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Verizon to Pick Up XO Communications' Fiber Business

February 22, 2016

Google Fiber, for many, put the term “fiber” on the communications map. So seeing businesses expand further into fiber is a reasonable proposition, one that Verizon seems to agree with. It's recently signed an agreement with XO Communications to acquire its fiber-optic network business in a deal valued at around $1.8 billion.

The deal will give Verizon control of XO's IP and Ethernet networks with a fiber backing, a move that will also help Verizon make its cell network a denser offering. The deal didn't stop there, as Verizon also leased XO's wireless spectrum in the process, and established an option to buy the spectrum outright by the end of 2018. XO Communications' Chris Ancell called the move a means to “...create a stronger provider of business broadband services for the customers of XO Communications.”

Reports note that XO will continue to operate as its own entity while regulatory approval for the deal is pursued, so the deal isn't expected to close until the first half of 2017. XO Communications has come a long way since the start of the new millennium, as explained by current chairman and sole shareholder Carl Icahn. Icahn detailed a story of bankruptcy, emergence from bankruptcy, and times when the company required capital infusions just to remain alive. Icahn noted that the sale didn't “...represent a significant annualized return on our investment,” but did note that it “...represent(s) the best achievable outcome for the company's customers, employees and owner.

While XO Communications' road to reach today's developments has been rocky, one thing is clear: since Icahn started purchasing that debt back in 2001 and leading the company out of bankruptcy, the demand for bandwidth has skyrocketed in the interim. From the simplest tasks of everyday life—watching movies and playing video games—to shopping, conducting business, and carrying out most any form of paying work, the need for bandwidth has entered most every discussion. From the mobile workforce needing cloud-based operations to make contact to the cable-cutter getting rid of old-fashioned cable television in favor of Netflix, Sling, or a host of other options, we need bandwidth. Fiber is going to be a great way to get there—Google Fiber has proven that conclusively enough to many—so Verizon augmenting its fiber offerings should be a smart idea. With Project Skybender in the works, however, Verizon may have bought in a little too late. A fiber network may not be as valuable when fiber speeds can be sent by autonomous drone.

Still, Verizon can take advantage of the improved fiber in the short term, and bolster some customer presence as well. A great short term move, sure, but maybe not one that holds its value for long.

Edited by Maurice Nagle

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