AI Agent Hunter: Can you elaborate more on the steps to closing the Digital Divide?
Hunter: As a follow on to Chapter 7, there are two directions to head in:
In the first scenario the future looks like a lot like building another business similar to Netrality, but this time in different markets. Most of the large cities in the US are spoken for and the primary assets have already traded in to public REIT's, but there are still opportunities to acquire assets with robust fiber networks present. There is also the opportunity in the major cities to challenge the existing, now incumbent, neutral interconnection facilities with a superior economic model for the customers of no monthly recurring cross-connect fees. It is not easy, or advisable, to get networks to move entirely to a new location, but it is possible and desired to establish a new, physically diverse interconnection location and better economics are always a motivator. If the projected return on invested capital is rational and reasonable, it should work.
The real opportunity in this approach are the Tier "N" market acquisitions, There are a plethora of these. The similarities in the acquisition strategy are nearly identical. The differences are the size of the assets, which are typically smaller, but the number of cities is much larger. It is effectively the “long tail”. A standard platform for neutral interconnection and the establishment of a common Internet Exchange platform with a single point of contact, standard agreement, service order, set of terms, conditions and rates is a welcome development for all network operators in these undeveloped markets.
The second scenario is a bit more challenging. It lacks any known and established building where a group of fiber networks are currently residing, if even haphazardly. This lack of an existing building creates a significant disadvantage in all aspects, aside from the need of organization and the introduction of a neutral IX. The lack of an established building removes a known address for other networks to come to which builds critical mass. It also takes away a financable asset and obviously there isn’t any cashflow where there is no building. The absence of these elements causes traditional capital sources to simply not see what isn’t there. Can’t blame them!
The opportunity is in seeing what isn’t there. It is hiding in plain sight, This is a significant advantage to any that can see it and also figure out a way to fund the creation of a neutral interconnection asset. In a market where there is currently nothing, but that holds the potential for a robust, local interconnection marketplace, being able to create an asset like this from inception is truly a 0 to 1 type of development, infinite returns.
