It’s been five years now since Allied Fiber and its CEO Hunter Newby started their campaign for a new kind of intercity dark fiber infrastructure company. And this year they’ve started to turn that dream into actual, physical things like conduit, fiber, and collocation huts down in Florida as they build northward. This past week they unveiled their first colo facility in West Palm Beach, see some pictures from the event in our gallery. As they near Jacksonville, Hunter Newby joins us to talk about how the buildout is going, how the vision is evolving, and what comes next:
TR: Can you give us a quick update on Allied Fiber’s progress building out its fiber and collocation infrastructure in Florida? How fast are you moving?
HN: You can look at our blog and our pictures weekly to get the latest. The most recent update has us over halfway up the coast from Miami in New Smyrna Beach. In one week we completed 19 miles, and that was the largest week we've had so far. A little less is about average.
TR: Once you reach Jacksonville, what’s the next step?
HN: We built fiber last year between Macon and Valdosta, Georgia, so that's ready for us to connect to. When we finish the Miami to Jacksonville build, we will continue by connecting Jacksonville to Valdosta. Then we pick it up in Macon and build to Atlanta.
TR: And the collocation huts?
HN: The colos are being built in Shreveport LA, and will be done in the same timeframe as the fiber. They're modular, made of pre-cast concrete and steel buildings of about 1100 square feet. They're miniature meet-me rooms, with AC/DC power, a generator, ladder racks, cabinets, etc. They break them down, put them on the back of tractor trailers, and reassemble them on-site. We tie them directly into the Allied Fiber system itself so the fiber comes up out of the ground and terminates in the colo in one cabinet and goes back out from another cabinet.
TR: Your original design combined very high count fiber cables, side by side longhaul and shorthaul ducts, and frequent handholes for access. Has it evolved much now that you’re putting it into practice?
HN: No it hasn't, the fundamental concept is the same. The only thing that has really changed is that the demand is greater than we ever planned for. When we buy existing duct, we can only fit a certain size cable in that. So if you can place a high count cable in the duct, you maximize the use of the air inside that duct. The only other change in applying it in practice is that in Florida we have handholes for splices every 5,000 feet, but for everything north of Jacksonville on Norfolk Southern we have handholes every 3,000 feet.
TR: What parts of the market are you seeing demand for dark fiber coming from now?
HN: Everything. Municipal, cable companies, wireless backhaul, traditional longhaul infrastructure, E-Rate, legacy IXC fiber, submarine cable backhaul, they're all placing orders with us. They all want their own dark fiber, they want to light their own glass. Even data centers up and down the coast of Florida have come to us and asked to get their own fiber to connect to Miami and up to Atlanta themselves.
TR: Demand for fiber-based wireless backhaul has been a big part of the rationale for your design since the beginning. Do wireless operators like what they are seeing so far?
HN: Having access points is a great thing when it comes to access to cell towers. Every mobile operator wants to deploy 4G LTE and they really can't if they don't have the backhaul. Bonding copper and other stuff doesn't cut it, they want fiber. So we're seeing a lot of actual network diagrams for wireless backhaul that include lateral splice points. And when you get down to it and start to map that out there are numerous points where operators want to tap into the Allied Fiber system. We tell them where our handholes are, and to them it's a tremendous advancement from what they previously had to deal with: a lot of independent, local networks islands that aren't all stitched together. We have a very simple, flat concept in comparison.
TR: Are you building laterals out from the backbone as well, or do you play matchmaker for that piece?
HN: We match people up in the dark fiber community. The laterals we do build are the ones into the main carrier hotels, peering points and landing stations. We don't build laterals to cell towers or schools or hospitals. That's the realm of the local network operators that are already there. We *want* to feed them business because they feed us business. Once they drop off equipment in our colos, that's a new node on their network so we can feed people coming on the longhaul side to them and vice versa. We're a big distributed meet-me room.
TR: Has visually documenting your progress in the Florida and Georgia buildouts on your blog helped educate potential funding sources about what you are trying to accomplish?
