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A Paradigm Shift in the New Digital Ecosystem

A Paradigm Shift in the New Digital Ecosystem

INDUSTRY PERSPECTIVE
BY BRAHAM SINGH:

Owning a building doesn’t amount to much in the telecommunications space. A telecom operator ‘owns’ real estate only when he lights it up by pulling fiber from the curb. Rewards for the hard work depends on what’s in the building — eyeballs or content. Literally, it had to be at least one or the other, for that piece of real estate to make the grade. And these days, it’s more and more about both the eyeballs in residential buildings and the growing volume of content stored in data centers.

Over the past decade, where money could be made in telecommunications, has always been a moving target. Way back in the days of the half-circuit, telecom operators had a license to kill. Those days, the ‘sweet spot’ rested mid-ocean. For example, if an American and an Asian telco decided to pull a cable across the Pacific, each would own the half on its respective side. No stepping on each other’s toes with each telco charging their customers whatever made sense to the company’s P&L; not necessarily what made sense to the captive users. Life was good and telcos treated each other with diplomatic courtesy. Literally.

All that changed with deregulation and the opportunities moving inland. While technically one could step on the other’s toes and one did, the incumbents in a particular country still held sway with their backhaul from cable landing stations into metros. Backhauls become money generators and to this day, don’t do too shabbily at all. In time, as others got into the back haul business, the opportunities moved to the last mile from the curb into buildings. Over in data centers, it boiled down to the cross-connect — a piece of fiber connecting one carrier’s switch to another. Carriers tearing into each other’s territories needed to connect with each other. Key data centers became carrier hotels and the cross-connect made fortunes for whomsoever owned this piece of telecom real estate.

Today, while carrier hotels are still needed, opportunities have shifted to data centers that house content, primarily video. It’s as if the past decade was a staging ground for the video flood that has hit the United States and now coming elsewhere. Only until recently,  leasing was the way to go but today, American MPLS and Ethernet service providers are realizing to make money they need to own fiber. Fiber owners now have a choice between leasing their asset to say, an MPLS provider, or selling IRUs to content providers streaming video across the country.

It isn’t just fiber that’s in high demand, but the whole ecosystem catering to content — quickly becoming synonymous with video. Content needs to be stored in servers, which in turn need to be housed and connected, for the content to reach eyeballs. Today you either own the content, the infrastructure it needs to be housed and transported, or you own the eyeballs. Else you don’t have game.

China and now India have video lapping at their shores and are beefing up their respective infrastructure to carry this content to eyeballs.

There apparently aren’t enough fiber pairs and data centers to go around and hundreds of gigabytes of capacity between Indian cities is being bought up every few months. 30 MW of power for data centers used to be more than sufficient. Today, it’s 30 MW per floor.  More fiber, more data centers and more power is the Indian mantra. A few years ago Indian telcos were scrambling overseas to engender growth in dollar terms. Today, India is the sweet spot.

 

BY BRAHAM SINGH