Level 3 to launch CDN in Latin America forecasting $80M in five years

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With high expectations, Level 3 plans to launch its content delivery network (CDN) solution in the Latin American market during second quarter this year. The global provider of IP-based communication services to business, content, government and wholesale customers forecasts that CDN revenues will reach U.S.$1 million in 2012, jumping to U.S.$80 million by the end of 2016 – with only local contracts.

The predictions are encouraging, and they are in line with Latin American CDN market perspectives. During an April 11 press conference in São Paulo, the Level 3 vice president of switched data for Latam, Pablo Yañez, said the huge growth in a five-year period will be possible due to the CDN’s market progress, which has increased at a rate of 60% per year.

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The company’s strategy to gain market share is focused on both selling CDN to its current client base and capturing its competitor’s customers.

Right now, the CDN field is dominated by Akamai, LimeLight Networks and Level 3, which together are estimated to control 85% of the total marketplace. Non-specialist companies are also eyeing the CDN market. On April 11, Dell revealed that it is teaming up with Edgecast Networks and Elemental Technologies to make content production and delivery networks. The content delivery platform (CDP) is based on Dell’s PowerEdge servers and EdgeCast Networks software.

Level 3 differentiates itself by owning both network infrastructure and CDN solutions. Other companies, such as Akamai, own software and application layers but must partner with network providers. In addition, Yañez said the company is building a local structure to support its Latin American operations, providing services in Portuguese and Spanish and planning to make local and direct sales. The goal is to make local contracts with enterprises such as airlines and e-commerce businesses.

The CDN Latin American market is still small compared to more mature regions, but it has enormous potential. The expectation, noted Yañez, is that the market could reach U.S.$2 billion. Even in more developed countries, such as United States, prospects are huge. The U.S. and Europe are growing at a rate of about 20%. “The driving force is video,” Yañez said.

Globally, Level 3 expects to generate U.S.$600 million in CDN revenues in 2012. Yañez noted that the market has increased at a rate of 35% to 40% per year.

CDN solutions have a direct impact on businesses’ revenues. “Amazon bills 1% more every millisecond of speed improvement in delivering Internet content,” Yañez said. He also cited surveys pointing out that ten years ago, Internet users agreed to wait ten seconds for content to load, and now they do not want to wait one second. In addition, web pages are more complex these days. “For a web page that normally takes 10 seconds to load,  with CDN, the time drops by half,” Yañez noted.

2012 launches in Latin America
In addition to CDN, Level 3 will also unveil Vyvx, which provides a customizable set of globally available video contribution and distribution services for programming content, as well as infrastructure as a service (IaaS) and cloud solutions.

“With all the changes that Latin America is passing through, it makes a lot of sense to launch Vyvx in this region,” Yañez explained. Indeed, Level 3 is looking toward the coming events of the FIFA World Cup and the Olympics Games, since its solutions address many content providers’ needs.

With these launches, Level 3 might be able to offer its complete portfolio in Latin America. The company’s presence in the region comes after it purchased Global Crossing one year ago for approximately U.S.$1.9 billion in an all-stock transaction. Global Crossing gave Level 3 fiber lines across the Pacific Ocean and in Latin America as well as adding to its capacity in the U.S. and Europe.

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