Sprint's thirst for dark fiber-based small cell backhaul spells opportunity for Zayo, Level 3, others

Sean Buckley, FierceTelecomSprint (NYSE: S) recently said during its fourth quarter earnings call that it would be using a mix of 2.5 GHz spectrum and dark fiber for small cell backhaul -- a move that could potentially benefit various competitive wireline carriers who have aggressively built out fiber networks in anticipation of the emerging small cell backhaul trend.

Initially the majority of the dark fiber backhaul activity has come from Verizon, which uses it in small cell markets.

The opportunity will attract a host of different players: tower providers (American Tower and Crown Castle), traditional competitors (Level 3, Southern Light, Tower Cloud, and UPN) and dark fiber-centric players (Wilcon, SummitIG and Cross River Fiber). What's attractive about dark fiber for these providers is these agreements are multiple years long, providing a long-term revenue stream.

Despite being a more expensive solution and not revealing any partners yet, Sprint sees dark fiber as a way to control bandwidth allocations. Unlike a lit service where an operator has to request their wireline provider partner to provision bandwidth, dark fiber allows Sprint to make upgrades themselves.

By working with competitive providers, Sprint could also reduce backhaul costs it typically pays to the ILECs for special access circuits. The carrier recently said that it pays up above $1 billion a year for such circuits.

Sprint's small cell plans are sizable with plans to add up to 70,000 small cells to its network. Since the small cells will be placed in various parts of the U.S., various competitive providers could compete for Sprint's dark fiber business.

But providing fiber is one part of the small cell backhaul equation. A number of service providers are offering, or are in the process of developing, turnkey small cell services. These turnkey services, which have become Small Cells as a Service (SCaaS), include site acquisition, permitting, installation and even network management. However, none of their approaches are the same.

Recent examples include Cox Communications and Zayo. Cox launched a small cell service in November 2015. Being a cable provider, Cox offers wireless customers three outdoor options for small cell: strand mount, pole mount and ground cabinet in addition to providing necessary power from its existing HFC network. When it comes to turnkey services, the service provider will work with local and national partners.

Zayo also continues to make progress with small cell services, reporting in its third-quarter 2015 earnings that it had connected 1,200 small cell sites to its fiber network. Dan Caruso, CEO of Zayo said that he sees growing opportunities for dark fiber across four key categories: fiber to the cell sites, dark fiber to cell tower sites, small cell and emerging C-Ran opportunities.

While it provides a set of turnkey services, the provider told FierceTelecom that wireless operators remain divided on how much they want Zayo to manage their small cell backhaul deployments. Regardless, the service provider continues to win dark fiber deals for tower and small backhaul, including a recent deal to equip 78 sites in Indiana, for example.  

Meanwhile, Crown Castle purchased Quanta last year for $1 billion with the aim of fulfilling what it says are over 3,500 small cell opportunities within its fiber footprint.

Regional Southeast players like Southern Light, TowerCloud and FirstLight Fiber are finding utility for dark fiber backhaul as well. Southern Light recently won a contract to provide fiber to 446 sites in Louisiana, Alabama, Mississippi and Florida.

Earlier this week, First Light Fiber completed a network upgrade in New York that is in the proximity to about 4,000 cell sites. However, it would not reveal if it had any dark fiber customers for backhaul. Nevertheless, it puts it in a good place as operators like Sprint look for dark fiber in the Tier 2 markets it serves.

But don't count out regional incumbent telcos like Cincinnati Bell, Lumos, FairPoint.

Lumos is in the process of completing its Project ARK initiative, a network that's specifically designed to target wireless backhaul needs in the Virginia and surrounding state markets. Likewise, Cincinnati Bell is seeing small cell backhaul activity in its operating market with what reports say is for Verizon.

FairPoint may not be an advocate of dark fiber, but it has begun offering a new set of construction services that it says were initially driven to serve small cell opportunities in the Northern New England region.

Sprint may be just in the planning stages of its small cell backhaul strategy, but given the size of its network plans it will give competitors a chance to compete on a wide-ranging project. Being able to provide a mix of dark fiber and turnkey solutions will give wireline operators a long-term revenue stream that they need as the market continues to consolidate.--Sean