The future value of a dark fiber lease to enterprise users
Partnering with an independent dark fiber infrastructure organization has tremendous value. Not only does a dark fiber network provide enhanced speed, increased security and scalability for the future, procuring a dark fiber lease enables your enterprise to control its networking infrastructure in ways that would be difficult with a major internet service provider (ISP).
What is a dark fiber lease?
To avoid confusion, when we speak of a dark fiber lease, it is in terms of financing a fiber network. There are two ways to finance a fiber network – an IRU and a dark fiber lease agreement. When speaking of the means to finance a dark fiber network through lease, we will use the term dark fiber lease agreement.
Dark fiber lease agreements allow the end user to have control over the fiber network throughout the length of the agreement. On the other hand, end users can opt for a dark fiber indefeasible right of use (IRU), which grants rights to the fiber network but requires a longer commitment.
Lease agreement contracts for dark fiber, according to generally accepted accounting principles (GAAP), are seen as an expense. Thus, the lease of dark fiber is accounted for as a current liability, with the remaining contract viewed as a non-current liability. Conversely, IRUs are considered assets, which would be amortized over the life of the contract benefit period.
The primary benefit of a dark fiber lease agreement is flexibility. If you’re unsure of the length of time you’ll use the network or can’t afford the upfront payment associated with an IRU, leasing is the best option. On the other hand, IRUs are seen as a better long-term value. An IRU is a set payment that doesn’t increase with inflation or market shifts.
What are the advantages of leasing dark fiber for your IT infrastructure?
A critical component needed for an IT infrastructure is a fast, reliable and secure network capable of scaling up with potential growth. With dedicated fibers, a network based on dark fiber could eliminate many of the shortcomings found in IT infrastructures based on copper telecommunications networks.
The combination of cloud computing, networked devices and internal data transfer and storage has put a strain on traditional IT infrastructure plans. The three components demand bandwidth at ever-increasing rates. The question businesses must ask is whether or not they are prepared to answer immediate and future demands as the business grows.
With a dark fiber lease, your internal IT department has the means to control the network without relying on another party to operate the framework. Your enterprise would merely be leasing the physical wires from an independent dark fiber organization and wouldn’t be subject to the organization’s rules and regulations outside of the payment structure and maintenance procedures. A dark fiber lease covers the sole use of the fibers while through a telecommunications company, users share fiber networks.
How are ISPs shaping the dark fiber infrastructure?
Major ISPs are starting to build new and buy existing fiber infrastructures since the demand for gigabit service is increasing. AT&T has been introducing fiber network options across St. Louis and Spectrum is now offering fiber internet to businesses. Growth in fiber ownership will limit future competitors from entering the market.
Many cities, including St. Louis, have an existing dark fiber infrastructure. With an existing infrastructure, cities are looking at provisions that make use of the infrastructure. Ideally, the cities would like to own the fiber infrastructure, with the goal to be carrier neutral. However, telecommunications companies are resistant to this and would rather own and control their own infrastructure. Under a model in which the city owned the fiber networks, ISPs would be required to charge a fair market value, enabling a fair access use of the infrastructure.
What does this mean for your business?
Until cities own the infrastructure and implement a carrier-neutral system, enterprises have the opportunity to eliminate the middleman, additional parties, and ancillary fees. By leasing your own dark fiber infrastructure, you can develop a network specifically tailored to your business. Leasing fiber now reduces dependency on large ISPs later. The dark fiber lease enables a structured payment system that reduces the risk of unknown future liabilities and spikes in cost structures.
As ISPs, the city and other stakeholders purchase and lease existing infrastructure and lay their own fiber networks, the lucrative opportunities to control your own network diminish. Fiber internet demand is increasing, and the ability to control your own dark fiber network will inversely decrease.
Find out what your business is missing out on
Drastically improved speeds, enhanced security, increased scalability, reduced downtimes and flexible financing options are just some of the ways a dark fiber network can improve any business’ network connectivity. Are you ready to learn more? Download our desktop guide to fiber networking.