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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.'"
So this means they'll be able to charge less for service, right?
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
Oh I don't know, back in the late 70's I was paying $2/min + operator's fee to call the UK from Oz, equivalent to about an hour's minimum wage per min. Now it's about $4/hr and min wage is ~$15/hr. By my reckoning that's a couple of orders of magnitude drop in prices over the last 35yrs.
And did you exchange a walk on part in the war for a lead role in a cage? - Pink Floyd.
They don't have to buy the spyware. The government will buy it for them.
Many of those telco facilities will probably remain as data centers, not office space. They're already built out as data centers.
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,
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.
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.
Then you need to practice your unit conversions, here's a trick I learned in engineering - put each conversion ratio in parentheses and make sure the numerator and denominator are equivalent. Then add as many ratios as necessary to convert all unwanted units into something relevant. This technique makes it possible to do complex unit conversions while guarding against careless mistakes. A quick double-check that each unwanted unit occurs exactly once in each a numerator and denominator so they can be canceled, and you're good to go.
Old price = $2/min * (1 man-hour/$2) = 1 man-hours/minute
New price = $4/hr * (1hr/60min) * (1 man-hour/$15) = 0.0044 man-hours/minute
Or 225 times cheaper for a minimum-wage worker, clearly more than 2 orders of magnitude.
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.
Right, but you're looking at real estate, meaning a 10x10' easement on the sidewalk near an office building, a 20x20' easement at the edge of a neighborhood (next to the well pump) and other tiny buildings. You might be able to stick a hotdog stand in there or a neighborhood convenience store, but it would have no windows, and is set back from the road by 20-30 feet, on the far side of a park.
These spaces are largely utility space, like a mechanical floor in a skyscraper. That said, there are a couple of larger switching buildings in each city, for example this monster which sits about 15 stories tall and is surrounded by single and double story homes. We call it the zombie apocalypse building because there are no windows on the first floor (or any of the other sides) and the back side has a deep wide loading ramp that sinks in to the earth like a moat. About four miles down the road there is a slightly more sane building, which looks more like a traditional warehouse or datacenter, and will probably be converted in to one at some point (many datacenters in Dallas are repurposed and upgraded railway warehouses along I-35). This amounts to a couple of big buildings in major cities, but I would argue that most of the 250 million square feet comes in chunks 400 sq feet at a time or smaller, and includes legal rights to telcom closets in office buildings, etc.
moox. for a new generation.
RTFAs! They're not talking about the easements, they're talking about the COs. The new tech allows the huge COs to be mostly closed and replaced by a few pedestals in the easements.
Look at those buildings again, and imagine what dozens of them in the actual city of New York must cost.
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.