Privately-owned Zayo Group is adding more fiber to its already-significant stockpile with the purchase of FiberGate, a dark fiber services company operating in the Washington, D.C. metro area. The acquisition includes 130,000 miles of fiber, and foreshadows a boost in bandwidth for businesses and government agencies in the nation's capital.
Why buy more fiber now? Despite the hype, most organizations today aren't using cloud-based services to support their primary operations. There are plenty of reasons for the hesitation, but one of them is a lack of necessary connectivity. Both enterprises and government agencies have focused heavily on virtualization within their data centers, but connecting storage resources across physical domains is a different matter. Among other issues, performance and security requirements present significant barriers.
Enter Zayo Group. Zayo's built up a large cache of fiber assets over the last five years, and is using them to satisfy bandwidth demand at the edge of existing networks. The FiberGate acquisition falls right in line with that mission, and it has the added benefit of creating new resources for Zayo in a strategic, bandwidth-hungry location. With federal efforts like the new Digital Government Strategy announced in May, and the Big Data Research and Development Initiative announced in March, the D.C. metro area is fertile ground for new fiber connectivity.
I spoke recently with Gillis Cashman, a managing partner at M/C Partners, one of Zayo Group's investors, and he talked about both the FiberGate news, and why there's such a strong market for fiber today:
There was a ton of capacity built out around 2000, and then the industry just stopped investing in the network completely... At the same time, though, at the end of the network – in the form of servers, laptops, and wireless phones – you had this huge surge in computing power… a huge imbalance… And that was fine when the computing resided on the device… but when computing needed to migrate from the device to the cloud, the network had to be as fast as that processor.
In other words, there's a lot of pent up demand for light-speed networks. And for companies with the right infrastructure assets, that means a lot of potential financial upside.
Meanwhile, Zayo Group is far from only focused on the D.C. region. Zayo's stockholders just approved another acquisition this week of AboveNet, a fiber services company operating in both the U.S. and Europe. Zayo is stocking up on a lot of fiber.