Dark fiber has re-emerged as the latest fashion trend in the wireline telecom industry, providing a mix of services for both service provider and even enterprise customers that want more control over their service destiny.
Like any market segment, service providers remain divided on the opportunity. On one hand, competitive providers like Allied Fiber, FiberLight and Wilcon are happy to provide dark fiber, while traditional incumbent telcos and cable MSOs shy away from it as it could potentially arm a competitor with a powerful asset.
There are three main elements that the dark fiber opportunity is focused on serving: wireless backhaul, enterprise customers and traditional carriers. Ultimately, the need for dark fiber varies by the customer type. An enterprise that needs a 1 Gbps circuit may be happy with a lit optical service, for example.
"Dark fiber is a real sexy term and everyone thinks they want dark fiber, but it depends on their distance, what their bandwidth requirements are and whether it proves in," said Ron Kormos, chief strategy officer for FiberLight. "We're getting a lot of dark fiber requests from a lot of carriers mostly, but there are a few large enterprise customers that are also requesting fiber."
Uses of dark fiber may vary by customer segment, but it's hard to overlook its growth.
In its 2014 Metro Report Card Survey, ATLANTIC-ACM revealed that 55.1 percent of wireless and wireline carrier participants said they will increase spending on dark fiber.
Wireless backhaul potential
Managed fiber-based Ethernet services may be the norm in next-generation wireless backhaul, but a number of reports have revealed that Verizon Wireless (NYSE: VZ) has been leading the charge for dark fiber-based backhaul.
Dark fiber allows a wireless operator to maintain complete control over their service experience, meaning if they want to increase capacity, they can do it on their own timeline.
"Verizon Wireless has been out there buying dark fiber to backhaul at cell sites," said Aaron Blazar, vice president for ATLANTIC-ACM. "They have been driving a lot of demand for dark fiber on the wireless backhaul front and have really sourced that from a whole slew of alternative fiber service providers such as FiberLight, Fibertech and Lightower so that's driven that market."
Besides Verizon Wireless, there have been rumors that Sprint (NYSE: S) and others may be interested in dark fiber for wireless backhaul, but nothing has materialized.
"We've heard other wireless operators talk about it, but we have not seen them pull the trigger on actually doing real dark fiber deals for backhaul," Blazar said. "We've seen most of the others stick to the lit services model and have not seen or heard deals from the other big three wireless operators."
One wholesale provider that is finding success in selling dark fiber for both large cell and small cell applications is Tower Cloud. In September, the service provider announced that it was named as Verizon Wireless' backhaul partner for its 4G LTE small cell deployment in Atlanta's Centennial Olympic Park to handle over 5,500 simultaneous users. For that project, Tower Cloud built dark fiber into the park and to each of the 22 small cell nodes.
PEG Bandwidth, which got its start as a wireless backhaul specialist, is providing dark fiber to stay ahead of its competition.
"We are reluctantly participating in the dark fiber business," said Greg Ortyl, senior vice president, sales and marketing for PEG Bandwidth. "It's been a hot topic over the past 12 months and FiberLight has led the way in some of our Texas markets and we are as well and believe that Verizon is aggressively going down that path and awarding contracts."
ILECs, Cable MSOs plot course
Traditionally dominated by competitive providers, incumbent telcos and cable operators are being cautious about the dark fiber opportunity. Despite the revenue potential associated with dark fiber, traditional ILECs have yet to jump into the dark fiber market with full force. One of the possible reasons is the concern of enabling a competitor to challenge them with more fiber-based services.
"You have the ILECs sitting on the fence," Blazar said. "They acknowledge the trend is out there, but there are some hurdles for them potentially to play in the market and also some strategic objections to playing in the market so we have not seen the ILECs be active in supporting dark fiber needs."
Chris Alberding, vice president, product marketing for FairPoint, said that selling dark fiber to a competitor would be a strain on potential retail and wholesale revenue opportunities.
"We spent $3.4 billion over the past three years building out this next-gen fiber network and when you get a dark fiber request, that's the gold that backs our company," he said. "When you think about it, it's the hardest asset to give up and turn over and know it's out of your provisioning service capabilities."
Cable operators have been largely divided on the opportunity.
"We do hear cable guys talk about it and there are a number of cable guys with ICB dark fiber offerings out there mainly geared toward the fiber-to-the-cell market where they're using it to defend business they won five years ago or using it to win new business," Blazar said.
Cable overbuilders like Wide Open West have been offering dark fiber to wireless operators. Earlier this year the service provider won a large deal to provide services to an unnamed provider in Chicago, for example. Under the terms of that deal, WOW's wholesale division will build over 50 contiguous fiber rings connecting the cell tower base stations to mobile switching centers (MSC) that link to the global Internet backbone and the local PSTN network.
