Verizon Refutes Windstream's, Others' Arguments Against XO Acquisition

Verizon is refuting claims by Windstream and Transbeam that its $1.8 billion acquisition of XO Communications’ fiber-optic network business could harm Ethernet over Copper (EoC) and business-data services competition.

In a filing with the Federal Communications Commission, Verizon said the deal will serve the public interest by growing the telco’s fiber-based IP and Ethernet networks, allowing it to better serve its enterprise and wholesale customers. In addition, it will enhance backhaul capacity for cell sites as Verizon densifies its mobile broadband network, and moves to develop and deploy 5G, it said.

Last month, Windstream urged the FCC to impose certain conditions on the merger, including requiring Verizon to offer unbundled DS1 and DS3 capacity over copper and fiber at regulated rates even after Verizon migrates to IP-based infrastructure.{ad}

XO and Verizon have failed to establish the merger is in the public interest, according to Windstream’s May 12 filing with the FCC.

Both Transbeam and Windstream, which purchase EoC services from XO, have said Verizon might not support their services after the deal is completed. In its FCC filing, Verizon said it will “honor existing contractual obligations to XO Communications’ customers after closing.”

Contrary to Transbeam’s claim, the acquisition will not affect the supply of copper loops that can be used for EoC, and Verizon complies with the commission’s copper retirement rules, which will continue to apply post-transaction, according to Verizon.

Also, Windstream’s claim that it could not match XO’s EoC speeds “forms no basis for denying or conditioning this transaction,” Verizon said.

“That claim (even if true) is not transaction-specific, but instead relates only to Windstream’s failure to date to develop or implement technologies as effective as those developed by XO Communications,” the telco said.

Verizon also said it will have “neither the incentive nor the ability to raise rivals’ costs as a result of the acquisition because numerous competitive alternatives to XO Communications’ services will remain in virtually all locations.”

Verizon said it will gain access to nearly 4,500 XO on-net buildings, of which almost 700, or 15 percent, are within Verizon’s ILEC footprint. Of those buildings, all but one are served by at least one other CLEC or cable company in addition to XO, while more than half (410) are served directly by at least two other CLECs and/or cable companies in addition to XO.

The 98 percent of the remaining buildings (274 of 281) are served by one other CLEC or cable company and are within one-tenth of a mile of fiber operated by at least one additional leading CLEC or cable company, Verizon said.

“In short, the data make clear that customers in Verizon’s ILEC footprint will retain considerable competitive choice following the transaction — even under a conservative approach that does not take into account the likely presence of yet more competitors and competing offerings,” Verizon said. “Given this data, any argument that the transaction presents some sort of risk to competition and customers is untenable.”