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The internet content providers (ICPs) continue to build global systems to connect their ever-growing network of data centers. The ICP connectivity networks consist of lit services provided by the communications service providers (CSPs), dark fiber–based networks, and commissioned networks both wholly owned and within partnerships. The ICPs are heavily reliant on the CSPs for both the lit services and dark fiber networks. In the very high bandwidth data center interconnect portion of the market, the ICPs prefer to construct dark fiber–based networks when dark fiber is available in the market. Dark fiber has been available in selected markets for over two decades, but it is not universally available. There are islands and deserts of dark fiber availability. Additionally, a select few wholesale-oriented CSPs offer dark fiber at scale. These CSPs have structured themselves for a wholesale business, including a cost structure aligned with a wholesale revenue structure. Other CSPs have supplied dark fiber in one-off financial crunch situations.

As ICPs expand beyond their lead markets of North America and Europe, they are in search of other markets that can provide dark fiber. In many international markets, a wholesale dark fiber market does not exist as incumbent CSPs have fiber but might not be structured to support dark fiber.

The ICPs' heart-warming proposition? Sell us dark fiber, the "crown jewels" of your network for "fractions of pennies on the dollar" or we will fund your future competitor. ICPs are not offering upsides in their cloud economics revenue. Few would consider this type of offer as win-win. Indeed, in the schoolyard, this type of behavior would be considered bullying.

So, what can a CSP do when the ICPs come calling for fiber? The answer is to be aware, be wary, and be prepared. ICPs' overtures of expanding services in new territories require network connectivity. Some markets have avoided outright dark fiber sales and served via high capacity lit services. Remove the rose-tinted glasses when reviewing line-by-line contract details. Recognize the bullying tactics for what they are and understand all the potential risks and any concrete upsides.

Straight Talk is a weekly briefing from the desk of the Chief Research Officer. To receive this newsletter by email, please contact us.

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