Ziply Fiber raises $450M for greenfields and 'edge-outs'

Not content with a plan to upgrade its own copper plant to fiber, Ziply Fiber has raised about $450 million in additional funding to apply toward new network buildouts in the northwestern US.

All current Ziply Fiber investors participated in this round of funding: WaveDivision Capital, Searchlight Capital Partners, Public Sector Pension Investment Board, British Columbia Investment Management Corp., and Canada Pension Plan Investment Board.

With the new stack of cash in hand, Ziply Fiber, a company formed by the acquisition of Frontier Communications operations in Washington, Oregon, Idaho and Montana, will explore both "edge-outs" and new, greenfield buildout opportunities. Edge-outs will focus on towns and cities adjacent to existing Ziply Fiber networks and facilities, while greenfield buildouts will be completely new areas for the company.

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Ziply Fiber's strategy shares some similarities with that of WideOpenWest (WOW), which has a long history of edge-out builds. WOW recently has embarked on a greenfield strategy targeted to areas that meet certain criteria with respect to existing market competition and expected return on investment.

'Comprehensive plan'

Ziply Fiber isn't expected to reveal where it will focus the funding until initial buildouts are underway. But the company expects the strategy to add "hundreds of thousands" of new homes and businesses to Ziply Fiber's footprint, according to CEO Harold Zeitz.

"We have a comprehensive plan," Zeitz said, adding that most of it will concentrate in the Northwest and areas that are relatively near Ziply Fiber's legacy footprint. However, he said he's not ruling out buildouts that fall outside the region.

Zeitz said the opportunity to explore the edge-out strategy became apparent as the company received inquiries from other towns and communicates near the Ziply Fiber network asking what it would take for the company to build at their location.

"We've gotten a lot of demand from towns and communities near our network, so we raised this money to go ahead and expand outside our footprint – still within northwest area – but outside of our footprint, to really accelerate that process," Zeitz said. "So, in addition to building what we had planned over the next couple of years, we're going to build incrementally more … And because our network crosses so many areas, it's natural for us to be able to do this in a straightforward way."

Setting targets

Ziply Fiber has a broad set of criteria to determine its edge-out and greenfield targets, Zeitz added. It includes "ease of build" (how much aerial versus underground building is required?) and how receptive a community is to fiber network construction with respect to elements such as permitting and access to rights-of-way, he explained.

Alongside the funding, Ziply Fiber is also supporting the effort through leadership moves. Chris Denzin, who has led Ziply Fiber's residential and small business teams, has been named chief operating officer. Meanwhile, Rob Griffith will oversee all fiber expansion activity at Ziply Fiber after being promoted to chief, fiber design and construction.

Ziply Fiber introduced multi-gigabit services in January, a move it is making alongside an existing plan to upgrade a large portion of the legacy networks acquired from the Frontier deal. About 30% of the Frontier footprint was upgraded to fiber-to-the-premises (FTTP) when Ziply Fiber made the deal. Today nearly half has been upgraded.

Zeitz said he believes the company is in position to upgrade 80% to 85% of its existing footprint using the "economic frame" being employed in the initial wave of copper-to-fiber upgrades.

Exploring other funding

Ziply Fiber is also pursuing government funding to build in areas that are underserved or unserved and deemed more costly to reach. Ziply Fiber participated in phase I of the Rural Digital Opportunity Fund (RDOF) and has forged some public-private partnerships tied to a portion of its buildouts. It has also explored state-level funding.

Zeitz said Ziply Fiber also intends to get involved in the Broadband Equity, Access, and Deployment (BEAD) program, which targets an additional $42.5 billion for rural broadband.

"We definitely expect to participate [in BEAD]. And it's a great way for expensive areas to get access to fiber, because it might be too expensive for private companies to do on their own," Zeitz said. "But with a public private partnership, it can be a good way to go."

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— Jeff Baumgartner, Senior Editor, Light Reading