American Tower's CoreSite deal adds credibility to drive the edge, CFO says

American Tower’s previously announced data center deal to acquire CoreSite, combined with existing tower assets, makes the company a more credible player in its ability to drive the evolving mobile edge from an infrastructure standpoint, according to CFO Rodney Smith.

His comments came during a Deutsche Bank investor conference this week, after a question about the company’s rationale behind owning rather than partnering on data centers. Key features Smith highlighted about the $10 billion CoreSite deal, which involves 25 core data centers, was high quality assets with a large number of widely dispersed interconnections and cloud on-ramps across the U.S.– which American Tower believes will become increasingly important for multiple players.

In terms of the mobile edge, “that network development won’t be driven by one company alone,” Smith said, adding that it will require cloud on-ramps, interconnections, and likely some towers and tower space.

“The wireless carriers will join those facilities to reduce their latency. I think they will want those cloud on-ramps and compute power close to where their base radios are, which are all at tower sites today,” he noted.

American Tower’s approximately 43,000 towers roughly align in a similar geographic layout as where the CoreSite data center assets are located, he commented. CoreSite data centers are in eight markets that span key U.S. regions and have over 32,000 interconnections within the facilities.

And wireless carriers aren’t the only ones involved in the evolving mobile edge, with Smith saying that as American Tower comes into negotiations with others such as cloud players, network companies, as well as wireless operators – it brings with it both those distributed interconnections and its tower infrastructure.

“So we are a much more credible player in terms of, not participating in the edge, but being able to drive the edge and drive where those mobile sites will be going,” he continued.

Verizon has been at the forefront among U.S. carriers to tout its mobile edge compute efforts, with partnerships across cloud players AWS, Google, and Microsoft and both public and private offerings. During its investor day, Verizon laid out expectations for public MEC to drive around $1 billion in growth for the carrier by the end of 2025.  

But as Smith pointed out, what the mobile edge exactly is has yet to be defined.

First up for CoreSite, American Tower’s going to continue to expanding capacity within the facilities to meet demand and drive growth on existing campuses. Its 2022 outlook calls for investing around $300 million in capital, which also includes “a new ground-up development” potentially in the Silicon Valley area where it already has eight facilities. But after that it will be working with the variety of edge stakeholders across tech, cloud, networking and wireless “to really figure out where that edge is,” and will make edge investments at tower sites when the opportunity arises, he said. 

Smith emphasized that American Tower isn’t looking to compete with some other large U.S. data center business but wants “to have a very unique high-quality set of select assets across the U.S. and use that to drive the networking facilities of the future.”

In terms of the rationale for the CoreSite deal, Smith said it also gives the company “full optionality in terms of what we could do with it going forward,” alongside benefits of direct ownership and customer relationships with cloud players.

There’s little downside to ownership, he noted, with strong revenue drivers, and “tremendous upside” when it comes to different opportunities.

Part of that revolves around the cloud on-ramps and network evolution, as American Tower believes 5G networks and users, and even landline network companies, over time will need lower latency.

“And in order to get that, you’ve got to push out the compute power of the on-ramps and the network connections out closer to the edge,” Smith said. Longer-term, user applications, enterprise data and applications for wireless networks will all be going to the cloud rather than held on servers and traditional data centers, he said.

The company anticipates those cloud on-ramps will need to be spread out, and expects “to see many more cloud on-ramps around the country.”

And as towers remain its core business, Smith said “those cloud on-ramps could certainly be at tower sites” with network compute located alongside base stations and power. Siting new cloud on-ramps wouldn’t just be to support wireless networks but “landline network companies can tap into that as well, enterprise customers could get easier access to cloud on-ramps if they were more distributed throughout the U.S,” he continued.

American Tower also owns three metro data centers and deployed six edge data centers located at tower sites.