Verizon-Corning $1.05B fiber deal part of larger build-out or buy program

Executive Summary:   Verizon has agreed to purchase optical fiber from Corning through 2020 for at least $1.05 billion. Verizon will buy up to 12.4 million miles of fiber each year, much of it for wireless backhaul [1] of its 4G and upcoming “5G” [2] networks.

Note 1.  Fiber backhaul promises to be a huge issue for 5G as most cell towers today are not fiber connected.  Verizon has announced it would be deploying a pre-standard version of 5G in mid 2017.

Note 2.  We’ve pounded, smashed and broken the table by repeatedly stating that ALL “5G” rollouts prior to 2021 will be non-standard as the ITU-R “real 5G” recommendations from IMT 2020 WP5D won’t be completed till the end of 2020. In fact, the Radio Access Network technologies won’t be chosen till mid to late 2018!

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The deal:  Corning will sell up to 12.4 million miles of optical fiber to Verizon each year from 2018 through 2020, with a minimum purchase commitment of $1.05 billion, according to the agreement.

In a statement, Verizon said the deal would help it meet its rollout schedule for a fiber-optic network in Boston.  Verizon began fiber rollouts in Boston last year under a One Fiber initiative that calls for densifying fiber assets to prepare for “5G” fixed wireless services.

Verizon is testing a 5G fixed wireless service with equipment maker Ericsson in 11 U.S. markets and expects a commercial launch as early as 2018.

U.S. Federal Communications Commission (FCC) Chairman Ajit Pai said in a statement that he supported the Verizon-Corning deal and that the agency would “continue to focus on creating a regulatory climate that favors greater investment and competition.”

What’s Next for Verizon Fiber Build-out or Buy?

Verizon and competitor AT&T Inc have been buying assets in preparation for 5G roll-outs. On Friday, sources told Reuters that Verizon is considering making a buyout offer for wireless spectrum license holder Straight Path Communications Inc that would top AT&T‘s $1.25 billion bid for that company.

Verizon has said it would evaluate opportunities to build out or buy fiber on a market-by-market basis.   In February, Verizon said it had closed on its acquisition of XO Communications’ fiber-optic network business for about $1.8 billion.

Earlier this year, Verizon released a forecast of its capital expenditures for 2017 as somewhere between $16.8 billion and $17.5 billion.  Beyond the Corning deal, how much of Verizon’s CAPEX budget will be used for additional fiber build-outs is unclear.

Verizon has said it would evaluate opportunities to build-out or buy fiber on a market-by-market basis. In February, Verizon said it had closed on its acquisition of XO Communications’ fiber-optic network business for about $1.8 billion.

Verizon has also hinted at an interest in buying cable provider Charter Communications Inc, which would give it access to a fiber and cable network across 49 million homes.

Verizon Chief Executive Lowell McAdam told investors in December that a deal with Charter would make “industrial sense,” igniting takeover speculation.

But in an interview with CNBC on Tuesday, McAdam said the company had not found the right “architectural fit” that would justify doing a big deal.

References:

http://in.reuters.com/article/us-corning-verizon-idINKBN17K201

http://www.lightreading.com/gigabit/fttx/verizons-fiber-spend-wont-end-with-corning/d/d-id/732163

http://www.cnbc.com/2017/04/18/reuters-america-update-1-verizon-corning-agree-to-105-bln-fiber-deal.html

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