Level 3 Dialing Up for Dollars

Level 3 Communications said it will pay $34 million cash
for Sprint’s wholesale dial-up Internet access business.
It’s the Broomfield, Colo., network operator’s third such purchase.

Sprint’s service provides dial-up Internet access to ISPs throughout the
United States. The transaction lets Level 3 expand its managed modem
footprint to smaller U.S. markets.

“We have about a 40 percent market share in wholesale dial-up prior to the
Sprint deal,” Paul Lonnegren, a Level 3 spokesman, told
internetnews.com. The other major player in the wholesale dial-up
business is UUNet, Lonnegren said.

Switching dial-up traffic from Sprint’s network to Level 3’s is expected to
take until mid-2005, the companies said.

Under a separate agreement, Sprint will use Level 3 to provide dial-up
services for enterprise and small-business customers as part of its remote
access service product offering. Further details of the transaction are
expected at Level 3’s quarterly conference call Oct. 27.

Level 3 acknowledges that the dial-up access business is “maturing,” and
that broadband will eventually replace dial-up. But the older, slower
technology won’t just vanish.

For many users who have broadband at work, slower home connections are just
fine for e-mail and other low-bandwidth activities.

Industry watchers concur. A survey by JupiterResearch (which is owned by
the parent of this Web site) forecast that there will be 91.2 million U.S.
households with Internet connections in 2008 — about half of which will
connect via high-speed, always-on technologies. (JupiterResearch and
internetnews.com are owned by Jupitermedia.)

The Sprint purchase follows two other wholesale dial-up buys. In April,
Level 3 announced the
purchase of ICG Communications’ dial unit for $35 million.

Like Level 3, ICG provides wholesale dial-up access to some of the largest
ISPs in North America, including America Online, EarthLink , MSN, United
Online.

And prior to that, Level 3 paid
$137 million for the assets of bankrupt Genuity.

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