Level 3 CDN Launches Streaming Service

Level 3 (LVLT) has launched its streaming media service, the latest step in its move into the content delivery network (CDN) business. Level 3 said its streaming service will cost the same as its high-speed Internet access and CDN cache and downloading services, continuing its aggressive pricing strategy. While there may be small premiums for certain file formats due to licensing issues, Level 3 said there will be no additional charges for bursts or large file sizes for any of the streaming formats, which the company said was an industry first.

Level 3 also announced that it is partnering with streaming media specialist Move Networks, which improves delivery of high-definition content by enabling multiple simultaneous streams. Level 3 will distribute Move's Media Services, and integrate of Move's technology into Level 3's content delivery infrastructure. The two companies will also collaborate on future technology development.

Level 3's streaming service has been in beta for some time, and recently delivered coverage of the finale of the World Cyber Games to 1.5 million viewers around the world. Analysts had expected aggressive pricing, and Level 3 has met those expectations. Grant van Rooyen, the Senior Vice President of Content Markets for Level 3, said that streaming services have historically been priced at a premium to high-speed Internet access, as was the case with caching and downloading services.

"With caching and download we knew that premium was 30 to 50 percent to high-speed IP," said van Rooyen. "With streaming, we know it's definitely a premium to IP, and definitely a premium to caching and download. We believe inappropriate premiums have constricted demand. We think unshackling pricing is a key to growth."

Analysts have tracked growing competition in the CDN business, where Akamai (AKAM) and Limelight Networks (LLNW) have been the market leaders.

Level 3's pricing takes advantage of the scale and efficiency of its network to offer caching and downloading at the same cost as Internet access (transit). Level 3 owns its own backbone, with more than 75,000 metro and intercity route miles in North America and Europe, which gives it a different cost profile than other CDNs who must buy transit. Level 3 bought its CDN network from Savvis (SVVS) in January.

Level 3's streaming service will supported Windows Media, Flash, QuickTime, and Real Media. van Rooyen said the company expects big things from the partnership with Move Networks on HD video delivery.

"We're pretty excited about Move, because we consider it true high-definition video over the Internet," said van Rooyen. "We consider it an intelligent solution. It's not just a reseller relationship, either. We will be one of Move's primary partners. But our excitement for Move shouldn't overwhelm the fact that we support Windows Media, Flash, QuickTime and Real."

Level 3 has been delivering high-definition content over its IP network since 2004 using its Vyvx broadcast service, which is widely used for point-to-point delivery of sporting events. "What we have now is the ability to take that feed from the source, and transport it across our network for a mass audience," said van Rooyen. "It's not lost on us that the last mile continues to be a challenge. We think this will work for all broadband enabled households."

How fast will the high-definition video market evolve? "We've seen professional sports attract high definition on the back of a robust business model," said van Rooyen. "Like anything, if you create a mechanism for content owners, they'll deliver the content. We think this creates a tipping point for HD on the Internet."