News Inks Deal with Level 3

6/06/1999 8:00 PM Eastern

Following its deal with Level 3 Communications Inc.,
Webcasting firm Inc. has put itself on course to ride a descending
bandwidth-cost curve as it gets ever closer to delivering TV-quality content.

"This is one of the most strategic deals we've
done," CEO Todd Wagner said. "It takes broadcasting over the
Internet from being a bandwidth-constrained medium to one that makes use of a robust,
high-speed backbone."

The proliferation of high-speed access over cable,
telephone and wireless links, in combination with backbone-distribution capabilities such
as those offered by Level 3, promises to greatly affect's business, Wagner

"We want to understand before anybody else does what
it takes to be able to scale the streaming of broadband media by orders of magnitude
beyond the levels we see today," he added.

"If you're only doing an event or two per day, there's
not much to it," Wagner said. "But if you're doing 500, as we are, there's an
exponential increase in the complexity, and that's compounded when you move to higher

As a provider of live-event coverage of every description
over the Internet, is starting from a fairly unique point on the
Web-business spectrum.

But it is essentially moving in the same direction taken by
a hoard of other players that are attempting to revolutionize the way people spend their
leisure time not only surfing the Web, but also viewing TV.

Some competitors, including @Home Network and Road Runner,
have already set up national high-speed backbone distribution to buttress their
local-access capabilities, and others are well along in similar efforts.

For example, Snap, the portal joint venture of NBC and
CNET, has established a gateway for broadband content with provisions for high-speed
backbone distribution over satellite, and it is said to be looking at terrestrial options,
as well.

RealNetworks Inc.'s "Real Broadcast Network"
Webcasting unit has set up a high-speed backbone for its content in a deal with Enron
Communications Inc., and America Online Inc. is preparing for backbone support of
high-speed content distribution in connection with its launch of service over
digital-subscriber-line facilities in several parts of the country later this year.

But aside from cable providers,'s deal with
Level 3 appears to represent the most ambitious attempt to secure all of the backbone
bandwidth that might be needed to reach all points of the country -- and other parts of
the world, as well -- for the long term.

In the evolving market envisioned by, the
end-user -- whether accessing content via personal computers, TVs or something in between
-- will be able to view live events, TV stations, programming networks and multimedia-rich
Web sites without regard to who is supplying the local bandwidth links, Wagner noted.

The accessibility of virtually anything from anywhere over
Internet-protocol links will not only change the way service providers are positioned --
it will vastly change the way content originators operate, as well, he asserted.

For example, it won't just be the current TV players in the
broadcast arena that will benefit from the high-quality video capabilities of broadband
distribution, Wagner said.

"We want to be able to go to local radio stations and
say, 'Hey, you can install a camera in your studio and do video broadcasts as easily as
you now do audio over the Web,' which gives stations a new way to look at their
businesses," he added.

While currently counts more than 40 TV
stations and about 400 radio stations among its suppliers, its main source of revenue is
the specialized feeds it supplies to niche markets in the business and institutional

"The big driver is business broadcasting, like the
Consumer Electronics Shows, shareholders' meetings, breakfasts with [Dell Computer Corp.
CEO] Michael Dell," president and chairman Mark Cuban said in comments
at a CES session earlier this year.

Hosting radio and TV stations only accounts for about 10
percent to 15 percent of the revenue total, he noted.

The strategy in the short term is to build on the
niche-business-services market by using the Level 3 backbone capability to exploit the
installed base of high-speed connectivity in the office market, Wagner said.

Not only does the higher-quality distribution improve the
attraction of the business-to-business broadcasting content, but it also enhances the
quality of general-interest content and broadcast-station feeds to a market segment where
91 percent of the viewers don't have access to TVs, he added.

"[A total of] 95 percent of people at work have PCs,
and they usually have access to the Internet over office LANs [local-area networks] that
are connected at T-1 or faster rates," Wagner noted.

"Reaching these people now with improved distribution
support gives us a huge opportunity to leverage our capabilities, rather than waiting for
DSL and cable modems in the residential market.", which is slated to be acquired by Internet
portal Yahoo! Inc., is expected to gain more visibility for its business-to-business
content, as well as its public-broadcast content, once that deal is closed.

"We could take our service as it is today and layer it
onto Yahoo! so that when an event that might normally draw 50 or 100 people becomes known
to all of the people visiting Yahoo!, it has the potential to draw tens of
thousands," Wagner said.

Such drawing power should make's platform
more appealing to specialized Webcasters, as well as general-interest Webcasters, while
allowing all providers to easily serve users at all access levels, he added.

He noted that by using streaming technology from both RN
and Microsoft Corp., his customers can distribute data from a single file at four to six
different bit rates, allowing users to access the content at anywhere from 20 kilobits per
second to as high as 1 megabit per second, depending on the type of connections they have.

The IP-backbone network being built by Level 3 also opens
opportunities to expand the range of material that can be accessed by end-users, Wagner

"We're in the business of distributing bits, and we
want to be the source for more bits than anybody on the planet," he said. "Once
you're operating digitally, it doesn't matter if it's a software download, video or audio
-- bits are bits."

