Up until a few years ago, phone companies owning massive data centers all over the place made sense. When Qwest was around, the Cyber Centers or Super PoPs (as they were called) were a critical asset in the telecom portfolio that generated decent revenue streams. Those days are long gone. It makes no sense for a phone company, especially a large one to own and operate a vast portfolio of data centers. Amazon single-handedly ruined the “Phone Company Owned Data Center” business model for good. And Azure and Google are just adding insult to injury.
- Windstream sells data center business to TierPoint for $575M
- Verizon is struggling mightily in the data center business
- AT&T is selling $2B worth data centers, freeing up capital for spectrum investment and acquisitions
Level 3 doesn’t plan on selling its data centers, however, lets set the record straight, Level 3 data centers are not in the same category as Verizon Terramark, CenturyLink Savvis, Equinix, and so on. Level 3 data centers are smaller in size, although they a couple of big ones, and they serve as a place to house telecom equipment, including Vyvx and CDN hardware.
Another big event in 2015 that signified the collapse of the “Phone Company Data Center” business model is the departure of Jared Wray and Jonathan King from CenturyLink. These two cloud execs are legendary, and up there in the ranks of influential cloud visionaries, along with Werner Vogels, CTO of Amazon. Their departure puts to rest the notion that a phone company can own and sell data center infrastructure and a cloud software stack in one sitting.
Selling ANI’s, T1’s, MPLS, Cloud PBX, Toll-Frees, GPON, and Private Lines are no longer compatible with selling data center space. The selling of data center space is best served by REITs such as Equinix, or the IBM’s of the world. Phone Companies are better off focusing on selling network services. As far as their data centers, they’re better off selling them to the likes of an IBM or Digital Realty, and leasing them back in smaller increments to sell back to customers in the form of cloud services.