Dycom says 5G wireless builds will bolster, not cannibalize, wireline investments

Dycom says the need for dark and lit fiber-based solutions will surpass what operators required for 4G LTE.

As AT&T, Verizon and other wireless operators move forward with their 5G wireless plans, Dycom says its wireline business will benefit from the backhaul facilities that will be needed to carry wireless traffic.

Steven Nielsen, CEO of Dycom, told investors during its first-quarter 2017 (PDF) call that the company expects to gain more wireline business as wireless operators either build fiber out to their wireless towers and small cell sites themselves or contract with a third party.

“I think everybody is going to learn that wireless technologies really require lots of wireline investment and as the networks converge we’re going to see an additional catalyst for growth around fiber for these wireless deployments,” Nielsen said during the earnings call, according to a Seeking Alpha transcript. “We are doing projects for customers around these converged wireless, wireline strategies that we weren’t doing as recently as four months ago.”

RELATED: Dycom says 1 Gbps builds from AT&T, Comcast, others are driving new organic wireline growth opportunities

Backhaul bounty

While many investors have cited concerns that the advent of 5G wireless will put a strain on wireline investment, Dycom sees the need for dark and lit fiber-based solutions will surpass what operators required for 4G LTE.

“If we go back to the rollout of LTE six, seven years ago, it did not result in any cannibalization of any meaningful extent of wireline investment and we had to take fiber to tens of thousands of towers,” Nielsen said. “And 5G will be much more reliant on a dense fiber network than LTE ever thought of being.”

Verizon is a good example of the fiber build-out trend for wireless networks. When it began rolling out LTE in 2010, it leveraged Verizon Global Wholesale’s fiber to the cell site connectivity for 3,500 cell sites across 25 states. 

The service provider also contracted with no less than nine fiber providers outside of its wireline footprint.

This trend has continued into this year. Today, a number of wireline-based service providers continue to win contracts with wireless operators, providing a mix of dark and lit fiber to towers and small cell sites.

Whether it is Verizon or another wireless operator, a number of fiber-centric wholesale providers are reaping new rewards from wireless operators’ ongoing network expansion and densification efforts.

Zayo, for one, won a fiber contract with an unnamed large wireless operator to provide fiber-based backhaul to 1,800 towers in 26 markets. As part of this deployment, Zayo will leverage the existing FTTT networks it has built out in 20 markets. This will enable Zayo to reduce capital costs to satisfy the wireless customer’s need to increase coverage and capacity.

Meanwhile, CS&L’s Uniti Fiber won a big dark fiber deal serving a large wireless operator, prompting it to expand its reach in three markets in Southeast Iowa and the Central and Northern Illinois regions.

Verizon shows potential

In markets like Boston, Verizon has set a new plan to effectively multitask its fiber assets to satisfy not only its wireless densification efforts, but also FiOS FTTH services to residents and businesses.

Through its agreement with Boston and the resulting fiber build to attach small cells on city street lights and utility poles, Verizon will improve its 4G LTE wireless service while laying a foundation for future 5G rollouts.

John Stratton, EVP and president of operations for Verizon, told investors earlier this month that it can leverage its fiber “as a common asset across all lines of the business.”

Dycom itself has a contract with Verizon that serves what Nielsen says is “a good portion of their wireline services on the East Coast,” including Boston.  

By purchasing XO Communications, a deal that just cleared the FCC’s approval, Verizon will have an even greater set of metro and long-haul fiber assets it can use to satisfy current and future backhaul and even business service needs. Specifically, Verizon will gain a fiber network that serves 40 major U.S. markets with over 4,000 on-net buildings and 1.2 million fiber miles. 

While Dycom did not cite any specific details about its current or future work with Verizon, Nielsen said that it sees the potential to help the telco expand its fiber assets as needed.

“We feel very good about our alignment with what Verizon would like to do both input footprint and out of the footprint in deploying additional fiber both across the XO network plus the networks that they already own as a result of other acquisitions that they’ve done over the years,” Nielsen said.