By making a five-year commitment to using Level 3's
network, is able to get very favorable pricing, and it will be able to
benefit from the falling costs of bandwidth as the network's capacity expands, noted Tom
Sweeney, senior vice president of marketing at Level 3. "We have the ability to
significantly decrease the cost of bits per mile over time," he added. is not alone in exploiting the
broadband-multimedia-distribution power of Level 3's network.

While Level 3 has generated much publicity over its plans
to launch IP-voice services later this year, it has also been amassing a large base of
clients in the broadband-multimedia sector, ranging from specialized providers of backbone
support like ECI to single-source providers like and Intervu Inc. "We
have a keen interest in seeing that industry succeed," Sweeney said.

Level 3 -- which began operations over leased facilities in
the third quarter of last year -- is building out a nationwide network that will support
10 to 12 conduits per link, each with a cable of bundled fibers.

"As time goes by and new generations of fiber
technology come along, we can fill up additional conduits to meet capacity needs without
replacing existing capacity or having to spend a lot of capital on new construction,"
Sweeney said.

In the first conduit, each fiber, using
dense-multiwavelength-division multiplexing across 16 wavelengths, will operate at a total
capacity of up to 160 gigabits per second, per fiber, depending on the level of output
used in individual lasers.

With up to 432 fibers per conduit, this would allow the
initial capacity of the dual-ring nationwide network to go as high as 70 terabits per
second, Level 3 CEO James Crowe noted during a recent talk at the Voice on the Net

Crowe, however, downplayed the idea that such capacity
means there will soon be a glut of bandwidth. Costs for bandwidth will fall by a
considerable margin, he said, but technology will find ways to consume ever more bandwidth
as it becomes available at low costs.

As an example, Crowe discussed the amount of information it
would take to create a virtual-reality experience that duplicates the informational input
of everyday reality -- something on the order of 15 tbps for two-way communications
matching the 10.4 billion-pixel, 24-bit color-processing power of the human eye and brain.

With use of the full capacity of one of its fiber conduits,
Level 3 could "support five of these conversations, which means we'd have to charge
something like $2 billion per minute," Crowe joked.

For now, though, Level 3's build-out plans bode well for
the capacity needs of providers of Web content like

Level 3 plans to have the intercity portion of its U.S.
network completed by the first quarter of 2001, gradually phasing out the leased segments
as it goes.

The company currently has 17 points of presence
domestically, Sweeney said, with at least 25 slated to be operational by year's end. It
also operates a 5-gbps link to London that will be expanded to encompass Paris and
Amsterdam, Netherlands, later this month.

At the same time, the carrier is building six- to
eight-conduit metropolitan-area ring networks, starting out with leased fiber, with a goal
of having 10 to 15 metro areas operational by year's end, he added.

Level 3 is offering its customers a wide range of options,
including leasing dark fiber, as well as a variety of private-line arrangements with
different levels of operational support.

At the metro-interface level, customers can colocate their
servers at Level 3's fiber-integrated carrier "hotels," which support local
peering of networks without requiring third-party interconnection arrangements.

While Level 3 is known for building a "pure-IP"
network, it is in fact relying on the use of SONET (synchronous optical network) for the
transport layer over fiber and on ATM (asynchronous transfer mode) switches in conjunction
with high-speed routers for handling trafficking requirements, Sweeney noted.

"Today, we need SONET to provide route restoration and
ATM to meet quality-of-service requirements, so IP rides on top, but when we can remove
ATM and SONET, we will," he said.

But the key distinction in Level 3's network, as opposed to
those of traditional carriers, is that there are no circuit switches, he said. This means
that all voice traffic, as well as data traffic, will operate in IP and other data modes
from the outset.

The infrastructure is designed to give Internet-service
providers big cost breaks compared with the prices they now pay, not only for backbone
support, but also for local interconnectivity and routing, Sweeney noted.

For example, he said, by connecting directly at the routing
layer to Level 3's network through its POPs, an ISP can operate a 1000baseT Ethernet port
at a rate of $300 per month or less, depending on volume, compared with the $1,500 or more
that it would spend to link from a backbone POP to its own routers via a leased 1000baseT

These network capabilities serve as a two-way street for
fostering a new broadband-services industry that relies on IP transport end-to-end to
deliver every type of content, including entertainment, as well as traditional PC-based
data. Any ISP can become a supplier of virtually any type of service.

From's perspective, it doesn't matter whether
that broadband market opens as a function of improving compression, rapid penetration of
DSL and cable modems, or a combination of both, so long as the quality of its content
feeds moves quickly to the VHS threshold and beyond, Wagner noted. Already, he said,
codecs (encoder/decoders) are delivering VHS-level streaming over 300-kbps pipes.

"I've seen compression technology in operation that
supports streaming at 30 frames per second at full-screen resolution over 100-kbps
links," he added. "That tells me my company will be able to reach an ever larger
market with high-quality audio/video content, no matter what the ultimate local-access
speeds are."

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