In the metro fiber space, few companies have gone as deep into one market as Lightpath did, with tens of thousands of on-net buildings in the New York metro area. The company was relatively quiet while under the umbrella of Altice, but in late 2020 it entered a new, independent phase when Morgan Stanley entered the picture. Now the company has entered Boston and Miami and seems hungry for more. More what, you ask? With us today to talk about the company’s plans and intentions is Lightpath CEO Chris Morley, an industry veteran who spent 8 years at Zayo during the height of the consolidation wave.
TR: What brought you to Lightpath?
CM: I joined Lightpath in January of 2021 after Morgan Stanley bought a 49.9% ownership interest in the business. While Altice continues to retain a 50.1% ownership interest, the entrance of Morgan Stanley enabled further focus and investment to transform Lightpath, extending the reach around customer engagement, as well as geographic network coverage. Their mission, and that I jumped on to carry forward, was to bring on a leadership team that had a strong track record in this space and accelerate growth and value to the business and Lightpath’s customers.
TR: What opportunity did you see?
CM: To me, Lightpath represented a hidden jewel. Over the course of 30 years, Lightpath developed the deepest and broadest network of any competitive fiber provider in its geographies. Today, Lightpath has over 20,000 route miles in the New York metropolitan area, which includes all five boroughs of New York City, Long Island, central and northern New Jersey, and southern Connecticut. That is about 4-5x more network coverage than the next closest competitive fiber provider. That density and reach was extraordinarily compelling. Partnering with Altice and Morgan Stanley with a renewed desire to invest, deploy capital to extend in-market reach, and enter new geographies, was what attracted me.
TR: For so long, Lightpath was focused tightly on the NY metro area and specifically the cable MSO franchise footprint. What changed that made the expansion into new markets like Boston and Miami?
CM: Our investment thesis is to identify markets that we think have the combination of attractive customer demand and growth, paired with the right competitive environment. Over the last 12+ years, there’s been significant consolidation in the industry — much of which I participated in while at Zayo. Over the course of time, in several tier-1 markets, a single dominant competitive fiber provider has emerged via consolidating other service providers in the market. To us, that looks like there’s room for an agile, smaller competitor like Lightpath to come in, deploy network, and create an alternative provider of choice. Boston had those attributes, as did our more recent expansion into Miami.
We additionally saw market expansion opportunities even within the boundaries of the original Lightpath footprint. Manhattan and Queens were territories that were out-of-franchise for the Cablevision-Altice Cable MSO properties, where Lightpath had limited physical assets and little to no focus. We’ve made significant investments into each of these attractive areas and given the sizable addressable markets, view them in the same magnitude as our expansions into Miami and Boston. Over the recent 2 years, we’ve taken a very aggressive approach to extend the business geographically coupled with driving more share across our customer base.
TR: How much change was required to Lightpath’s business model to go beyond those franchise territories?
CM: Out-of-franchise expansion was unconventional for Lightpath over the last 30 years. We built a team that was comprised largely of former Zayo and Lightower veterans who have experience entering, building, constructing, developing, and monetizing networks in these types of geographies. There are definitely different dynamics when we extend into brand-new geographies, like Boston and Miami, as opposed to expanding within the footprint. In Queens and Manhattan, we benefit from our brand, on-the-ground salespeople, and our ability to leverage in-place customer relationships. Boston and Miami require the development of new capabilities including new go-to-market plans, sales teams, network placement strategy, and construction capabilities.
TR: How is the Boston network expansion going?
CM: We have around 200 route miles of network deployed and in process in our Boston market and recently crossed a milestone of selling our 200th customer and 200th on-net location. We followed our initial market entrance with a major expansion, extending out west from Boston along the Mass Pike toward Marlborough, hitting several attractive markets along the route. We are nearing completion of this western expansion, after which we will continue to invest based on our expanding customer needs and we are active in several anchor-led network expansion conversations with strategic customers. We will build where our customers take us.
TR: The most recent expansion market is Miami. Why go all the way south to Miami?
CM: Why not go to Miami? The weather is great! Beyond that though are several reasons.
1) The competitive dynamic there was attractive to us. Relative to the customers we address, a single provider had consolidated most of the competition. 2) Miami, and really SE Florida, is growing anywhere between 5-10% on an annual basis depending on what metric you use, which is one of the fastest growing business environments in the country. 3) The addressable market in Miami is about $800 million, very similar in size to our addressable market in Boston, providing a meaningful market opportunity to leverage against our investment. Our initial deployment of approximately 135 route miles in Miami will enable us to address about a third of that larger Miami addressable market. 4) The combination of New York, Boston, and Miami puts Lightpath in three of the top ten US Metro markets, all conveniently on the East Coast, transforming Lightpath from a regional player, into a provider that can address a broader set of our customer requirements. We also found strong synergy in our customer base between Miami and New York. About 20% of the addressable market in Miami has direct overlap with existing and target customers we do business with around the New York area.
