Equinix’s proposed purchase of Switch and Data seems to be facing some hurdles at the anti-trust division of the Department of Justice. In filings today, the two companies pushed back the expected closing of the deal into the second quarter. After resetting the waiting period once already in December, Equinix has now received a second request to which it needs to respond and which adds yet another 30 days to the process. Is there a chance the government will nix the deal entirely? I doubt it.
Equinix is certainly becoming quite large, but there remains a healthy competitive environment – new facilities are being built by many parties all over the country. If there is harm to competition from the deal, it will be on a market by market basis and in the worst case all Equinix probably would have to do is to divest some of the extra assets. That’s something they are likely to do anyway, not every piece of Switch and Data is a perfect fit with their strategy.
It’s quite a change from the previous administration though, which shrugged off the reassembly of much of the old Ma Bell while AT&T and Verizon promised to be good while crossing their fingers behind their backs. Equinix is improperly flexing its muscle, it is that they increasingly realize that the data center business is now an integral part of the national infrastructure. They don’t really understand the sector very well yet, and they don’t want to wake up one day and have a problem. Therefore, as good hard-working bureaucrats, they are going to take their time on this one and make them jump through a few extra hoops.
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Categories: Datacenter · Government Regulations · Mergers and Acquisitions
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That’s pretty interesting: if a new administration is prepared to review a currently unregulated part of the broader communications industry, which clearly isn’t a natural monopoly, it sends a pretty strong signal that any forthcoming infrastructure mergers are also likely to attract scrutiny.
From an analytical point of view it will be interesting to see how the data center market is analyzed if this proceeds to a full-blown investigation, including the extent to which co-location services form part of a bundled or joint product with connectivity and interconnection services.
Also, although Verizon and AT&T should still be high-fiving after getting through their massive mergers virtually scot-free, they could still nevertheless be subject to some rear-guard action. woods yet. The FCC is likely to put special access under the spotlight and will probably find a way (albeit imperfect) of reducing local inter-carrier charges. If this were to happen it would significantly improve the bottom line of the larger CLECs.