The coming Metro Demand as told by Fiber Ops

This one is probably more relevant for Dycom but also worth noting for Infinera.…?

Metro Connect Bubbles With Optimism

MIAMI – Metro Connect 2016 – This annual lovefest of competitive fiber network operators and the financial community that backs them is held each year in the historic Eden Roc hotel, with its famous circular bar dating back to the 1950s. But this year’s event has a distinctive late-90s feel about it – in a good way.

Many of the CEOs and other leaders gathered here are survivors of the go-go '90s and the crash that followed as the “build it and they will come” philosophy fell victim to business realities, vendor financing fails and the bursting of the Internet bubble. What they are seeing and doing is actually quite different – if anything, the feeling is that today’s fiber buildouts are just trying to keep up with demand.

It was fitting that Zayo Group Inc. (NYSE: ZAYO) Chairman and CEO Dan Caruso kicked off Metro Connect with a keynote he called “Demandwidth,” looking at everything from teleportation to using human genomes to build personalized disease prevention to drone taxis – all of which will require massive amounts of bandwidth, ensuring there is a need for fiber optics for many years to come, he said.

Event chair Andrew Lipman, senior partner with Morgan, Lewis and Bockius, and a telecom law veteran, pointed to the continued growth of conference attendance and the number of companies participating. Even with significant industry consolidation, he noted, the conference continues to get bigger, along with the industry it serves. “This is an industry driven by optimism,” Lipman commented.

It’s also an industry driven by practicality, given the reality of capex, opex and logistical requirements for building fiber optic networks. Yet that construction continues apace in places as diverse as Manhattan, where ZenFi is taking fiber to the intersection, and rural Florida and Georgia, where Tower Cloud Inc. is constructing a 1,500-mile network to connect cell towers and data centers.

Much of that construction is being driven by content providers, video and Internet, who need massive connections between their data centers and a growing demand for bandwidth at the edge of the network as more content and data needs to be available there. “Content providers are putting 24 conduits between their data centers – the volume is unheard of,” Kevin Coyne, CFO of FiberLight LLC , said on a Tuesday afternoon panel. Among the emerging themes here this week:

The network’s edge is being transformed and massive fiber is part of that. This is the over-arching theme that emerged regardless of the specific topic – small cells and wireless “densification”, the merging of data centers and colocation, content players distributing caches closer to the customer and even, in some cases, backhaul to towers. Judd Carothers, co-founder of USA Fiber, noted the industry needs to avoid repeating the mistakes of the past in just putting fiber runs directly into cell towers, because “robust networks that run tower to tower don’t solve some of the metro problems.” So today’s metro networks need to be built with many more access points, and the ability to connect multiple types of facilities. Multi-use builds seem to be the wave of the future.

Small cells are real, and potentially a really big market for fiber. The advent of C-RANs, which today mostly means consolidated radio access networks but will morph to be cloud RANs in the future, opens up new demand for connections between widely distributed antennas and consolidated base stations, notes Ray La Chance, president and CEO of ZenFi Networks. Going forward, however, companies like his are building fiber connections through the streets of New York City, while TowerCloud and other traditional backhaul providers are looking at new densities in other less populated areas as well. The driving force is the need of wireless carriers to densify their networks where bandwidth demands grow and additional spectrum isn’t available.

Backhaul is still big biz. On one panel of CEOs, Consolidated Communications Inc. ’ President and CEO Bob Udell and Chris Morley, president and COO of Strategic Business Segments at Zayo, used a baseball analogy to describe this market as “perpetually in the seventh inning” or, according to Morley, being reset now to the third inning. Basically their companies are still doing major fiber construction to cell towers.

Cable is coming. Multiple speakers mentioned the rise of cable operators in the business market, and the likely reality that these operators will be breaking out of their regional footprints to more national coverage. Interestingly, most saw that as a business opportunity and are ready to sell dark fiber or wavelengths to cable operators looking to interconnect their facilities. At worst, it’s a neutral thing. As Hunter Newby, CEO of Allied Fiber LLC , pointed out, when telco or cable incumbents build fiber, they don’t usually open it up to sell dark fiber or wavelengths, so they aren’t really competitors to most Metro Connect attendees.

A variety of business models continue to thrive. Dark fiber is rising but lit fiber such as wavelength services, Layer 2 offerings such as Ethernet and Layer 3 Internet access are all represented here, on stage and in the audience. Global Capacity used Metro Connect to announce a significant expansion of its Ethernet offerings, while Dave Schaeffer, founder and CEO of Cogent Communications Holdings Inc. (Nasdaq: CCOI), says his company continues to grow selling one product: Internet access. Speaker after speaker drove home the need to tailor company strategies to target customers, and that’s what this industry is becoming; a very focused set of business-driven players.

And finally, consolidation will continue in the sector and in some cases, will merge previously separate segments, such as the Crown Castle acquisition of Sunesys, which joined a tower company with a fiber operator. (See Crown Castle Bids $1B for Sunesys Fiber Assets.)

— Carol Wilson, Editor-at-Large, Light Reading