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saltybit

By saltybit
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SnarkyPuppy Newbie

SnarkyPuppy

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dark fiber...very attractive assets that are misunderstood b/c they are not currently cash generative...

 

Do you have any good resources or primers on this?  Have been looking at tucows...

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oddballstocks Newbie

oddballstocks

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I don't think much true dark fiber exists.  It's become a marketing term.  There was a lot around the turn of the century, but it's all been lit.

 

Go through the ZAYO worksheets to buy a circuit.  They just multiplex you on some trunks they already have.  There is no guarantee you're on your own dedicated circuit, especially if it's long. 

 

They have an interesting asset, mainly the conduit and footprint.  It's extremely hard to replicate.  Right now it seems like there are no competitors, although point to point wireless is just as fast (faster at times), but doesn't have the bandwidth.

 

Zayo sort of reminds me of AT&T in the 60s and 70s.  They had telephone wires to every house and it seemed impossible they'd be toppled.  And here we are, copper is worthless.

 

It seems fiber has a long runway, right now we're limited by switches and transceivers.

 

From my interactions (we have equipment sub-leased in one of their POPs) they seem decent, they are responsive on tickets, equipment is in good working order, they're ahead of the curve on what they run.

 

Oddly sales is non-responsive.  I tried to get a few quotes from them and it took forever to get someone to finally respond.  That's always a huge strike in my book.  But operationally they're very responsive. 

 

I really really hope a PE firm doesn't buy them, same with CenturyLink.  As a customer those are two great ways to lose clients, squeeze on maintenance, and bring in incompetent staff.

 

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walkie518 Newbie

walkie518

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dark fiber...very attractive assets that are misunderstood b/c they are not currently cash generative...

 

Do you have any good resources or primers on this?  Have been looking at tucows...

 

there are a lot of reasons dark fiber will be attractive, the question is mostly timing as to when an acquirer will want to assemble

 

I think the general trend will be over the next 5 years or so as there is further adoption into the cloud (saw a statistic that was shocking as to how many companies still use mainframes), as wireless carriers need more back haul for 5G applications, further adoption of game and video streaming, etc

 

when asking companies like twitter what the number 1 obstacle in the way of providing a better service, networking needs tend to be number one...there are many uses for dark fiber and it's very expensive to put in the ground so buying it cuts a lot of knots

 

below are a few articles that might be interesting...

 

https://business.comcast.com/cdn.wcdc.business.comcast.com/~/media/business_comcast_com/PDFs/White%20Papers/CB_EthernetVSDarkFiber_Whitepaper_WHT90031_12.15.pdf?rev=1c15e109-75e8-41c3-86e3-5334778fd580

 

https://www.fiercetelecom.com/telecom/from-centurylink-to-firstlight-charting-top-13-fiber-buyers-2017

 

http://investor.uniti.com/static-files/6eb6fcf8-944c-4c0a-823b-25fd189db4dd

 

https://www.archfibernetworks.com/the-future-value-of-a-dark-fiber-lease-to-enterprise-users/

 

https://www.gtt.net/media/1614/gtt-investor-presentation-nov-2018.pdf

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oddballstocks Newbie

oddballstocks

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I think dark fiber is a red herring and the wrong way to look at this.

 

If you look at any stats almost all fiber is lit.  There was a glut of unlit stuff back in 2002, but it's almost all lit now.  If you aren't sure call ZAYO's sales team and ask if you can buy a dark circuit, completely dark and unlit.  What they are selling are waves and dedicated circuits on their routes.

 

Zayo's asset is their network presence, it'd be too expensive to rebuild or replicate.  The best analogy is a railroad.  If you build a new factory you build a spur into the closest railroad.  Zayo is the closet digital railroad to most places.

 

 

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walkie518 Newbie

walkie518

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I think dark fiber is a red herring and the wrong way to look at this.

 

If you look at any stats almost all fiber is lit.  There was a glut of unlit stuff back in 2002, but it's almost all lit now.  If you aren't sure call ZAYO's sales team and ask if you can buy a dark circuit, completely dark and unlit.  What they are selling are waves and dedicated circuits on their routes.