HN: As far as lenders, yes documenting our progress has helped in a big way to explain what we are doing. We have lenders that want to participate. They see it happening and understand the demand drivers for wireless backhaul, video, municipal networks, and submarine systems and they want to participate.
TR: Nevertheless, funding this new business model has certainly taken a lot of legwork. How will you take this to other parts of the country? Have you found any creative ways to bypass traditional funding sources?
HN: We have some strategic relationships that we've developed over the past several years, particularly in the data center space and around accessing sustainable green power at low cost. These entities understand what we're doing and that they can't build a data center where there's cheap power without fiber. So there is a way for us to fund our growth in other parts of the country through non-conventional means, which really is ultimately what we need both as a company and as a country.
TR: Why do you think it has become so difficult to build intercity fiber infrastructure, and how do you think we overcome it?
HN: If you look at the history of fiber builds in the US, particularly longhaul, it's not a pretty picture. A lot of money spent, investors have suffered, and at the same time we have the internet we have today. The trick is to make a business profitable that is providing infrastructure to network operators and do it in a timeframe that is realistic. Not to take on too much up front and set the wrong expectations that it will all happen in 12 months. This is going to take a very long time, and we're 5 years into it now already.
People don't realize how big the United States is, how much a mile of right-of-way costs, how much it costs to construct a true fiber system. But it's the infrastructure that everything they do relies on every single day now. This is the chasm we're trying to cross, and as we go along the capital sources that have an interest in higher layers of the stack begin to realize that they cannot execute without this infrastructure. And that's where we're finding new avenues for financing that didn't exist before.
Traditional institutional money wants a return at this rate and at this time. Sometimes you can't stretch the rubber band that far that fast. There are other businesses where they can find that and invest in. But there are some parts of this country that are going to be difficult to build out. The returns will be much greater than the multiples they want, but it's just going to take longer to do. The construction process itself takes a long time, and you can't expect to cash out of a business before its finished being built. I see where they're coming from, but it's not my way.
TR: Institutional private equity has invested heavily in the internet infrastructure sector in recent years, but they haven’t been lining up at your door. Has the Florida buildout helped get their attention?
HN: At first when we came out with Allied Fiber, they thought we were a carrier. They didn't really understand, and we had to tell them our story. After a few times, they began to understand it and I think they realized it could be a game changer and we could create a whole new floor in terms of a type of service provider. But eventually they realized that they just don't play at this stage of investment. They don't invest, they trade. They buy entities that are already in existence that have EBITDA that they can comfortably put a multiple on.
So we go out and start in Florida and they see it happening and they say "We think what you guys are doing is amazing, let us know as soon as it's done and the customers are in and you're generating all this EBITDA and we'll pay you five times your original investment. Thank you for taking the risk off the table for us." And then of course we say, "At that point, we don't need you anymore".
It isn’t that we don’t need private equity investors, or that there isn’t a role for them, it is just that the situation will be very different at that point and we don't need them in them same way we did when we first started. The biggest difference will be the valuation of the business and that we then will have the option of funding through conventional, senior debt which can be more attractive than equity investment to grow the business. They're starting to see that, and it's interesting to see how they're reacting to it.
TR: Do you think people take the infrastructure that powers all their modern toys for granted?
HN: People talk cloud so much that they get far away from the understanding of what it physically takes to build the cloud's infrastructure. As you can see from the pictures on our website, it takes digging holes in dirt and building fiber underground.
For example, suppose that you have a submarine cable network where the fiber comes up out of the ocean to its own landing station. What has that accomplished? You have a fiber cable that's connecting two continents, but now the landing station needs to be connected to something else that's part of a bigger superstructure that the submarine cable operator doesn't own and control.
A lot of people just don't understand, and I find they're increasingly more ambivalent. They just want it to work and to be cheaper and faster. So we've tried to create a standard that makes it easy to understand, easy to deploy, and easy to use.
TR: So have you been having more fun now that Allied Fiber is digging holes and blowing fiber?
HN: Of course, isn't it always better to be building? It's more fun when people finally understand what you're doing and they're not skeptical. When they finally believe, that's when it's fun.
TR: Thank you for talking with Telecom Ramblings!
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