Level 3 Outlines Network Expansion On Netflix Pact (LVLT, NFLX, LLNW, AKAM)

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Level 3 Communications, Inc. (NASDAQ: LVLT) is confirming what we already knew… Netflix Inc. (NASDAQ: NFLX) selected the wholesale data carrier to serve as a primary content delivery network provider for streaming functionality and to support storage for the entire Netflix library of content.  Level 3 announced simultaneously that it is expanding its network capacity as a result.

Level 3 noted that it will double its storage capacity and add 2.9 Terabits per second of capacity.  The 2.9T is in addition to the 1.65 Tbps that was just deployed in the third quarter.

Netflix is expected to pass 19 million subscribers in North America by the end of this year alone, and the real growth ahead may come from international expansion in the years ahead.

As part of the deal, Level 3 will store the entire Netflix streaming library of more than 20,000 titles beginning January 1, 2011.

Limelight Networks, Inc. (NASDAQ: LLNW) is deemed the other winner in this pact, although Akamai Technologies, Inc. (NASDAQ: AKAM) is deemed the loser even though Netflix may still have some business with them.

Level 3 has been on a roll this week in anticipation of this deal.  Shares closed on Monday at $0.89 but rose to $1.05  on more than 100 million shares on Tuesday.  A small pullback on Wednesday took it to $1.03, but so far we are seeing shares up 7.7% at $1.11 in early Thursday trading indications.

JON C. OGG