As planning and deployments of 5G continue, and enterprises increasingly move their applications and data to the cloud, one thing has become crystal clear: unlike popular belief, there is nowhere near enough fiber in the ground to support this explosive growth. That’s right, even highly anticipated wireless 5G networks require a robust fiber network - in fact, just about everything “connected” would come to a screeching halt without one. This fiber shortage is both a challenge and an opportunity for service providers, and just select fiber providers are truly positioned to contribute.
The challenge is well-known; internet traffic is booming. Businesses are increasingly utilizing mission-critical applications from cloud-based software-as-a-service tools like Salesforce and Slack, to infrastructure-as-a-service platforms like Amazon Web Services and Microsoft Azure, to video conferencing and data replication. Meanwhile, consumers are burning up network bandwidth with real-time video and gaming applications. Both are putting significant strain on the fiber, coax, and legacy copper networks already in the ground, especially in the business-rich suburban markets.
And it’s only going to get worse:
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Business internet traffic in the U.S. is expected to reach 224 exabytes of data in 2023, a staggering 397% increase from 45.1 exabytes in 2016.
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It is estimated that more than 1 million small cells will need to be implemented over the next decade to support 5G.
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93% of organizations are using cloud services currently to access and store their data.
Massive investment needed
Now here’s the opportunity - which comes with its own set of challenges: All this data traffic requires access to a highly reliable, dense fiber network. And for networks to scale at a pace to keep up with the growing demand, that means a sizable fiber investment from service providers - something most might not be able to do or be interested in supporting financially.
Let’s look at three areas of opportunity:
1) 5G rollouts. If you look at the headlines and service provider commercials, 5G is already here, and in multiple markets. The reality is quite different. For 5G small cells alone in the U.S. market, the investment will be tens of billions of dollars to get enough fiber in the ground to support any kind of density. And 5G is a complex puzzle where fiber is only one piece:
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Regulatory approvals are a complex, multi-step process and they are different for every municipality.
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Network density is needed to cover even a small geographic area, especially in cities.
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Fiber must be run to each small cell and eventually back to each macro tower or access node.
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Power companies must be engaged to bring electricity to each small cell, taxing their labor resources.
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Carrier competition is intense, and the first mover oftentimes will have a significant advantage not only in network coverage, but in avoiding “burnout” from cities and towns that have to deal with 5G on a carrier-by-carrier basis.
Because of this first-mover advantage and the sheer cost of deployment, it’s unlikely that we will see multiple service providers in every U.S. city and town for quite some time.
Contrary to what you hear in carrier advertising, carriers simply do not have enough capital to deliver on their 5G ambitions on their own. We are likely to see some strange but necessary bedfellows pop up among traditional service providers, tower companies and utilities, along with a new breed of fiber-based service providers who focus squarely on bringing fiber to cities and business-rich suburbs.
2) The push of applications to the cloud at the enterprise level. Alongside traditional cloud-based and on-premises business tools, even before the onset of the coronavirus, businesses are increasingly using cloud-based video conferencing tools for everything from team calls to global board meetings. As the Internet of Things (IoT) grows and continues to add to the data load of enterprises, the cloud becomes critical for processing and storage. Nearly 60% of enterprise decision-makers say they are adopting a hybrid cloud model, which uses a combination of on-premises, private cloud and third-party, public cloud services with coordination between the platforms. Access to a high-quality fiber network is critical to help enterprises access these services and drive their business to the next level.
3) The continuing demand for regional data centers - despite rumors of their demise - will have a long-term play in the enterprise arena as there are a number of applications whose latency requirements make the cloud a poor fit. For enterprises requiring real time data replication, any more than 15 milliseconds of latency will result in poor performance. Regional data centers paired with a fiber network can reduce high levels of latency, delivering better performance.
The industry is thirsty for more bandwidth. With the long-term work associated with 5G rollouts, coupled with rapidly emerging new business applications, there’s a 10-year tailwind for high-capacity fiber network buildouts. Now, with the incumbent service providers laser focused on building out infrastructure like small cells for 5G, they are not as committed as they were in the past to building the capacity that is needed to support today’s demand. Selecting the right partnerships will be crucial and access to a high-quality, high-capacity, dense fiber network is critical for all these advanced services to succeed.
