In a recent report titled “Bandwidth (News - Alert) Infrastructure: A New Investment Opportunity” published by Colby Synesael of Cowen and Company the subject of dark fiber is discussed extensively. This report is probably one of the best, current and most accurate depictions of the reality of this segment of the communications network landscape. For too many years dark fiber has been stigmatized and misunderstood. It is refreshing to see such intelligent reporting on what is one of the most critical dimensions of any nation’s economy.
From the Report:
A legacy bias to the fiber industry will incorrectly skew your view.
“Today, we no longer refer to the group of companies that offer fiber-oriented data services as CLECs and instead more appropriately refer to them as bandwidth infrastructure companies. While these companies are still building networks, they are more focused on building differentiated networks and therefore a heavier concentration on building unique routes and what they connect to (enterprise locations, data centers, wireless towers). They also are more focused on metro builds vs. long-haul builds, although builds that connect cities that previously weren’t connected to one another or utilize unique routes are also valuable.
The primary ways in which a network can differentiate and add value is through 1) connection points, 2) uniqueness of routes, and 3) scale/breadth.”
Source (News - Alert): Cowen and Company
These are succinct and excellent points and all worthy of attention and further discussion, but in focusing specifically on “uniqueness of routes”…
From the Report:
The Uniqueness of Routes
“In many cases the uniqueness of a fiber route can in and of itself provide inherent and meaningful value to a bandwidth provider network. Having a unique route means a unique footprint, and a unique set of connection points that may be advantageous for some enterprise or content customers. Having a unique route (or set of routes) is also appealing for carriers (and enterprises for that matter) to lease as backup in case of an outage on more common routes. Lastly a unique route and its ability to connect in to an uncommon set of access points may allow for performance metrics (such as lower latency) that give a network an unparalleled competitive advantage.”
Source: Cowen and Company
Definitions and attributes play a major role in any aspect of life. The definitions of words and how they are used is the basis of the entire legal profession, so it should not be taken lightly in any other. In this report and as in this case of defining dark fiber and the uniqueness of a specific route from which an investment would derive value, the attributes that make the route unique need to be expanded.
Of everything stated, this one comment needs further clarification.
“They also are more focused on metro builds vs. long-haul builds, although builds that connect cities that previously weren’t connected to one another or utilize unique routes are also valuable.”
This is implying that new “long-haul” dark fiber builds are not valuable, or as valuable as metro fiber builds, unless they are connecting cities that were never connected, or are otherwise utilizing different route paths than what already exists. This is true, but there is something missing here.
The missing element is that not all fiber is available as dark fiber for lease. For example the vast majority of long-haul dark fiber in the United States is owned by carriers. These carriers have no interest in selling off their dark fiber assets to enable “competitors”. So, how then do the metro fiber providers connect their metros?
Data center to data center, or tower to tower within a metro is not trivial, but it is more manageable to obtain as there are more providers of this type of dark fiber. The reason for that is that metros are a smaller geography to cover, so therefore require less capital to construct and hence have a shorter payback period for the investment. If possessing dark fiber is important and valuable to network operators, which it is, this then still leaves the issue of how to extend the benefit and reach of dark fiber between the metros. This leads to the conclusion that building new “carrier-neutral” dark fiber even on existing fiber routes is valuable.
Hunter Newby (News - Alert) is CEO of Allied Fiber.
Edited by Maurice Nagle