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Crains – FiberLink sells to Zayo

Local investor sells Chicago-Denver fiber network

October 07, 2013

During the depths of the telecom bust, Ken Anderson and Christopher Jensen bought an unused fiber-optic network that had been built between Chicago and Denver, betting that demand would come.

That day has arrived. Their company, Chicago-based Anderson Pacific sold the network, called Fiberlink, to Zayo Group LLC, a Denver-based bandwidth provider backed by private-equity firm GTCR.

The deal comes amid a buying spree by Zayo and others, as excess fiber-optic capacity finds plenty of customers amid the explosion of data that’s being driven by smartphones and other devices connected to the Internet. Time Warner Cable Inc. today said it’s buying DukeNet Communications Inc., a fiber network in the Carolinas, for $600 million. Last week, Zayo bought a fiber network in Minneapolis for $41 million.

Terms of Zayo’s Fiberlink acquisition were not disclosed, but it’s likely in the tens of millions. Anderson Pacific bought the 1,200-mile network, which was built for more than $100 million at the peak of the first dot-com boom in 1999-2000, out of bankruptcy for just $3 million in 2004.

But Anderson Pacific says “we bought at bottom and sold at a place where we’re happy,” Mr. Jensen says.

Demand for fiber is surging, particularly among media and technology companies that are moving video and other bandwidth-hogging amounts of data. Chicago is a major beneficiary of this trend because it lies at the center of the nation’s fiber networks, which largely follow rail lines laid down more than a century ago.

“Zayo had eyed the network for some time,” Mr. Anderson said. “It’s a unique network. There’s no other direct network from Chicago to Denver. We’re the electronic Interstate 80 between Chicago and Denver.”

That’s a good place to be these days. Google Inc., Facebook Inc. and Microsoft Corp. all have, or are building, massive data centers in Iowa.

The Fiberlink network was “dark fiber,” or unused capacity, when Anderson Pacific bought it. “At the time, it took guts,” Mr. Anderson said. “We didn’t know how long it would take.”

But companies have gradually begun using it. Two of Anderson Pacific’s investors were companies that had a need for capacity, as well.

Mr. Jensen wouldn’t say exactly how much of the fiber is in use, nor identify the customers that have leased it. The network also contains unused conduit that will dramatically lower Zayo’s costs to add capacity.

Mr. Anderson is a veteran telecom investor, who has bought and sold cellular towers, wireless spectrum, fiber-optic networks and data centers over the past 35 years. Anderson Pacific owns a data center at 725 S. Wells St. and is an investor in a new fiber-optic network being built between Atlanta and Miami. It’s also making another technology play, investing in the area of machine-to-machine networks, also called the “Internet of things.”

“We’re not done,” said Mr. Anderson, 68.

Editor’s note: The story has been updated to correct the address of Anderson Pacific’s data center.

Follow John on Twitter at @JohnPletz.

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