31, we sent a second letter to Cogent's management regarding our plans and advised them to make appropriate arrangements to prepare for the termination of our agreement. We then contacted Cogent senior management to offer to discuss alternative commercial terms to allow the continued exchange of traffic. Cogent refused. Subsequently, we had a discussion with Cogent's CEO, David Schaeffer, to again advise him of the impending termination. Despite more than 75 days of advance written notice of the termination of our agreement, Cogent apparently failed to notify its customers or make any business plans to prepare for disconnection.
"On October 6, Level 3, as it had repeatedly advised Cogent it would, terminated free traffic exchange with Cogent. Because Internet users, apparently without notice from Cogent and through no fault of their own, have been impacted, Level 3 has, effective immediately, re-established a free connection to Cogent. In order to allow Internet users to make alternative arrangements, we will maintain this connection until 6:00 a.m. ET, November 9, 2005. The effectiveness of this arrangement of course depends on Cogent's willingness to maintain their side of the traffic exchange.
"Over the next 30 days, we will work diligently to help assure Internet connectivity is available to all users on a fair and open basis. Further, as has always been the case, we are willing to work with Cogent to reach a contractual arrangement that is equitable to both parties. If this is not possible, we expect that Cogent will make arrangements with one of the numerous alternative carriers currently offering such services.
"We have gone through similar processes with many other companies with little or no disruption. Those firms chose to enter into arrangements -- either with Level 3 or others -- to obtain the appropriate connectivity and keep the interests of their customers paramount.
"To be lasting, business relationships should be mutually beneficial. In cases where the benefit we receive is in line with the benefit we deliver, we will exchange traffic on a settlement-free basis. Contrary to Cogent's public statements, reasonable, balanced, and mutually beneficial agreements for the exchange of traffic do not represent a threat to the Internet. They don't represent a threat to anyone other than those trying to get a free ride on someone else's network.
"As always, Level 3's goal is to continue to play a role in assuring ubiquitous and fair access to the Internet. We will continue to take appropriate action to receive fair value for the investments that we have made in our network infrastructure and to support the economic viability and vitality of the Internet as an integral part of today's marketplace."
About Level 3 Communications
Level 3 (NASDAQ: LVLT) is an international communications and information services company. The company operates one of the largest Internet backbones in the world, is one of the largest providers of wholesale dial-up service to ISPs in North America and is the primary provider of Internet connectivity for millions of broadband subscribers, through its cable and DSL partners. The company offers a wide range of communications services over its 23,000-mile broadband fiber optic network including Internet Protocol (IP) services, broadband transport and infrastructure services, colocation services, and patented softswitch managed modem and voice services. Its Web address is www.Level3.com.
The company offers information services through its subsidiaries, Software Spectrum and (i)Structure. For additional information, visit their respective Web sites at www.softwarespectrum.com and www.i-structure.com.
The Level 3 logo is a registered service mark of Level 3 Communications, Inc. in the United States and/or other countries. Services described in this press release are provided by wholly owned subsidiaries of Level 3 Communications, Inc.
Some of the statements made by Level 3 in this press release are forward-looking in nature. Actual results may differ materially from those projected in forward-looking statements. Level 3 believes that its primary risk factors include, but are not limited to: developing new products and services that meet customer demands and generate acceptable margins; increasing the volume of traffic on Level 3's network; overcoming the softness in the economy given its disproportionate effect on the telecommunications industry; integrating strategic acquisitions; attracting and retaining qualified management and other personnel; successfully completing commercial testing of new technology and information systems to support new products and services, including voice transmission services; ability to meet all of the terms and conditions of our debt obligations; overcoming Software Spectrum's reliance on financial incentives, volume discounts and marketing funds from software publishers; reducing downward pressure of Software Spectrum's margins as a result of the use of volume licensing and maintenance agreements; and reducing rate of price compression on certain of the Company's existing transport and IP services. Additional information concerning these and other important factors can be found within Level 3's filings with the Securities and Exchange Commission. Statements in this release should be evaluated in light of these important factors.
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SOURCE: Level 3 Communications
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Web site: http://www.softwarespectrum.com/
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