Posted: 02/2001

BLECs Cautioned: Know Your Tenants Before
Playing with Fiber
By Josh Long

In a nation where copper and incumbents reign, unlighted fiber can satiate
in-building carriers starving for savvy applications and the flexibility to
layer enhanced services in the future.

Of course, in-building carriers must secure the clientele–and bandwidth
demand–to justify a dark fiber lease.

"You have to have a fair amount of bandwidth requirements in order to
justify the … expense of a dark fiber lease today," says Mark Davis, vice
president of engineering at UrbanMedia Inc. (www.urbanmedia.com),
a business services carrier that delivers broadband access and
network-integrated e-business solutions to small to medium-sized enterprises.

And then, there is downtime.

The wait to light the dark fiber, in order to provide services, can range
between three and six months, according to Shiv Padhi, director of corporate
development for Everest Broadband Networks (www.everestbroadband.com).

Because fiber cannot be laid at the doorstep of every single building, a
fiber splice point might be located more than a mile away, Padhi adds.

Still, for many carriers like Everest, the wait is worth it.

Metromedia Fiber Network Inc. (www.mmfn.com),
which began providing dark fiber during the late 1990s to carriers and
high-bandwidth users in Tier 1 areas, had autographed $3.5 billion in agreements
by the second quarter last year.

"Certainly the quantity of dark fiber is growing significantly,"
says Hilary Mine, executive vice president of New Jersey-based Probe Research
Inc. (www.proberesearch.com).

While in-building carriers, sometimes referred to as BLECs, manage their own
electronics and infrastructure, they are gaining flexibility. An in-building
carrier leasing a T1 or T3 line must brave capacity limits, but dark fiber
patrons can tweak their electronic equipment to spike traffic and incorporate
hip applications like streaming media.

Fiber, despite its prevalence in some metro markets, still plays second
fiddle to the incumbent: copper. Of an estimated 750,000 commercial buildings in
the nation, only 5 percent are wired with fiber, according to Bob Pommer, vice
chairman and co-founder of Universal Access Inc. (www.universalaccess.net),
the information and infrastructure provider that "stitches together"
networks across the nation.

The fervor with which some in-building carriers have wired buildings has not
always led to high bandwidth demand. Scrambling to hog real estate, some
organizations neglected to evaluate the tenants or their communication needs
carefully, some industry executives and analysts say.

"They didn’t take a whole lot of time to understand the demographics of
a given building," explains Tim McElgunn, a senior research analyst at the
San Jose, Calif.-based Stratecast Partners (www.stratecast.com).
"The problem was, there was no payback coming."

Companies like Allied Riser Communications Corp. (www.alliedriser.com)–a
public in-building carrier that provides first-mile broadband data and Internet
services to small to medium-sized businesses–are concentrating less on new real
estate and more on the customers in the structures they have wired. (Allied
Riser’s stock plunged from a 52-week high of $49.50 last spring to only a few
dollars as of last December.)

Says McElgunn, "The shift in strategy has gone from a geographic
expansion to increasing penetration in existing markets."

In time, these companies may entice more tenants to devour the rich
applications that dark fiber supports.

Chart: Significant Demand for Local Bandwidth

Chart: Technology Choices