Dark fiber could yield deep savings for wireless carriers

Dark fiber is an investment that more wireless network operators are exploring as they look for ways to manage operational costs, because it is usually less expensive to lease dark fiber than it is to lease lit fiber. Lit fiber has been activated by the company that owns it, and that company will charge mobile network operators a fee to backhaul traffic over the fiber network. Dark fiber, on the other hand, is useless until someone activates it, making the monthly payments for this resource lower.
Carriers activate dark fiber by installing an optical modular transceiver, often called a hot-swappable small form factor pluggable. Managing fiber networks is a relatively new business for wireless carriers; their entry into this business came with the rollout of LTE networks. Traditional copper backhaul is less suited than fiber for the IP protocols, high speeds and low latency of LTE.
“With the deployment of 4G the industry realized that [copper] was a constraint, so there has been a big, big transition to provide fiber to all these different base stations,” said Omar Flores, global business development manager at 3M.
During the early days of LTE, carriers relied heavily on lit fiber, according to analyst Aaron Blazar of Atlantic-ACM. Blazar said that in the future he expects to see more reliance on dark fiber. Dark fiber is often a good fit for small cell deployments, but carriers also are using it to backhaul tower traffic.
“We’re also seeing the fiber backhaul side of things evolve to a dark fiber model at macro sites, as operators are looking for ways to better control their cost structure from a backhaul perspective as well as manage ongoing capacity needs,” said Blazar, speaking recently on RCR Wireless News’ tower technology trends webinar.
Operators pay for dark fiber in various ways. Fiber is often priced per route mile, and carriers will pay for each strand they want to use. Often carriers will pay up front for a 10- or 20-year lease, called an indefeasible right of use. IRUs can be capitalized, meaning that carriers can depreciate this investment over time.
Verizon Communications is investing in its own fiber assets by purchasing XO Communications’ fiber network business for $1.8 billion. The fiber purchase is expected to cut both operating expenses and capital expenditures, Verizon said. The carrier also may end up counting some of its competitors as customers on its fiber network.
Analysts say companies that own fiber in the U.S. are set to profit from the ongoing densification of wireless networks. While operators in some countries are deeply invested in wireless backhaul, U.S. operators are blessed with a relative abundance of fiber.
“The U.S. is a fiber-rich country,” said Flores. “There is a lot of fiber, so getting fiber from that fiber ring into the backhaul will continue to be an area of opportunity for the whole industry.”