According to a report in the Communications Daily newsletter this morning, XO Holdings (news, filings) is planning to file comments this week opposing the Level 3-Global Crossing merger with the FCC and perhaps DOJ. The grounds? That it will give Level 3 too much leverage in the Tier 1 backbone market of course.
While the combined entity will certainly be the largest in terms of traffic, I find it hard to believe that that they will suddenly have the leverage to start pushing around fellow Tier 1 Goliaths Verizon, AT&T, NTT, Sprint, DT, and Teliasonera in any meaningful way. The fact is, being a Tier 1 backbone just ain’t what it used to be – and actually the term itself is a bit meaningless and has been made somewhat obsolete by more nuanced transit free, paid peering arrangements. Regulators have always avoided treading in the transit/peering swamp, and I doubt they will change course on it here.
What XO is really after though seems to be a better peering agreement with Level 3, as they are ‘transit free’ but still not getting the interconnection deal they feel they should from their larger rival. XO’s increased activity and success in the wholesale transport and IP business has put the two companies in opposition much more often in the past few years. By making a bit of noise and trying to set up a speed bump on the road to a merger Level 3 obviously needs and wants, they probably hope to add another minor bargaining chip to the table.
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