There's a very interesting article over at Capacity Magazine that takes a look at the future of European fiber networks in light of the coming expiration of the IRUs signed in the bubble years. Yes, the golden age of the fiber swap (1997-2000) was 12-15 years and four presidential elections ago now. The industry is sliding inexorably toward having to figure out what comes after those IRUs come due.
Each was somewhat different of course, and in many cases the leasing operator has the option of taking over the asset for a nominal fee. But the question of OAM fees would need to be negotiated, and it's completely unclear right now whether fiber owners will prefer the status quo and just be glad for the further payments for old fiber or whether they might use the negotiations as leverage to reclaim the fiber level entirely. And in Europe, there are still a lot of operators out there that use these fiber IRUs as a core part of their business and will face this question at roughly the same time.
The US and Europe followed a similar path in the bubble when it came to fiber IRUs, but since then have diverged somewhat. In the US, there has been much more consolidation and nearly all of the fiber IRUs sold or swapped in those days came off of fiber builds now in the hands of two operators, i.e. CenturyLink and Level 3. Additionally, much of the dark fiber itself was returned over the years in favor of waves and such.
But there are still a few holdouts here, and there are rumblings of a future disagreement in at least one case. XO's 18-fiber asset within rival Level 3's original fiber plant is probably the biggest, and it's one that I've wondered about in the past. XO claims full title to the fiber, and indeed the IRU agreement reads that way. But unofficial rumblings at Level 3 suggest they see the IRU expiration (whose date is unclear, but probably 5 years off if I had to guess) as a major event that limits XO's options. The Capacity Magazine article illustrates their leverage, which is likely the the 'stranded asset' case, i.e. the simple fact that XO's ownership of the fiber won't take them far without OAM services to go with it. XO and Level 3 have banged heads over the use of the IRU fiber in court before, and seem likely to again before it's all said and done unless an M&A intervenes that changes things.
CenturyLink and Level 3 each have acquired various IRU assets from the others' footprints over the years, so the two probably have enough common ground and alternative options to get past the threshold without a public fight breaking out. Other fiber IRU assets still out there in the US that date from the same era include those of Teliasonera IC, the older pieces of Cogent's footprint, tw telecom's western intercity links, and the intercity pieces of AboveNet that Zayo just acquired, each of which run on fiber IRUs within the current Level 3 and CenturyLink asset bases (WilTel in many cases). Verizon and AT&T each have pieces of their network built off of such swaps in addition to their older fiber builds, however they have the obvious leverage of having the resources to build if they must.
And out there in the wings hoping to take advantage of the situation is still Allied Fiber and its protagonist CEO Hunter Newby. This whole scenario has been part of his pitch for a new wholesale dark fiber build in the US, the bulk of which is still looking for the funding it will need to start blowing fiber. Since service providers are, on average, much more reluctant to sell intercity dark fiber IRUs the way they once were, the so-called 'fiber glut' hasn't been a meaningful concept in a long time. As we get closer to the end of those 15 and 20 year IRU terms, perhaps Allied Fiber's plans will gain more traction.
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