U.S. carriers narrow business fiber gap to nearly 50%, says VSG

dark fiber
VSG said in its recent report that the U.S. Fiber Gap continued to narrow in 2016 as business fiber penetration in commercial buildings grew to 49.6%.

As traditional large ILECs and CLECs expand their fiber networks into buildings to serve business customers, these providers have helped narrow what Vertical Systems Group calls the “fiber gap.”

The year 2016 was no different.

VSG said in its recent report that the U.S. Fiber Gap continued to narrow in 2016 as business fiber penetration in commercial buildings grew to 49.6%.

VSG fiber gap 2016

In this annual report, VSG quantified fiber-lit multitenant and company-owned buildings in the U.S. that house twenty or more employees. The research firm said there are more than 1 million buildings in the U.S. with fewer than 20 employees.

VSG noted that the fiber gap, which refers to the remaining commercial buildings with no access to fiber facilities, “has progressively dropped to 50.4% in 2016, down from nearly 90% in 2004.”

RELATED: VSG: Fiber penetration gap in U.S. businesses narrowed to under 60%

“The number of net new U.S. commercial fiber installations in 2016 was the highest over the past several years, and we expect 2017 to be at the same level,” said Rosemary Cochran, principal of Vertical Systems Group, in an interview with FierceTelecom. “Nearly all new commercial buildings to be opened this year will be connected by fiber.”

Service providers see fiber as a key asset for delivering Carrier Ethernet services in the U.S.

Service providers and business customers see fiber as a means to support higher speed dedicated connectivity to the internet, cloud services, data centers, hybrid VPNs and emerging SDN-enabled services.

A number of recent developments with some of the largest telcos and competitors have shown how important fiber networks are to the future growth of the wireline segment of the telecom industry.

Incumbents bulk up

The nation’s largest wireline providers—AT&T, Verizon and CenturyLink—have all continued to ramp up their on-net and overall fiber holdings.

AT&T, which remains the top Ethernet provider according to VSG’s Ethernet Leaderboard, now reaches over 1 million business locations with fiber. This goal was reached through fiber-to-the-building (FTTB) program that was part of its Project VIP initiative.

As part of that program, the service provider extended its fiber network by an additional 76,000 route miles, bringing its total to almost 500,000.

The service provider is hardly resting on its laurels. AT&T continues to announce AT&T Fiber Ready certified buildings in large cities like New Orleans' Urban League of Greater New Orleans Building, for example. 

Verizon and CenturyLink are also being aggressive on the fiber expansion front through a mix of acquisitions and internal expansion efforts.

One of the biggest developments came earlier this week when Verizon announced a $1.1 billion purchase for fiber from Corning. The service provider will purchase up to 20 million km (12.4 million miles) of optical fiber each year from 2018 through 2020.

Cochran said that the wireless industry’s overall 5G initiatives will drive large fiber buildouts in the coming years.  

“The ramp up for 5G deployments by Verizon, AT&T and other carriers necessitates new fiber infrastructure, which should help to narrow coverage gaps, particularly within the more underserved mid-market segments,” Cochran said.

This fiber agreement supply will support Verizon’s move to realign its network around a next-gen fiber platform that will serve multiple purposes: Improve 4G LTE coverage, speed 5G deployments and deliver fiber-based broadband to homes and businesses.

Earlier, Verizon completed its purchase of XO Communications, a deal that gave it presence in 45 large U.S. metros.

CenturyLink plans to immediately enhance its on-net and long-haul fiber footprint upon completing its acquisition of Level 3 later this year in the domestic and international market. While CenturyLink has not called out a specific expansion strategy following the completion of the acquisition it will be in a position to extend its larger footprint to more buildings and locations.

In the near term, CenturyLink continues to expand its local fiber market availability. Earlier this month, CenturyLink made its 1 Gbps FTTP broadband service available to over 13,000 small to large business customers in 1,150 multi-tenant unit (MTU) office buildings in Utah, enabling it to drive Ethernet and emerging services like SD-WAN to more customers.

This is not just a large incumbent play, however.

Windstream and Lumos Networks are being no less aggressive in expanding their respective metro and on-net building fiber footprints.

For Windstream, the strategy has been built on a mix of high profile acquisitions like EarthLink and an ongoing organic fiber expansion program.

As part of its broader metro network fiber expansion, the service provider recently expanded its network in Detroit. Windstream is also expanding its metro fiber networks in other cities including Charlotte, North Carolina; Nashville, Tennessee; Richmond, Virginia; Minneapolis; Atlanta; Chicago and Cleveland.

While Lumos still operates a rural ILEC business, the service provider has in recent years been enhancing its status as a fiber player targeting a host of business and wholesale opportunities.  

By building new fiber routes into Richmond and Ashburn, Lumos is in the position to help carriers deal with a surge in bandwidth demand going through the landing site to Ashburn and other key East Coast data center destinations. 

Competitors step up

Competitive carriers continue to step up their fiber enhancement plans via ongoing network builds and acquisitions of regional fiber providers.

Two of the competitors that have been aggressive on the fiber network expansion front are clearly Zayo and relative newcomer Crown Castle.

After completing its acquisition of Electric Lightwave, Zayo reorganized its company into five main segments, giving onlookers greater visibility into their operations. By purchasing ELI, Zayo gained a greater foothold in the western part of the U.S. with access to 8,100 route miles of long haul fiber and 4,000 miles of dense metro fiber.

What’s interesting about Zayo is that when CenturyLink completes its acquisition of Level 3, it will become the largest independent fiber operator. In addition to likely purchasing other providers, Zayo will continue to expand its fiber network to meet its wholesale and enterprise customer needs.

But the competitive arena is also driving nontraditional fiber players like Crown Castle to bulk up their network holdings.

Crown Castle, a well-known wireless tower company, has also been making regional fiber advance their fiber standing. Its most recent acquisition was Wilcon, a regional provider focused on serving the Los Angeles market.

Similar to earlier deals it made for FPL Fibernet and Quanta, the impetus for purchasing Wilcon is to position itself to get a larger foothold of the small cell market in California. However, the Wilcon purchase will also give Crown Castle other revenue sources with traditional enterprise customers, including a large base of E-Rate local school districts.

Cochran said that while fiber acquisitions are an ongoing trend, they are mainly driven to broaden a carrier’s footprint.

“The primary driver for fiber M&A is to close competitive gaps in on-net service reach,” Cochran said. “Mergers don’t substantially close the fiber gap when companies merge existing active fiber infrastructures—and there is often building overlap to factor in.”

Cochran added that “M&A deals involving dark fiber assets are more likely to fill gaps.”

Regardless of the reason fiber providers are consolidating the market or building out fiber, it is clear service providers are seeing fiber as an essential element of their growth strategy.