Verizon got federal approval for a key piece of its strategy to use up and coming 5G wireless technology to offer TV and Internet service in more areas.
After some delays, the Federal Communications Commission late Wednesday formally approved Verizon’s $1.8 billion purchase of XO Communications’ national fiber optic network. The deal still must be approved by state regulators in Pennsylvania and New York, but the FCC was considered the most significant hurdle.
XO’s network of 26,000 miles of fiber optic cable runs stretches from Seattle to Miami and New York to Los Angeles. The FCC had already allowed Verizon to enter a lease to use XO’s wireless spectrum licenses, which are in ranges that can be used for 5G.
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Verizon (VZ) has a nationwide wireless network for 4G LTE and plans to add much faster 5G technology over the next few years. But because 5G signals do not carry as far as current wireless networks, Verizon says it will need to add many more cellular base stations, each of which needs to be connected to wired networks and the Internet via fiber optic cables. In the meantime, the XO network could be used to carry business and consumer traffic from Verizon’s wired Internet service.
“We are pleased that the FCC has approved Verizon’s purchase of XO’s wireline business,” senior vice president Will Johnson said in a statement.
The carrier has said it will likely go national with cable TV and Internet service offered via 5G, which can carry signals at speeds of two to five gigabits per second—20 to 50 times faster that common 4G networks. And current 4G networks don’t have enough bandwidth to support the kind of cable TV and Internet connections consumers want at home.
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Many of Verizon’s competitors had sought to have the FCC block the deal. Windstream Services, Transbeam and Dish Networks, among others, argued that the deal would quash competition for fiber optic network operators and wireless carriers that need to connect to wired networks and the Internet. “XO Communications serves as a significant, independent alternative path into at least some of Verizon’s U.S. network,” Dish (DISH) argued in a filing with the FCC in June.
But the FCC, in the waning days of Obama-appointee and chairman Ton Wheeler’s tenure, disagreed. “Commenters have provided no evidence, and the record is to the contrary, that Verizon has any market power outside of its incumbent (local exchange carrier) territory,” the agency wrote in its 38-page decision. “Competitive harm is unlikely.”