- Hyperscale cloud providers are asking fiber providers to build routes to rural locations to support new data centers
- When fiber companies evaluate these opportunities, they look for other ways to monetize the new fiber
- Metro fiber is also getting a lot more data center traffic, and AT&T is pre-deploying optical circuits to light up on demand
DATACLOUD USA, AUSTIN, TEXAS — Leaders from the data center and fiber industries came together in Austin, Texas this week as the Datacloud USA and Metro Connect conferences joined forces. And for good measure the conference organizers included the power generation companies, dubbing their 2025 show Datacloud Energy USA/Metro Connect Fall.
Fiber industry executives said they are getting plenty of requests from data center developers. But those developers are often pushing projects out of major metro areas in order to chase available power. So, they’re asking for fiber in places that don’t otherwise make economic sense for providers.
Sound familiar? Bringing fiber to remote areas is, of course, the goal of the government’s Broadband Equity, Access and Deployment (BEAD) program, which continues to evolve and so far has not resulted in many new connections.
Could the data center industry step in to connect parts of rural America? That depends in part on whether fiber providers are willing to take the terms offered by data center builders, primarily hyperscalers.
“Just because you can, doesn’t mean you should," said David Kamphuis, VP carrier sales at fiber provider Segra, part of Cox Communications. "We have to do what is right, fiscally."
Kamphuis was part of a panel at the Datacloud show entitled “How are new data center deployments driving additional fiber deployment?” moderated by Digital Bridge managing director Horace Zona. Some of the panel's commentary sounded similar to the talking points fiber providers use when asked why government subsidies are needed to connect certain areas of the country.
“If it made sense on Day One to build it, it would have already been built. It hasn’t gotten built for a reason,” explained Dan Davis, CEO and co-founder of Arcadian Infracom.
So, what does it take to get fiber providers to commit to a data center build? “You have to have a belief set not just in the one place, but all along these routes,” Davis said. He added that the cost of a fiber build is typically around $300 million, a fraction of the $2 billion to $3 billion a hyperscaler may be spending on the data center at the end of the route.
Tom Spackman, CEO of Gigabit Fiber, said his company has raised cash to deploy more fiber by selling a 51% stake to Blue Owl Capital. “We go back 25 years providing metro fiber,” he said. “The last 36 months, the hyperscalers have sucked the oxygen out of the room and we have pivoted to providing what these guys want.” What they want is massive fiber builds, he said. “The fiber count and the conduit count is really mindboggling.”
When it comes to building fiber in remote areas to support new data centers, Spackman said “we love the anchor customer to pay for all or more of the bill.” But there are exceptions to that rule. The Texas-based company is involved with Stargate’s first AI data center in Abilene. “Should we go build to a $10 billion or $20 billion factory that is creating human intelligence? The answer is yes, even if you have to maybe not have perfect financial discipline,” said Spackman.
Greg Ortyl, EVP and president of wholesale at Uniti Group, said publicly traded fiber providers often need to exercise stricter fiscal discipline than private companies, and he added that subsidies from the hyperscalers are getting smaller. “There are startups coming in, so we are seeing tougher stances from the hypers on how much they will subsidize,” he said.
Metro demand
Ortyl said not all the demand comes from remote locations. He said the fiber networks in major metros are typically inadequate for the needs of a hyperscale data center and he predicted that in the coming years the industry will see “a rebuilding of the entire national fiber infrastructure, both metro and long haul.”
John Golden, AVP product strategy and development at AT&T Business Fiber Products, confirmed that there are “billions of dollars going into metro and long haul. He said his company can consider fiber deployments holistically.
“At AT&T we have our business assets that comingle with our consumer assets and our mobility assets,” he said. “If there are consumers along the way, and there almost always are, and we want to put in some cell towers, it helps to mitigate some of the costs [of a fiber deployment].”
Golden also said AT&T is in the process of launching pre-deployed optical circuits, both 400G and 800G, in a number of areas. “We can turn those up within a day,” he said. He said AT&T’s program to offer these circuits “will be up and running in just a couple of weeks.”
Equinix will be one of AT&T’s first customers for this product, said the data center company’s John Hanahan, senior director, interconnection product management. Unlike the hyperscalers, Equinix is not breaking ground on new data centers in remote rural locations. The company’s Leanne Starace, SVP, global technical sales, explained the Equinix strategy. “We are building large deployments in metros where there is gravity of data, networks and end users,” she said.
Some of these projects will require upgrades to fiber networks, and providers may see these projects as safer bets than distant AI factories. But those behemoths need to be connected, and if traditional fiber players don’t deliver, look for startups with lower cost structures to step in.