Why tower owners are eyeing the edge computing and data center markets

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Why tower owners are eyeing the edge computing and data center markets

Guest post by Jonathan Lawrence, Associate Vice President of Pinpoint Capital Advisors

Over the course of 2020, major US wireless tower owners have been advancing their data center strategies. In what appears to be somewhat of a “learn-as-we-go” approach, tower companies have begun investing in the data center market, specifically edge data centers. It is interesting to consider the attractiveness of the edge market to tower owners. In doing so it is important to understand what is meant by “edge computing.”

Like all critical infrastructure, data centers—facilities holding servers that store and process digital information, or data—are typically located where needed most. Traditionally locations were in relatively close proximity to hubs of government, financial and commercial activity that accessed technology to create and receive information. Over time, however, the geographic span of where digital information is demanded has spread wider. Data demands from households and SMEs have become much greater. The volume of transferred information has grown considerably. In addition, the nature of information or “content” has changed, with video streaming today being a huge contributor to data demands.

As demand for digital information has soared, so too has the requirement that delivery of information be quick and uninterrupted. Fast and low-latency delivery depends on the distance between where information is stored and processed, and where it is required. Matt Trifiro, Chief Marketing Officer of edge data center company Vapor IO describes it well – quality data transfer “is about the shortest path through fiber for two facilities to connect.” Data center deployment has moved from regional hubs to the “edges” of digital communications networks closer to where information is demanded. The “edge” has become increasingly important.

As companies deploy modular edge data centers, identifying and securing strategic sites is vital. And here lies a driver of the convergence of the data center and towers sectors. US-based Colony Capital is perhaps the best example of a company that understands the importance of controlling strategic locations and is positioned to capitalize, and indeed advance, interconnectivity across the spectrum of communications infrastructure. Through its separate businesses, Colony Capital owns and operates wireless towers, traditional data centers, edge data centers, and fiber, and controls a vast number of strategic locations. Colony Capital’s recent investment in edge owner and operator EdgePresence through its DataBank business demonstrates that the convergence of communication infrastructure is a key feature of its strategy, with edge computing being a key component. Indeed, CEO Marc Ganzi has said he sees a “demand tsunami” coming in edge computing.

Tower companies see the tsunami approaching and with certain strategic advantages have begun making firm moves into edge computing.

Securing sites is critical in streamlining edge deployment and ensuring sites are in optimal locations. Tower companies already control large portfolios of strategically located macro tower sites and have long-established expertise and relationships to quickly analyze, identify, and secure sites. American Tower (AMT), SBA Communications (SBA), and Crown Castle (CCI) control tens of thousands of wireless tower sites across the US featuring installed power, wireless connectivity, and terrestrial connectivity through connected fiber.

In 2020, CCI has invested further in Vapor IO with a plan to deploy in 36 markets. Following the acquisition of its Colo Atl data center in Atlanta, AMT rolled out an edge facility at a nearby tower site and plans to deploy further sites in strategic markets. SBA has acquired colocation facilities in Jacksonville and Chicago and has signaled plans to deploy edge data centers at its tower sites.

Tower companies appear to be taking a careful and considered approach to embarking on their data center strategies. This makes sense. Operating a data center business takes significant expertise and resources which without care could jeopardize core tower operations. Deploying data centers at tower sites is but one part of a much broader strategic picture. A major strategic consideration, as SBA President and CEO Jeff Stoops has discussed, will be how tower companies play in the space, whether as landlords to facility owners, owners of facilities themselves, or owner/operators of data center businesses. These questions will take time to answer and the continuously changing data center market adds complexity to decision making.

Demands for quick, low-latency digital information delivery will only continue to increase – AI, IoT, and Machine-to-Machine communication, and cloud computing will bring massive demands for data transfer. As we think ahead to applications such as automated drones and transportation, the need for data transfer of the highest standard becomes absolutely critical.

Tower companies understand that demand for data processing at locations closer to end-users will continue to grow. With clear synergies capitalizing on existing infrastructure these companies are making the right moves. It will be some time before a clear strategy for how they play in the data center space becomes evident.

In addition to tower companies, other network-focused industries with strategic real estate assets are using their sites for the deployment of data center infrastructure. FedEx recently partnered with edge data center builder Switch and Dell to deploy modular colocation facilities on FedEx land in strategic locations in the US. Given these trends, we see an opportunity for small and mid-sized tower site owners to generate value by considering how their sites could be utilized as locations for other forms of communications infrastructure such as edge data centers.

About the author

Jonathan Lawrence is Associate Vice President of Pinpoint Capital Advisors (1). Pinpoint Capital Advisors is a leading corporate finance advisory and capital raising firm focused on the mid-market communications infrastructure sector in North America, with a primary focus on wireless towers, data centers, and fiber.

(1) Securities Products and Investment Banking Services are offered through BA Securities, LLC. Member FINRA SIPC. Pinpoint Capital Advisors Incorporated, a business consulting company and BA Securities, LLC are separate, unaffiliated entities.

DISCLAIMER: Guest posts are submitted content. The views expressed in this blog are that of the author, and don’t necessarily reflect the views of Edge Industry Review (EdgeIR.com).

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