Data Centers Chase Power, Will Fiber Follow?

Data Centers Chase Power, Will Fiber Follow?

 

This week, leaders from the data center and fiber industries gathered in Austin, Texas, as the Datacloud USA and Metro Connect conferences were held jointly. To more comprehensively address the topics, the conference organizers also invited power generation companies, renaming their 2025 event "Datacloud Energy USA/Metro Connect Fall".

 

Fiber industry executives report receiving a high volume of requests from data center developers. However, in their quest for available power, these developers often push projects outside of major metropolitan areas. Consequently, they are requesting fiber to be laid in locations that lack economic viability on their own.

 

Does this sound familiar? Bringing fiber to remote areas is precisely the goal of the U.S. government's Broadband Equity, Access, and Deployment (BEAD) program, which is still evolving and has yet to result in many new connections.

 

Could the data center industry step in to connect parts of rural America? This depends, in part, on whether fiber providers are willing to accept the terms proposed by data center builders, who are predominantly hyperscale companies.

 

"Just because you can, doesn't mean you should," said David Kamphuis, Vice President of Carrier Sales at fiber provider Segra (part of Cox Communications). "We have to do what's right for us fiscally".

 

Kamphuis participated in a panel at the Datacloud event titled "How are new data center deployments driving additional fiber deployments?", moderated by Horace Zona, a Managing Director at Digital Bridge. Some comments from the panel sounded similar to the positions fiber providers take when asked why they need government subsidies to connect certain parts of the country.

 

"If it made sense to build on day one, it would have been built. There's a reason it wasn't built," explained Dan Davis, CEO and co-founder of Arcadian Infracom.

 

So, what does it take for a fiber provider to commit to a build for a data center? "You have to believe in not just the one location, but the entire route," Davis said. He added that the cost of a fiber build is typically around $300 million, which is only a fraction of the $2 billion to $3 billion a hyperscaler might spend on the data center at the end of the route.

 

Tom Spackman, CEO of Gigabit Fiber, said his company raised capital to deploy more fiber by selling a 51% stake to Blue Owl Capital. "We've been a metro fiber provider for 25 years," he said. "In the last 36 months, the hyperscalers have sucked all the oxygen out of the room, and we have pivoted to giving these guys what they want." What they want, he said, is massive fiber builds. "The fiber counts and the conduit counts are just mind-boggling".

 

When it comes to building fiber in remote areas to support new data centers, Spackman said, "We like the anchor tenant paying for all or most of it." But there are exceptions to this rule. The Texas-based company is involved in Stargate's first AI data center project in Abilene. "Should we build to a $10 or $20 billion factory that's creating human intelligence [referring to jobs]? The answer is yes, even if you might have to relax your strict financial discipline a little bit," Spackman said.

 

Greg Ortyl, Executive Vice President and President of Wholesale at Uniti Group, stated that publicly-traded fiber providers typically need to execute with stricter financial discipline than private companies, adding that subsidies from hyperscalers are diminishing. "There are startups coming in, so we are seeing the hyperscalers take a much harder line on how much they're going to subsidize," he said.

Metro Demand

 

Not all demand is coming from remote areas, according to Ortyl. He said that fiber networks in major metropolitan areas are often unable to meet the needs of hyperscale data centers, and he predicted that in the coming years the industry will see a "rebuild of the nation's entire fiber infrastructure, both metro and long-haul".

 

John Golden, Assistant Vice President of Product Strategy & Development for AT&T Business Fiber Products, confirmed that "there are billions of dollars being poured into the metro and long-haul" space. He said his company can look at fiber deployments holistically.

 

"At AT&T, our business assets are co-mingled with our consumer assets and our mobility assets," he said. "If there are consumers along the way, which there almost always are, and we want to put some cell towers up, that helps defray some of the cost [of the fiber deployment]".

 

Golden also said that AT&T is in the process of pre-deploying optical circuits (400G and 800G) in some areas. "We can turn those circuits up in a day," he said. He stated that AT&T's program to offer these circuits "will be up and running in a few weeks".

 

John Hanahan, Senior Director of Interconnection Product Management at data center company Equinix, said Equinix will be one of the first customers for this AT&T product. Unlike the hyperscalers, Equinix is not breaking ground on new data centers in remote rural areas. Leanne Starace, the company's Senior Vice President of Global Technical Sales, explained Equinix's strategy. "We are deploying at scale in metros where we see a confluence of data, networks and end users," she said.

 

Some of these projects will require upgrades to fiber networks, which providers may see as a safer bet than a distant AI factory. But those giant facilities need to be connected too, and if the traditional fiber players can't meet the demand, it's inevitable that startups with lower cost structures will be sought to step in.