XO to Oppose Level 3 Acquisition of Global Crossing
XO Communications will file comments opposing Level 3’s proposed $3 billion acquisition of Global Crossing, XO Vice President Heather Gold told us Friday. “Everybody’s caught up in the AT&T/T-Mobile merger,” Gold said. “The way we see the Level 3-Global Crossing merger, in a very, very short period of time this will have a much bigger impact.” If the FCC and Justice Department approve Level 3’s acquisition, it will create a company with 55 percent of the Tier 1 Internet backbone market, she said. That'll be three times the size of the next largest Tier 1 company, NTT Communications, Gold said.
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Level 3 and Global Crossing announced their proposed deal in April and there were few regulatory hurdles expected (CD April 12 p3). But Gold said XO is worried that the combined company will “corner the market” in part because the public isn’t aware how critical the Internet backbone is. “People just don’t understand the implications in a world that has become so interconnected on an IP basis -- the absolute dependence on the Internet on companies, the explosion of growth and the dependence of all companies, really, on what happens on the Tier 1 Internet backbone,” she said. “The thing about this Tier 1 market is that you can’t go around and you can’t go above it.”
Level 3 Vice President Josh Howell sent an email statement Friday, saying: “As a matter of practice, we don’t comment on pending legal proceedings. If you are referring to filings before the FCC, all such filings are public.” Global Crossing officials didn’t respond to a request for comment.
Gold said the biggest concern is that Level 3 does not have a publicly available template on peering agreements. “AT&T and Verizon are the good guys here,” she said, referring to two companies that do publish peering templates. “With Level 3 it’s constantly a moving target.” Asked what sort of merger conditions XO might consider sufficient to alleviate its concerns, Gold said: “First we have to have the FCC and DOJ focus on the harm.” The FCC has examined backbone mergers before, she said, including the 2001 Worldcom-Intermedia deal. XO’s comments will be filed early next week, Gold said.