Data centers catering to AI bring more fiber to rural America

Rural broadband is getting a big boost from the Broadband Equity, Access and Deployment (BEAD) program, but rural broadband could also get a boost from the AI-fueled data center boom — even if we don't usually think of AI and rural at the same time.

Public cloud providers need fiber to connect a growing number of data centers in places like Council Bluffs, Iowa, Virginia’s Prince William County, and Midlothian, Texas. 

“Anywhere you build a new data center will drive incremental network construction by at least three providers,” said Frank Louthan, equity analyst and managing director at Raymond James. Louthan said applications that use artificial intelligence are driving demand for data centers, and regional ISPs, dark fiber providers and hyperscalers are all building fiber networks to support new data centers.

Louthan said fiber providers like Lumen and Zayo could benefit from this demand, and that as they extend their networks for data centers, they will create new opportunities for fiber-to-the-home (FTTH). As they bring fiber to small towns, they can lease it to local ISPs who can extend the network to residences.

Firms building fiber networks to support data centers are ready to work with regional telcos as they deploy in rural areas. “We are the spine, and other carriers [can] either lease fiber or build conduit off of it, and be able to feed the rural communities,” said Josh Snowhorn, founder and CEO of Quantum Loophole.

Run by veterans of Cyrus One, Apple and Verizon, Quantum Loophole has raised more than $100 million to build infrastructure, which it plans to wholesale to data center developers, including a 40-mile fiber ring, 2,100 acres of land, and agreements with providers of power and water.

Snowhorn said his company is building in rural areas in Frederick and Montgomery County in Maryland and Loudoun County in Virginia, passing “farmers and small towns that really have terrible connectivity now.” Quantum Loophole itself has no plans to light up individual homes, but the company did connect some residences to fiber in exchange for easements.

“We had farmers who were not so giddy about us building this big, giant trench in front of their house,” Snowhorn said. So Quantum Loophole offered to bring the fiber to those homes.  “We won’t light it, it will be an FTTH provider, an ISP, someone in the region who will do it, but at least they’ve got that baseline piece done, and that’s a big deal to them,” Snowhorn said. 

Some regional ISPs may jump at the chance to lease a fiber backbone, but others who can afford to build will prefer owner’s economics. In the Des Moines, Iowa area, both Meta and Microsoft have built huge data centers, but local ISP MiFiber chose not to lease fiber from the hyperscalers. “MiFiber takes great pride in building our own fiber network. We have our fiber in the ground to serve our customers,” a company spokesperson said. She added that MiFiber’s parent company serves rural customers, and also uses its own fiber rather than leasing from others.

On the supply side, some regional ISPs using BEAD funds to build new FTTH networks may find that the hyperscalers are competitors. Demand from these giants can drive up prices and reduce availability of fiber and fiber optic equipment. 

Quantum Loophole’s Snowhorn said he ran into competition from the hyperscalers when he procured fiber to build his network. The supply chain was tight and several manufacturers told Snowhorn he would have to get in line behind the likes of Google and Microsoft. Snowhorn said he ended up working with a higher-cost provider who could guarantee him the fiber he needed. Now, the hyperscalers are no longer his competitors; as he starts to wholesale his fiber they are his biggest customers.