With a little help from my friends

The philosophy of building out networks definitely has changed as capital markets have tightened. Gone are the days of service providers laying every piece of fiber on every back road and busy city street. At this point, letting someone else struggle for right of ways and tear up streets looks far more attractive and economical.

Verizon Communications last week revealed a deal with regional network wholesaler NEON Communications to give the incumbent more connectivity in Massachusetts and New York — states in which Verizon is allowed sell long distance.

Under the multimillion-dollar contract, NEON will provide dark-fiber backbone infrastructure to enable long-distance voice and data service in the two states. The deal follows existing arrangements between the two companies in which NEON gives Verizon lit-fiber capacity and space in points of presence.

Verizon is getting the lion's share of the fiber in the region from NEON, according to Claudia Cuddy, vice president of planning and engineering at Verizon Global Networks.

Verizon intends to use the dark fiber from NEON to connect its existing networks in Massachusetts and New York and to provide faster and more efficient provisioning times for long-distance services.

“They want to move quickly to market, and we have already done the build, so it is a great fit,” said Steve Courter, chairman and CEO of NEON.

NEON has amassed its network quickly because of strong ties to utility companies, according to Courter.

“Four of our major shareholders are big utility companies, and we have been able to use their rights of way,” Courter said.

That connectivity in smaller cities such as Manchester, N.Y., is just what Verizon was seeking, according to Courter.

“We are building into their facilities and connecting between cities and back into the New York area,” said Jack Dagle, senior technician and sales executive at NEON.

But NEON isn't Verizon's sole fiber source for the area. The company also has significant relationships with Metromedia Fiber Network and Telergy — relationships that provide more metropolitan connectivity for Verizon than the NEON deal, which focuses on smaller cities.

“NEON is just one of several relationships we have,” Cuddy said, noting the existing MFN and Telergy deals.

Conversely, Courter says the company is selective when choosing dark-fiber customers.

“I am very careful with whom I sell to. Dark fiber is our biggest asset,” Courter said. “Big customers use it for special applications, not just resale.”

Verizon also is preparing in areas where it is anticipates long-distance approval or where specific traffic levels flow through. That affects how Verizon assembles capacity.

“We really take a hybridized approach,” Cuddy said. “We do everything from build to lease to resale. There is a lot of capacity in the market, and prices are continuing to drop.”

Verizon is executing a targeted build approach, building out heavily in areas where the company expects to capture a large number of customers and carry a certain volume of traffic.

“In places of large volume, we may build. In other areas, we may lease or not even touch traffic and go with a resale model,” Cuddy said. “Resale is really the most cost-effective, but if volume grows too quickly, we will move to build. In some places, fiber is really cheap, while in others, it is really expensive.”

When Verizon does build, it has much more control.

“We aren't at the mercy of our partners,” Cuddy said. “The dilemma we have is in working with vendors to keep the prices down so we can continue to build.”

But the economics of cooperative buildouts often are too great to ignore, says Jeanne Schaaf, senior analyst at Forrester Research, referencing AT&T's build last year with providers such as Adelphia and CapRock Communications.

“A lot of providers are having a bit of an identity crisis [with buildouts],” Schaaf said. “A lot of them worry about how a lease or [cooperative build] would look…. But in actuality, it is very reasonable for them to do so.”