Get ready to ride the new competitive consolidation wave

Sean Buckley, FierceTelecomIf you haven't noticed lately, there's been no shortage of rumors that four regional fiber network providers are rumored to be for sale. For anyone that can remember back to the late 1990s .com era/.bomb era, there was a land rush of competitive fiber providers selling either dark fiber or wholesale bandwidth pipes or a combination of both.
In just the past week, rumors emerged that four fiber provider networks--Alpheus, KDL, Fibertech and now FiberNet--are looking for potential bidders to buy their respective fiber network assets.

Hoping to possibly cash out at a time when there's a rise in new bandwidth hungry traffic from smart phones, online gaming, interactive over the top (OTT) video, and business services these service providers apparently feel now is the right time to sell. Not surprisingly, none of these providers are actually talking.

According to a report in the Wall Street Journal, these providers want sizeable offers for their respective assets. Just to recap, Evansville, Indiana-based KDL wants $950 million for its 30,000-mile fiber network, while Rochester, N.Y.-based Fibertech and Houston, Texas-based Alpheus Communications are angling for $400 to $500 million for their respective assets.

FiberNet, a subsidiary of ONE Communications-also the product of various mergers/acquisitions-could also be for sale. One reason, muses a respondent to an article in the Charleston Daily Mail is that company parent ONE Communications needs to sell off some non-core assets to lower its debt load.

Caught up in the late 1990s craze--one that even my wife joined brieflyas a representative for a .com building insurance sites--many of these fiber networks were at the time built to accommodate the growth of the Internet business that never really materialized. Fresh with billions of dollars in funding, these service providers built out fiber networks to effectively serve a demand that at the time did not really exist.   

But now this bevy of fiber networks that that became one man's trash could now be another's service provider's treasure.
So who could be the possible buyers of these assets if these sales are actually true? I think this could pertain to two segments-the competitive providers (RCN (NasdaqGS: RCNI), Time Warner Telecom (NasdaqGS: TWTC) and Paetec (NasdaqGS: PAET)) or maybe one of the cable MSOS-that want to flesh out their respective footprints.

As the economy starts to turn, I could see how these competitive providers could possibly purchase one of these providers to expand their respective fiber network reach with complementary assets for business customers.

Then there's cable. With much of their networks constructed of regional clusters, a cable operator could leverage these assets to expand its business network reach.  

Case in point is Comcast's (NasdaqGS: CMCSA) acquisition of Chicago-based Cimco, which heralds a new CLEC competitor. Looking to deepen its presence in the medium-to-large business space, Comcast found that Cimco gave it a nice entry point into a market that it sees growth potential. It's possible some of these fiber assets could be attractive to Comcast or another cable operator trying to advance its movement up the larger business stack.  

With much of the U.S. tier one and tier two service provider market consolidating, I am not surprised to hear rumors of these deals coming to light. What that's saying to me is maybe it's time we get ready for a new competitive consolidation wave.--Sean

P.S. We also put up a poll asking about your opinion on what you think of the recent fiber network acquisition rumors. Please take a look at let us know what you think.

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