2005 Computerworld Honors Program

	First Upgradeable, International Fiber-Optic Network Optimized for Internet Protocal (IP) Technology Level 3 Communications, Inc. Broomfield, CO USA Year: 2000 Status: Finalist Category: Business & Related Services Nominating Company: Nortel Networks
	The world's first upgradeable international fibre-optic network to be completely optimized for internet protocol technology is helping to stimulate the biggest change in communications technology in 100 years.
	A fundamental technological shift is occurring in the communications industry that is as important as the shift from telegraph to telephone, from mainframe to personal computer or from vacuum tubes to transistors and integrated circuits. That fundamental technological change redefining the industry at its roots - and how people around the world will communicate in the coming century - is the move from the 100-year old circuit switching technology to the newer Internet Protocol (IP) based packet switching technologies. The new technology makes much more efficient use of the transmission pipe by filling it and moving massive amounts of information faster, thereby making the newer technology better able to address the growing demand for capacity. Who is Level 3? Level 3 is a communications and information services company that is building the world's first international communications network completely optimized for Internet technology, or Internet Protocol (IP). It is also the first continuously upgradeable network designed to evolve as technology continues to evolve. Level 3's Network is designed to be the world's most advanced platform for e-commerce. Level 3 sees itself as an enabler for its growing base of Web-centric customers, providing them with the infrastructure, facilities and tools to, in turn, serve their customers. The company is traded over the Nasdaq National Market (U.S.) under the symbol LVLT. Its web address is www.Level3.com. What does the name "Level 3" mean? The name is drawn from something called a Protocol Stack, which is simply a set of specifications that describe a network. At the bottom of the stack are the "pipes" - fiber, copper maybe even radio - that transmit or carry information. The middle layer, is the software and hardware that makes the network work - switches, routers, and so forth - and makes sure the information gets where it is supposed to go. These components sense failures, tell operators when it's time to do something and perform other critical, but invisible to the user, operations. At the top of the stack are the interfaces - the telephone, the fax or the computer - that generate the information. Because the company operates at all three levels of the Protocol Stack, "Level 3 Communications" was selected as the company's name. An overview of the Level 3 Network This summary explains the technology that Level 3 has employed using Internet Protocol (IP) tools in a state-of-the-art fiber-optic network and the construction methods that make the network upgradeable. Each piece of Level 3's Network is designed and constructed so that upgrades in switching and fiber-optic technology and fiber-optics can be quickly employed. Level 3 installed additional physical pipes, or conduits, so that new fiber-optic cable can be quickly installed as the technology changes or as demand increases. Linking Level 3's intercity or long distance and intracity or local communications networks are Gateways located in major cities around the world. These Gateways are secure technical facilities with sophisticated communications switches, routers, backup generators, and networking equipment. Additionally, Level 3's Gateway facilities include space to house customer networking equipment offering customers a rapid, cost-effective way to launch Web-based businesses and services, by providing them with secure technical space, equipment and network access. The switching systems through Level 3's Network of Gateways are also designed for swift upgrades. These physical efficiencies, in addition to the technical efficiencies described below, are at the core of Level 3 Communications' unique approach to communications. The impact to users Level 3's use of technology in its network will fundamentally change the way people communicate. Level 3 has harnessed existing state-of-the-art technology: fiber-optic cable, high-speed switching systems and software, and IP technology standards in a global network design that will make communications - around the world - faster, more accessible and affordable. Instead of using traditional 100-year old circuit switching technology - that is still the predominant technology in the traditional telephone company networks - Level 3 uses newer IP-based packet switching technologies as its operating standard. The faster technology behind Level 3 What is circuit switching and IP packet technology? The comparison between the two highlights the significance of the Level 3 Network. The circuit switching technology used in a traditional telephone network opens and maintains a dedicated line whenever a call is made, regardless of the density of the information being transmitted. The result is wasted capacity or "quiet spots" as the end-to-end connection remains in place even during those moments when no actual information is being transmitted. To more easily understand circuit switched systems visualize an interstate highway between two cities. Traditional or circuit switched systems would dedicate an entire lane of the highway to one car for the duration of its trip. Conversely, the new IP packet technology, which Level 3 is implementing in the new network, breaks the information down into pieces called "bits" and places them into electronic "envelopes," or packets, with electronic "addresses", and then fills the pipe or network with these packets of information. In a packet network, there is no single, unbroken connection between sender and receiver. Packets from different transmissions are mixed together, sent over many different routes at the same time, and then reassembled at