NNSquad - Network Neutrality Squad
[ NNSquad ] AT&T's $100 Billion All-IP Network Real Estate Windfall
----- Forwarded message from Dave Farber <dave@farber.net> ----- Date: Fri, 10 Feb 2012 09:09:42 -0500 From: Dave Farber <dave@farber.net> Subject: [IP] : AT&T's $100 Billion All-IP Network Real Estate Windfall Reply-To: dave@farber.net To: ip <ip@listbox.com> ---------- Forwarded message ---------- From: Daniel Berninger Date: Friday, February 10, 2012 Subject: AT&T's $100 Billion All-IP Network Real Estate Windfall To: David Farber <dave@farber.net> Dave, For IP, the essay below connects dots on another dimension of the PSTN retirement story and the dramatically smaller footprint of IP equipment. $100 billion is an "as much as" number with lots of execution challenges, but it represents yet another reason for AT&T to embrace the all-IP future. AT&T is the 3rd largest commercial real estate landlord in the US. France Telecom and BT already proved the benefits of the IP transition in generating cash via real estate divestitures. Regards, Dan .......................................... Daniel Berninger Founder, Voice Communication Exchange Committee e: dan@danielberninger.com tel SD: +1.202.250.3838 SIP HD: dan@danielberninger.com w: www.vcxc.org >>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>> Link - http://vcxc.org/att/ AT&T's $100 Billion All-IP Network Real Estate Windfall Daniel Berninger, founder, VCXC - dan@danielberninger.com The global telecom transition to HD voice and all-IP networks shrinks the footprint of required network equipment by as much as 90 percent. This liberation of floor space translate the $25 billion "buildings" line item on AT&T's balance sheet into a $100 billion windfall. Generally accepted accounting principles require listing real estate at historic acquisition cost. AT&T's portfolio goes back more than 100 years even as commercial real estate appreciated five fold since the 1970's. All-IP networks require both less equipment and far fewer points of interconnection between networks. The transition of the AT&T's core network to all-IP already started emptying buildings, but most of the benefits await adoption of the IP-IP interconnects necessary to support HD voice. IP-IP interconnects allow AT&T to consolidate the vast majority of the company's 5000 central offices into a handful of hub data centers. Comcast's all-IP network supports 10 million Digital Voice customers from five data centers. Legacy circuit switching preserves the physical connections between end points except for multiplexing in the core network. The copper loops linking premise to the central office connect through a giant Master Distribution Frame and circuit switch line cards. IP connections utilize logical address assignments, so a single fiber can support any almost arbitrary number of end user connections. Half a rack of VoIP network equipment replaces a room full of Class 4 and 5 of circuit switching equipment. Equipment sheds replace the contents of entire buildings. AT&T proposed a date certain PSTN retirement in a FCC filing on December 21, 2009. The filing and media coverage at the time focused on the move from wireline to wireless networks as well as the operational efficiencies of the converged all-IP network necessary to support broadband. The all-IP network promises to dramatically reduce the $3.5bn AT&T spends monthly to operate its network, but the cost of new equipment and price competition prevent much of the benefit from becoming profit. The bulk of the upside comes through divesting the resulting real estate surplus or as much as $20 billion each year from 2013 to 2018. AT&T can even follow France Telecom's example and accelerate the benefits through private equity deals. The recoverable value of AT&T's real estate assets remains unknowable with any precision, but the growth of telephone service during the 20th century leaves the company with real estate in prime locations across America. SBC CEO Ed Whitacre rolled up half the assets of the old AT&T and accumulated 250 million sq ft of floor space between network facilities and office space or 1000 sq ft per employee. There may also exist ways to generate cash by recycling the copper in network elements or even outside plant. Pole space remains scarce, so recovering copper in outside plant makes room for other uses of the pole attachments. Embracing all-IP networks represents the only option allowing AT&T to compete with over-the-top services even without the real estate windfall. The main questions owe to the unwinding of the legacy regulations necessary to retire circuit switched network elements. The scale of the real estate divestiture challenge may justify creating a separate business unit to deal with the all-IP network transition. The complexity of the task and extracting the most value out of liberated space will require careful planning. For the moment, at least 90% of traffic still transits a circuit switch at some point and circuit switching remains the baseline even for wireless network interconnection. The deployment of all-IP wireless 4G networks represents the final piece of the puzzle making the all-IP transition inevitable. AT&T already converted two million voice customers to all-IP Uverse voice and large enterprises started embracing SIP VoIP infrastructure two years ago. A push to reclaim spectrum provided much of the energy driving the digital broadcasting and HDTV transition. A similar dynamic around reclaiming real estate can fund the global transition to HD voice and all-IP networks. The resulting transformation promises to reset the entire telecom competitive landscape in AT&T's favor. ------------------------------------------- ----- End forwarded message ----- _______________________________________________ nnsquad mailing list http://lists.nnsquad.org/mailman/listinfo/nnsquad