Given the ongoing network builds and acquisitions by a number of major and smaller service providers, it’s clear that the value of fiber for business services and wireless backhaul is rising.
When it comes to on-net fiber in business buildings, Vertical Systems Group revealed in its new U.S. Fiber Lit Buildings LEADERBOARD report that 11 service providers have the largest presence. The research group said that retail and wholesale fiber providers with 10,000 or more on-net fiber-lit commercial buildings in the U.S. qualify for this new benchmark.
Perhaps not surprisingly, the top 11 providers on VSG’s list include a mixture of traditional telcos, cable providers and a competitive carrier: AT&T, Verizon, Spectrum Enterprise, CenturyLink, Comcast, Level 3, Cox, Lightower, Zayo, Altice USA and Frontier.
Rosemary Cochran, principal at Vertical Systems Group, told FierceTelecom the focus is on service providers that actually have fiber installed and equipment to serve business customers.
“This is commercial buildings and data centers that have fiber in place and there is active service equipment that enables provisioning of commercial services,” Cochran said. “We’re not counting residential fiber or standalone cell towers.”
Cochran added that VSG is not counting near-net buildings where service providers may be passing buildings with fiber but have not connected them yet.
“It is either lit or not lit,” Cochran said.
The remaining service providers, which are placed into the Challenge Tier, include companies with lit fiber connections to between 2,000 and 9,999 U.S. commercial buildings.
VSG said that 17 service providers qualified for the 2016 Fiber Lit Buildings Challenge Tier.
Despite where these companies are ranked, Cochran warned that establishing on-net connectivity in buildings is not an easy feat even for the largest service providers.
“There are a lot of challenges to install fiber in buildings,” Cochran said. “You have to deal with local town or state regulations and then the building landlords who get to say what providers get access.”
Pending M&A will shift profiles
Since this report looks at the end of the year 2016, the makeup of the Leaderboard will likely be different next year as a number of acquisitions will be completed.
One of the largest out of this group is CenturyLink’s pending deal for Level 3, one that will enhance the telco’s on-net footprint.
CenturyLink’s Level 3 acquisition will increase its reach by nearly 75% to approximately 75,000, including 10,000 buildings in EMEA and Latin America, giving the telco a larger footprint to deliver Ethernet and software-defined services.
By purchasing XO, Verizon gained metro fiber networks in 40 major U.S. markets with over 4,000 on-net buildings and 1.2 million fiber miles.
Cochran said that since a number of these deals have not been completed it remains unclear as to what effect they will have.
Crown Castle, which will gain an additional 22,000 buildings, stands out from the crowd since the service provider has been operating the fiber providers it has bought as separate companies.
However, other pending acquisitions being made by Consolidated Communications, Cincinnati Bell and newer players like Uniti Fiber will have an effect.
Consolidated Communications, which will announce its second-quarter earnings tomorrow, recently completed its acquisition of FairPoint. By acquiring FairPoint, Consolidated immediately established itself as the ninth largest fiber player with a presence in 24 states and 8,000 on-net buildings.
This greater density will enable Consolidated to pursue more dark fiber and lit Ethernet service opportunities with a larger mix of business and wholesale customers.
Uniti Fiber, meanwhile, has purchased two regional fiber providers—Southern Light and Hunt Telecom—two deals that give the REIT more fiber to pursue a mix of wireless, E-Rate, military, enterprise and wholesale sectors, including fiber-to-the-tower backhaul, small cell networks and dark fiber.
The acquisition of Southern Light gives Uniti access to an additional 4,500 on-net locations, for example.
Cochran said these deals could have an eventual effect.
“Out of the companies on the Leaderboard, 18 of them either already completed acquisitions or some are pending,” Cochran said. “Because a lot of deals happened in July with some that are pending such CenturyLink/Level 3, they are not reflected here.”
Regardless of when these deals are completed, Cochran added that they show how having a large arsenal of fiber is important to compete for business services.
“There’s a lot that happened in the first half of this year and that’s going to shake things up,” Cochran said. “Just the fact that you have more than half of these companies involved in some kind of transaction shows the value of fiber.”
The Ethernet factor
The other factor in the on-net building race is that a number of these service providers represent the largest U.S. Ethernet providers.
On the fiber leaderboard, 7 service providers have an ongoing spot on VSG’s Carrier Ethernet Leaderboard report. These providers include: AT&T, Verizon, Spectrum Enterprise, CenturyLink, Comcast, Level 3, and Cox.
Cochran noted that the presence of fiber has coincided with the growth of Ethernet in the domestic U.S. market.
“Fiber-based Ethernet is the most widely deployed technology,” Cochran said. “As those upgrades take place, one of the drivers is trying to get more bandwidth so there’s a correlation between higher bandwidth services and having that fiber in the building.”
But retail Ethernet is only one part of the equation. Emerging standards efforts within the MEF are enabling service providers to more effectively provision and deliver wholesale Ethernet services.
“Wholesale services are also a big driver, which becomes a question of service provisioning,” Cochran said. “The work that’s being done at the MEF on inter-carrier provisioning and service orchestration across carriers to automate it with standard APIs would help to accelerate new services.”
This article was updated on Aug. 2 with additional information from Vertical Systems Group and the companies mentioned.