The metro fiber sector has of course been remarkably strong for several years. However since much of it is in private hands, public data points are sparse and many don’t realize just how good business is these days. One of the more dynamic private companies out there right now is FiberLight, which operates metro and regional fiber across 21 markets with especially deep coverage in Texas, the Washington DC and Baltimore metro area, Atlanta, and in Florida. FiberLight was previously the division of Xspedius that built the company’s more recent fiber networks, but it followed a separate path when its parent was bought by TW Telecom. With us today to offer an overview of the company’s growth and expansion plans is the CEO of FiberLight, Mike Miller.
TR: There are many different business models in the metro fiber sector. What is it that FiberLight does best?
MM: FiberLight provides optical transport in the metro area interconnecting large users of bandwidth, including wholesale, enterprise as well as government between their locations and key aggregation points. Key aggregation points are not typically CO’s, but rather the 21st century interconnections such as data centers, carrier POPs, MTSOs and content creation points. FiberLight focuses on leveraging its extensive fiber footprint in a metro market in terms of both fiber count and route miles to deliver Ethernet, Wavelengths, SONET or Dark Fiber. FiberLight has the added advantage and flexibility of being agnostic as to the type of transport delivered as long as it’s high bandwidth.
TR: The overall economic environment has been challenging for a couple years now. How has it affected FiberLight’s growth?
MM: FiberLight’s growth has not slowed due to the economic climate. Our company has experienced tremendous growth consistently quarter over quarter since we began offering managed optical transport and expanded outside of our dark fiber product portfolio. FiberLight has benefited from the fact that we own, build and maintain very large metro fiber networks. This, coupled with the explosion in demand for high bandwidth transport, has created a cost-efficient solution for businesses looking to reduce costs in their IT spend, enable productivity improvements from better communications and collaboration and provide a means for delivery of more powerful applications to the users through vehicles like the cloud. FiberLight does not use the “build it and they will come” business plan that got so many CLECs in trouble not too many years ago. Instead, FiberLight’s growth has always focused on a disciplined approach to securing business with emphasis on a strong ROI prior to making the investment. Building new networks based on strong demand, coupled with smart financial decisions, has made FiberLight extremely successful. As a result, in 2009 when other companies were scrambling to find ways to slash costs and remain financially viable in the marketplace we were able to secure our first $13 million in debt, which will be used on projects that demonstrate the same strict payback model we require of all new construction projects.
TR: In which products has growth been strongest?
MM: Our strongest growth segment would have to be our LightSource® Ethernet product line where we offer a full portfolio of E-Line, E-LAN and E-Tree solutions in an Ethernet over DWDM or Ethernet over Fiber network architecture. Our products range from 10 Meg to 10 Gig circuits, with most of our connections ranging from 100MB to 1Gig. FiberLight has approached the Ethernet market by leveraging our significant fiber resources to deploy only non oversubscribed, high quality services. But it’s not just about the superior product we offer, our strong sales are the result of our nimbleness as a company and the ability we have to turn up a circuit quickly as well as support the customer by providing customized designs, a rapid response to quotes and a quality customer experience.
TR: FiberLight expanded rapidly in Texas in 2009. Is there more in store for the state in 2010?
MM: What we’ve discovered as we’ve begun building out our multiple metro markets in Texas is a strong demand for lit services from Dallas to Houston and to San Antonio along the path of the Texas Triangle as well as the need for connectivity to the cities of Laredo and McAllen at the southern tip. Our company’s goal in 2010 and beyond is to interconnect all of our expanded networks in Texas and create a 1,958-mile lit network to enable us to sell our entire suite of LightSource managed services to clients throughout Texas and not just the large Tier 1 markets. In addition, one of the key expansions we completed in 2009 is to Waco, Texas. We purchased a metro fiber network from Consolidated and interconnected the metro fiber network there to Dallas with Fujitsu 9500 Core Packet Optical Transport gear. We look to do similar expansions in the coming months and years by leveraging our vast Tier 1 market footprints into the adjacent smaller markets as demand for DR/BC and IP connectivity pushes large bandwidth needs to those markets.
TR: You have also been active in the Washington DC and Baltimore region, including a substantial build out to Culpeper last year. What can you tell us about current projects in the area?
MM: In 2010, we began expanding our Baltimore network with 104 miles of new network representing two independent routes. One route we call the 95 corridor, and the other will extend our presence outside of downtown Baltimore to encompass the cities of Laurel, Columbia, Elkridge and Greenbelt. Right now we are doing directional boring around the airport and putting in conduit and networks. Once we complete this network and connect it to our existing networks in DC and VA we’ll have the largest contiguous metro network outside of RBOC in the metro DC area.
TR: In Florida, you applied for stimulus funding for a unique middle mile route to Key West. While that application was not successful, is this project still on the menu?
MM: Absolutely it is. Although we were not selected for the first round of the Broadband Stimulus funding for the Key West project, we are still very interested in building a network from Miami to Key West. We’ve engineered and have the plans in place, now we are just looking for an anchor tenant to make it happen.
TR: One of the bigger topics in the industry right now is that of wireless backhaul and the economics of fiber-to-the-tower. What is FiberLight’s approach to this opportunity?
MM: FiberLight has approached the wireless backhaul market with the same disciplined approach we have incorporated into all of our business, by identifying the opportunities where we can create the solution the customer needs and do it with an acceptable financial return. We were one of the first companies to build fiber to the tower. Six years ago, when I sold my first fiber to the tower, the model was six T-1s banded together to justify the potential conversion, then it was DS3s. Now we are looking at 100 Megs or higher of Ethernet. Today it is all about Ethernet and the demand is just the beginning. We have built connectivity to approximately 400 towers over the years and that market segment continues to grow for us. In terms of the economics of fiber-to-the-tower for fiber providers, I’d say it’s difficult to prove in towers from an ROI perspective historically, but that is changing as the bandwidth levels increase. We have also worked hard to identify the clusters of towers that we can build to around our network, blending the capital costs to gain more locations. Personally, I think it’s not going to be too long before those companies that build towers start lighting the towers themselves and selling the connectivity back to the carriers.
TR: While FiberLight’s story has been of organic growth, many are expecting a new wave of consolidation in the sector in the next year or two. What sort of M&A opportunities would be attractive?
MM: Our funding partner, Thermo Capital, backs long-term growth, and as FiberLight is still in its infancy, it may be premature to talk about M&A opportunities. Certainly acquisitions are an important part of growing the business, but our management team believes in growing the business organically by deploying the necessary people and resources to grow it effectively, and our success rate has been astonishing. We’ve never had a growth period less than 20% top and bottom line. In 2009, Fiberlight grew 114%, and our MRR has grown 60% annually, and in some cases tripling in value. With this formula in place, we believe we can grow to become a $500 million company in short order.
TR: Thank you for talking with Telecom Ramblings!
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