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30 September 2019

US towercos increase investments in edge as SBA makes a move

The latest US tower operator to make moves into the edge computing market is SBA, the  country’s third largest towerco. While Crown Castle, the second towerco, has already made significant investments in adding neutral host micro-data centers to its tower sites, the market leader, American Tower, has only recently announced its first cautious deployments. SBA is taking a similarly wary approach, but has acquired a data center in Chicago – currently the hotbed of neutral host edge developments in the USA – in order to test and evaluate the edge opportunity.

The acquisition – of a center which currently handles highly secure government computing functions – also includes a small loop of fiber in downtown Chicago.

CEO Jeffrey Stoops told a Goldman Sachs investor conference in New York earlier this month: “We’re going to use it as an R&D facility, so that we can understand how it all works. The data center has a mix of wholesale and retail, fiber and interconnect, which we are going to experiment with and learn from.”

He is cautious about timescales, indicating that “when the computing world really does start to take shape, we will be educated, knowledgeable, and will know exactly how best to maximize our interest there”.

The company owns 16,000 cell towers in the USA and he acknowledged, as Crown Castle has already said, that every one of them could potentially host an edge data center, which could help existing telco customers to enhance their applications, or could open the towercos up to new tenants – for instance, cloud providers which want more dispersed locations in order to distribute their cloud infrastructure and services.

Stoops believes there are three roles SBA could take in the edge market:

  • Act as a landlord for edge computing locations, extending its existing tower rental model.
  • Build data centers itself but allow others to manage the locations.
  • Fully own and manage data centers for edge computing, perhaps in aligned with moves into other active equipment such as base stations (something Crown Castle, in particular, is considering as cellular networks densify).

Stoops acknowledged that SBA “doesn’t really know how to do that last part”, hence the R&D aspect of the Chicago purchase.

This is not the first move SBA has made towards the edge. Last year, it formed an alliance with Packet, which provides edge data center platforms, and this mirrors a similar deal Crown Castle has with another start-up, Packet broke ground on its first edge data center location, in Boston, last autumn, positioned at the base of an SBA cell tower.

“We are excited to partner with Packet to bring the power of edge computing to our tower site in Foxborough, Massachusetts, the first of what we expect will be many sites in our extensive portfolio to become distributed network connectivity points for emerging 5G and edge computing applications,” said Clay Moran, director of strategy at SBA, at the time.

And on an earnings call in November, Stoops told investors: “We continue to work on initial prototype mobile edge computing locations built around our existing property locations. It’s still very early in the development of these solutions. But we believe we have a distinct advantage with the quality locations we are targeting and we are excited about the potential for this additional business line down the road.”

Packet raised $25m in a second round of funding in September, to help build 50 new edge sites. It is currently working on the first three, though they are not all with SBA – in fact, the other two are on Crown Castle sites in Chicago, which is also the first city targeted by Vapor IO. Packet says it will have started deployment of 10 edge sites before year end and its medium term goal is to have 50 in the USA.

American Tower is the world’s largest wireless infrastructure owner, with over 170,000 tower sites in 17 countries (57,000 in the USA), but has not, to date, made a move comparable to Crown Castle’s investment in neutral host edge platform provider (and has been sceptical about small cells too). But earlier this year, the company told an Oppenheimer investor event that it was starting to make preparatory investments in edge, looking ahead to a future date when the micro-data centers might be deployed at the base of its towers.

Rod Smith, SVP of corporate finance, said: “We’re really looking at these networks of the future to say, with our existing assets, are there any additional customers that we can bring in and have them utilize our tower space in addition to the core wireless carriers?”

He added: “We’re also saying: are there new types of assets that we can offer back to our traditional carrier customers?” such as street furniture or light poles.

And finally, he said the firm has to evaluate whether there are any new classes of asset in which to invest to bring in new customers.

This echoed comments made by CEO James Taiclet on an earnings call in October 2018, when he said the firm had conducted an “ongoing evaluation of edge compute solutions at our tower sites”.

He added:  “We are currently engaged in discussions with players in numerous industries that may ultimately be edge compute tenants and expect to further explore the potential long term opportunity going forward, noting that the tower sites can act as convergence points for the RAN, cloud services, the IoT and enterprise networks.

Smith pointed out that most current edge build-outs use telco central offices, rather than cell sites, or are on enterprise premises – largely out of reach of the telco ecosystem.

But he said: “We think there could be a day where the latency in a 5G network is so important that having that edge computing right at the base of a tower improves 100 milliseconds of latency, it actually makes the applications and the services work better.”

The company is now evaluating how the cloud-based 5G networks of the future will look and what infrastructure they will require, so that American Tower can start to make investments in the most likely candidates, including edge data centers. This means predicting the new types of infrastructure on which future telco networks will run, rather than getting into the data center business in its own right. So American Tower acquired an Atlanta-based collocation data center, ColoATL, earlier this year, “not because we want to be in the data center business but … to learn more about how data centers operate”, a move that has now clearly been emulated by SBA.

American Tower has also made some steps towards edge computing by placing micro-data centers at the base of some towers, to support new revenue streams, but Smith does not categorize this as edge computing yet. “The most important thing there is we’re learning about how to deploy these things, we’re learning about the cost of deploying small data centers, power and cooling,” he said Then if the tower-based edge market does take off, the firm will be ready to move quickly.

Crown Castle has been more active in developing its edge+tower proposition than its arch-rival. Recently, Vapor filled in another gap in the edge jigsaw, by offering a direct connection between its edge computing nodes, called Kinetic Edge – many of them located in Crown Castle sites and supported by Crown’s fiber – and AWS’s cloud data centers. A “straight fiber line” from a Vapor micro-data center to the AWS cloud would reduce latency and make it easier for customers to decide, on the fly, which data needs to be processed and stored locally and which needs to be sent to the central repository.

Developers will have access to the full suite of AWS cloud services and can create applications which split workloads between the edge and the central cloud.

The service was jointly developed with Crown Castle and initially uses the towerco’s high speed Cloud Connect fiber-based links, which support one or more links of 50Mbps to 500Mbps, to implement AWS Direct Connect, which Amazon offers as a private connection from a customer’s location to the AWS cloud services. This is an alternative to routing traffic to AWS over a public Internet connection.

Despite the closeness to Crown Castle, Vapor IO is likely to develop similar capabilities with other site and fiber partners. It also has agreements with other tower companies, like SBA, to locate its edge hardware on their sites, and will work with other fiber owners, like Zayo, to ensure its growing network of micro-data centers always has connectivity to AWS.

And the firm acknowledged earlier this year that, despite its close ties to towercos, their sites did not always align well with all the edge services required. CEO Cole Crawford told LightReading that it was “not relevant to talk about sitting at the bottom of one tower”, but instead to focus on “tower-aggregated and connected, not tower-located” scenarios. In fact, the firm’s first edge data center in Chicago is in a DAS hub which, unlike some cell towers, has significant amounts of fiber. Another edge neutral host, EdgeMicro, has also moved away from the idea of building its nodes at the base of cell towers, because there is often insufficient fiber.