Level 3 Partner Program Seeks 300 VARs By End of '05

The program was started to expand the company's market to small and midsize businesses (SMB) eager to purchase Internet access, data and co-location services from telecommunications equipment resellers, value-added resellers, telecommunications solution providers and carriers throughout the United States. The company now has 150 employees dedicated to channel sales and marketing. Last year it had none.

"The majority of our revenue growth will come from the channel in 2005," says Craig Schlagbaum, channel development vice president. "The end user now has more choices and they also want one point of contact, which is what the solution provider does. The old model was go to the local phone company and get your local service. Now, the value-add is a new paradigm," he says.

One of the partners that signed up with Level 3 in the past year was Bandwidth.com, a Cary, N.C.-based reseller with $10 million in annual revenue. Why did the company decide to hook up with Level 3? "Three reasons—network, network and network," says David Morken, its president and co-founder. "My understanding is, after canvassing similar providers, that their availability surpasses AT&T and other providers. They pass more business addresses than anyone else."

The solution provider, which partnered up with Level 3 this past summer, believes that Level 3 offered it a "competitive and fair" deal. "We did not go with the cheapest provider—VoIP is a meaningful and critical application," explains the president of the 4-year-old company, which focuses exclusively on the small- and midsize-business (SMB) segment.

Like many solution providers, Bandwidth.com has made its first foray into voice. The value proposition Morken says he brings to the table is to give the SMB owner availability to purchase local and long-distance Internet service from one source. What challenges remain with the Level 3 offering?

"E911 availability needs to improve, but I believe the process around it will get better," Morken says. "We look forward to disruptive pricing. I would like to see very valuable features at revolutionary prices. Level 3 has a rare opportunity to disrupt the marketplace," he adds.

Schlagbaum says that the company's acquisition of channel partners comes both from VARs approaching Level 3 and Level 3 approaching VARs.

"Some come to us because they see the opportunity," he explains. "Others, we have to talk to them about the value-add and how they can function as a service provider, taking the place of the phone company."

Reignmaker Communications, an 8-year-old, Atlanta-based $5 million solution provider, was one of the companies that approached Level 3. For CEO Steve Smithwick, the move was a no-brainer.

"We knew that the technology was going to get some traction, and when we looked at building our own softswitch, we realized it was going to be expensive--a minimum of $3 million," says Smithwick, who signed an initial agreement in May. "The future is in owning the customer, not the equipment. Level 3 gives us reach to almost 300 U.S. cities. Its challenge will be to find partners who can manage the customer, all the way to the desktop."

"We're pleased with the number, diversity and quality of the channel partners that we've been able to recruit to date and expect to continue to grow our certified reseller base with strong partners that can effectively serve the broad enterprise market," says Glenn Russo, Level 3 senior vice president of channel programs.

Adds Stewart: "[We offer] services on a wholesale basis, with partners reselling and implementing the services and providing customer care. Our partners own the customer relationship, which enables them to set their own retail prices and customize the labeling of their offerings without a large up-front investment."

Schlagbaum says the channel wants sales-training skills in VoIP that will help them understand the reality of a VoIP sales cycle. "It's not a simple installation," he says. "We are investing heavily in sales presentations--over a million dollars in 2005. We think it's an absolute critical differentiator for our program."