James Q. Crowe, CEO and President, Level 3 Communications

Visualize a communications racetrack. In the first lane, you have the established communications giants: AT&T, MCI WorldCom, the Bells, Sprint. In the second lane, picture the new-era communications companies, such as Qwest Communications, Frontier Communications, IXC, Global Crossing, and The Williams Companies. In the third lane, you see the relatively unknown opponents--those who have yet to demonstrate their competitive prowess. And in the fourth lane: Level 3 Communications.

Level 3, a communications and information-services company based in Broomfield, CO, has set out to build--from the ground up--the first international network optimized for Internet Protocol (IP) technology. Level 3 has undertaken this enterprise believing that IP will become the dominant means of transporting voice over the next five years. Upon completion, Level 3's network will offer local, long-distance, data-transmission, international, and Internet services, connecting customers end to end across the United States, Europe, and Asia. The network will span approximately 24,000 miles throughout the United States, and, using underwater cable, key business markets in Europe and Asia.

How will Level 3 beat the competitors in the first, second, and third lanes to the finish line? 'With respect to the traditional telephone companies, our biggest single weapon is focus,' says James Q Crowe, Level 3's president and CEO.

The companies with as-yet-unknown names--Crowe deems them the 'Level 4s'--are the competitors he fears most. 'These companies come into market with a focus,' Crowe says. 'And the way we compete with them is by being better. We have a head start over those to-be-named competitors, and that's a big advantage in today's market.'

Being better often means capitalizing on a competitive edge. Level 3 believes its edge comes in the form of packets. Packet switching breaks up information into packets, which a network then sends over fiber-optic lines and reassembles into cohesive information at the receiving end. Currently, most of the world's phone and fax traffic moves over circuit-switched networks. Such networks require an open line from point to point. Level 3 is banking on the fact that packet-switched networks use their capacity more efficiently and will therefore cost less than traditional telecommunications systems. Level 3 hopes that as it implements its network, capacity will increase, prices will decrease, and customer demand for new services will rise dramatically.

Many of the traditional (read, circuit-switched) telephone companies are now hurrying to adjust their systems to accommodate the data flows inherent in an IP-based future. They are incorporating packet-switching technology into portions of their networks. Likewise, to keep pace, Qwest, Frontier, and others are building their own intercity communications networks. Level 3's network will be solely IP-based, with no circuit switching.

Although these companies have 'a whole lot of legacy baggage to deal with,' Crowe says, Level 3 faces some hurdles along the track, too. The incumbents have been around a long time, and they control the major accounts. Level 3 must gain its own major accounts; the company focuses mainly on. Web-centric clients that typically spend a quarter to half of their entire operating expense on what Level 3 sells. 'We're not simply a casual purchase for these companies,' Crowe says. 'We're a strategic part of their business plan and their ability to provide value to their customers.' So far, Level 3 is negotiating these hurdles, recently naming such companies as Yahoo, NetZero, Earthlink, American Online, Time Warner, and Sony as customers.

Contrary to the-tortoise-and-the-hare theory, speed is also important to winning this race, and Crowe again asserts that Level 3 has a head start over its circuit-switching competitors. Network implementation is running ahead of schedule.

The question is, how do you keep up a fast pace without sacrificing quality? According to Crowe, speed and quality go side by side. 'The way you speed up your efforts--the way you continue to go faster and faster--is by focusing on the bottlenecks, focusing on the things that pop up, as they do on a regular basis,' he says.

Although Level 3 has a head start, it must find a way to maintain that lead. To that end, Level 3 is making its network fully upgradable. Thus, as the technology changes--and Crowe expects that it will, rapidly--so will Level 3's network.

This kind of competitive spirit has brought Level 3 into 2000. Says Crowe, 'I think the key for 2000 is to recognize that for Level 3, this is the year that the previous two and a half years of planning, work, effort, capital raising, construction efforts, service development--all of those efforts--come together.'

Once this coming together happens and Level 3's network is completely up and running, what next? 'I believe somebody is going to end up with a very large market share in the part of the business we focus on,' Crowe says.

The starting gun has fired. Level 3's starting block is empty. The race is on.