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.'"

Comments

Re:So...

[Anonymous Coward]

Being able and actually charging less are two very different things.

Please mod parent Funny

[AliasMarlowe]

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.

Re:Please mod parent Funny

[Anonymous Coward]

Yes. Cheaper running costs, not only from the reduced equipment demands, but from all the staff that they no longer need to employ to fill all of those buildings.
So, they make hefty profits from all this, a lot of people lose their jobs and naturally prices will rise, because customers need to pay for this amazing new technology that'll give them 'better service quality.'
I may love technology and improved efficiency, but I can't help seeing this kind of thing and thinking that we (i.e. everyone except the telecom companies) might be better off without it.

Re:Please mod parent Funny

[Rockoon]

It is unlikely that the costs that these properties incur are significant compared to the total operating costs of AT&T. The $100 billion is in the value of the properties themselves, and as such the sale of them arent supposed to effect the price of service that AT&T provides.

Car analogy: You are an independent contractor and own a $60,000 car. You wouldn't charge less for your services just because you sold the $60,000 car.

Re:Please mod parent Funny

[GLMDesigns]

Look at movies from 50 years ago and see the floors full of secretaries. Those jobs are all gone now. Look at movies from 100 years ago. There were horses. The horse-shoers all lost their jobs. 120 years ago 80% of Americans worked in farms now 2% do. Look at all those lost jobs.

Efficiency is good. It helps.

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.

That would be silly wouldn't it. Again increasing efficiency in the system is a general good.

Re:Please mod parent Funny

[DarkOx]

There is old story.

An economist goes to visit a small South American country. As a visiting dignitary the a representative of the local government takes him to see the canal project the country is working on. Men are their laboring away in the heat amongst the pests with shovels and picks.

The economist asks, "Surely it would be cheaper to use power equipment even if you had to get loans and by the equipment abroad?"

The representative replies, "You misunderstand sir this a jobs program for the people."

The economist responds, "Then why the picks and shovels, would not spoons be better?"

The representative strokes his chin and says "Perhaps."

There's a problem here

[overshoot]

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.

Berninger is simply full of guano

[isdnip]

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.