 

Zayo's asset is their network presence, it'd be too expensive to rebuild or replicate.  The best analogy is a railroad.  If you build a new factory you build a spur into the closest railroad.  Zayo is the closet digital railroad to most places.

Maybe I misunderstand your point?

 

Your argument is that "dark fiber" should only mean fiber that is not in use, at all? 

 

Whereas fiber that is underutilitized, and can in effect duplicate its current capacity by the addition of a wavelength requiring separate encoding and decoding for a particular customer, is different than fiber that is dark?  Maybe this is simplistic unless dedicated lines are what you mean?

 

Is fiber with one customer different than two waves being used simultaneously despite the fact that the fiber itself can carry many wavelengths simultaneously? 

 

Is your argument that the "security" is compromised should some other firm detect and decode other wavelengths? 

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oddballstocks Newbie

oddballstocks

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Yes. Dark means dark, lines that are unlit. So nothing over it.

 

You can multiplex lines with multiple waves to provide a dedicated circuit. Dedicated being it is privately routed vs publicly routed over a trunk.

 

My point is dark is a marketing term for buying something pseudo private.

 

A true dedicated circuit is really expensive. There is almost no valuable fiber that remains unlit.

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walkie518 Newbie

walkie518

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Yes. Dark means dark, lines that are unlit. So nothing over it.

 

You can multiplex lines with multiple waves to provide a dedicated circuit. Dedicated being it is privately routed vs publicly routed over a trunk.

 

My point is dark is a marketing term for buying something pseudo private.

 

A true dedicated circuit is really expensive. There is almost no valuable fiber that remains unlit.

 

ok, then I would correct my original statement: zayo has a lot of partially lit, ie underutilized, fiber available.

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oddballstocks Newbie

oddballstocks

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I'm not even sure that's technically true.

 

Fiber has a physical limit of some crazy amount of Pbps.  Right now ZAYO will sell you a 100Gbps circuit, that's because the Juniper routers they use have line cards that max out at 100Gbps.  100Gbps is near top of the line, 400Gbps exists, but it's edge stuff, not carrier core yet.  So yes, 100 is much less than fiber's max capacity.

 

But here's the thing, Zayo is getting rocked, rocked.  In the POP I'm in they upgraded each router to a 1Tbps backplane, so 3Tbps of switch capacity.  They said so many people are streaming and watching content that bandwidth is rising faster than they can upgrade, but they can't charge more.  Margins used to be higher when bandwidth needs were lower.

 

When people stream you can't oversubscribe as easily.  Rewind 10-15 years ago and it wasn't uncommon to oversubscribe 400:1 at an ISP.  This was because surfing was bursty and people weren't hitting things at the same time.  Now with cloud hosts and streaming traffic is higher and doesn't burst, it's steady.  As a SP they have to provide for this, so they upgrade their equipment.

 

Zayo uses Juniper (prices widely available online) and Infinera.  I'd say they spent $5m easily on new Infinera gear (INFN), this is just the cost of doing business.  INFN might be a way to play some of the expansion.

 

I think it's very hard to replicate their asset, but it's also a race to the bottom business.  Customers want bandwidth cheap, they're using more of it, and they have to provide the backhaul to support it.  Think of the curve.  If you're at 1Gbps today in 3-5 years you want 10Gbps for the same price, so Zayo has to hope that transceiver and line card prices fall enough so that they can upgrade and still maintain their same margin. 

 

If you've never been to a fiber plan I'd suggest it.  The sheer scale is impressive.  Seeing 10s of thousands of lines terminate is crazy.  It's a modern CLEC, and that's exactly the framework I'd look at them through.

 

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walkie518 Newbie

walkie518

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I'm not even sure that's technically true.

 

Fiber has a physical limit of some crazy amount of Pbps.  Right now ZAYO will sell you a 100Gbps circuit, that's because the Juniper routers they use have line cards that max out at 100Gbps.  100Gbps is near top of the line, 400Gbps exists, but it's edge stuff, not carrier core yet.  So yes, 100 is much less than fiber's max capacity.

