Zayo’s Fiber Bet: Scaling Long-Haul and Metro Networks for AI Data Centers
Zayo Group Holdings Inc. has emerged as one of the most aggressive fiber infrastructure players in North America, particularly in the context of AI-driven growth. With a $4 billion investment in AI-related long-haul fiber expansion, Zayo is positioning itself as a critical enabler of the AI and cloud computing boom.
The company is aggressively expanding its long-haul fiber network, adding over 5,000 route miles to accommodate the anticipated 2-6X increase in AI-driven data center capacity by 2030. This initiative comes as AI workloads continue to push the limits of existing network infrastructure, particularly in long-haul connectivity.
New Fiber Routes
The new routes include critical connections between key AI data center hubs, such as Chicago-Columbus, Las Vegas-Reno, Atlanta-Ashburn, and Columbus-Indianapolis, among others.
Additionally, Zayo is overbuilding seven existing routes to further enhance network performance, resiliency, and low-latency connectivity.
This new development is a follow-on to 15 new long haul routes representing over 5300 route miles of new and expanded capacity deployed over the last five years.
These route locations were selected based on expected data center growth, power availability, existing capacity constraints, and specific regional considerations.
The AI Data Center Sector: A Significant Driver of Fiber Infrastructure
The exponential growth of AI-driven data center demand means that the U.S. faces a potential bandwidth shortage. Zayo’s investments look to ensure that long-haul fiber capacity keeps pace with this growth, allowing AI data centers to efficiently transmit data between key markets.
This is especially important as data center development locations are being driven more by land and power availability rather than proximity to market.
Emerging AI data center markets get the high speed fiber they need, especially as they are moving away from expensive power regions (e.g., California, Virginia) to lower-cost locations (e.g., Ohio, Nevada, Midwest).
Without the high-speed networking capabilities offered by companies like Zayo, these developments are far less practical.
US Fiber Infrastructure Outlook
Currently, the US fiber infrastructure is insufficient to meet demand and growth projections. Without new fiber routes, bandwidth congestion could throttle AI adoption, limiting growth in AI-driven applications.
Low-latency fiber networks are a key component of AI growth. AI applications need ultra-low-latency connections, especially for real-time inferencing and federated learning across multiple data center locations.
These workloads also require huge bandwidth, as training AI models like OpenAI’s GPT-4 and Google’s Gemini demands petabit-scale data transfer between data centers. This bandwidth demand makes Zayo’s 400G -enabled infrastructure stand out.
Hyperscalers such as Microsoft, Google, Amazon, and Meta need high-capacity long-haul fiber to power AI workloads. Their continued investment in AI data center infrastructure shows the demand for the high-performance interconnection and long-haul fiber that Zayo is specialized in.
Perspective on Zayo's US Fiber Positioning
Zayo is executing one of the largest fiber expansions in response to AI-driven demand. Its long-haul fiber network will be crucial for AI workloads, ensuring the necessary bandwidth and low latency for hyperscale AI operations.
Competitors, from specialized businesses such as Lumen Technologies and traditional telecom players like AT&T and Verizon, lack the very specific focus that Zayo is exploiting. Zayo is taking this opportunity to focus on the rapidly expanding AI data center connection market while competitors such as the telcos have more of a general cloud connectivity focus.
There is a certain level of risk in Zayo’s singular focus but given the level of investment that is being made in AI data centers, the risk, at this time, seems minimal.
Lumen has discussed the over $8 billion in related deals they have made in hyperscale networking, but it is clear that the market has room for multiple players, given the overall investment by those hyperscalers in infrastructure.
Zayo’s point is that they are the only provider that continues to build out significant long-haul fiber routes. And by doing so, they position themselves as the provider of choice for the hyperscaler and AI data center builders.
Steve Smith, Chief Executive Officer at Zayo, points out that the company is responding to the demand that they have already been reacting to, saying:
Keeping pace with the next wave of AI growth will require new long-haul networks to enable the rapid scaling of capacity needs in both existing and emerging AI data center markets. In 2024, Zayo saw significant AI-driven demand for long-haul routes, including more than $1 billion in AI-related deals and an additional $3 billion in pipeline. This demand shows no signs of letting up. As the complexity of long-haul builds continues to be prohibitive to many providers, Zayo remains the only company building long-haul routes at scale to lead this next phase of infrastructure growth.
From Long-Haul to Urban Networking
Zayo also just announced it would be acquiring Crown Castle's fiber cell assets in a deal valued at $4.5 billion. This acquisition is significant for both companies and the broader telecommunications infrastructure landscape.
Zayo, owned by EQT and DigitalBridge, reportedly outbid private equity firm TPG in this acquisition. This $4.5 billion investment is on top of the $4 billion that has been committed to the fiber network buildout. Crown Castle has a value of over $38 billion and outside the assets being sold operate over 40,000 cell towers across the US.
Acquiring Crown Castle's fiber assets will significantly bolster Zayo's metro fiber footprint, complementing its existing long-haul network. This expansion will enable Zayo to offer more comprehensive services to its clients, including a broader range of enhanced connectivity options for data centers, enterprises, and carriers.
Further, increasing their urban and metro connectivity options will improve their capabilities as an end-to-end provider.
According to Zayo, they are one of the only companies actively investing in expanding their network and that their “North America network spans 16.6 million fiber miles with 820,000 fiber miles and 14 new 400G-enabled wavelength routes added in 2024.”
The Crown Castle acquistion will add over 90,000 route miles of fiber to Zayo's networks. EQT, one of the owners of Zayo, is acquiring Crown Castle's small cell assets in a separate $4.5 billion deal.
Implications for DigitalBridge
DigitalBridge, formerly known as Colony Capital, has strategically positioned itself as a leading investor in digital infrastructure by acquiring and managing a diverse portfolio of data center operators. In 2019, the company acquired Digital Bridge Holdings, which owned stakes in DataBank and Vantage Data Centers, for $325 million. This acquisition marked a pivotal shift towards digital assets, aligning with Chief Executive Officer Marc Ganzi's vision for a cloud-powered future.
Building on this momentum, DigitalBridge expanded its footprint by acquiring Switch Inc. for $11 billion in 2022. Switch, known for its advanced data center facilities, complemented DigitalBridge's existing investments and underscored its commitment to meeting the escalating demand for data center services. (Last September, Reuters reported that Switch is considering an IPO that could value the company at approximately $40 billion, including debt.)
Now, DigitalBridge's ownership of prominent fiber infrastructure provider Zayo Group Holdings Inc. enhances its ability to offer integrated solutions that cater to the growing needs of AI and cloud computing sectors. This strategic alignment of data center operations and fiber infrastructure positions DigitalBridge as a comprehensive enabler in the digital infrastructure landscape.
Marc Ganzi, CEO of Zayo investor DigitalBridge, said:
As AI reshapes industries and accelerates economic transformation, this transaction underscores the vital nature of fiber and the critical role it plays as the backbone of innovation, productivity and market growth. With Crown Castle’s robust metro-focused assets, Zayo will be well-positioned to fuel AI adoption, enhance connectivity solutions and accelerate technological progress. We look forward to continuing to support Zayo as it helps to position the United States as a global powerhouse for AI and strengthen the country’s industrial capabilities.
