10 Moves That Reshaped The Telecom Landscape
A Year In Review
The telecom landscape has undergone a major facelift since the beginning of the year. During 2016, several major carriers joined forces to better compete in the crowded market. Service providers also sought to branch out from the legacy voice and connectivity services for more strategic services, like hybrid networking and Internet of Things (IoT) solutions. At the same time, many carriers finally bit the bullet and sold off their ailing data center assets.
Here are 10 moves that reshaped the telecom landscape in 2016.
A Market Consolidates
The telecom market was in full-blown merger and acquisition mode this year.
Telecom giant Verizon kicked off 2016 by announcing it would acquire telecom provider XO Communications for its fiber-optic network assets in a deal worth about $1.8 billion in February. The deal gained FCC approval in November. CenturyLink in October revealed plans to scoop up Broomfield, Colo.-based service provider Level 3 for $34 billion. Combined, the two companies will be able to offer a combination of cloud and data services for business customers over a wide-reaching, high-speed network. In November, Little Rock, Ark.-based Windstream and Atlanta-based EarthLink announced merger plans to create a large, national footprint to compete better against Verizon and AT&T. The all-stock transaction was valued at $1.1 billion.
AT&T Announces Monster Acquisition Of Time Warner
In a mega stock-and-cash deal, AT&T in October said it would acquire media powerhouse Time Warner for $85.4 billion. The deal will give Dallas-based AT&T access to content assets such as HBO, CNN and Warner Bros. Studios, at a time in which carriers are seeing an opportunity to branch out from their core connectivity offerings and deliver premium content.
The deal is still subject to regulatory approval, but if passed, the AT&T-Time Warner merger would create the nation’s largest entertainment company just ahead of cable giant Comcast, which acquired NBCUniversal in 2009.
Verizon Set To Buy Yahoo
Similar to the AT&T-Time Warner merger, Verizon in July announced its intent to acquire Internet giant Yahoo's media, search, and communications assets in a $4.83 billion deal.
At the time of the announcement, Verizon Chairman and CEO Lowell McAdam said that the acquisition would help Verizon become a global mobile media company, and help accelerate the carrier’s digital advertising revenue stream. The deal shined a light on the fact that carriers are feeling the need to innovate, rather than rely on their legacy connectivity services, especially as providers like Google, Apple, and Netflix are leveraging connectivity to deliver lucrative content to consumers and businesses.
Verizon Sells Data Centers To Equinix
Reports first emerged in January that Verizon was considering a data center sale, but the telecom giant made it official in December, announcing plans to sell its cloud hosting and data center business to global data center operator Equinix in a deal worth $3.6 billion.
The $3.6 billion cash deal is giving Equinix 29 additional data center buildings across 24 data center sites in U.S. and Latin America. This will bring Equinix's data center footprint to 175 buildings in 43 global markets.
By offloading its data center business, Basking Ridge, N.J.-based Verizon can focus on its core connectivity and wireless business, similar to what its carrier competition is also doing.
CenturyLink Offloads Data Center, Colocation Business
The telecom exodus from the data center market came to a fever pitch in 2016. For the past year, CenturyLink said it was evaluating "strategic" options for its colocation business and data center assets. In November, the Monroe, La.-based carrier formally exited the market, announcing plans to sell off its data centers and co-location business for $2.15 billion to a group of funds advised by investment firm BC Partners.
Via the terms of the deal, BC Partners said it would work in a consortium that also includes Medina Capital Advisors and Longview Asset Management. The deal will roll CenturyLink's 57 data centers and co-location business into the consortium's newly formed global secure infrastructure company. CenturyLink plans on continuing to offer co-location services through the commercial relationship it will enter into with the consortium when the deal closes.
Comcast Announces Mobility Practice
In September, Cable giant Comcast announced that would launch a wireless service by mid-2017. The new mobility practice will rely on leased airwaves from competitor Verizon Wireless, as well as Comcast’s extensive network of 15 million Wi-Fi hot spots across the U.S. The business unit will be led by Greg Butz, a veteran Comcast Cable sales and marketing executive.
The addition of wireless to the Philadelphia-based provider's portfolio will give Comcast another service to add to its "bundles," which today, include TV, broadband, and phone services. Comcast said the mobility practice would help it compete with fellow carriers, retain more customers and tap into new revenue streams.
Scansource Joins Forces With Intelisys
The merger between IT distributor ScanSource and master agent Intelisys marked the first time that a distributor purchased a master agent. The deal, which was valued at $83.6 million plus earn-outs, will let more VARs start selling telecom services and earn monthly recurring revenue.
The merger will also allow Greenville, S.C.-based ScanSource, a hardware distributor, change its business to a recurring revenue model as more capital expenditure purchases are migrating to the cloud. While the deal was the first of its kind, many partners believe that it's unlikely to be the last as more IT distributors look to break into the telecom and cloud services markets.
The Fate of Net Neutrality Up In The Air
In November, Donald Trump was elected president. While it's still largely unknown how a Trump presidency will impact telecom regulations, the new administration that the president-elect is appointing a Federal Communications Commission (FCC) transition team led by Jeffrey Eisenach, a telecom consultant who has worked for Verizon and Sprint. Eisenach is a known critic of current FCC Chairman Tom Wheeler's policies, including net neutrality.
Under a Republican presidency, the FCC could challenge or even reverse net neutrality regulations, including the FCC's decision last year to reclassify the internet as a utility that can be regulated by the government, which would come as good news to service providers.
Carriers Embrace IoT
Service providers spent 2016 diligently building out Internet of Things (IoT) strategies to offer more strategic services and overcome the declining demand for their legacy connectivity and voice services.
Verizon in August announced it would acquire fleet and mobile management company Fleetmatics for $2.4 billion. In September, Verizon acquired IoT startup Sensity Systems, a smart LED lighting provider, to add more smart city control to its IoT development platform, ThingSpace. Verizon also announced a partnership with chipmaker Qualcomm to integrate ThingSpace with Qualcomm's modem technology in September. In November, Verizon bought LQD WiFi, a privately-held company that develops outdoor interactive displays and kiosks for smart city use cases.
AT&T was also busy in the IoT space. The carrier rolled out Fleet Complete to its solution provider partners in August, a fleet and mobile workforce management offering. In March, AT&T made Control Center available through the channel, a cloud-based IoT platform for deploying, managing and scaling IoT applications and devices connected to AT&T's 4G LTE network.
Service Providers Set Sights On SDN
As the carriers worked to create more flexible and agile networks, several turned their attention to software-defined networking (SDN) technology to help them get there.
AT&T in October unveiled an SD-WAN service that business customers can use to prioritize and route traffic across their networks intelligently. CenturyLink announced plans to acquire particular SDN and NFV assets from Active Broadband Networks, a software-based broadband networking provider in June. EarthLink also got in on the action, rolling out its cloud-based SD-WAN Concierge service, a network management platform for customers in partnership with SD-WAN vendor VeloCloud in September.
VeloCloud's technology is also behind AT&T's SDN offering, a move that shows carriers are willing to partner to bring new software-defined network capabilities to market.