Denis, I think it's interesting how the article segues from the main theme, which was the alleged [or contested, as it were] fiber glut, to FuelCell Energy and Enron's gas lines, without any mention of the latter's involvement with the general theme of the story, since Enron is one of the most active players in the new age bandwidth game. Also, I thought it was rather strange to introduce the energy story in an article whose main focus is bandwidth. Weird. The author could have had a field day showing some of the relationships between the two.
Earlier in the piece, McLellan mentioned: "Telecom links aren't yet fungible commodities..."
How true. And there is no guarantee that it will be fungible anytime soon. Pooling points and bandwidth exchanges are a whole new industry. That is, they don't necessarily overlap with the hand-off and flow paths that already exist today. Furthermore, some of the largest incumbents are loathe to give up their pricing models, which may stunt the growth of such a trading model. Notwithstanding, I do see the benefits, even to non-participants in commodity-like trading arrangements, per se, for the type of bandwidth exchange that the likes of LayerOne is putting in, purely from an efficiency standpoint. See: cookreport.com
The bandwidth and fiber glut stories these days are getting way too much inkblack for my taste. We've probably covered every angle that these stories have to offer at least a dozen times. About six months ago I mentioned the greater possibility of a pending colocation/hosting and carrier hotel glut. Or a "Colo Glut," for short.
Here's a story [below] that speaks to such a colo glut, and the fact that it already exists. I don't see a direct tie-in, however, between overall bandwidth supply [and potential], and the rush to open up colocation centers. Bandwidth is application and services driven, while the greater number of colos that have gone up are mostly real estate industry driven, trying to exploit the former, often in the most uneducated of ways.
FAC
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cpnrenet.com
Telco Hotel Demand Slowdown: How Long Will it Last?
By Dan Friedman, Senior Editor
Chicago - The new asset type of telco hotels, which over the last few years has rolled out practically at Internet speed, is facing its first slowdown. Mark Schoenfeld, a principal with The Carlyle Group, which has worked with Core Location L.L.C. to build a number of telco hotels around the country, said his firm has stopped looking for new properties. Demand for space in co-location facilities is now about half of what it was half a year ago, Schoenfeld added. "We stopped dead in our tracks six months ago. Now is not the time to buy; pricing will go down more before it goes up."
Schoenfeld was among some 200 landlords, developers, investors, telecom executives, power company representatives, attorneys, city officials and university administrators gathered at Chicago's Hyatt Regency McCormick Place Wednesday to take part in Commercial Property News' first Telecom Property Summit.
Attendees came from every corner of the United States and from as far away as Tokyo and London to participate in eight panel discussions that covered the new property type from virtually every angle-from the challenges of telecom property development to potential exit strategies.
The general consensus at the conference was that the current slump is a natural correction to the hyper-inflated birth of the property type. "During the gestation period, too much venture capital was pumped into telco startups," noted Alex Twining, president & COO of MetroNexus North America, a telco hotel chain backed by Morgan Stanley Real Estate Funds. He and others said that many tenants had taken down more space than they could initially digest.
"The telcos are moving from a growth-at-any-cost attitude to trying to make the space they have as productive as possible. They have to prove to Wall Street that they have a business plan that can work."
Despite the obvious slowdown, virtually every speaker at the conference agreed that the real estate fundamentals of the telco hotel niche-including the continued expansion of Internet use around the world-are solid. "There will be some shakeout in the industry. Once that happens, we'll see another cycle of growth," predicted Shaker Khayatt, vice president at Goldman, Sachs & Co., which through the Archon Group L.P. has launched the Genisus Network.
Genisus has six telco hotels under construction or renovation in the United States. "The easy home runs are over. Now we have to get down to the nuts-and-bolts business of commercial real estate."
Many at the conference felt the next wave of growth will not come from telecommunication firms but from companies that manage outsourced corporate data. Twining pointed out that 600 million square feet of space in the United States is being used for data storage, but only 25 million square feet represented data outsourced to co-location facilities. "Corporations are getting more and more comfortable with outsourcing data," noted Khayatt.
"They know it's not cost effective to manage it themselves, but they've been jumpy about letting others manage their data." Petra Schroeder, senior director of customer premise for Qwest Communications, added: "By the end of the year, the outsourcing of corporate data will more than take up the slack left by the telco firms."
Among the other topics explored in depth at the summit were: the impact of telco hotels on the communities in which they are located; the challenge of providing the vast amounts of power needed by these facilities; establishing financial guidelines for evaluating telecom properties; and the varieties in telco hotel demand and development in different parts of the world.
The summit concluded with a tour of the 1.1 million-square-foot Lakeside Technology Center, which Core Locations and the Carlyle Group have just finished transforming from a printing plant into one of the world's largest, state-of-the art telco hotels. |
