Verizon says XO deal will not hinder competition for Windstream, other CLECs

Verizon (NYSE: VZ) says its pending acquisition of XO Communications' assets will enhance the services it provides to enterprise and wholesale customers, refuting arguments made by Windstream and Transbeam that the deal will hinder the Ethernet over Copper (EoC) and business data services (BDS) industry segments.

A key fear that Transbeam and Windstream -- two providers that purchase EoC services from XO in a number of markets -- have cited about Verizon's acquisition is that the telco will not support their services after the deal is completed.

Verizon said in an FCC filing that it "will honor existing contractual obligations to XO Communications' customers after closing."

The telco said that claims made by Transbeam and Windstream that the XO asset acquisition will affect its copper retirement processes are without merit.

In an earlier filing, Transbeam said that while it 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."

Verizon countered that Transbeam does not provide evidence on how the telco's copper retirement process relates to the XO sale.

"Transbeam fails to explain how Verizon's copper retirement practices are relevant to a transaction-specific complaint," Verizon said. "The proposed transaction 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 to Verizon post-transaction."

The telco also took issue with Windstream's argument that when Verizon acquires the XO assets that it would be able to offer similar EoC speeds.

"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."

In addition to EoC services, Verizon claims that the XO acquisition will not hinder competition in the broader business data services market.

By acquiring XO Communications, Verizon said it will gain access to 4,487 XO Communications on-net buildings, of which only 691 (15 percent) are located within Verizon's ILEC footprint.

Verizon said in its FCC filing that 99 percent, or 690 out of 691 buildings, are served by at least one other CLEC or cable company besides XO Communications. The one building that isn't on this list is in East Texas, Pennsylvania, a location to which XO stopped providing service in 2011.

About 60 percent, or 410 buildings, are served directly by at least two other CLECs and/or cable companies in addition to XO Communications. The 98 percent of the remaining buildings (274 of 281 buildings) are served by one other CLEC or cable company and are within a half mile of fiber of at least one additional CLEC or cable company.

"Of the remaining seven buildings, all but one is served by at least one other CLEC or cable company in addition to XO Communications," Verizon said. "Furthermore, two of these seven are located in zip codes served by legacy Time Warner Cable (Business Class), four are in cities served by Windstream, and the one remaining building is the unrecognizable address noted above located in East Texas, Pennsylvania. All of the CLECs and nearly all of the cable companies providing service to these buildings offer Ethernet service."

For more:
- see this FCC filing (PDF)

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