Within the universe of metro fiber providers, the howling winds of the recession seem far away. The services sold are rarely discretionary, the competition is light, and demand remains strong. Against this backdrop, Telecom Ramblings takes a deeper look at one participant in this market: RCN Metro Optical Networks. RCN Metro is a subsidiary of cable provider RCN Business (NASDAQ:RCNI, news, filings), but is run as an independent entity. They generated $171.3M in 2008, or 23% of RCN's total revenues, with adjusted OIBDA of $48.8M or 28.5% margins.
The company's assets are a unique synthesis of the original RCN Commercial footprint, the deep New York City network of ConEd Communications (acquired in 2006), and the northeastern regional and metro assets of Neon Communications (acquired in 2007). Their network routes are surprisingly diverse from both their parent cable company and from most other metro fiber providers. Many of the metro fiber providers I follow stick to less competitive markets where they face only the ILEC much of the time, but RCN Metro's business is highly concentrated in its Tier-1 markets of New York, Boston, Chicago, and Washington DC. The regional routes acquired from Neon connect these markets as well as many Tier-2 and Tier-3 markets in the region, giving them a strong regional presence.
As recorded on my metro fiber and lit buildings list, RCN Metro has 1300+ lit buildings on 7000+ miles of metro fiber, and chooses its targets selectively. The company targets the wholesale market and enterprises with high bandwidth requirements, and has a big presence in the financial sector. Uh oh, the financial sector? Isn't that a huge risk? Not when it comes to fiber access, stocks may rise and stocks may fall, but who cuts fiber to their buildings? Connectivity is just not a discretionary expense in the financial world nowadays, you have it or you don't exist.
Looking forward into 2009, it is hard to find any speed bumps for RCN Metro. Their integration of Neon and ConEd seems to have been successful, they aren't capital constrained, they have plenty of options for expansion, and the demand just keeps coming. In part II of this article, we hear from the company itself, as Telecom Ramblings interviews Felipe Alvarez, President of RCN Metro.
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