CenturyLink, Level 3 have not proven merger will promote facilities-based competition, says Incompas

A map of CenturyLink and Level 3's network
Image: CenturyLink

CenturyLink cleared a large hurdle by getting shareholder approval to proceed with its acquisition of Level 3 Communications, but Incompas is concerned that the marriage will ultimately stifle competition in the fiber-based business services market.

Incompas, an industry group that represents competitive service providers, said in a recent FCC filing (PDF) that its chief concern is that CenturyLink won’t expand its fiber footprint beyond its current network boundaries.

“The applicants have yet to demonstrate that the combined company will increase facilities-based competition—namely that it will build connections to buildings outside of CenturyLink’s ILEC territory on a larger scale than Level 3 would on its own—and assure competitive use of those facilities at the same or more favorable rates, terms, and conditions than those offered by Level 3 today,” Incompas said in a FCC filing. “As it stands, the applicants have not provided evidence—or even a statement—of intent to build vigorously outside CenturyLink’s ILEC region.”

RELATED: CenturyLink, Level 3 shareholders approve merger, but competitors’ protests remain

Instead of proving the pending deal “serves the public interest,” Incompas said CenturyLink and Level 3’s focus has centered on how it will benefit the new company’s fiber footprint.

Specifically, CenturyLink will gain an additional 200,000 route miles of fiber, including 64,000 route miles in 350 metropolitan areas and 33,000 subsea route miles connecting multiple continents.

“The applicants cite factors such as the combined company’s ability to reduce the applicants’ dependency on leased networks, the combination of the applicants’ footprint, the combined company’s improved financial profile, and the experienced management team the combined company will have in place—all of which are beneficial to the combined entity, but the applicants have not shown how these factors translate into public interest benefits,” Incompas said.

A particular concern is the amount on-net fiber connections present in local buildings, including multi-tenant units (MTUs) where multiple businesses reside.

“The applicants gloss over the public interest concerns that the transaction will actually undermine competition by eliminating choice of last-mile facilities-based providers for enterprise customers in many buildings,” Incompas said. “The applicants have entirely failed to respond to INCOMPAS’s concern that they have limited their analysis of impacted buildings to only those buildings where they both have lit fiber facilities in place today and may omit buildings where they offer carriers the opportunity to buy wholesale fiber-based Ethernet at lit building rates.”

Incompas said that the “Commission should not make any decisions on the transaction until the applicants have updated the record and provided third parties a sufficient opportunity to review their revised analysis.”

Although CenturyLink has not made a formal response to Incompas’ latest filing, the service provider previously said that the industry group’s argument related to on-net fiber buildings was flawed.

In an earlier FCC filing (PDF), CenturyLink said that there’s only a small amount of building locations where both companies have installed within various Metropolitan Serving Areas (MSAs). 

“The updated assessment demonstrates that, at most, 80 buildings within CenturyLink’s ILEC region would go from having two competitors to one without a fiber-based competitor within the distance specified by the screens,” CenturyLink said. “These buildings would be spread across 23 MSAs, which would not be competitively significant.”