Uniti Has Massive Fiber Buildout Plans
DALLAS -- Incompas -- Uniti Fiber is a new US fiber infrastructure company created by combining two existing fiber networks under the ownership of a third fiber optic network company. Now here's the real news: Uniti is building fiber networks in a totally new way, unlike what any of the three have done before.
Here's how that riddle is unpacked: Uniti Fiber was created when Commercial Sales & Leaving (CS&L) , the only telecom REIT (real estate investment trust) in the US, acquired both Tower Cloud and PEG Bandwidth and put the two of them together into a single company. CS&L operates a national fiber network which is exclusively controlled by Windstream Communications Inc. (Nasdaq: WIN), the network operator which created the REIT to operate its physical network. (See CS&L Buys Tower Cloud for $230M in Small Cells, 5G Play.)
With CS&L's financial backing, Uniti is now building networks to expand the footprint of Tower Cloud in the Southeast and PEG Bandwidth in the mid-Atlantic and South Central regions of the US, as well as Illinois. The goal is to create a national fiber footprint designed for the future, and as CEO Ron Mudry told an Incompas audience here Tuesday, that's what requires Uniti to build networks in a very different fashion.
Uniti then delivers dark fiber, Ethernet or wavelength services to telecom carriers including wireless operators and large enterprises.
Most of the fiber networks in use today were built in the 1990s or 2000s, for telecom and data services, and are 12- or 48-strand bundles of fiber which connect cell towers, carrier hotels, central offices and hubs, noted Greg Ortyl, senior vice president of sales for Uniti, in an interview following Mudry's speech.
According to Ortyl, in an era of social media, smartphones and massive video files, today's fiber networks require much greater density and the ability to make many more connections at the edge. These fiber networks need to accommodate the small cells and cloud radio access network deployments that are being used to densify wireless coverage today, and to ensure they can support 5G networks in the future. As a result, the networks Uniti is building now frequently have parallel conduits, each with a minimum of 288 fibers. One conduit is dedicated to delivering that small cell connectivity, while the other supports general data traffic.
"We do this everywhere, unless it is not financially feasible," Ortyl said. "And that's a minimum number of fibers, sometimes it's more. The second conduit is to support small cells, so you can chop into it because you are going to be chopping in many times. You may only go a quarter mile or 1000 feet between connections, and you want to keep your primary conduit as contiguous as possible."
Given the nature of its strategy, Uniti is taking a disciplined approach to expansion, Mudry told the Incompas audience. That includes having anchor tenants signed before the expansion starts. Its first expansion is in the Midwest, where it is building in the Quad Cities/Davenport area of Iowa and in two Illinois markets -- Peoria and Rockford -- as the company announced this week.
Ortyl said Uniti has signed other anchor tenants in key markets that aren't yet announced, adding that the network operator hopes to expand to the West Coast, which is well afield of its existing footprint. One of Uniti's advantages in the process is funding from CS&L, which can use its REIT status to gain tax advantages in funding the buildouts.
"When we do a big dark fiber build, we have the ability to leverage REIT status -- which has tax benefits for dark fiber," he noted. "We can put those assets into the REIT structure and capture tax savings. It makes our cost of capital for dark fiber buildouts less than most."
CS&L and Uniti are eager to leverage those benefits to expand the national fiber rollout at an accelerated pace -- if the right conditions exist. Some of that growth will be inorganic, as CS&L has aggressive acquisition targets, Ortyl declared.
"We are seeing a lot of demand from potential anchor tenants," he added. "You have companies who have diverse carriers but their traffic is riding the exact fiber path in the exact sheath and they are interested in avoiding those routes and providing diversity. All those big content players -- Facebook, Amazon, Netflix and Google -- have their route plans and we are reviewing those. It's a beautiful thing when you get an anchor customer who can help pay for a really unique route. I think we will end up being nationwide."
For one of its core customer sets -- wireless operators -- Uniti is also providing a managed service for their cell site construction, operation and maintenance. "We'll do the whole thing, turnkey, or any part of it they want us to," he said.
Given the hassles that wireless operators have in sourcing small cell sites, installing and maintaining that gear, Ortyl added, it's an attractive service that Uniti can offer at scale and for reasonable costs.
— Carol Wilson, Editor-at-Large, Light Reading