Verizon Comes to Senses With XO Fiber

Late in 2015, Verizon was apparently considering a terribly reckless action involving ridding itself of its invaluable enterprise properties. The purchase of XO’s assets definitely indicates a reversal in this line of thinking. Nevertheless, the industry discussion of this acquisition, which Verizon bought at a very attractive price, has not concentrated enough on the blatantly important on-net connections with businesses, but on other seemingly less vital considerations, including in support for future 5G applications, which are hardly around the corner, in what at least partially appears to be in order for top-level, wireless-centric executives at the large service provider to save face.

There definitely seems to be an excessive preoccupation in the investigation of this buyout on backhaul/fronthaul applications as well as on spectrum. One may presume that Verizon could have rented (with an option to buy later) the latter without purchasing the fiber. It should also be noted that somehow the carrier was able to convince at least one investment analyst that “the purchase is all about” next-generation wireless, according to Communications Daily.

Perhaps the Verizon leadership is starting to figure out the pitfalls with adopting a business strategy exclusively focused on wireless sales that is obviously heavily consumer-oriented, and that characteristic has to play a significant role in the diminishing growth in that sector. The layoffs/store closings at Walmart and the financial difficulties at Apple reinforce the idea that giving up diversification with corporate customers would be foolhardy. Frankly, Verizon previously contemplating not at least retaining dark fiber serving these firms defies logic.

Another point that has been made in the press that we find invalid is that the sale means “only…4,000 on-net buildings”, and that supposedly AT&T and CenturyLink have been more aggressive by just announcing plans recently to pass more commercial customers. Once again, what is totally ignored is that the basis of FiOS last decade was to obsessively position the carrier within its incumbent territory to go after lucrative opportunities at enterprises. Also, we do not find 4,000-plus connections to buildings an especially paltry number when one of the biggest obstacles for so long has been figuring out how to gain access to such edifices in a cost-effective manner, even including the study of the use of sewer systems to obtain entry with fiber.

A second contention from commentary on another blog that we find unconvincing is that the original article in Reuters was incorrect, despite the company mentioning the contribution of several sources. We pointed out at the time that Verizon did not refute the report until several days later about unloading the ex-“MCI”-based infrastructure. The news organization also provided a lot of specific detail including the earlier involvement of CenturyLink as a potential purchaser (which did not issue a denial) of a portion of the network as well as the participation of Citigroup. At a bare minimum, Reuters accurately reported on Verizon looking at the divestment of its data centers.

[written by Mark Lutkowitz]