Brad Cheedle, VP of WOW!, said the company is seeing demands for dark fiber from a number of customer types, particularly on the wireless backhaul side.
"The wireless carriers are coming to us and we're seeing others in the planning phase--not necessarily moving towards execution in that direction yet--but I think you will see some more momentum in this space as the other large ones start to make their migrations in that direction," Cheedle said. "It only makes sense they operate networks today with what's happening with the devices and the consumption of bandwidth is pretty big and they're also making a lot of investments in small cells."
While WOW! is a good example of how cable can play in the dark fiber market, Blazar said that other cable operators have the service at their disposal if they need it.
"Wide Open West won a big deal in Chicago and there are also several of the largest cable operators out there that are discussing dark fiber and do have it as something on their tool belt that they can use in deals, but they don't actively market it," said Blazar.
Time Warner Cable, which has built a sizeable wholesale business serving a mix of traditional service providers and wireless operators, will provide services as customer needs dictate.
"The way we look at dark fiber is on a case-by-case basis," said Thane Storck, group vice president, Carrier Services, Time Warner Cable Business Class. "One of the areas where we have an appetite for dark fiber is in the macrocell where we're pulling dark fiber to cell towers."
Storck added that while the company would not want to pursue single sites, it does see potential in macrocell and small cell deployments. "What we would typically shy away from would be single sites or a few sites," Storck said. "Small cell will drive us a bit into that zone based on the CPRI protocols that these small cell locations need to run so whether it's dark or dim fiber to these small cell locations we're going to approach both."
Alternatively, Cox, which has been providing wholesale services for over 20 years, does not provide dark fiber today.
"There's definitely cases where we have done some things, but we don't sell it as a product today," said Jeremy Bye, VP of wholesale and national accounts for Cox Business. "We would much rather in a total cost of operations view of things deliver a lit service that is more cost effective than them running their own dark fiber network."
Blazar said that the cable operators are using dark fiber as a method to get an anchor customer tenant from which they can add other customers over time.
"Like we have seen the fiber guys use it in the past, dark fiber is a method to get an anchor tenant to enter new markets," Blazar said. "I think that's really what dark fiber has been used as a mechanism for over the past five years: If I can get an anchor tenant dark fiber customer and build to 500 towers in a region, it gives me a mark where I have extra strand count to support my lit services offering to business customers and other carrier customers."
Other uses emerge
Wireless backhaul is just one of several uses for dark fiber. Besides wireless backhaul, dark fiber has become a hot commodity for other industry segments such as educational institutions, enterprises and data center providers.
Fatbeam and United Private Networks (UPN) have been actively pursuing E-Rate education activities.
Fatbeam, a competitive fiber provider, has been using the E-Rate funding program to build dark fiber networks for school districts to establish anchor tenants in a community and attract local businesses. But in order to extend the network to other businesses or increase fiber counts, they leverage their own funds.
Greg Green, co-founder and president of Fatbeam, said the company sees a mix of education customers that want a dark or a lit fiber service with about 50 percent of their business being dark fiber.
"There are some school districts that want a finished product and don't want to manage lighting the fiber, but the larger ones want to lease and take advantage of the dark fiber," Green said. "Their costs are flat and they can replace the electronics on the end and increase the capacity by whatever multiples they're interested in."
Blazar agreed that while he sees potential for dark fiber in educational institutions, it's not for everyone. "There has been a lot of discussion made about it, but it tends to be a harder solution for education institutions to adopt because they need the technical knowledge and the ability to manage and deploy the network required for having dark fiber," Blazar said. "It's not widespread, but another angle for them to use."
Along with education, a number of service providers are also providing dark fiber to data centers.
SummitIG, an emerging dark fiber-centric player, has been finding success in the data center connectivity market. SummitIG will provide dark fiber connectivity services to QTS Realty Trust's data center campus in Richmond, Va., a sign of the growing trend to extend fiber-based services to colocation centers.
Likewise, Integra Telecom has been extending its network to carrier hotels in the West to serve its own customers and those of the data center provider. Earlier this year, the service provider announced that it has extended its fiber network into a total of 92 data centers.
Integra said that data center providers want to use dark fiber to connect their facilities and provide for their customers.
"We've seen a fair amount of interest around dark fiber in carrier hotels and data center assets and that market has not changed," said Mike Kozlowski, vice president of Product Management at Integra. "There are obviously advantages as to why our customers want to procure dark fiber because they control the connectivity to the site."