One of the most impressive examples of a broadband service provider (BSP) utilizing private capital to scale quickly and dramatically started in 2007. At the time, Zayo was a small provider in Colorado and Minnesota. Using largely private capital, Zayo completed over 40 acquisitions and grew to over $2 billion in annual revenue by 2017. By 2019, the company was sold in a deal valued at $14.3 billion. That’s explosive growth across just 10 years.
More recently, I’ve seen a growing number of broadband service providers also discover the power of private investments to accelerate growth.
- Ziply Fiber in Washington recently used private investments to buy assets from Frontier. Investors funded $500 million beyond the purchase price just to create instant capital to push fiber faster. With that money, Ziply is now doing a large fiber overbuild project and taking their service area from 13 percent to 80 percent fiber-to-the-home.
- Consolidated Fiber in Ohio is taking a similar approach, using private funds to purchase valuable assets.
- In the United Kingdom, I’ve also seen Hyperoptic and Lit Fibre leverage private equity for faster growth.
What Broadband Service Providers Can Expect From Private Investors
Some general managers feel wary of private equity, but rural broadband investors focused on fiber infrastructure aren’t looking to “turn and burn” with their investments. They want to partner strategically and see a return over several years, and understand the effort and time it takes to roll out fiber networks.
Also, most government programs do not fully fund a network build, so private capital can be a perfect complement to government funding. These rural-broadband infrastructure projects offer long-term profitability with relatively low risk due to the unmatched capacity and lowest operating expense model. Therefore, these are sought-after investments in the market today; and there is a surplus of investors eager to connect with rural providers at any stage of their projects.
If you lead a rural BSP and want to sit down with a fiber-savvy private equity firm to explore the possibilities for rural broadband funding, here’s what you can expect.
- Faster Funding: Grants are a powerful tool for moving rural projects forward. That said, the application process is expensive, can take a long time, and sometimes leaves funding gaps. By contrast, I’ve seen BSPs get full funding within 45 days after a standard due-diligence period. None of them had to wait for an application window to begin.
- No-Risk Meetings: Private investors are eager to meet with BSPs, regardless of where you may be in the process of exploring or expanding broadband. Initial conversations are a meet-and-greet, not a high-pressure discussion.
- Interest in Long-term Plans: Private investors aren’t interested in funding one neighborhood here or there. They want to hear ambitious visions to scale up and increase your market share with a repeatable business model. (Think back to that example from the Zayo group!)
- Ongoing Support: As you leverage investments for growth, private investors will be eager to provide more broadband funding—no painstaking government application process required.
- Discussions Around Equity: There are many ways to structure partnerships, but expect to share some equity in your existing company or a new side company/LLC you may set up for rural broadband projects.
- Expert Support: Many private investors seeking these opportunities have years or even decades of experience in the telecommunications industry. You’ll benefit not only from their dollars but also their fiber-network build out expertise as you work together to make your projects a success.
Taking the No-Risk First Step To Explore Private Equity for Broadband Funding
Government grants have great value and can be an ideal opportunity. If you go that route and need support, Calix has a terrific track record setting up broadband businesses for success with our scalable, trustworthy, and simple solution designed for FCC compliance. But know that private investments can complement the funding and cover government funding gaps, or be leveraged separately from government funding, to allow you to scale growth faster. Government funding and private capital is therefore not an either/or proposition; but rather another source of building your financial syndicate.
If you have any interest in growth and expansion, now is the time to meet investors. Private investors are eager for introductions to BSPs in any stage of exploration to discuss new startups, asset acquisitions, or fiber overbuilds—be they greenfield or brownfield plans.
To help, I’m facilitating no-risk introductory discussions between BSPs and fiber savvy potential investment partners. Email me directly to learn more or get started. See why BSPs across the globe are opting for this more accessible and lucrative funding option. With a simple introduction, you might achieve growth faster than you ever hoped.
To learn more or request an introduction to potential investors, email Todd Ortberg at Todd.Ortberg@calix.com.