Verizon's XO purchase will stifle EoC choices, say Windstream and Transbeam

Verizon's (NYSE: VZ) proposed $1.8 billion acquisition of XO Communications' fiber assets has come under fire from Windstream and Transbeam, which say it could cut off a major alternative source for Ethernet over Copper (EoC) access.

While Transbeam and Windstream continue to expand their respective on-net fiber networks into more buildings each of these service providers leverage copper-based services to deliver EoC services to their business customers on available copper loops.

Windstream has launched a program to bring more of its customers onto its own fiber network, but it faces the ongoing reality that it can't prove a business case to build out fiber to every one of its customers' locations.

"XO offers Windstream an alternative to Verizon Ethernet services when deploying its own network facilities is not economically feasible," Windstream said in a FCC filing.

About 50 percent of the Ethernet circuits Windstream 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.

The service provider said that if the FCC does not put conditions on Verizon's purchase of XO, the telco could compromise competition in the areas where it operates as a CLEC.

"Although Windstream has invested in building its network, for many business locations there simply is no viable business case for Windstream to overbuild the incumbent," Windstream said in an FCC filing. "If this transaction is permitted to go through without conditions, Verizon would have an increased incentive and ability to choke off enterprise business solution competition in its ILEC service area, including shutting down EoC and eliminating the price competition XO brings, and Verizon would have an increased ability to cooperate with AT&T to raise rivals' costs to choke off enterprise business solution competition nationwide."

Among the conditions that Windstream has asked for include: offering best retail prices for seven years; make unbundled loop facilities available over copper and fiber; Verizon reform its special construction charging regime; eliminate the lock-in special access pricing penalties; and comply with any additional requirements imposed on other price cap ILECs in the FCC's Business Data Services proceeding.

Transbeam, while not as large as Windstream in terms of customer base and footprint, is facing a similar dilemma.

In particular, Transbeam is concerned that Verizon's ongoing copper to fiber migration where it is replacing aging copper with fiber could potentially leave it without service. 

While Transbeam does not have an issue with Verizon's move to fiber, it claims that Verizon has not offered the CLEC "a replacement offering that is a reasonably priced wholesale alternative."

"Acquiring XO will eliminate a major provider of EoC services, increasing Verizon's leverage negotiating a reasonable replacement offering with those EoC providers that remain," Transbeam said in an FCC filing. "In addition, eliminating XO will greatly reduce Transbeam's effective footprint and ability to provide EoC services to multi-location customers."

Currently, Transbeam has colocated its facilities in 16 wire centers and it has a contract with XO to obtain wholesale EoC circuits in wire centers where XO has facilities.

By using XO's copper facilities, Transbeam said it has been able to "serve customers in over 40 additional wire centers, with the potential to serve customers in even more wire centers."

In a previous interview with FierceTelecom, Transbeam said it hopes that they can come to an agreement over the copper retirement and related special access issues.

For more:
- see Windstream's FCC filing (PDF)
- here's Transbeam's FCC filing (PDF)

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