Zayo: Second Act Has Begun……

May 17, 2022 | “Strange Bedfellows” was the phrase that popped into my head when I read Zayo’sMay 10th press release.  While I was not surprised to see Zayo's news about the network expansion and 400G upgrade (under DigitalBridge and EQT, Zayo will never be accused of under-investing), it was the quote by my old fan favorite Cogent CEO Dave Schaeffer (a CEO I have known for 20+ years) within the press release that was somewhat interesting. 

Specifically, Schaeffer noted:  “Cogent Communications is at the cutting edge of the IP / communications industry, and we are constantly expanding our footprint to new facilities and new markets. Zayo’s future-ready, reliable dark fiber network with route diversity is an essential component in our network ….We look forward to leveraging Zayo’s dark fiber footprint to grow our network in the future.”

This was noteworthy for a few reasons.  First, Dave Schaeffer is a CEO who typically likes to fly under the radar.  Second, these two companies represent very different models.  One very asset heavy (Zayo); one asset light (Cogent).  However, they do work together, with Zayo representing an important partner and client of Cogent.  While Cogent (and Dave specifically) is not normally one to throw out quotes easily, the fact that they did we believe offers further evidence of the blurring of layers and relationships between the fiber ecosystem and landscape. 

The fact that Schaffer chose to offer a quote may also speak to the important changes which Zayo is making to strengthen their customer relationships is indeed working.  This was a significant point made in this same release which may have been too buried for people to take notice.  Specifically, Zayo announced it had increased its operational staff by 200 people to focus on three main pillars: 1) service delivery, 2) service assurance, and 3) network performance.  These moves are not just corporate talking points – it is transitioning into tangible results.  Specifically, Zayo noted that on-time delivery performance has increased by 20% and install intervals have decreased by 10%.

Why is this significant?  Because Zayo has entered a meaningful second act.  The first act (which I followed closely as an analyst) was the exciting gold rush chapter.  The former CEO, Dan Caruso, and his team had the foresight to realize fiber assets would be critical in the changing digital ecosystem, but that it would require significant scale to realize their full potential.  This thesis was played out in the acquisition of over 40 assets over only a few short years.  That team worked feverishly to move fast and were tireless in this effort.  But what may have been lacking in all this flurry was the constant customer touchpoints and sometimes handholding that are required to realize the dividends from this scale.

Enter the former Equinix ‘Midas touch’ man – Steve Smith – as new CEO of Zayo.  Following Equinix as an analyst was almost an easy job.  It was like having the one child in your family you did not really have to worry about.  They followed the rules, kept making right choices and hit their marks. Equinix rarely faltered because their eyes (and systems) were always aligned on the prize….the customer.  Smith held the whiteboard and the dry erase marker in designing the plays for the team to carry out this mission.  While the playbook maybe has moved from San Fran to Boulder, it is a playbook that works and is proven…..now it is time to watch it rock and roll!

Schaeffer – always the wise professor of this sector – may be the canary in the coal mine calling out good things to come for Zayo’s important second act!

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