Dish warns key 5G spectrum 'will be controlled almost exclusively by Verizon' if XO deal approved

Dish Network is lobbying the FCC to deny Verizon's proposed $1.8 billion acquisition of XO Communications' spectrum assets and fiber business, claiming among other things that the deal would have an adverse impact on competition in multiple markets.

The nation's largest mobile network operator announced in February it planned to buy XO's substantial fiber-optic network, which covers 40 major U.S. markets through 1.2 million fiber miles. The move would enable Verizon to deepen its Ethernet penetration to serve its fixed-line customers, and it may allow the carrier to cut the backhaul payments it makes to fiber providers outside its wireline markets as it densifies its cell network, partially through deploying small cells.

Verizon's purchase of XO would also enable Verizon to lease XO's LMDS spectrum with an option to buy it before the end of 2018. XO has 102 LMDS licenses in 28 GHz and 39 GHz bands that Verizon has said can be used to conduct 5G testing.

"The two transactions would place Verizon, one of the two largest mobile phone carriers in the nation, in control of resources -- specifically XO's fiber network and Nextlink's local multipoint distribution service (LMDS) and 39 GHz spectrum -- that promise to play central roles in 5G applications and hence will be important to the companies competing against Verizon in the commercial mobile radio service (CMRS) 5G marketplace," Dish said in its petition. "Just as important, the transactions will eliminate current and potential competition between Verizon and XO in the mobile backhaul (both wireless and fiber), Internet transit, and enterprise and wholesale markets."

Verizon representatives declined to comment on the filing.

Dish went on to claim that the LMDS frequencies are among the most important "next-frontier" airwaves for 5G, and licensed millimeter wave spectrum in that range "will be controlled almost exclusively by Verizon" should the acquisition go through.

The proposed XO acquisition is seen as an important part of Verizon's ambitious 5G plans. The operator has vowed to be the first in the U.S. to deploy 5G, and it is actively testing 5G technologies in advance of an initial fixed wireless pilot scheduled to begin next year.

Verizon and XO inked separate deals for the fiber acquisition and spectrum lease, but Dish said the two should be considered a single transaction because so much overlap exists between mobile and wireline communications.

"Indeed, wireline and wireless facilities are often substitutes for each other in the mobile backhaul, Internet transit, and enterprise services markets, and promise to become even more interchangeable as engineers are able to realize the high-capacity promise of the upper frequency bands," Dish wrote. "By structuring the spectrum component of the transaction as a de facto transfer lease instead of an acquisition, Verizon has avoided discussion of the total impact of its deal with XO Holdings."

Dish urged the Commission to "set both applications for a hearing, and deny them." The FCC is accepting petitions to the acquisition through May 12, and reply comments are due by May 27. Verizon has said previously it expects the deal to close in the first half of 2017.

Dish, a satellite TV provider, for years has been quietly amassing a major warchest of spectrum itself, though it's unclear what the company might do with its spectrum. According to Evercore, Dish owns roughly 75 MHz of spectrum nationwide, holdings that include AWS-3, PCS H Block and AWS-4 licenses. The company is also among the bidders signed up to participate in the FCC's upcoming incentive auction of TV broadcasters' unwanted 600 MHz airwaves. 

For more:
- see this Dish Network filing

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