the receiving end. In this way, the packets not only fill the pipe, but are also directed along the way by special computers or routers that read the address information and direct each packet along the fastest route to its destination. When a packet reaches its destination, it is reassembled with other associated packets into a complete voice transmission, the data for a fax or email, or the video transmission (such as a video conference conducted over the Internet). All of the pieces of information are reassembled, ready for receipt by fax, computer to listener - and it takes place in a fraction of a second. Again, visualizing that interstate highway, IP technology fills all of the lanes with traffic, with lines of cars bumper to bumper in each lane thereby making more efficient use of the "highway" or transmission path. IP networks cost less. The cost of moving information through an IP network is much lower than a traditional circuit switched network, because IP technology makes much more efficient use of the transmission "pipe" or network. Because this new technology makes much more efficient use of the transmission pipe (or bandwidth) by filling it and moving massive amounts of information faster, IP technology is also better able to address the growing demand for capacity in the marketplace. As software companies continue to develop more sophisticated applications, the need for bandwidth will increase, and a more efficient network - such as Level 3's - will enable organizations to save dollars and expand their use of communication technology. The economics of more efficient network services will make global communications more accessible to users around the world. Level 3's Network will be able to address capacity needs and will set a precedence of providing more affordable communications services for all people over time. Installing technology faster to keep up with changes Level 3 recognizes that the "newest" technologies today will be replaced by even newer ones tomorrow. Because Level 3 is a user of these technologies, it wants to ensure that it is able to change and adapt as the technology changes and adapts. For this reason, Level 3 is designing its network to be continuously upgradeable. The physical infrastructure of the network will include installation of eight to twelve conduits, only one of which will initially have fiber running through it. The rest are left empty, to be filled as new technology is introduced or demand increases. This is seven to ten times as many "spare" conduits as most traditional telephone companies have in their network, which typically have a single fiber-optic cable "direct buried" or in a single conduit. Some newer companies are installing one or two spares at most. (The illustrations on Pages 5 and 6 demonstrate this method.) Technology is adapting and changing rapidly - fiber is now in its third generation this decade. When first developed in the mid-sixties, it was asserted that "enormous" amounts of information - as many as 600 simultaneous phone calls - could be transmitted and received over a fiber-based system. Now, fiber technology - using the individual spectrum colors that exist in a single beam of light - can carry more than 4 million simultaneous phone calls. This same fast-paced evolution will continue to occur, and by laying a multi-conduit network, Level 3 will be able to adapt to these new changes to give customers quality connections at lower costs without removing old fiber, disrupting service, or having to dig up the old network to replace it with the new.
	Level 3's customers will benefit first, because the Level 3 is upgradeable thereby ensuring the network will always feature the state-of-the-art in communications technology. Second, the Level 3 Network can move information at a lower cost. Thirdly, the network will provide a level of capacity or bandwidth that is unprecedented in the industry.
	For the world of business, and for many people in the world, the use of computers and information technology as tools in everyday life are no longer an option, but a necessity. The ability to use those tools with greater speed and effectiveness are competitive factors to success. The importance of a cost-effective voice, data or video network is no longer an option, but a necessity. This is where Level 3's Network design becomes a competitive factor not only in its own success, but also in the success of its customers, the people within their organizations and in many cases their customers. This section describes the origins of the existing technology that Level 3 used to design a unique network, and the importance of information technology innovations in upgrades to Level 3's Network around the world. Fiber-optic technology The basis of success in communicating with Level 3's Network begins with fiber-optic technology. When Charles Kao and George Hockham first theorized the use of glass fiber as a telecommunications conduit in 1966, they asserted that "enormous" amounts of information - as many as 600 simultaneous phone calls - could be transmitted and received at a distance of more than one-quarter of a mile. Fantastic at the time, their estimates eventually proved too conservative by more than two orders of magnitude. By 1985, systems capable of transporting more than 8,000 simultaneous telephone calls between regenerator stations spaced 25 miles apart (a "span") were generally available in the marketplace. By 1987, a technique called Wavelength Division Multiplexing (WDM) allowed multiple systems operating at different wavelengths to share the same glass fiber "span," and doubled capacity on some established routes. By 1995, Dense Wavelength Division Multiplexing (DWDM), teamed with new higher speed electronic terminals pushed the capacity limit to slightly beyond 160,000 simultaneous telephone calls on longer "spans" of about 30 miles. DWDM technology literally splits apart the color spectrum in a light wave and is able to carry information on different wavelengths. In effect, more information is carried using an existing resource. And