The Definition of “Digital Infrastructure” Continues to Stretch Toward New Exciting Territories

March 27, 2024 | The definition of Digital Infrastructure continues to stretch.  This was my immediate thought when I saw the news earlier this month that Boldyn Networks would be buying Apogee Telecom. Apogee was not a name with which I was overly familiar but when I read about their model it resonated on a very personal level.  Apogee is the leading provider of on-campus connectivity infrastructure in the US Higher Education industry.

What is the personal connection?  Well, we have a sophomore in college who seems to have major connection issues, dropped call, poor internet etc. every time we Facetime.  While my husband and I are not naïve to the fact these “poor connections” may just come when having to call his dear old mom and dad and his little brother and sister, his suitemates have noted similar issues that have impacted submitting assignments, group work, etc.  So I have some back up witnesses!

The model of Apogee is a brilliant one.  College and grad students live in and expect an ‘always connected’ world.  If they don’t have it, things go array.  Parents and students who pay these (lofty) tuitions also expect connectivity to be a non-issue.  When it becomes a problem, that leads to a good amount of “And why am I paying this much?” type of rabbit hole thoughts.

But from a bigger picture perspective, this deal perfectly illustrates the new and unchartered silos that Digital Infrastructure is sailing towards.  There are likely a good amount of cost synergies that Boldyn can realize by adding Apogee to the “family,” but it is the revenue synergies that are a lot more interesting to me.  Carriers which Boldyn is serving know that this student silo is an extremely important one to keep happy.  And as most CFOs would attest to, the number one reason for customer churn is not service pricing but rather a poor network experience.  This transaction gives Boldyn yet another tool in its (already deep) toolbox to help these carriers servicing these education institutions fix this.

Importantly, Apogee also can bring a new customer silo to Boldyn – the educational institutions themselves.  Like we have seen in Class A office buildings, hotels, sporting venues etc, good connectivity is table stakes.  It is an expected utility to have in place….no question.   Educational institutions should be viewed in the same light – especially with all the learning now being done via electronic means.

This transaction offers further evidence of all the many different silos that digital infra can serve. An analogy can in some ways be made by Blackstone’s 2021 acquisition of Hotwire Communications.  This deal was announced when Fiber to the Home (FTTH) assets were all the rage in the wake of COVID.  While Hotwire is a consumer fiber connectivity player, it offers the service to a different ‘twist’ of customers than the traditional FTTH players.  Specifically, it focuses on service to commercial and community-living (think gated communities) customers.  The model is especially attractive.  When you lay this fiber to these communities first and have an agreement in place with the Home Owners Association (HOA), it is unlikely others will follow and overbuild.  Simply put, the moat is very thick.  While other infrastructure funds have put capital behind other similar models in other geographies, Blackstone found it first and put the stamp on making these gated community fiber plays a new digital infrastructure silo.

While the Hotwire model is not apples-to-apples to the type of infrastructure Apogee provides, the two deals are similar in that they brought a new, untapped customer base to target to the buyer and, in doing so, broadened the definition of this ever growing and quickly evolving sector.

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