Things are looking up for dark-fiber providers: By the end of this year, revenues will grow at an average annual rate of 3.7 percent to reach $986.2 million.
Dark-fiber providers lease or sell their unused fiber-optic cables to communications or Internet-based companies for the purpose of creating a communications network.
According to IBISWorld industry analyst Nikoleta Panteva, “As the amount of data and broadband use has grown, demand for networks that support communication has increased as well, thus supporting industry revenue growth.”
While revenue stagnated during the recession due to the discounted rate at which dark fibers were offloaded, growth has been substantial in the years that have followed. Adds Panteva, “The combination of increased broadband connections and rebounding corporate profit has supported strong revenue growth during the past five years.”
The industry’s largest players have outpaced overall industry growth because of their strategic acquisitions. To gain resources (e.g., fiber-optic cables), players often buy the capital of smaller companies because it is too costly to install new cables. As a result of the acquisition activity, the number of participating firms has declined each year on average since 2007 to 165 in 2012.
IBISWorld says this trend is likely to continue for the next five years, though at a less pronounced rate because the dark-fiber industry is considered to have a low level of concentration.
“But as operators continue to seek out a competitive advantage by providing an expansive dark fiber network for large telecommunications companies that allows them to improve their products and services, industry concentration will increase over the next five years,” it says. “Meanwhile, growing corporate profit and demand for data transfer will continue to underpin industry revenue growth.”