Has the Fiber Roll-up Started?

Many internet service providers (ISPs) who operate mature fiber networks have been recently approached to sell their businesses to buyers who want to roll up and amass multiple fiber networks into a larger business. I know fiber network owners who are being offered prices for their business that they never expected. I’ve heard of offers at a multiple in the range of twenty times adjusted earnings. High multiples are a sure sign of plans for rolling up many ISPs into a larger business. These high valuations are also a sign that the broadband industry has attracted large equity investors trying to buy into the market. It seems likely that the original impetus that attracted investors to the industry today is the big influx of grant funding that is helping to pay for broadband infrastructure. I have to honestly chuckle if that’s what the equity investors are chasing because they’ve never looked hard at a rural grant-funded ISP. Even with grant funding, the typical rural fiber market is never going to generate significant margins. Every ISP that operates a rural fiber network will tell you that the business will eventually create a modest return and will generate cash over the long haul. All market booms eventually come back to earth, and the characteristics of operating last-mile networks will never sustain permanent high multiples. A lot of these investors will get stuck with assets that will never justify the purchase price paid.