Cogent is finding that the ongoing emergence of dark fiber providers means it has greater purchasing power for the metro fiber connectivity it needs to serve its business and wholesale customers.
The service provider has long-term dark fiber indefeasible rights of use (IRU) agreements with over 225 different suppliers and it continues to look at other emerging options.
Dave Schaeffer, CEO of Cogent, told investors during the 2017 Media, Communications & Entertainment Conference that the service provider says the IRUs it has with these suppliers won’t expire for a number of years.
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“Our IRUs today have an average remaining life today of 20-plus years,” Schaeffer said. “We have renewed some IRUs that have come due.”
Schaeffer added that the desire for dark fiber from a host of enterprises and wireless operators is benefitting Cogent when it shops for service.
Some of the emerging dark fiber players include REITs like Uniti Fiber, Crown Castle and regional provider Fatbeam, which has found a sizeable niche in the e-Rate and wireless markets.
While Cogent did not reveal which dark fiber players it works with, the service provider says the bevy of available dark fiber is encouraging.
“We’re in a golden age of fiber supply,” Schaeffer said. “There are more sources today than there have ever been being driven by things like 4G, governmental programs, e-Rate and a lower negative cost of capital for companies deploying fiber.”
Cogent has been proactive in renewing IRU contracts with fiber suppliers’ own right of way updates.
A number of these renewals have no costs related to them other than an operations and maintenance expense.
“We have no material IRU expense for the foreseeable future,” Schaeffer said. “We do have an O&M expense that typically grows 2-3% per year, which becomes incremental profit for the carrier who sold us the fiber IRU.”
Cogent will continue to purchase long-term dark fiber IRUs from more suppliers in the United States and in other regions like Europe.
Schaeffer said that the diversity of suppliers enables the service provider to negotiate better IRU deals with existing suppliers.
“I think we’re going to buy from more suppliers, continue to have a long duration, and we don’t see any material risk to our business for more fiber purchases,” Schaeffer said. “In fact, we’re seeing more suppliers, which has helped us put pressure on lowering our O&M costs.”
Schaeffer added that in Spain, France and in California, “we have abandoned fiber that we fully paid for because we found a better deal on maintenance.”