Shifting supply and demand dynamics in the US fibre sector
The former C-level executive at Zayo Group LLC said investors are looking at fibre networks in the same way that they viewed cell towers and data centres — as capital-intensive businesses with long-term customer bases and stable prices.
The Interview also unpicked the drivers of demand for dark fibre and fibre-based networks, with the expert noting that there are “no major headwinds”.
That said, a number of changes are taking place. In the past two or three years, all internet traffic has come through the “top handful of providers”. Meanwhile, the advent of cloud services from the likes of Amazon and Google is giving rise to a new ecosystem around connect-to-cloud. Although in the very early innings, 5G is also influencing the landscape while presenting its own challenges. The specialist also expressed his interest in what cable providers will do over the next five years, having built high-growth, multi-billion dollar businesses over the past decade.
While supply and demand for fibre-based services is “still reasonably balanced”, competition has intensified in large markets including New York, Chicago and San Francisco. This has resulted in slightly muted growth rates among individual players. The Interview also revealed that there is “plenty of opportunity” in Tier 2 and 3 markets, particularly those with a growing data presence.
In terms of sales trends, many smaller providers are focusing on one market or a small number of markets that they know well. Larger players with vast sales teams have struggled more as they try to serve an array of verticals with specific requirements. “I think that’s the piece we’re yet to figure out, who may be really successful at selling across the multiple verticals and demand streams,” the specialist said.
To access all the human insights from Third Bridge Forum’s US Fibre Sector 2020 Outlook Interview, click here to view the full transcript.
The information used in compiling this document has been obtained by Third Bridge from experts participating in Forum Interviews. Third Bridge does not warrant the accuracy of the information and has not independently verified it. It should not be regarded as a trade recommendation or form the basis of any investment decision.
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