Emerging Rural and Municipal Network Operators – Don’t Overlook Enterprise Connectivity Opportunities
Several weeks ago, Zayo announced that it had agreed to be acquired by private equity firms Digital Colony and EQT. Over several years, Zayo had expanded its network footprint significantly through network buildouts and a series of acquisitions. Interestingly, EQT recently completed its acquisition of regional fiber network operator Lumos Networks. In another May 2019 transaction, Great Plains Communications, controlled by Grain Management, acquired InterCarrier Networks.
Zayo, Lumos, and InterCarrier Networks shared several traits, including a focus on high capacity private line services, dedicated Internet access services and dark fiber offerings targeting enterprise customers and other services providers. Interestingly, Lumos and InterCarrier developed regional fiber networks extending into and connecting multiple 2nd and 3rd tier cities.
These transactions reaffirm the long-term value of fiber-based networks in the telecommunications marketplace. These companies’ services and product offerings underscore that high capacity services and dark fiber arrangements are meeting a critical demand among mid-to-large enterprises and government agencies that previously looked almost exclusively to the enterprise service offerings of the major carriers—AT&T, Verizon (now including XO) and CenturyLink (now including Level 3).
Zayo’s, Lumos’s, and InterCarrier’s focus on fiber offerings for business customers should be fully considered for, if not immediately incorporated in, the business plans of emerging fiber-based municipal and rural broadband providers. The incremental investment in business-oriented offerings is nominal, particularly for dark fiber. Network extensions to business locations can and should be accomplished through non-recurring, one-time charges. Unlike services to consumers, small businesses and anchor institutions, flexibility is the dominant theme in pricing enterprise-focused services and dark fiber offerings.
Emerging rural and municipal services providers should understand the two-dimensions of the concept of “location.” For consumer and small business customers, customer locations within a network’s physical footprint is paramount. These customers are looking for substantially upgraded, last-mile broadband connectivity for their homes and businesses. Providing connectivity to and from wireless carrier small cell locations may emerge in several years as even AT&T and Verizon do not have unlimited capital to extend fiber backhaul and fronthaul connectivity to all of their cell sites.
For larger businesses, government customers and other services providers, the 2nd dimension of location comes into play. This dimension relates to whether the entity’s network is located along or provides a leg in a path or route diversity for a major regional or multi-state east-west or north-south fiber route, a much-needed lateral route, or connectivity to a remote data center or even to an undersea cable landing location.
As noted above, fiber-based networks have long-term economic value. As with core assets in virtually all industries, maximizing the value of these assets is fundamental to business success.