Verizon's XO acquisition hits roadblock as FCC asks about EoC, interconnection agreements

Verizon's (NYSE: VZ) proposed $1.8 billion acquisition of XO Communications -- a deal that will deepen its fiber and millimeter wave wireless spectrum holdings for future 5G wireless deployments -- has hit a speed bump as the FCC has asked the two service providers for additional information.

Matt Del Nero, the FCC's Wireline Competition Bureau chief, said in a letter that the two service providers have not provided the FCC with documents it requested on June 22. At that time, the FCC set July 7 as a deadline for XO and Verizon to respond.  

"However, as of the date of this letter, neither applicant has completed their production of responsive material," DelNero wrote. "Further, with respect to certain information requests no anticipated production date has been offered."

As a result, the FCC has hit the stop button on an informal 180-day time clock for review of the acquisition applications, effective as of July 7, which marked day 86 of the review process.

DelNero said that the FCC "will restart the clock upon completion of the Applicants' responses as discussed herein."

In the request it made on June 22, the FCC asked XO and Verizon for clarification on 30 items related to on-net fiber buildings, interconnection agreements, internet backbone networks, and Verizon's plans for XO's existing EoC services.

The FCC's review of Verizon's acquisition of XO's fiber and millimeter wave wireless assets comes amidst protest from a number of competitive providers, notably Windstream and Transbeam, which currently purchase the competitive carrier's Ethernet over Copper (EoC) services to augment their offerings for business customers.

Windstream said that 50 percent of the Ethernet circuits it buys from XO, or about 32 percent of its Ethernet expense with XO, is provisioned as EoC. By using XO's EoC services, Windstream can provide symmetrical bandwidth of up to 100 Mbps to business customers.

Transbeam said that is concerned that Verizon's ongoing shutdown of copper circuits could cause issues. The CLEC claims that Verizon has not offered the CLEC "a replacement offering that is a reasonably priced wholesale alternative."

Verizon said in an earlier filing responding to Transbeam that claims made by Transbeam and Windstream that the XO asset acquisition will affect its copper retirement processes are without merit.

Later, Verizon assured XO's existing CLEC customers that it would continue to support Ethernet over Copper services after it takes control of the assets -- depending on several factors.

Verizon said that "intends to grandfather and continue to provide those XO services that are not migrated to an equivalent Verizon service."

As part of its review of the EoC agreements XO has with its wholesale customers, Verizon said it plans to migrate those customers to "reasonably equivalent" Verizon business services. However, the telco cautioned that it would take steps to ensure that any migration does not violate those customers' current service agreement terms.

In addition to EoC and fiber, the acquisition has implications for Verizon's upcoming 5G deployments that will leverage millimeter wave wireless bands. Under the terms of the agreement, Verizon will lease XO's LMDS spectrum with an option to buy it before the end of 2018. XO has 102 LMDS licenses in 28 GHz and 39 GHz bands.

For more:
- see this FCC letter (PDF)

Editor's Corner: Verizon builds breadth, depth with XO fiber buy, but gaps still remain

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