Qwest Builds More Metro Fiber

In their Q4 earnings conference call last week, q announced that they will deploy metro fiber rings in six new markets outside their home region, hoping to “improve their out-of-region cost structure and competitive position.”  No kidding, Qwest has always lacked sufficient on/off ramps outside its home turf, it was a strategic mistake that originated back in the bubble that has weighed on the non-RBOC part of the company ever since. Qwest says the move is “a little bit of offense, and a little bit of defense”.

Qwest’s acquisition of OnFiber in 2006 seemed to be an attempt at a cure, but it was only the first step.  OnFiber just wasn’t big enough to solve their problems. I honestly expected them to do further M&A of metro fiber assets, but it never happened. The fact that they didn’t do so has led to some speculation that they would separate out and sell the classic Qwest fiber network, but they haven’t done that either. Their story over the last few years has been more about what they didn’t do than what they did do, it has been a decade-long rebuilding year. But this quarter’s solid results may portend further improvements, and their willingness to deploy capital outside their region implies growing confidence on their part.

Qwest’s new buildout also seems to confirm what we already knew, that M&A of any type is unlikely at the moment for most of the sector. After all, there are metro assets out there that would help Qwest’s out-of-region cost structure, and they aren’t very expensive. Larger targets such as XO and Abovenet have always made sense for them in terms of an asset fit.  But instead, they are finally using the assets and capabilities they purchased from OnFiber and expanding on them. They haven’t told us which six new markets they entering, if anyone knows please let me know.

I am curious also just what they mean by ‘deploy’, their plans remain a bit vague. Are they buying metro dark fiber IRUs? Or are they stringing high fiber count cables through conduits? To put it another way, are they mainly seeking to reduce costs by bringing existing revenue on-net, or are they intending to start bringing new buildings on-net and really compete in these new markets? I’m guessing it is the former.

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Categories: ILECs, PTTs · Metro fiber