There was a surprise announcement recently that Apollo Global Management is in serious talks to acquire $5 billion of copper assets from Lumen (CenturyLink). This is not a done deal and could fizzle, but it raises the question of why companies would spend anything to buy dying copper networks.

There are some clear downsides to buying an existing copper-based telco. The current DSL technology is obsolete. One has to assume that a buyer plans to walk away from the copper networks as soon as reasonably possible after buying. And that is the major dilemma to overcome. Buying and then upgrading a copper property effectively means paying for the property twice.

Anybody willing to spend $5 billion to buy copper networks and then billions more to upgrade the properties has other options. Why not just go out and overbuild fiber in many dozens of county seats where a fiber competitor could thrive?

I’ve had clients that were faced with the same opportunity over the last decade, and it’s not an easy decision. One of the big upsides of buying is getting the existing revenue stream. But in the case of Lumen, that revenue stream has been dying as households find alternatives to DSL. But the immediate revenue stream, even if small, can help to fund the new property.

Perhaps the big plus to such a transaction is the many county seats and other towns where Lumen operates as an ISP. In most cases, Lumen has already lost the battle against the cable company competitor – but in rural towns it’s not unusual for the cable company network to also be outdated and underperforming. Competing against Charter and Comcast in rural markets is not the same as competing against these companies in upgraded urban markets.

Another interesting upside to buying these properties is that Lumen has some vitally needed fiber. Even where there is no fiber to customers, a fiber network connects all of the small towns in a region together. This backhaul makes it possible to support all of the towns in a region. Another network upside is that new fiber can be overlashed onto old copper wires for a lot lower cost than adding new standalone fiber to poles. Lumen already owns the rights-of-ways, and there would be little or no make-ready costs needed to overlash fiber. From this perspective, buying Lumen almost equates to buying a huge messenger-wire network ready to accept fiber.

Of course, there are big downsides to buying an existing telco. If the buyer is smart, they will want to walk away from much of the rural areas, much like AT&T has recently walked away from DSL. The dilemma is that a buyer is probably going to have to make promises to regulators that it won’t abandon rural areas quickly.

There is also the huge operational challenge of taking over a big-company network. I’ve helped clients do this several times, and it’s a bear. The purchase generally transfers the assets but not the operational systems supporting the assets. Even if those systems somehow come along, the big telcos are using software that is massively out of date and obsolete. Big telcos also are highly decentralized, and many of the functions that support the properties are a challenge to work with during a transition and hard to replace quickly.

We’ve seen big companies in the past that failed at the process of consolidating obsolete copper networks. One only has to look at Frontier and Windstream to see how hard it is to make this work. A buyer of this many properties will likely have grandiose plans to overbuild all of the lucrative parts of markets quickly – before somebody else does so. But there doesn’t seem to be an easy solution about what to do with the rural copper networks. No big company is ever going to be satisfied with the returns from rural markets even should it do everything right.