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The Core

American Tower talks up edge while dumping cash on core data centers

Cell tower giant American Tower said it will spend $10.1 billion to buy CoreSite Realty, one of the nation's biggest operators of data centers. The news helps to highlight interest around edge computing, as well as the potential importance of data centers in general to future telecommunications networks.

American Tower isn't the only company moving in on data centers. Also on Monday, investment companies KKR & Co. and Global Infrastructure Partners LLC said they would purchase data center operator CyrusOne in a deal worth around $15 billion, including debt.

American Tower owns and operates around 43,000 cell towers in the US and a total of 175,000 cell tower sites globally. CoreSite, meanwhile, owns and operates 25 massive data centers (including 21 cloud computing on-ramps) across eight big US cities, including Chicago, Boston, Los Angeles and Miami.

American Towers officials explained that the company's purchase of CoreSite and its data centers would help position the company to take advantage of a variety of opportunities, including potentially expanding a data center business internationally. But company officials said the most important element of the transaction involves "the convergence of wireline and wireless networks amid accelerating global 5G deployments."

Specifically, company officials said American Tower hopes to operate data centers not only in big US cities but also in smaller cities – as well as potentially in thousands of locations all over the country and the world by putting mini edge computing data centers at the base of American Tower's cell towers. Company officials said the deployment of speedy, midband 5G networks would help drive demand for low-latency applications that will require distributed computing capabilities, thus driving demand for edge computing data facilities.

American Tower officials said the company's purchase of CoreSite will help position the merged company to build computing services across the core, metro edge and mobile edge of the network. Click here for a larger version of this image. (Source: American Tower)
American Tower officials said the company's purchase of CoreSite will help position the merged company to build computing services across the core, metro edge and mobile edge of the network. Click here for a larger version of this image.
(Source: American Tower)

American Tower estimates the total addressable market for the "mobile edge" to hit $1 billion by 2026, and the total addressable market for the "metro edge" to reach $2 billion during that same timeframe.

Talking up the edge while spending on the core

During an investor call to discuss their CoreSite purchase, American Tower officials declined to discuss exactly how and when the company plans to expand its edge computing operations beyond the core and metro network. Indeed, American Tower officials have long discussed the prospect of installing computing capabilities at the base of the company's cell towers, but in recent months American Tower has mostly focused on purchasing massive data centers in dense, downtown areas. Just last month, American Tower acquired DataSite's data centers in Atlanta, Georgia, and Orlando, Florida – raising the total number of data centers operated by the company to nine.

Broadly, demand for data centers has skyrocketed in recent years largely thanks to COVID-19. The pandemic forced large portions of the world's population to work and school from home, generating record-setting amounts of Internet traffic to cloud computing services offered by the likes of Microsoft, Amazon and Google. And though pandemic restrictions have been easing in the US and globally, many expect the use of cloud computing services to continue.

Concurrently, many expect data centers to play a larger role in telecom networks of the future, as network operators increasingly virtualize their network services. Doing so will allow them to run much of their network in software inside of data centers, thereby dramatically lowering costs. Already AT&T has agreed to place its core network inside of Microsoft's cloud, while Dish Network plans to run all of its network operations inside Amazon's cloud.

American Tower isn't the only cell tower operator to expand into the data center realm. For example, SBA Communications has purchased several data centers and is now selling computing services under its new SBA Edge brand. And DigitalBridge – which owns everything from cell towers to fiber networks to small cell systems to data centers – recently announced an expansion of its Vantage data center business in Santa Clara, California.

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Mike Dano, Editorial Director, 5G & Mobile Strategies, Light Reading | @mikeddano

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