Private equity can move faster on fiber deployments than government

The prospect of billions of dollars flowing to states from the Broadband Equity Access & Deployment (BEAD) program is causing private equity companies to also flood the market with investment funds for fiber.

On a panel at the recent Connect(X) conference in New Orleans, panelists were asked if private equity companies will compete for BEAD funds or if they will add to the overall investment in fiber. Two panelists — Jessica Koch, broadband program manager at Calix and Daniel D’Costa, principal within the Carrier and Reseller Vertical at Zayo — said that private equity will put up their own money. But they will look to partner with service providers who are applying for BEAD funds. In that way, service providers will be able to boost their business models by getting BEAD money as well as private funding.

Zayo has already seen a lot of private equity companies coming into the space aggressively, including GI Partners, Blackstone and Macquarie. And D’Costa noted that private equity, by its very nature, can move much faster than government programs with all the red tape.

A representative for Grain Management told Fierce Telecom recently there are “natives” in the private equity space, which specialize in telecom and have a track record of successful investments in fiber, towers, spectrum or data centers. And there are “tourists” that are flooding the telecom space because they sense financial opportunity.

Two prominent names in the space now are Apollo and BlackRock.

Apollo is the private equity company that purchased the ILEC assets in 20 states from Lumen Technologies for $7.5 billion and set up the new company Brightspeed. Its service territory encompasses about 6.5 million homes, making Brightspeed the fifth largest ILEC in the U.S.

BlackRock Alternatives formed a joint venture with AT&T to provide a wholesale fiber network across the U.S. called Gigapower. The joint venture will provide fiber infrastructure designed as a commercial open-access platform. It will lease the network to internet service providers and other businesses outside of AT&T’s traditional 21-state wireline footprint.

Panelists at the recent Connect(X) conference in New Orleans discussed “How Private Equity is Fueling Fiber’s Growth.” They were asked if there is a magic number that developers should target for the cost per home passed with fiber.

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Beth Hoffman, managing director with Berkshire Partners said that a lot of it depends on the density of the market. The cost per home passed in a dense city like San Francisco could be as low as $700. But in many of the rural areas that BEAD is targeting, the cost will be in excess of $3,000 per home passed.