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Level 3 discount strategy could spark price wars
Providers faced with selling into a fiercely competitive market can adopt one of two main tactics. They can slash prices in the hopes of gaining market share and putting their competitors under pressure, or they can offer value-added services that generate higher revenue. The smart ones know how to mix the two.
One wholesale provider has taken a definitive stand on how it intends to survive. Level 3 Communications Inc. (Broomfield, Colo.) hopes to spur more revenue over time by offering drastically lower prices. The provider's plan, dubbed CrossRoads, reduces transport fees for customers that keep as much traffic as possible within the company's network and cuts fees even more for traffic kept within a metro network. In extreme cases, customers can save up to 50 percent of their transportation fees; most customers, however, see at least a 20 percent reduction, the carrier reports. The obvious target of the plan is every bandwidth wholesaler's dream customer base: content providers, streaming media companies, caching and Web hosting companies, Internet service providers (ISPs) and data providers.
Level 3 calls CrossRoads a...