Once the construction arm of Xspedius, FiberLight builds and operates deep regional and metro fiber networks in Texas, the DC metro area, Georgia, and Florida. They are currently in the midst of a giant buildout project in Texas that when complete will have added some 8,000 route miles to their network. With us today to talk about the company’s expansion plans is Paul Pierron, who was promoted to CEO three months ago after joining the company as COO early in 2013. He is no stranger to this sector or to FiberLight’s main markets, having previously held leadership roles at AT&T, SBC, Sprint, Nuvox, LightCore and Xspedius.
TR: FiberLight had been primarily a carrier's carrier until you became CEO last year. What changes have you been making?
PP: What I was brought in to do was to monetize our existing network, and that's about as simple as I can put it. My focus is to build a company that can last and compete going forward. When you are building networks for other people, and you're not lighting the networks, you're experiencing one time revenues. They're very profitable and have good margins, but for the most part that doesn't continue and you're at the whims of other people's budgets and other people's need to expand. We are changing our focus from a wholesale dark fiber model to more of an enterprise/carrier MRR model.
TR: How strong have you found growth to be on the enterprise side?
PP: Extremely fast. It may not have the margins of dark fiber, but it has the longevity. The MRR has been growing dramatically, with CAGR on the order of 30% a year.
TR: As part of this shift, is FiberLight hooking up more enterprise buildings directly to its network?
PP: We are hooking up multi-tenant buildings, though not at as fast a pace as I'd like. Most of our focus has been in fiber-to-the tower. I consider multi-tenant towers to be every bit as valuable as a multi-tenant building, and with a lot less headaches. Multi-tenant buildings are difficult to penetrate because of building access issues, and because building owners are demanding more and more beyond the access points. It's much easier to deal with companies that have towers – they understand the business economics.
TR: You have been engaged in a giant tower backhaul effort in central and western Texas. Why Texas, and how is the buildout going?
PP: We like Texas primarily because we had an extensive network in Dallas, Houston, Austin, and San Antonio. So it was a natural extension because all of the wireless backhaul termination points and switches in those markets. The wireless carriers needed to terminate into those markets, and it just made sense for a company such as FiberLight to build it out for them. I daresay that our construction project in Texas may be one of the largest in the country right now. It's just huge. We're primarily expanding into rural markets in Texas, which I find to be an excellent opportunity for us to grow where the competition is not as demanding – many of our potential customers are underserved. That being said, rural markets have their own challenges.
TR: What has been the biggest of the challenges FiberLight has faced building fiber out into rural Texas?
PP: We’ve struggled with permitting. You go into a small town where they're used to issuing maybe one construction permit a month and we're submitting 15 or 16 permit applications at a time. It’s really challenging for them. They don't mind dealing with us, they just can't move as quickly as some of the metro areas that we have operated in to-date. And we're building in the oil and gas fields in West Texas, areas where there is also a huge energy explosion, which means that we’re also competing against energy companies for construction resources. It's overloading a lot of those communities.
TR: Will FiberLight be looking at other opportunities like E-Rate within its new Texas regional footprint?
PP: Yes. We’ve only just begun to dip our toes into E-Rate, and we plan to expand in this area as well. We need diversity as we build out, but once we have our footprint built we'll start turning our attention to it more fully. One of the advantages of going into rural Texas is that there aren't a lot of fiber operators. Whereas in Dallas we have maybe 11 different fiber providers that we’re competing against, in rural Texas you're lucky if you see two. It drops off real quick.
TR: Do you think there are similar opportunities for projects similar to your Texas buildout elsewhere?
PP: Our ability to expand from that particular market is something we're looking to do. Atlanta, Washington DC, and Florida -- Miami in particular but Tampa too -- are markets where it would make sense to build out from those central points and continue our expansion.
TR: Consolidation has played a big role in the fiber business for a number of years now, but FiberLight has not made a move as a buyer or seller. How do you view the M&A opportunities in the market today?
PP: We continually see requests for information regarding FiberLight. A lot of that was based on the fact we were a builder and that we were in markets that everyone wanted to be in. But we are not involved in any conversations about being acquired or even acquiring anybody. Our focus has always been: run the business properly, continue to improve on our processes and productivity, and the M&A stuff will take care of itself. I'm not being elusive, I've just felt that M&A happens naturally. Somebody might come along with synergies, although I hate to use that word, and with a natural footprint that fits with ours, and then it will just make sense. But the only way we're going to be able to come out of the M&A side where we want to be is to be profitable and continually improving on our margins, and that's what we're doing.
TR: You recently announced a cloud services partnership with Cirracore for cloud-based disaster recovery. Do you have other cloud-related plans in the works?
PP: What we're looking at are products and services that differentiate us from a lot of different fiber companies. We don't provide voice, but we have found that many of our enterprise customers are looking for cloud-based services. We believe that's an excellent way to provide value to our customers and set us apart. I don't see us getting into voice, but I do see things like cloud-based services. We think that's sticky and will help us offer our customers something more.
TR: Will any new cloud-based services you move into also involve partners like this, or do you have plans to build out such infrastructure yourselves?
PP: There are people in those spaces that know the business better than us. We have a strong sales force and the ability to market and distribute those products. We could do it, but we don't see any reason why we should be the ones developing and doing something that other people are very, very good at. In this case, engaging in partnerships makes more sense.
TR: What else do you see on the horizon for FiberLight?
PP: We're starting to see a lot of interest in small cell. That's the next area that we can utilize our existing network footprint for. Regardless of what is being said about the economics being cost-prohibitive, small cell technology has to get backhauled via fiber.
TR: Are you looking at the indoor or outdoor small cell opportunity? And what challenges must be overcome for small cells to take off?
PP: We're more interested in the outdoor. It could be on a lamp post of a Walmart shopping center or the parking lot of a Home Depot. In some of the metro areas we are in, we have found that just looking at the demographics that the carriers are producing you can find hotspots, like stadiums or sports arenas.
One of the problems we're having right now is settling on the different specifications of the equipment. And there are different ways to go about it too: going to the cell tower and downloading the information to ship back over fiber, or taking it straight to the switch.
Some of the MRR for small cells are much lower, while the dark fiber and laterals require construction. In some cases we think they may go to lit services. We're in conversations on balancing these costs and it's a learning curve for everyone involved. One good thing is that the cellular companies are sharing their economics and trying to make it work. There's no question that there's a need for the bandwidth, it's just how to make the economics work.
TR: Thank you for talking with Telecom Ramblings!