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Level 3 Communications Inc (NASDAQ: LVLT) flexed it muscles yesterday when it announced that it would be dropping prices for its content delivery network (CDN) services. Level 3's stock jumped over 4% on the news.

The IP-centric service provider has boasted for years about its low-cost structure and constant inferences that it could slash prices and drive volume unlike any other network provider in the country, if not the world. This is the first time the company has been so public about a specific price action.

Lisa Guillaume, VP of CDN Product Development for Level 3, said CDN services usually carry a 20 to 30% premium over the cost of transport, in a LightReading.com interview. This pricing action eliminates that differential. The ownership of a massive long-haul network and CDN platform will allow Level 3 to do this profitably, she added.
Level 3's network was designed to play the price-elasticity curve for bandwidth consumption in the Internet age. Volume increases in bandwidth consumption would offset per-unit price declines for transporting all those bits of information for MySpace, YouTube and Wallstrip.com.

Level 3 reported light revenue and earnings in the most recent quarter as it attempts to integrate seven acquisitions that it has completed during the last eighteen months. Demand for its services is strong, but the company is having issues getting the new customers onto their network.

After years of anticipation, possibly yesterday's announcement is a sign that Level 3 is finally ready for prime time and will be able to drive its business model, leading to higher revenue and profit growth. The company is due to report earnings on October 23 -- a must listen to call for investors.

Wall Street is a funny place. The concoction of fear, greed, a lot of money, and the potential to be humiliated at any time from a random event causes smart people to do silly things. While I often read analyst reports and tend to believe they can offer value for certain situations, every once in a while I come across a pretty bizarre upgrade or downgrade.

As Kevin Shult reported on BloggingStocks earlier, Hambrecht downgraded Akamai Technologies (NASDAQ: AKAM) from a buy to a hold. Normally I wouldn't really think much of such a subtle downgrade, but it seems like this downgrade goes against any logic.

If you look at the chart to the right, shares of Akamai have been killed during the last month. Off more than 40% from their highs, it would only seem logical that shares have become more attractive for new money than they were at a price 60% higher than the current quote.

But according to Hambrecht, this isn't the case. As I said before, this seems to go against any logic, especially if someone looks at a stock as a share in a business.

So why do I think they downgraded the stock? In my opinion, they probably wanted the poor performer off their buy list because it's currently humiliating them due to its poor performance. Once the stock trades back up 20-30%, they will re-add the stock to their buy list with the hopes of continued momentum.

A fair amount has already been written about the fact that since the recent IPO, content delivery network Limelight (NASDAQ: LLNW) has dropped sharply in price. In about three months, the stock has gone from $24.33 to $7.91.

But, how could something like this happen? In some ways it is, to used an abused phrase, a perfect storm of events.

The market has assumed that content delivery networks are part of the wave of the future. The largest one, Akamai (NASDAQ: AKAM) had been a victim of the internet bubble. In December 1999, the shares were at $345 on the assumption that broadband would open a huge need for storage and moving content around the web. When the market collapsed, Akamai's shares were as low at $0.70.

But, because Akamai did hold on until the YouTube wave of online video streaming hit, its shares went from $11 in early 2005 to $50 last month.

Limelight, and one of its largest investors, Goldman Sachs (NYSE: GS) decided to cash in on the excitement around Akamai, and took the smaller company public. Certainly the IPO would be popular because of the tremendous excitement around audio and video streaming as companies including the TV networks and studios put their content online.