Level 3-Global Crossing deal reflects interconnect needs as online video demand grows

In a deal valued at $3 billion, network services provider Level 3 Communications (Nasdaq: LVLT) announced its intention to buy competitor Global Crossing on Monday (Nasdaq: GLBC). The two companies may have traditionally competed for the same cadre of customers, but they are on the same page when it comes to lobbying the Federal Communications Commission to regulate interconnection pricing of last-mile Internet service providers. In fact, the U.S. House of Representatives voted yesterday to reject the FCC's proposed net neutrality rules.

The rules, which were passed by the FCC in late December, prevent ISPs from blocking specific applications (video and file sharing) but give large service provider telcos like AT&T and Verizon and cable operators like Comcast some control over how they manage their network traffic. Level 3 has been battling Comcast over what it charged in December was unfair and extra fees to deliver Netflix's programming to consumers. Global Crossing weighed in the imbroglio last February claiming Comcast's actions prove that retail ISPs are "distorting" the economics of traditional peering relationships. 

Level 3 Communications delivers Netflix video and Apple music and serves nine of the top 10 U.S. cable MSOs. Level 3 and Comcast sparred last year when Comcast started charging Level 3 a premium for carrying Netflix movies. The combined Level 3 and Global Crossing will provide network transport, content delivery, data center, co-location and voice services, serving customers in more than 50 countries and with connections to more than 70 countries.

For more:
- Multichannel News has this story
- the New York Times has this story
- Light Reading has this story
- see Level 3's announcement

Related articles:
Level 3-Comcast dispute could end up in wary FCC's lap
Republican-led House votes to reject FCC's net neutrality rules