- AT&T and Verizon have both come out with big data center connectivity news
- AT&T is now offering a rapid turnup wavelength service with 100G and 400G options
- Verizon bagged a high-profile deal with AWS, though isn’t disclosing terms
With their wireless revenue growth slowing in recent years to single-digit snail’s pace, AT&T and Verizon have been on the hunt for a new cash cow. And they may have just found it. No, it’s not the mythical mind-blowing 5G use case or even fixed wireless, but (surprise!) data center connectivity.
The operators have come out with dueling data center announcements, with AT&T debuting new rapid-rollout 100G and 400G wavelength offerings late last week and Verizon following on Monday with a high-profile deal with AWS to build new high-capacity long haul fiber routes to connect the latter’s data centers.
The Verizon news came on the heels of Amazon’s reveal of a $38 billion deal with OpenAI to run the latter’s AI workloads in its facilities.
Verizon’s work with AWS is a follow up to the introduction of its AI Connect service in January, which is designed to leverage existing assets to meet demand for data center connectivity. As part of the deal with AWS, it’ll be building new fiber segments and providing redundant connectivity paths using AI Connect.
Beyond that, though, the release provided scant detail. That means there’s no word on how many segments Verizon plans to build, the timeframe for the arrangement or contracted value.
A Verizon rep declined to provide additional detail but stated: “The network is the critical enabler for the exponential growth of AI and this initiative is a significant commitment to enabling the exponential data growth driven by generative AI and addresses the ‘hidden bottleneck’ that could otherwise restrict AI's benefits.”
Meanwhile, AT&T hyped up its new Express Waves product, which has an explicit target audience of data centers and other running high-bandwidth AI workloads. Colocation provider Equinix is notably cited in the release as having added AT&T’s 400G wavelength service to its backbone connectivity fabric.
Data center and AI market context
It’s no surprise that AT&T and Verizon are going this route – after all, long-haul fiber providers Lumen and Zayo have been cleaning up in the data center networking arena for more than a year and a half at this point. So, if anything, it’s a surprise it took AT&T and Verizon – which both own extensive fiber backhaul networks – so long to get here.
Lucky for the latecomers then that there’s plenty of data center demand to go around.
According to Synergy Research Group’s count from September, there are 1,244 hyperscale data centers around the world, with another 527 either in planning or under construction. And there are no signs of market demand slowing anytime soon.
Synergy noted in a fresh release that enterprise spending on cloud infrastructure services saw its largest ever sequential increase in Q3, jumping $7.5 billion to nearly $107 billion. Meanwhile, Amazon, Google and Microsoft’s combined capex hit $93.1billion in Q3 as all three pressed ahead with data center footprint expansions.
Capex figures for all the hyperscalers are only continuing to climb. Amazon said it expects to spend a total of $125 billion in 2025 and even more in 2026. Similarly, Google Cloud parent company Alphabet raised its 2025 capex guidance from $85 billion to a range of $91 billion to $93 billion in 2025 and warned it expects a significant jump in spending in 2026.
Dell'Oro Group Senior Research Director Baron Fung told Fierce that the analyst firm is projecting that the number of AI accelerators in data centers will jump from 11 million in 2024 to 28 million by 2029. He added this forecast "may be conservative given all the recent announcements from cloud providers and neo clouds expanding data center capacity over the next 5 years."
In terms of what this means for fiber, it mostly relates to demand for back-end or scale-out networks. But Fung noted the potential for "increasing demand on optical fibers for scale-across networks," or the networks that connect different data centers. And these, he said, "will likely be based on optical fibers."
All this is to say, there’s not only a lot of money flying around in the data center realm, but a lot of growth expected. And with AI workloads increasingly running across multiple data centers, that means connectivity players like AT&T and Verizon are poised to play a pivotal role.
11/3/2-25 2:45 pm ET: This story has been updated to include comments from Dell'Oro Group.