American Tower's CEO believes the edge computing market could eventually grow into an opportunity worth billions of dollars every year. And he said his company is well positioned to take advantage of that situation.
"Given that our attractively located tower sites have existing access to fiber and power while already hosting multiple communications providers, they are a natural candidate to represent hub locations for these low latency wireless edge data centers," Tom Bartlett said Thursday during American Tower's quarterly conference call, according to a Seeking Alpha transcript of his remarks.
Further, he hinted at his company's interest in pursuing the market through a number of avenues, including potentially major partnerships.
"The early data points we are seeing throughout the industry all suggest that this can be a meaningful, scalable opportunity that can represent solid upside for us in due time," he said. "We intend to explore global joint ventures or partnerships to effectively leverage these inherent opportunities, and we continue to work through a number of different scenarios on that front."
The open RAN driver
Bartlett also suggested that the trend toward open RAN technology in the wireless market is helping to drive the edge computing opportunity by separating the elements of a wireless network into pieces that could benefit from edge computing capabilities at the base of a cell tower.
"It's different types of equipment that our customers are able to put together to be able to load onto the site, and at the base level, at the baseband unit, which is where the data center element comes in," he said.
However, he cautioned that it's a market that is still in its infancy. "We really are at the beginning of it," he said.
American Tower is one of the nation's three big cell tower owners. As a result, it's among the companies that stand to benefit from network operators' increased 5G spending for midband spectrum like 2.5GHz and C-band.
"By all accounts, 2022 should be a good year for the domestic tower leasing industry," argued the financial analysts at MoffettNathanson in a recent note to investors. "Between initial C-band deployments, T-Mobile making progress with its 2.5GHz rollout, and Dish Network entering the early stages of its greenfield network build, there is reason for optimism that growth will accelerate for all players."
Indeed, American Tower's rival, Crown Castle, just last week lifted its 2021 expectations for site rental revenues; adjusted earnings before interest, taxes, depreciation and amortization (EBITDA); and adjusted funds from operations (AFFO) due to those exact reasons.
American Tower, for its part, on Thursday posted first quarter financial results showing EBITDA and AFFO significantly ahead of most financial analysts' expectations.
"American Tower's results today confirm that the ramp in carrier activity that we expected is indeed happening: application volumes have increased, which should drive accelerating gross organic revenue growth as the year progresses and into 2022," wrote the financial analysts at New Street Research in a note to investors.
This growth in its core business makes American Tower's bet into edge computing even more noteworthy. The company just this week announced it expanded and upgraded the data center it purchased two years ago in Atlanta.
5G players eye the edge
But American Tower isn't the only tower company eying the edge computing market. For example, SBA Communications has purchased several data centers and is now selling computing services under its new SBA Edge brand.
However, the financial analysts at MoffettNathanson recently argued that most edge computing services can be supplied by a relatively small number of regional data centers rather than hundreds or thousands of tiny data centers on the edge, as American Tower's Bartlett suggested.
"We don't doubt that edge computing is a real trend," they wrote in a recent report to investors. "Instead, our suspicion is that most edge computing needs can likely be met with regional deployments in locations like traditional data centers rather than deployments at the base of a cell tower."
- Analysts tamp down hopes for edge computing proliferation
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