TR: Miami is rather different in terms of physical geography and regulatory bodies than Lightpath deals with in the northeast. Does that make for a different entry for you?
CM: Manhattan itself is surprisingly a fairly convenient place in which to build because they’ve set up an infrastructure conduit system that all providers are able to leverage. When you start getting into the boroughs and the outer areas, and even Boston, it becomes more challenging and difficult due to expense, bureaucracy, and extended permitting timelines. Fortunately, we have such an extensive, existing reach that our builds are typically very short. Our early days impression of Miami is different. It’s an easier environment in which to construct with more reasonable permitting timeframes. The environment in Miami has been welcoming and I believe customers are enthusiastic at the prospect of an alternative provider entering the market.
TR: How far along is your Miami expansion?
CM: We launched the Miami market in the first quarter of 2023. Initially, we are building out fiber throughout the Central Business District, with additional builds to the north and to the west towards the airport. The initial deployments encompass 55 route miles and we’ve begun the permitting process on construction of approximately 80 additional route miles. By next year, we should have roughly 135 route miles developed, and our plans are to extend beyond that through a phased investment cycle.
TR: Looking beyond Miami and Boston, does Lightpath expect to enter additional new markets?
CM: Yes. There are other markets that fit those same competitive dynamics that we find compelling. Our plan over the next several years is to be in 5-7 total markets. We’re not going to go into fifty markets though. When we go into a market, we’re going to go very, very deep. In New York, we probably have more sales and support team members on the ground than any other competitive fiber provider. In Boston we’re still growing, but we intend to go very deep with all our sales and support resources and cover a broad set of customers.
TR: How might you approach that next market?
CM: We have our eye on roughly 10 to 12 markets. A brand-new market takes a long time to develop, and a key part of our strategy is to find a way to accelerate our entry. It could be via the acquisition of an existing business, though those are fewer and farther between than they were 10-15 years ago. It could be through the identification of underutilized assets that exist there today, such as conduits. It could also be via an anchor tenant led build-out. Depending on those levers, it could cause us to jump one of the markets we are keeping an eye on ahead of the others.
Using Boston as an example, we found two small acquisitions that allowed us to accelerate that entry. One was under-monetized, just a pure asset with no revenue. The other one had some revenue, but I would say it was under-monetized and underdeveloped. In Miami, we were also able to find some assets that were in the ground that would accelerate our entry.
TR: What does today’s fiber M&A market look like in 2023?
CM: The team that we’ve brought onto the Lightpath platform probably has as much, if not more, M&A experience than anyone over the last 15 years around the consolidation cycle in our industry. I view the identification of, execution, and integration of an acquisition as a core competency of ours. Unfortunately, there’s not a whole lot out there, and what is out there has tended to be very expensive over the last several years. That’s part of the reason why we’ve shifted to a bit of a different market expansion strategy where we look for more opportunistic ways to enter and extend into new geographies.
While the debt markets were challenged in 2022, I do see some glimmers of improvement, but that has limited M&A activity recently. It’s just a case of finding the right opportunity that fits in with our strategy.
TR: How has Lightpath’s customer mix shifted over the last few years?
CM: Historically, Lightpath has been focused on mid-market customers in the enterprise space, with heightened penetration in a few verticals, healthcare, government, and education. Over the past 2 years, we have extended deeper into the financial vertical and large, strategic enterprises. We have also increased addressability in wholesale, carrier, and wireless, well beyond Lightpath’s historical focus. We are making our initial inroads with hyperscalers and content customers who tend to be more national buyers.
TR: Other than geographical expansion, where have you been putting your resources?
CM: In my first two years, it has been all about investing: investing in our network, investing in expanding our sales and support teams, investing in our processes and systems, and investing in attracting talented team members. We are in the early innings but have achieved that initial inflection to growth. We increased our sales bookings activity by 85% in 2022 vs. levels prior to undertaking this business transformation, which implies a high, single-digit annual revenue growth rate. We’re still working on improving and scaling operationally to recognize that growth, and I think we are creating a unique story in the space. There are few companies you can point to in our space that are driving that level of growth at a similar scale. We have the right team to execute on a consolidation play if the opportunity presents itself, and we will continue to look opportunistically at ways to expand to a handful of additional markets, however, we remain ultra-focused on our organic strategy and execution in our 3 operating markets.
TR: Thank you for talking with Telecom Ramblings!
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