US Eyeball Networks and Middle-Mile Carriers

When it comes to buying transit in the form of 10Gbps Internet Ports from carriers, CDNs buy from the usual suspects, some more than others, and at various price points in the form of $/Mbps. The primary last mile / eyeball networks include Verizon, AT&T and CenturyLink. The middle-mile players include Level 3, Cogent and a few others. Its no surprise that last mile carriers charge more for transit than middle-mile carriers, because after all, they’ve invested tens of billions of dollars in last mile infrastructure, such as Fiber-to-the-home.

In the US, some of the favorites are Level 3 and Cogent. If the CDN is large enough with strong cash flow, they can buy transit from the large eyeball networks. Comcast is another last mile carrier that offers transit to CDNs at competitive price points, but they were not included in the matrix below, since a big chunk of their revenue comes from entertainment properties like NBC.  Zayo is a new up-in-comer in the CDN space, and Frontier is really not there yet. In the matrix below, the listed carriers have billion dollars + in market cap.

Over the last couple of years, the carrier market has undergone tremendous change, as cable operators and carriers merged or got acquired, and new entrants like Google, Facebook, and Microsoft entered the landscape. The biggest surprise of the year, Level 3 is now the third largest Telco in the US, surpassing CenturyLink.

No more than sixteen months ago, CenturyLink was the clear-cut #3 US carrier with a market cap in the $22B+/- range, and Level 3 was in the $8.B +/- range. Then Jeff Storey took over the helm from Jim Crowe at Level 3, acquired TW Telecom in the process, and Level 3 is a $18.5B company, and CenturyLink is a $15.8B.

Company Market Cap 3/31/15 12/31/15 9/30/14
Verizon $187B $32B 33.2B $31.6B
AT&T $178B $32.5B $34.4B $32.9B
Level 3 $18.5B $2B $1.9B $1.6B
CenturyLink $15.8B $4.5B $4.4B $4.5B
Zayo $6.3B $341M $324M $320M
Frontier $5.2B $1.4B $1.3B $1.1B
Cogent $1.46B $97M $97M $96M

*Frontier and Windstream not included, since their market cap is below $1B.

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