now, active fiber amplifier technology, improved fiber and further advances in DWDM techniques will be combined by Level 3 in a network in which one strand of fiber - about the diameter of a human hair - can carry the equivalent of more than 4 million simultaneous telephone calls along spans of up to 370 miles. This is more than 6,000 times the capacity and nearly 1,500 times the span distance theorized by Kao and Hockham. The fiber Level 3 will deploy is a new product that enjoys a 10 percent advantage in capacity and/or span distance over similarly priced alternatives. These technology advances will only continue. While software upgrades can be as simple as installing new files on a computer, the hardware, such as the fiber-optic that carries the software, takes more time to upgrade. Level 3 has taken a practical approach in keeping up with each step of technology. Using the multiple conduit approach described earlier, Level 3 will be able to adapt to these new changes to give customers quality connections at lower costs without removing old fiber or disrupting service. Level 3 is taking this same, upgradeable approach to the design of its network electronics and to its software automation systems. Because the new technology makes much more efficient use of the transmission pipe by filling it and moving massive amounts of information faster, IP technology is better able to address the growing demand for capacity. As software companies continue to develop more sophisticated software applications, the need for bandwidth and more efficient networks will only increase. Level 3's pioneering efforts in Softswitch technology are discussed in the following section, Originality.
	An original concept The originality of Level 3 Communications' concept is deceptively simple: constructing an information pipeline that is easy to upgrade in a fast-changing communication environment. No other company has taken this approach. The hardware and software that comprises an original network design includes: * Multi-conduit fiber-optic pipelines * Internet Protocol (IP) technology * Softswitch technology that increases network speed and affordability while setting quality and technology standards for the future Multi-conduit fiber-optic pipelines The construction design of Level 3's Network enables cost-effective and swift technology upgrades throughout time. This enables customers to remain competitive in the marketplace by having the speed and reliability of communications available to them - uninterrupted. This simple, yet original concept is a distinguishing factor for Level 3. Visuals of this concept are presented on Pages 5 and 6 of this submittal. Using the technology of the Internet Economic factors are a key differentiator in the originality and competitive value of what Level 3 provides. In spite of the rapid growth of the Internet, data traffic today consumes about 50 percent of the capacity of global networks, but represents only about 10 percent of total telecommunications spending worldwide. Voice traffic still accounts for the remaining 90 percent of spending. Level 3 believes that this economic discontinuity will change over time. Those statistics are simply a result of the fact that a voice "bit" of information today is priced at about 15 times a data bit. Addressing this revenue gap is an important opportunity for the company. And, while IP is now the acknowledged standard for data communications, it is just emerging as the standard for voice. However, when a company commits to circuit switching, it necessarily buys into an economic structure, a set of skills, and a software infrastructure that is outdated and inefficient. Level 3 intends to address voice, but the company does not want to do it by giving up its single biggest advantage - that of basing its business on the economics of the future and not the past. Pioneering Softswitch Technology A major opportunity - and challenge - for any next generation communications company is to offer voice service over IP that is of comparable or superior quality to traditional voice service. Level 3's "Softswitch" technology uses computer servers, software and open market-based standards to interconnect the traditional telephone network to Level 3's IP Network. The Softswitch controls equipment throughout the network, including voice over IP Gateways, modem banks, and telephone equipment. The Softswitch is responsible for all the routing and service delivery logic that is part of a typical communications service, and therefore in function, is similar to a traditional circuit switch. Currently, Softswitch technology costs 45 percent less than an equivalent circuit switch. Given relative price-performance improvement rates, Softswitches' cost advantage will only increase over time. Level 3's Network will translate circuit-based messages from its business customers to IP for cost-efficient transport and then, if required, convert them back to circuit-based messages for delivery over the public telephone network. Initially, Level 3 will offer long distance IP Voice service. When Level 3 offers its local IP Voice service, the Softswitch will enable Level 3 to offer its customers Advanced Intelligent Network services - such as call waiting, call forwarding, billing and operator assistance - over either traditional or IP networks. A key feature of the Softswitch is its ability to provide traditional telephone system quality and reliability at all times, without having the customer use extended dialing schemes, automatic dialers or new equipment. Voice IP service is a new technology and service in the marketplace and has been successfully tested and demonstrated. In conjunction with Lucent Technologies, Level 3 Communications demonstrated the effectiveness of this technology using its Softswitch, as well as one provided by Lucent Technologies, at a major financial analyst conference hosted in New York City on February 2, 1999. A video tape of this demonstration of Level 3's Voice IP technology is included in the Time Capsule of Level 3's submittal to the Smithsonian.
