Fiber Networks: The Economics of Access

As any network manager or CTO can corroborate, building your own fiber optic network from the ground up is not for the faint of heart. While fiber optic networks provide the best conduit for high-bandwidth data transmission, building a fiber optic network isn’t cheap—and it’s certainly no cheaper than building a legacy copper network.  The cost of the electronics and the equipment requires significant upfront capital investment.  However, the equipment cost is almost immaterial relative to the cost of labor and construction. The network planning, the permitting process with local county/city government and labor costs drive up the construction expenses far more than the fiber cable and equipment.   Decisions on what fiber route build is often is based on construction costs and ease of the permitting process versus the cost of the fiber itself and the equipment.

The final payout of building your own fiber network is that fiber technology enables capacity that is exponentially higher and has essentially no physical limitations.  With continuous improvement of laser technology, companies adopting fiber-based networking are future proofing their investments and securing the fastest and most versatile method of data transmission.

During the Internet and telecom boom in the late 1990s and early 2000, companies built speculative fiber optic networks, hoping to provide high-bandwidth services to places they thought demand would come from. Many of these companies went bankrupt or had to restructure their debt.  The very high cost of building and operating a metropolitan fiber network demands high-levels of capitalization, which is why very few new players have entered the market since 2000 to build and provide fiber-based network services.

Our industry is going through a consolidation phase precisely because of the buildout economics.  Alpheus is very fortunate in that we own and operate one of the largest fiber networks in Texas.  We already have the fiber “in the ground”.  To meet future capacity demands of our customers, we simply need to upgrade our optical equipment and take advantage of the virtually unlimited fiber cable capacity.

Francisco Maella, COO, Alpheus Communications