Strategic acquisitions and rebounding corporate profit will facilitate industry growth.
Los Angeles, CA (PRWEB) November 10, 2013
With mounting bandwidth needs from downstream firms, the Dark Fiber Network Operators industry has returned to growth in recent years. Dark fiber is simply optical fiber that is not yet connected to telecommunications transmission equipment; if the fiber were connected, it would be considered “lit.” Industry operators primarily lease or sell previously installed fiber to a range of markets, including telecommunications and internet-based companies, allowing these firms to manage their own networks.
During the tech boom in the late 1990s, a significant amount of telecommunications companies started to lay new fiber in anticipation of future sharp increases in demand for their services. However, when the tech bubble burst and technological advancements reduced the need for cable, demand ultimately fell short of supply. Yet, falling lease prices and increasing bandwidth needs since 2005 have caused the industry's performance to pick up in recent years. According to IBISWorld Industry Analyst Stephen Hoopes, “Over the five years to 2013, industry revenue is anticipated to increase at an annualized rate of 7.2%, to reach $1.0 billion; this growth includes a 3.6% rise in revenue expected in 2013 alone.”
There are numerous benefits associated with leasing dark fiber for downstream markets. For example, firms that are growing quickly and are uncertain about changes in future bandwidth needs can upgrade their data capabilities without coordinating with a carrier. However, fiber cuts can cause long outages for users of dark fiber, particularly in the case of long-haul services, where the problem can be a substantial distance away from the actual user. These long routes also highlight the high fixed costs and barriers to entry associated with becoming a new dark fiber network operator.
Over the five years to 2018, industry revenue is anticipated to increase. Over the past five years, industry players have added route miles to their networks through the purchase of smaller companies, largely because of the high cost of installing new cables. “This trend is anticipated to continue over the next five years; as such, the number of industry enterprises is forecast to decline,” says Hoopes. Meanwhile, growing corporate profit and demand for data transfer will underpin industry revenue growth, while pricing difficulties associated with long-term contracts and mounting external competition will temper the industry's performance.
Market share concentration within the Dark Fiber Network Operators industry is moderate. The top four companies are Zayo, Quanta Services, Level 3 Communications. The industry's level of concentration has increased in recent years. Among the industry's major companies, Zayo's market share has increased the most. While increasing downstream demand has explained some of this growth, a remarkable number of acquisitions in recent years have primarily explained the company's rapid expansion. In particular, the $2.2 billion acquisition of the industry's largest player, AboveNet, which included an additional 20,590 route miles of fiber, caused the company's revenue in fiscal 2013 to grow.
For more information, visit IBISWorld’s Dark Fiber Network Operators in the US industry report page.
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IBISWorld industry Report Key Topics
The Dark Fiber Network Operators industry primarily leases unlit (unused) direct fiber-optic networks to third-party organizations. The industry excludes companies that primarily provide lit services and proprietary and traditional cable operators
Key External Drivers
Industry Life Cycle
Products & Markets
Products & Services
Globalization & Trade
Market Share Concentration
Key Success Factors
Cost Structure Benchmarks
Barriers to Entry
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