Visa has changed their definitions of service providers. The current info is on this page on Visa’s site:
http://usa.visa.com/merchants/risk_management/cisp_service_providers.html
As noted on this page, this now deletes the use of “gateway” as part of the definition. This was always an incredibly confusing and ambiguous term. I had actually spoken with the leader of the CISP compliance team years ago about this definition. That’s when I made the post that you are referring to.
Now, SP’s are strictly classified by volume. However, a level 2 provider does not have to have an independent audit. Practically speaking, this means that they have not had their compliance validated. From a competitive standpoint, I think that a level 2 SP would have a very difficult time competing in a market with level 1 SP’s.
Thanks for your comments. I am hoping to resurrect this blog soon and resume regular posts.