Verizon’s aggressive fiber push could help it regain Ethernet, business market share

Verizon sign

Verizon’s latest fiber push has a strong focus on serving as a homegrown fiber backhaul mechanism for its current 4G and 5G wireless networks, and it could be a platform to drive further growth in the business services market.  

After several years of being the number-two Ethernet player, Verizon lost ground to Level 3, which overtook Verizon as the second-largest Ethernet player according to Vertical Systems Group when it completed its purchase of tw telecom in 2015.

By purchasing tw telecom for $5.7 billion in cash and stock last June, Level 3 immediately expanded its on-net fiber building footprint. tw telecom brought nearly 21,000 buildings connected to its fiber network to Level 3. Verizon will face another big challenge when CenturyLink completes its acquisition of Level 3 later this year.

“Fiber plays a crucial role in VZ's business, as it will (1) build up the core network (in both Wireless/Wireline), (2) help grow other areas of the business (ie. in Wholesale and regain share in Enterprise/SMB), and (3) increase in strategic value with the development of smart cities (IoT),” said Deutsche Bank in a research note.

Verizon has certainly put in place the assets to potentially enhance its fiber network to enhance its business services play. The service provider recently signed two fiber expansion deals: one with Corning and another with Prysmian.

RELATED: Verizon signs $1.1B fiber purchase agreement with Corning, supports wireline, wireless broadband initiatives

It signed a $1.1 billion, three-year fiber and hardware purchase agreement with Corning, enhancing capacity to support a next-generation fiber platform that will support all of the company's businesses.

The telco followed up the Corning purchase with a new $300 agreement with Prysmian, which will be an additional supplier of fiber cable to support Verizon's 4G and 5G wireless and wireline broadband plans.

Earlier, Verizon completed its purchase of XO Communications, which immediately deepened its metro fiber density in 45 U.S. markets.

The XO acquisition fulfills multiple needs for Verizon. For one, the provider can bring its network services like Ethernet to more of its enterprise and wholesale customers. Also, Verizon gains metro networks in 40 major U.S. markets with over 4,000 on-net buildings and 1.2 million fiber miles.

However, Verizon has seen a near-term challenge in the business services market. In the first quarter, business and wholesale saw declines during the quarter. Enterprise Solutions revenues were $2.47 billion, down 4.3% year-over-year from $2.53 billion in the first quarter of 2016.

While the telco has cited a slow business spending environment in recent quarters, the service provider’s recent fiber build out moves could put in a good position to lure more large and even smaller business customers onto its network.