March 1, 2016 — The importance of fiber to future generations of high-speed, low-latency wireless networks was underscored recently as Verizon announced the purchase XO Communications’ fiber network business for $1.8 billion. XO’s fiber network spans 20,000 inter-city route miles, 13,000 metro route miles, more than 4,000 on-net buildings and more than 2 million business locations.
The XO Communications acquisition mirrors AT&T’s emphasis on pushing fiber deeper into its wireless footprint, Wells Fargo Senior Analyst Jennifer Fritzsche wrote in a published Wells Fargo Equity Research note.
“The fiber footprint will help VZ densify its cell network and leverage XO’s fiber footprint to more cost-efficiently deploy wireless backhaul and fronthaul for C-RAN (centralized radio access network) applications,” Fritzsche wrote.
This is also a wireless backhaul play for Verizon, which will lease XO’s wireless spectrum, which includes 91 licenses of LDMS (local multipoint distribution system) spectrum in the 28-31 GHz range and 10 licenses in the 39 GHz band.
“Given VZ’s focus on small cells and its leadership role on developing 5G standards, we believe the high-capacity LDMS spectrum will play a greater role in VZ’s evolving network architecture,” Fritzsche wrote.
What about the other fiber players? Level Three (LVLT) is much larger than XO, with 207,000 route miles, including 64,000 metro miles, and ZAYO has 110,000 route miles. ZAYO, which has invested $355 million in the last year in its urban dark fiber network, should be in demand for high-capacity, metro dark fiber, according to Fritzsche wrote.
“VZ will still need metro fiber from both LVLT and ZAYO as it seeks to densify its wireless network with small cells and centralized radio access network,” Fritzsche wrote.