	While still early in the game, the success of Level 3's accomplishments can be measured in several ways: the financial results of the company, the level and number of customers it serves, and the effect of the technology on individuals within an organization. The Benefits section of this entry features a list of global customers who use Level 3's products and services; this demonstrates the earnings success of Level 3 and the numbers of customers it serves. The effects of Level 3's technology will affect many individuals whether or not they are part of an organization - simply because communications services will be more affordably priced for organizations and individuals. Linked to the list of customers in the Benefits section are the words of a few who will explain in this section how Level 3 benefits the success of their organizations. The Successful Use of Level 3's Technology and Network These customers demonstrate how Level 3 benefits their customers, and in turn, how technology benefits the users of Sony Online Entertainment, Webley and Internext. Webley Systems uses Level 3's Colocation Services. Webley Systems provides personal communications management services that allow customers to access their telephone, email, fax and pager messages in any of three ways: 1) Through a voice-activated, speech recognition telephone system; 2) Via a telephone key pad; or, 3) Over the Internet. The company colocates its data center equipment in Level 3's Chicago Gateway facility and receives 24-hour-a-day, 7-day-a-week monitoring and direct access to Level 3's Network. James Whitley, Chairman of Webley Systems, describes how Level 3's technology enables his customers to use messaging - whether voice or email - as well as Internet tools: "We want our customers to be able to say to our voice-activated product: 'Check my voice mail and email, read me what's on CNN.com, buy two thousand shares of XYZ, Inc. and call my sister.' To do this, we need a communications company that understands that each of these commands is entirely dependent on moving data fast, whether it's on the phone or on the Web. Level 3 is unique in this regard. They understand our needs and have built a network infrastructure that addresses them today. Level 3 is truly committed to revolutionizing the way telecommunications services are provided." Sony Online Entertainment, Inc. uses Level 3's Private Line Services. Sony Online Entertainment, Inc. (SOE) owns and manages The Station @sony.com, one of the leading online entertainment networks with nearly three million registered members. SOE colocates Web servers in Level 3 Gateways to connect its members to its content (or entertainment information). Level 3's Private Line Service between New York and Los Angeles delivers the capacity needed to power one of the premier destinations on the World Wide Web. Mark Kortekas, vice president of technology for Sony Online Entertainment, describes how his company is able to deliver more information at a faster speed to their entertainment subscribers: "We were looking for increased network backbone performance and Level 3's key ability to deliver high capacity bandwidth when and where we needed it was key. The high caliber of the Level 3 Gateways will allow us to expand our network as we grow and put content closer to our end users." INTERNEXT is in a unique partnership with Level 3 Communications in developing a network; this partnership demonstrates a Special Projects capability that joins Level 3's IP technology with wireless communications, and offers additional fiber-optic conduit resources to other businesses. INTERNEXT is beneficially owned by NEXTLINK Communications, Nextel Communications, Inc. and Eagle River Investments, LLC. Together, these companies signed a cost-sharing network construction agreement. INTERNEXT will have the right to use 24 fibers and associated facilities installed along the entire route of the Level 3 intercity fiber-optic network in the United States. This "right-of-way" for technology development is another creative approach to alternative methods for communication in the 21st century: using a fiber-optic network, an existing construction route and access to existing fiber-optic resources. Craig McCaw, chairman and chief executive officer of Eagle River Investments, LLC and the founder of INTERNEXT, described Level 3's expertise in building a unique network: "Level 3 epitomizes the perfect partner for us. They are smart, honest and know what it takes to build networks. We have a common vision about networks in the future, but will each have our own ideas about what to do with the capabilities we are creating. Together, we will work to give people communications tools that can enable the information age for everyone." The success of Level 3 is tied to the success of its customers. This is where Level 3 has met and exceeded its goals in providing technology for the benefit of organizations and individuals, and in deploying construction and technology resources to develop its international network. A map of this network is included in the Time Capsule section of this submittal. The success of Level 3 as an organization has also met and exceeded a number of goals and expectations. Building the Network Following is a snapshot of how the Level 3 Network appears as of November 1999. Construction began in the summer of 1998: * Total projected network (currently pre-funded