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Next Level heeds Qwest threat to quit buying

The company works to reduce costs in an example of the influence the giant communications carriers such as Qwest have on smaller hardware suppliers.

Qwest Communications International represents more than half of broadband Internet equipment maker Next Level Communications' revenue. So when the carrier threatened to quit buying the hardware unless Next Level cut the costs of installation, Next Level listened.

Communications carriers such as Qwest use Next Level's VDSL (Very High Speed Digital Subscriber Line) hardware, capable of transmission speeds up to 30 megabits per second, to deliver cable television-like, multichannel video programming to consumers using phone lines.

Rohnert Park, Calif.-based Next Level will introduce Monday the latest version of its VDSL hardware, which delivers Internet and video at speeds faster than most broadband data connections.

By increasing the number of customers that can be served by each fiber-optic connection, thus reducing carriers' bandwidth costs, the gear is expected to reduce the per-subscriber cost of installation by one-third, Next Level executives said. Next Level's newest products also offer other new features and cost-saving advancements.

"Driven by Qwest and other customers, we've been addressing the cost side of the equation," said Jeff Weber, vice president of systems engineering for Next Level.

The new equipment is the latest stage in a saga that began when Qwest acquired local phone giant US West last year. Next Level stock was pummeled in August amid uncertainty about whether Qwest would continue to buy its products after the merger was completed. When Qwest integrated US West, Chief Executive Joe Nacchio said he remained committed to Next Level but implored the company to reduce the cost of its gear by 30 percent to 40 percent.

The situation is an example of the influence the giant communications carriers, such as AT&T, Verizon Communications and others, have on smaller hardware suppliers. Many upstart communications and network equipment makers have just a handful of customers and are eager to tailor their gear to suit those carriers' needs.

Next Level has had a difficult time rebounding from its stock market lows. The company's shares, hovering around $4, have traded as high as $128.50 and as low as $2.88 in the past year.