Verizon, XO Defend Deal Before Regulators
Verizon and XO Communications responded to competitor attacks Friday at the FCC and the New York Public Service Commission as regulatory reviews moved along on Verizon’s bid to buy XO and its wireline assets. On the federal side, the FCC and DOJ have been reviewing the deal, with the Wireline Bureau last week asking for more information (see 1606230056). In the states, the companies have received deal approval from 12 of 16 jurisdictions, a Verizon spokesman said. The companies said the deal is expected to close in the first half of 2017.
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The FCC should disregard condemnations from Dish Network, said Verizon and XO in an ex parte letter posted in docket 16-70 Monday. Dish said the deal would give Verizon increased control over 5G spectrum, wireless backhaul and dark fiber and kill a competitor in backhaul and transit (see 1605310038). Verizon and XO said Dish made “nothing more than a kitchen-sink assortment of unsupported claims and specious arguments that ignore standard competition policy analysis, disregard Commission precedent, and refuse to acknowledge marketplace realities.” XO doesn’t provide wireless backhaul, so the market won’t lose competition, they said: Dish isn’t an XO customer and doesn’t have any cell sites needing backhaul.
In New York, Verizon and XO countered an attack from EarthLink. The merging entities previously defended against Windstream there (see 1606130035). Both competitors claimed the deal will reduce competition in business data services and other areas. “The transaction will create substantial public interest benefits and will have no anti-competitive effects,” Verizon and XO said Friday in joint surreply comments. “Ample competitive alternatives to Verizon’s and XO’s services -- including Business Data Services ('BDS') and collocations -- will continue to be available after the transaction closes.”
The deal won't reduce competitive options outside of Verizon's ILEC footprint in New York, and Verizon will still have incentive to use XO assets to compete in business data services out of region, they said. “Where service providers invest resources in network facilities, they have every incentive to use those facilities to provide services and collect revenues.” The PSC should dismiss criticisms of Verizon’s interconnection practices, they said. Even if interconnection is within New York PSC jurisdiction, it’s not affected by the transaction, they said. "Verizon’s practices with respect to Internet traffic exchange and voice interconnection are lawful and reasonable -- as they must be, given the competitive nature of the relevant marketplace."
New York has emerged as a key battleground among state reviews. The state is a lucrative market for EarthLink and Windstream, and they may see the deal as giving Verizon and XO an insurmountable sales and service advantage, said 556 Ventures analyst William Ho. Also, Windstream and EarthLink may have competed against XO in delivering dark fiber and transport to Verizon, he said. “With a merger, these revenue opportunities may dry up and affect future revenue.”
Three other states also must approve the deal -- Hawaii, New Jersey and Pennsylvania, the Verizon spokesman said. The Pennsylvania Public Utility Commission plans a hearing July 27 in Harrisburg, where another CLEC -- Core Communications -- and the Office of Small Business Advocate are intervenors (see 1606230013). Core is developing its positions and is seeking more information from Verizon and XO about competitive effects of the deal, said Michael Gruin, an outside attorney for Core with Stevens & Lee.