Over the objections of several petitioners, the FCC on Wednesday approved plans by Verizon Communications to purchase the fiber optic network business of XO Communications, LLC, concluding that the public interest benefits of the $1.8 billion transaction outweigh any potential harms. Announced in February, the XO purchase is expected to boost Verizon’s ability to offer fiber-optic backhaul services which form the bridge between mobile and landline networks. Owing to XO’s inner-city fiber network assets, which span 20,000 route miles, and collection of FCC wireless licenses in the 28 GHz and 39 GHz bands, which cover 45% of the U.S. population, the transaction is also expected to improve Verizon’s position for the future launch of fifth-generation (5G) wireless services. Wednesday’s ruling follows the FCC’s decision last July to approve a separate, but related agreement between Verizon and XO through which Verizon will lease spectrum licensed to XO unit Nextlink Wireless in market areas that cover 63% of the U.S. population.
Applying a “sliding scale approach” in evaluating the benefits of the transaction against potential harms that “appear less likely and less substantial,” the FCC cited several benefits that “outweigh any public interest harms.” In the words of the FCC, such advantages include “certain credited operational and economic synergies, along with the 5G and wireless backhaul enhancements, increased multi-location customer competition, and . . . . benefit to current XO customers gaining first time access to Verizon services.” Although DISH Network and Incompas challenged the acquisition on grounds that it would harm competition in the business data service and IP transit services markets, the FCC concluded that “the loss of XO as an independent route into Verizon’s network is unlikely to affect Verizon’s incentive or ability to impose paid-peering arrangements on interconnecting networks, edge providers, or content delivery networks for access to Verizon’s network.” Applauding the FCC’s action, Verizon senior vice president Will Johnson proclaimed: “we look forward to quickly putting XO’s fiber to work to better serve our customers and to aid our deployment of 5G.”