- Zayo and Nvidia are building 16 new fiber routes across the U.S.
- Zayo top executives said they're focusing on high-growth AI corridors
- While Lumen's CFO said new long-haul routes don't have a good business model, Zayo said this deal is "good business"
In April, Bill Long, Zayo’s chief product and strategy officer, told Fierce that Zayo was building 8,000 more route miles of fiber, and the company had signed an anchor tenant for the build in a “monster deal.” Today, Zayo confirmed that the anchor tenant is Nvidia.
In partnership with Nvidia, Zayo is building 16 new fiber routes in high-growth AI corridors across the U.S.
Six of those routes are new (greenfield) routes, and 10 are overbuilds on existing Zayo fiber. In addition, Nvidia is also leasing fiber on eight other Zayo long-haul routes.
Zayo CEO Steve Smith told Fierce today, “Eight of those routes already had sufficient capacity that we didn't need to augment the network with a new build or an overbuild.”
The long-haul expansion is a multi-year build program, with individual routes scheduled for completion incrementally over the coming years. Timing will vary by route, but Zayo expects the first routes to be completed as early as next year, with the full set completed by 2030.
The company started seeing long-haul fiber demand grow a lot more about two years ago, as it was getting orders for much higher fiber counts than in the past. “So, we did a pretty deep analysis of where power was available throughout the U.S. and got conviction that those were going to be the quarters where bulk fiber was going to be needed,” said Long. “We came up with these geographies where we're confident data centers are going to be built, and we've been planning on these routes for over two years.”
Earlier this week, Fierce spoke with Lumen Technologies’ CFO Chris Stansbury, who said Lumen has backed away from deals to build greenfield long-haul networks because of the economics. “Building a new route, the economics stink,” said Stansbury. “We’ve stepped away from a number of deals that are in the marketplace today because the returns to shareholders are awful.”
However, Lumen is actually building a new greenfield route between Seattle and Minneapolis, the NorthLine, route. But Stansbury said that route makes sense financially “because we have partnered with somebody else on it, and so the economics for that are actually very good.” Lumen has declined to name that partner.
In Zayo’s deal with Nvidia, Fierce asked how much the new build is going to cost and how much Nvidia is investing, but Zayo declined to answer those questions.
Long said, “We will say that it's good business with an attractive return profile.”
Elaborating on the cost to build new long-haul fiber, Long said when building bulk fiber for multiple customers along the biggest power corridors in the U.S. “it is a great business.”
“We're kind of the only one who's been building new routes at scale over the past seven or eight years in the U.S,” he said. “And so, our ability to have that proven track record of a good business makes us kind of a natural choice for these new-build kind of opportunities.”
Long commended Nvidia for helping build these new routes with Zayo. “The amount of infrastructure we're putting in is not just enough for Nvidia to buy. They wanted to make sure we were putting in a build package that would enable the rest of the ecosystem, both for their own use and for the greater good of the ecosystem, which was a solid thing to do.”
Although both Smith and Long said the deal with Nvidia will offer good returns, they didn’t downplay the difficulty or expense of building new long-haul fiber routes.
They noted that it requires going through hundreds of municipalities and dealing with regulatory bodies and getting permits and dealing with multiple contractors. “There's a whole set of just school-of-hard-knocks learnings that we've had over the past six or seven years that gives us a kind of a unique ability that no one else has at scale to be able to deliver with confidence on these routes,” said Long.
Fiber counts will vary by route, but Smith said, “On the popular routes, we're doing at least a 1,728. Our build packages can support 20,000 fibers a month from what we're putting in the ground today. Obviously, you don't put all 20,000 fibers in the ground day-one. You put conduits that you can then fill with fibers over time.”
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