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XO Completes Nationwide Network Upgrade| October 10, 2006 | Wholesale Telecom Services - Global | Show Update | Client Access | Analyst: Cindy Whelan
On October 9th, at COMPTEL Fall 2006, XO announced that it had completed its next-generation nationwide inter-city fiber optic network, delivering 100 Gbps of capacity to 75 major U.S. metropolitan markets. • Current Perspective: Positive on the completion of XO’s nationwide inter-city fiber optic network upgrade, because the carrier has more than doubled the current capacity on its long haul network and is now positioned to further upgrade city pairs to 400 Gbps, enabling the carrier to meet its short and long-term wholesale requirements. • Vendor Importance: High to XO, because the carrier has upgraded its network by a factor of 10 across its entire 18,000-mile footprint, enabling the carrier to offer DS-1 to OC-48 services on a much broader basis, while reducing its costs. • Market Impact: Moderate on the wholesale services market, because the upgrade facilitates the availability of high-capacity wholesale services; however, several other entrenched wholesale carriers, such as Level 3, are also upgrading their network capacity with the same optical platform from Infinera. On the other hand, competitors Verizon and AT&T are more focused on upgrading their networks to service consumers and business directly, rather than enhancing capacity for wholesale customers.
Competitive Positives • XO’s announcement of an upgrade to 100 Gbps for its long-haul network, with the potential for future upgrades on links between city-pairs to 400 Gbps, positions the carrier to meet short-term (i.e., three to five years) and long-term wholesale requirements. XO’s long-haul network connects PoPs in 75 major U.S. metropolitan markets, and the carrier operates local fiber networks in 37 metros. The demand from enterprises and content providers for high-capacity optical services continues to increase, and XO is well-positioned to meet its carrier customers’ requirements for long-haul transport as well as metro access services. • Carriers that purchase wholesale services typically purchase services from multiple carriers for diversity to protect against network disruptions. Consolidation in the telecom market is eliminating that diversity for some carriers, and they must seek alternatives. In considering a change in wholesale providers, customers are likely to take that time to evaluate longer-term network requirements. XO is well-positioned to offer these customers a solution that will meet their needs for the next five years and beyond, giving XO the opportunity to move into position as the primary carrier if they perform well, as well as to win new business. • XO can position itself as a stable provider with the ability to meet even the most demanding network requirements. Unlike its peers, XO is not in the midst of integrating other companies and network facilities into its own, nor is it under acquisition itself.
Competitive Concerns • Most of XO’s fellow CLECs and IXCs have also begun upgrading their networks using the same optical technology that XO is using, thus making the benefits of rapid provisioning and upgrades something that will be expected rather than the exception. The carrier is not offering anything that is truly different from the others. • XO is now positioning itself to compete directly with carriers such as Level 3, which also provides much of its fiber and long-haul wavelength services. Competitors that were previously settled into the optical services market can point out that, until recently, XO was mainly selling to small to medium-sized businesses; therefore, it is not usually on the short list for large corporate RFPs.
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