Zayo snags $50M, 20-year dark fiber contract with major service provider

Zayo Group has won a $50 million, 20-year dark fiber network deal, enabling an unnamed large service provider to immediately expand its service area throughout the United States.

Similar to other large fiber deals it has won with wireless operators, this new dark fiber network build will leverage a mix of Zayo's existing long haul fiber network and previously announced routes that are under construction.

Specifically, Zayo's carrier customer will use 3,200 route miles of fiber from Zayo, connecting nine markets and crossing eight states.

Zayo said that by leveraging network that is nearly built, Zayo expects to generate strong internal rate of return (IRR) and unlevered cash flow from this contract.

Through a mix of organic builds and acquisitions of other regional service providers, Zayo's North American long haul dark fiber network includes approximately 29,000 route miles.

While wireless carriers are a clear focus of its growing dark fiber business, the service provider is finding that those same builds can address a mix of other carrier, content, enterprise and public-sector organization needs along the path of the fiber route.

Besides traditional carriers, Zayo is seeing new demands for dark fiber with data center operators, content providers, and school districts.

Dan Caruso, CEO of Zayo, told investors in May that data center providers -- a group that typically that typically relies on third-party connections to interconnect their own facilities and their clients' to major Internet hubs – are a good target.

Caruso said that data center providers need three or four paths that "often go between these data centers."

Internet content providers are also a good target for dark fiber because they are building denser networks at the edge that feed into data centers and connectivity to other partners.

Zayo has already seen this trend take place in Texas.

Earlier this year, Zayo won a $15.6 million, 12-year contract from the City of Fort Worth, Texas, to supply it with dark fiber service to satisfy the growth of its network. To fulfill this contract, Zayo will use 2,000-mile fiber-to-the-tower (FTTT) network currently being built for a major wireless operator in Dallas.

For more:
- see the release

Special report: AT&T, Verizon, and competitive providers remain divided on dark fiber, but interest is rising

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