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All-IP Network Produces $100B Real Estate Windfall
Hugh Pickens writes "Daniel Berniger writes that one of the unexpected consequences of AT&T's transition to HD voice and all-IP networks is that the footprint of required network equipment will shrink by as much as 90 percent, translating into a $100 billion windfall as the global telecom giant starts emptying buildings and selling off the resulting real estate surplus. Since IP connections utilize logical address assignments, a single fiber can support an almost arbitrary number of end-user connections — so half a rack of VoIP network equipment replaces a room full of Class 4 and Class 5 circuit switching equipment, and equipment sheds replace the contents of entire buildings. AT&T's portfolio goes back more than 100 years, even as commercial real estate appreciated five fold since the 1970s, so growth of telephone service during the 20th century leaves the company with 250 million sq ft of floor space real estate in prime locations across America. 'The scale of the real estate divestiture challenge may justify creating a separate business unit to deal with the all-IP network transition,' writes Berniger, who adds that ATT isn't the only one who will benefit. 'The transition to all-IP networks allows carriers to sell-off a vast majority of the 100,000 or so central offices (PDF) currently occupying prime real estate around the globe.'"
Need I say more?
Being able and actually charging less are two very different things.
The summary sounds all rosey and it is just as simple as selling off unused office space. In order to sell something you need someone willing to buy it. It sounds like the office-space market is going to get flooded with office-space getting sold at liquidation prices in an already sucky economy. How many people are out of work and how many companies have folded? There's already lots of empty buildings. Oh, you now AT&T will unload even more office space? Yeah, this sounds great! Sigh.
They're reducing their costs, not their prices.
Prices will go down if there is competitive pressure. Which apparently, is largely absent from the US market.
Those who can make you believe absurdities can make you commit atrocities. - Voltaire
Regulated monopolies are generally allowed a fixed return on investment. For instance, all of that copper laid down in the twenties though the seventies is listed as an asset that the telcos get a few percent profit on each year. And that includes those buildings.
That means that AT&T will make a windfall of billions, but will also reduce their capitalization (and thus profits) going forward. They'd best invest wisely.
Lacking <sarcasm> tags,
Actually long distance has really come down a lot. You can get unlimited long distance on most land lines pretty cheap and most cells have unlimited long distance nights and weekends. There was a time when long distance was super expensive. Even 12 or so years ago it was not all that cheap. Today it really is pretty dang cheap. I would say that a lot of the benefits are already here.
I guess no one here took economics. Demand drives pricing not the cost of production. If you can produce a high demand product inexpensively you make big profits. Ideally competition drives down prices because the costs are low enough that others will undercut your pricing. That has actually been working in the long distance phone market in the US. VOIP providers like Vontage, Comcast, and so on plus cell providers have pushed down the cost of land line long distance. The Telcoms are pretty evil as a rule but voice long distance pricing is not exactly one of their big sins today.
See my blog http://ilovecookes.blogspot.com/ for light hearted technical information.
Their land-line business is regulated at set rates of return on investment. Sell off the capital base and they'll be required to reduce their land-line rates proportionately.
Or at any rate, that's the theory. Actual results depend on public rate commissions. Wise citizens pay careful attention to them, and this is an election year.
Lacking <sarcasm> tags,
So really, how much of that $100 billion will actually be reinvested for things like improving national infrastructure and providing better service to customers, or anything that isn't cutting bigger bonus checks to top execs?
That's because of advances in technology and competition, not because of ATT passing their savings onto you.
Um, the real estate belongs to AT&T, not its customers: precisely what is it that the customers are supposed to expect from any sale of real estate?
You are making the same argument that Luddites were making in England 200 hundred years ago. What happened in between is that the work week went down from 76 hours a week to 40 hrs a week. A similar move needs to happen now, but with increase in vacation time to about a total of two months a year.
Problem is that this would mean a modest drop in wages so you wouldn't be able to afford your McMansion and second SUV in the garage but we as a society just don't seem ready to give that up.
The huge savings in telephone company real estate happened over 20 years ago. Their big buildings were built for electromechanical switching systems, mostly installed between 1920 and 1970. The digital switches mostly installed in the 1980s were a fraction of the size, leaving lots of empty space in the big buildings. Some space has already been repurposed. And some is available, but the Bells don't want to give it up because it would make competition easier.
Most of the real estate still used by telco gear is for line drivers, the stuff needed to run analog phones. Whether these are fed by VoIP or TDM doesn't matter; 90 volt power ring and 48 volt battery take space. They also take power, but home-based analog terminal adapters (local battery) use even more, so centralized power (common battery) is a net savings.
Berninger is simply repeating Cisco memes, that somehow the magic pixie dust of IP makes everything wonderfuler. It's bullshit, but somebody has to call them on it.
Yeah, I've noticed that the science fiction stories of the golden age (40s~50s) had noticed the improvement in prodictivity of workers over time. So they naturally assumed that by year 2000 we would all be working 4 hours a week. Wrong: some people work 70h/week and make a butload of money while the others are unemployed (or work lousy jobs for hardly more benefits than being on welfare). That's what you get when you don't have strong labor laws and/or central control.
Non-Linux Penguins ?
If what you were saying was correct we should get rid of concrete mixers and pumps and have slews of people mix the concrete and carry it in buckets to where it needs to be poured.
Suppose you weren't a Slashdot-posting nerd. Imagine facebook is difficult for you, because it has text. You can't quite read "The Cat and the Hat" without help, but you're an adult and you'll make any excuse to hide your embarassing illiteracy. Your math skills include counting to 100 and adding single-digit positive numbers.
You'd like those jobs. Better yet, the crazy-high expense would knock the rich down a few levels, changing demand (and thus supply) of various things to your benefit. You could live mostly as well as pretty much everybody else. You'd feel better about yourself, attract better women, etc. Live would be pretty sweet, at least regarding jealosy and feelings of unfairness.
There are more people like the above than most of us Slashdot people realize. It's uncomfortably close to being the norm.
Say what? Did you really think about that sentence before you hit "post"?
Competition drives companies to use new technology. Technology saves money, enabling companies to drop prices further to compete.
It's a self-serving cycle of profitability.
If AT&T weren't passing on those savings, where do you think the price drops came from? Thin air? The phone fairy?
I do not fail; I succeed at finding out what does not work.