Verizon, XO Ask FCC to OK Fiber Deal, Citing Efficiencies, Consumer Benefits, Lack of Harms

providing Verizon with access to XO Communications’ fiber-based IP and Ethernet networks, the proposed transaction will drive significant consumer benefits. That access will allow Verizon to better serve its enterprise and wholesale customers with deepened and expanded fiber facilities,” the companies said in their application posted in the agency’s electronic comment filing system Monday. “Verizon also will use the fiber assets to densify its mobile broadband network nationwide to provide wireless consumers with more capacity and enhanced network reliability. Densifying the network also will help pave the way for Verizon to deploy 5G technology.” XO's fiber network "is largely complementary to Verizon's," they said. Most of the XO fiber in its top 20 markets is “dark” (not being used), which matches well with Verizon’s wireless network and its increasing traffic flows and backhaul demand, they said. When the transaction is fully implemented, it “will yield synergies that Verizon estimates to result in total expense savings in excess of $1.5 billion on a net present value basis,” combining with other efficiencies to boost Verizon’s ability to compete, the companies said. The cost savings will come from “eliminating some access costs paid to third parties, and by consolidating various network monitoring and support systems, business functions, and finance and accounting processes,” and the FCC recognizes such efficiencies as public interest benefits, they said. The companies said the deal poses no material harms, including to consumers, because XO doesn't serve mass market customers and Verizon "will meet" XO legal obligations to customers. They said XO’s fiber network is largely outside areas where Verizon deployed fiber, with almost 85 percent of XO’s owned fiber outside Verizon’s remaining ILEC footprint. “There is no potential for material competitive harm in the market for high-capacity service,” they said. “Even in the small number of markets in Verizon’s ILEC territories where XO Communications has fiber facilities, there is sufficient supply of high-capacity facilities from other major providers and thus no material competitive harm from the transaction. Moreover, exploding demand for high-speed data services is feeding these providers and creating enormous opportunities in a rapidly evolving and dynamic market for high-capacity connections.” Colleen Boothby -- counsel for the Ad Hoc Telecommunications Users Committee, who raised concerns when the deal was announced (see 1602220071) -- emailed us Monday: "The driver for this acquisition seems to be the XO assets that can support Verizon’s wireless services. But XO has also been a useful competitive source for enterprise wireline services. We’re still looking at how the two companies' geographic markets line up but we remain concerned about the competitive impacts in enterprise wireline markets.”