 

But here's the thing, Zayo is getting rocked, rocked.  In the POP I'm in they upgraded each router to a 1Tbps backplane, so 3Tbps of switch capacity.  They said so many people are streaming and watching content that bandwidth is rising faster than they can upgrade, but they can't charge more.  Margins used to be higher when bandwidth needs were lower.

 

When people stream you can't oversubscribe as easily.  Rewind 10-15 years ago and it wasn't uncommon to oversubscribe 400:1 at an ISP.  This was because surfing was bursty and people weren't hitting things at the same time.  Now with cloud hosts and streaming traffic is higher and doesn't burst, it's steady.  As a SP they have to provide for this, so they upgrade their equipment.

 

Zayo uses Juniper (prices widely available online) and Infinera.  I'd say they spent $5m easily on new Infinera gear (INFN), this is just the cost of doing business.  INFN might be a way to play some of the expansion.

 

I think it's very hard to replicate their asset, but it's also a race to the bottom business.  Customers want bandwidth cheap, they're using more of it, and they have to provide the backhaul to support it.  Think of the curve.  If you're at 1Gbps today in 3-5 years you want 10Gbps for the same price, so Zayo has to hope that transceiver and line card prices fall enough so that they can upgrade and still maintain their same margin. 

 

If you've never been to a fiber plan I'd suggest it.  The sheer scale is impressive.  Seeing 10s of thousands of lines terminate is crazy.  It's a modern CLEC, and that's exactly the framework I'd look at them through.

ok, then fiber isn't the bottleneck as much as the need for constant upgrades?

 

this leads us back to the question of unused capacity...if 400Gbps and beyond becomes the next standard (though I believe most 400Gbps hardware that exists today is duplexed 200Gbps? (Neophotonics/NPTN), there will certainly be an upgrade wave but how do we get there?

 

if pricing has to fall on amplifiers, line cards, switches, etc, but more money must be invested to find a way around GaN switch pricing, this sounds like a tough problem? 

 

Maybe equipment manufacturers get squeezed, maybe there's consolidation between the equipment manufacturers and fiber assets? 

 

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rogermunibond Newbie

rogermunibond

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Zayo's sales issues were supposed to be fixed like 2-3 quarters ago.  They revamped their sales force but it seems like the results have been mediocre.

 

There was a lot expectation that 5G/small cell buildouts would see wireless carriers coming to Zayo for fiber to small cells but as AT&T, T-mobile, and Verizon have rolled out small cells.  They are doing a lot of this infrastructure internally.  Verizon cut a deal with Corning on fiber IIRC.  Of the carriers the one using Zayo the most is Sprint and since they are entering merger with T-Mobile, they may have cut back on capex spend.

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Spekulatius Newbie

Spekulatius

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Verizon, ATT, CHTR and CMCSA have their own fiber network that is probably going closer to the homes than  Zayo. I think providing bandwidth, which is what Zayo does, is a commodity business ( and has been for a long time) and I don’t see how a company can make excessive returns in it.

 

Nate is correct, the cost of adding more bandwidth is with the equipment, not with the fiber.  When fiber is laid down, typically multiple strands are laid down for future capacity or reduncy, because the incremental cost is low. Then there is the choice if additional capacity is  refer to either multiplex on the same strand or light the dark unused strands, based on what is cheaper.

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  • 2 months later...
saltybit Newbie

saltybit

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Up 5% on more concrete acquisition news

https://www.google.com/url?sa=i&source=web&cd=&ved=2ahUKEwjv0P2nnsbhAhXymOAKHQkAC0oQzPwBegQIARAC&url=https%3A%2F%2Fwww.reuters.com%2Farticle%2Fus-zayo-m-a-digitalcolony-exclusive%2Fexclusive-eqt-digital-colony-stonepeak-group-near-deal-to-buy-zayo-sources-say-idUSKCN1RM1XH&psig=AOvVaw2xTos9c5GGqCUvxLj5T14s&ust=1555010137028121

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