Yankee Group Sees Opportunities for Regional Fiber Networks

📅 March 1, 2002 - While the national fiber-optic carriers are struggling, regional carriers, especially those serving Tier 2 and Tier 3 markets, aregoing strong, according to Yankee Group (yankeegroup.com) research.

Regional carriers include Dominion Telecom of Richmond, Virginia, ProgressTelecom of St. Petersburg, Florida, and Norlight Telecom of Brookfield,Wisconsin. All three are well-positioned to capture pent-up demand, theresearch firm said. Dominion Telecom, for example, builds dense networksusing compact rings to bring Tier 1 city-grade service to smaller metroareas east of the Mississippi River.
Unlike the national carriers that concentrated on connecting the Tier 1markets, the regional carriers focused on building networks connecting Tier2 and Tier 3 markets in a specific geographic territory. In the recentYankee Group Wholesale Communications Services Report entitled "Trends inWholesale Products and Services," analyst Mary Regan shows that thisstrategy is paying off. Based on Yankee Group interviews with serviceproviders and their customers, the report reveals that while demand andpricing for fiber services vary widely based on specific routes and markets,demand for wholesale services in Tier 2 and Tier 3 markets is still strong.In 2001, wholesale bandwidth demand in the United States overall grew in the11% to 20% range. In Tier 2 and Tier 3 markets, demand increases of 26% tomore than 30% were reported.
According to Regan, "The relatively underdeveloped infrastructure,particularly in Tier 2 and Tier 3 metro areas, and the need for routediversity in metropolitan regions contribute significantly to demand." Inaddition to stronger demand, bandwidth prices are declining more slowly inTier 2 and Tier 3 markets than in Tier 1 markets. While some Tier 1 routessaw price declines of 26% to 30%, Tier 2 and Tier 3 route prices declinedbetween 6% and 15%. Wholesale growth in the less served Tier 2 and Tier 3markets will continue, as few service providers' networks have full reach inthese areas.