Zayo’s dark fiber business is gaining wireless momentum, but CS&L, Crown Castle remain tough competitors

cell tower

Zayo is finding that its dark fiber message continues to resonate with the largest wireless operators, but the service provider is going to face growing competition from a host of tower companies and emerging providers like Communications Sales and Leasing (CS&L).

The service provider is seeing a set of near and long-term wireless opportunities for tower and emerging small cell backhaul.

In the near-term, Zayo is extending dark fiber to wireless operators’ tower sites that had traditional lit service and efforts to complement an existing build.

“Part of it is certainly dark fiber to the tower, which we have been seeing for several years now and that’s continuing to occur in the form of markets that are not dark fiber and they want to convert a good chunk of them,” said Dave Jones, executive vice president of Dark Fiber Services for Zayo, in an interview with FierceTelecom. “We’re also seeing a lot of add on business in a market where we are already providing dark fiber to a carrier. They are moving another site to dark fiber and new build sites that they want to put dark fiber to out of the gate.”

Earlier this month, Zayo won a contract to expand and upgrade an unnamed wireless operator customer’s fiber to the tower (FTTT) network, extending its dark fiber facilities to over 1,800 cell sites in 26 markets. After it completes this expansion, Zayo’s FTTT network will surpasses an estimated 10,000 cell sites nationwide, including those under construction.

Like other service providers, Zayo is also seeing potential in the small cell market, one where large wireless providers like Verizon and Sprint have mandated dark fiber as their main backhaul solution.

“Of course, there’s a lot of small cell activity,” Jones said. “Pretty much all of the small cell activity we’re seeing and bidding on is dark fiber as opposed to lit services.”

Analysts agree that while Zayo’s presence in the small cell backhaul market is still nascent, the wireless industry’s ongoing movement to increase capacity and coverage could bode well for the service provider’s dark fiber business.

According to some industry estimates, the wireless industry plans to deploy over 1 million small cells nationwide over the next five years.

“Zayo is uniquely positioned to benefit from small cell growth on their existing fiber in addition to using this investment cycle of wireless operators to fund the extension of their fiber networks to new locations that will increase their enterprise opportunity,” BTIG said in a research note. “We believe the market for dark fiber sales to enterprise customers continues to broaden driven by the control it offers in pricing, reliability and security to customers.”

Despite the ongoing momentum Zayo is seeing in the dark fiber-based backhaul market, Pacific Crest Securities said that the service provider will face a number of tough competitors in Crown Castle as well as emerging players like Communications Sales & Leasing’s Uniti Fiber division.

“We estimate that Crown Castle International (CCI) has deployed approximately 19,000 [small cells] (63%), making CCI the competitor to knock off,” Pacific Crest Securities said in a research note. “However, we see increased competition emerging in the space from regional providers, most notably from Communications Sales and Leasing, which will combine its acquisition of Tower Cloud and PEG Bandwidth to form Uniti Fiber, which will look to expand its scale with wireless carriers in major markets in the Southeast and Northeast regions.”

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