An Ignoble Experiment

Google (Nasdaq: GOOG) and Level 3 Communications (NYSE: LVLT) are taking over AT&T's (NYSE: T) role as the backbone providers supporting coffee chain Starbucks' in-store Wi-Fi service.

Starbucks said the new agreement will enable them to deliver network and Wi-Fi connection speeds "up to 10 times faster" to consumers who shop in their retail stores. Similar to a LTE-based mobile wireless service, the new network will deliver speeds ranging from 5-10 Mbps.

Set to serve over 7,000 U.S. stores, Level 3 will begin upgrading Starbuck's network and install related Wi-Fi equipment in a number of locations in Colorado and other states.

Under the terms of the agreement, the Wi-Fi will be branded as a Google service while Level 3 will manage network connectivity in each store.

Although the companies did not reveal financial terms of the contract, D.A. Davidson & Co. telecom analyst Donna Jaegers said in a Denver Post article that it could be worth an estimated $50 million for Level 3.

Level 3 does not sell services directly to consumers, but Jaegers said that the added benefit is that since many Starbucks are located in office buildings and strip malls, the coffee shops could attract new business clients with their suite of IP-based data and voice services.

As part of the agreement, Starbucks and Google will also jointly develop the next-gen Starbucks Digital Network.

Adam Brotman, chief digital officer of Starbucks said in a release that the goal of the Digital Network is to enable any of its customers to access the Web easily over its Wi-Fi network.

For more:
- see the release
- The Denver Post has this article

2. Level 3 core network services revenue rises 2.4 percent to $1.4 billion

By Sean Buckley

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Level 3 Communications' (NYSE: LVLT) Core Network Services was once again the shining star in its portfolio in the second quarter, rising 2.4 percent to $1.4 billion.

The service provider said that it saw growth across all three of its regions--North America, EMEA and Latin America.

Leading CNS revenues by region was North America with $970 million in revenues, while EMEA and Latin America had $220 and $189 million in revenue, respectively.

"Level 3 saw good growth in enterprise Core Network Services revenue this quarter across all three of our regions, and it continues to be the key driver for our business," said Jeff Storey, president and CEO, in the earnings release. "Demand remains healthy, and we had solid growth in Core Network Services sales this quarter."

However, as seen in previous quarters wholesale revenues declined again by $19 million. Sunit Patel, CFO for Level 3 said they "expect further declines for the remainder of the year" in wholesale services.

The service provider's total revenue was $1.57 billion, up from $1.58 billion in Q1 2013.

During the quarter, the competitive provider also reduced its net loss to $24 million, compared to $62 million in Q2 2012. The net loss, which included cash and non-cash severance charges attributable to executive management changes incurred in the second quarter 2013, was 11 cents per share.

Patel said that they "expect sequential CNS revenue growth in 2013 to be generally stronger compared to 2012."

Shares of Level 3 were trading at $22.37, up 51 cents, or 2.33 percent, in late Wednesday morning trading on the New York Stock Exchange.

For more:
- see the earnings release

Special Report: Wireline telecom earnings in the second quarter of 2013

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3. CenturyLink, CWA carve out 5-year tentative agreement

By Sean Buckley

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CenturyLink (NYSE: CTL) and the Communications Workers of America District 7 have reached a tentative five-year labor agreement covering about 11,000 legacy Qwest employees.

The contract, which will now be sent to the CWA bargaining unit members for ratification, represents workers in a number of Midwest and Western states, including Arizona, Colorado, Idaho, Iowa, Minnesota, Nebraska, New Mexico, North Dakota, Oregon, South Dakota, Utah, Washington and Wyoming.

"CenturyLink and the CWA are pleased that we have come to an agreement that provides our employees fair and equitable benefits and will better enable us to deliver on our mutual commitment to serve our customers," said Glen Post, CEO and president of CenturyLink, in a release.

Under the terms of the proposed agreement, CenturyLink will provide lump sum increases and pay raises. In addition, the telco will implement limitations on its ability to outsource its call center work outside of its wireline footprint and bringing back jobs that were outsourced or off shored.

Reaching agreement will likely ensure that CenturyLink will avoid any possible service installation and repair interruptions. In February, the executive board of CWA District 7 authorized setting a strike date for 13,000 CenturyLink CWA members.

CWA's previous contracts with CenturyLink, which expired on Oct. 6, 2012, were extended on a day-to-day basis while negotiations continued.

Qwest employees who work in Montana, represented by the International Brotherhood of Electrical Workers (IBEW) Local 206, should complete negotiations in the coming weeks, CenturyLink said.

For more:
- see the release

Special Report: The battle for union contracts: AT&T, Hawaiian Telcom, others hash out wireline benefits

4. Birch Communications' wholesale division appoints new director, adds clients

By Sean Buckley

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Birch Carrier Solutions, the wholesale unit of Birch Communications, has appointed 30-year telecom industry veteran Greg Hogan as its director of business development.

Hogan comes to Birch from Ernest Communications where he served as that service provider's VP of client services. Birch is in the process of acquiring Ernest's customer assets, a deal scheduled to close in the third quarter of 2013.

Vincent Oddo, president and CEO of Birch, said in a release that "With Greg's help, we plan to expand our wholesale portfolio in the near future, with new territories, new products and new clients."

During the quarter it also signed six new wholesale carrier customers, including Bullseye Telecom, Belgacom, Staratos, Telaris, 382 Communications, and Primus Telecommunications.

Being able to announce these six customers is a big milestone for Birch as it only launched the wholesale division last February.

The wholesale division leverages the $50 million the CLEC spent to build out its network in the Southeast and Southwest, an effort that included its own organic efforts and the acquisitions of other regional service providers.

This February, Birch completed the final phase of its multi-year network upgrade and expansion project, during which it added 43 central office colocations, for a total of 290 COs, and 15 wireless towers for its wireless local loop services in five states.

For more:
- see the release

5. Calix's Q2 revenue rises 20 percent to $99.4 million on strong sales

By Sean Buckley

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