VARs: Level 3 Layoffs Likely Tied To Channel Changes

Level 3's traditional business is as one of the largest Internet backbone providers of data transport and related services. However, the company has been trying to take advantage of the growing demand for VoIP and is experiencing transitional pains in the process, said Jeff Rothel, CEO and president of CentricVoice, a Level 3 partner in Dallas.

"Level 3 is caught between the shift to moving from a data company to a voice and data company," he said. "They are trying to reorganize internally so they can support more growth on voice."

Though Rothell said he does not know for sure, he speculated that Wednesday's announcement, in which Level 3 CEO James Crowe said the company would reduce its workforce by about 500 to 600 employees, or about 12 percent of its overall workforce, is a result of that restructuring.

"When Level 3 first got into voice, they kept their data infrastructure resources intact and brought in all these voice people to try to grow a separate voice channel," Rothell said. "But there were many areas that were duplicative, and I think a large part of the [layoffs] is that."

Level 3 on Wednesday would not provide comment to CRN on how the layoffs might affect its channel. But partners said the carrier is mulling changes that would dole out more management of its VoIP sales to channel partners.

In a statement, Crowe said while "contract activity" for VoIP services at Level 3 has been strong, "it is difficult to predict revenue growth in that area with certainty because it depends on sales to end users by our service provider customers." Because of this, the company is making sure its resources are "properly allocated" to take advantage of the VoIP opportunity.

Emmet Tydings, president of AB&T Telecom, a master telecom agent in Gaithersburg, Md., put a different spin on Crowe's comments. He said Level 3 does not have billing infrastructure in place to handle a large volume of VoIP customers, which is why it is having difficulty tracking revenue in that space. As a result, Level 3 is considering how it can better utilize the channel to handle billing and other service for those accounts, Tydings said.

"Level 3 needs to scale to VoIP because that's where the world is headed, but they can't scale to support all the individual end customers from a billing, technical support, marketing and sales [standpoint]," Tydings said. "They are planning to leverage the channel for those services."

One scenario Level 3 is considering is to send the bulk of its VoIP customers and partners to a group of master agents or resellers that would handle billing and front-office support for those services, Tydings said. "The reseller community would take the burden of cost that Level 3 can't support," he said.

A Level 3 spokesman would not comment conclusively on channel changes to support VoIP, saying only that plans were not yet clear.