This week I was speaking to an Attorney who deals greatly in the Telecom Space and he thought I might want to speak a bit about the upcoming acquisition of Verizon Telephone Lines in some areas by Frontier Communications. I think this a great idea. From this, I hope you will learn some about the changing landscape and the issues from other perspective.
If you followed the link above, you would have found you were looking at a presentation by Frontier about this transaction. Frontier is going to purchase territories that have just over 6M residents. In doing so, they take over the obligations of Verizon in these properties as well as the equipment to serve these homes. On top of that Frontier will receive about 11,000 employees. All of this is a massive expansion. Frontier will grow about 40% by just about any metric.
This is a very interesting transaction because the territories being acquired came into Verizon as part of its acquisition of GTE. The lines being sold are in Florida, Texas and California. All of these states are growing in population and the areas involved are mostly urban. These properties have over 1/2 the lines capable of delivering Verizon’s FiOS FTTH. This makes the transaction very different than Verizon/Frontier transactions in the past that were mostly rural and copper based.
Now the regulatory issue primarily involved here will be what is called “Local Loop Unbundling”. Today a company like SONIC.net can rent phone lines from AT&T and sell you DSL. If a Telco has used FTTH technology, they are not required to unbundle the fiber. But if you are Frontier, you really want to get rid of the copper in the ground that you replaced. Frontier is no longer using it and maintaining it costs money. The only people that want it are their competitors and they want to pay only wholesale rates.
The reason that consumers want the copper maintained is competition. In most places, this is more theoretical than actual. But competition is one of the two reasons that people deploy more technology in the Broadband network (the other being government intervention). The reason that the copper can be important is that Frontier and Verizon work very differently. It will be interesting to see how well Frontier is able to absorb this rather large chunk of high powered users.
One other thing to think about is that after this acquisition that there will be 4 Telcos with over 10M lines (AT&T, Centurylink, Verizon, and Frontier). The Cable companies are consolidating as well (Comcast/Time-Warner Cable). Our 10+ year trend of industry consolidation continues. At this point, I don’t see this stopping for some time. Another straw to stir the competition drink.
Have a great weekend!
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