phases): 21,000 miles * Total intercity network miles completed to date: 6,000 * Planned investment to build total system: $11 billion * Amount of cash raised to date: $8.5 billion * Projected capital investment in 1999: $3 billion * Number of network cities with operating Gateways: 30 Level 3's third quarter announcement in October 1999, stated that 80 percent of the city-to-city connections which comprise the U.S. intercity network are now simultaneously under construction. Level 3 has installed approximately 1,400 miles of fiber-optic cable in a single conduit of the completed sections of the U.S. intercity network. The company's multi-conduit network is designed to allow new generations of fiber cables to be installed in the remaining empty conduits at low incremental cost. The European intercity network build is also ahead of schedule. More than 300 miles of the planned 1,800 mile Ring 1 - which links London, Amsterdam, Frankfurt, Paris and Brussels - were completed during the third quarter of 1999. Rights-of-way have been secured for over 700 miles in Europe. The company remains on schedule to have Ring 1 completed by September of 2000. By September 30, 1999, Level 3 offered communications services in 26 U.S. markets and four European markets. The Economic Yardstick Ultimately, an organization will measure the success of its communications tools with an economic yardstick. The elements of Level 3's Network are closely tied to the economic efficiency of its network design and how it can respond to the rate of change in technological advancement. The efficiencies made possible by the underlying IP and fiber-optic technologies are so significant, that the cost implications are enormous and irrefutable. For example: Today, Level 3's analysis of network costs shows that if you want to move the amount of information on a CD ROM - approximately the contents of an eight volume encyclopedia set - from New York to Los Angeles, it will cost a carrier approximately $27 over a traditional phone network. Over an IP network, it will cost a carrier approximately $2. With that kind of lower network cost structure, Level 3 believes it will be in an excellent position to offer customers significant savings over its IP network. Moreover, Level 3 believes that the marked difference in costs is likely to widen even further as IP technologies continue to improve faster than the alternatives because most entrepreneurial effort and capital is now being focused on IP technologies. As a result, IP networks are improving much faster than the older, legacy telephone networks. In Level 3's opinion, newer IP networks are going to displace the traditional telephone network technology over time, because IP is simply cheaper and improving more quickly. Traditional networks certainly will not disappear anytime soon, but Level 3 believes that the real value will be created by those who embrace and capitalize on the fundamental change that is occurring. That is the power of the newer technology. And, until Level 3, no one has built an international, fully upgradeable, fiber communications network using the new IP technology end-to-end.
	Building a unique worldwide network holds a diverse set challenges - as with any construction project. The two key challenges that Level 3 has faced, and continues to face, are related to its strengths: construction expertise and labor recruitment. Construction Challenges Permitting, rights-of-way, and mobilizing resources in the race against competitor networks are an ongoing challenge. Permitting and right-of-way issues are similar in scale to constructing an interstate highway system. Level 3's design, right-of-way, and permitting team has totaled 1,300 and requires 150,000 construction documents and 30,000 permits alone for the intercity system in the United States. Securing and managing raw materials also has been a challenge. Nortel Networks, Ottawa, Ontario, is delivering about 90 million feet of fiber cable strands manufactured by Corning for the first phase of the project. They are bundled and sheathed by Sicor, Hickory, N.C. However, to place the 1 billion feet of conduit needed and cut costs, Level 3 bought duct resin directly from manufacturers, including Union Carbide, Solvay Polymers, and Nova Chemicals. It then contracted with 13 different manufacturers to start producing and stockpiling conduit early on. Materials are delivered to storage yards that serve legs connecting two cities. This method of production saved Level 3 $80 million in spite of challenging production cycles and limited raw materials. Labor Recruitment and Mobilization Boldly choosing a corporate location based on the needs and wants of its workforce, Level 3's survey of 1,000 pre- and post-graduates made the Front Range of Colorado part of its business plan. Level 3's competitive location as well as other employee incentives enabled the company to recruit more than 1,000 employees in 1998 alone. In addition to its challenges and successes in a tight information technology labor market, Level 3 has managed to secure the human resources as well as the raw materials required in constructing its intercity network in the United States. Fast-tracking field construction and decentralizing construction districts in the United States has enabled Level 3 employees and contractors to simultaneously proceed with 67 different projects in developing 16,000 miles of their network.