10 Signs Of Telecom Turmoil

Rough Turbulence

The convergence of the IT and telecommunications markets is causing chaos among the carriers. In an effort to stay relevant with their customers, many telecom providers scooped up data center assets to get into the cloud market. But now, carriers are realizing that competing with the cloud leaders such as Amazon and Google is a losing battle.

As telecoms back out of the data center business, many are putting their once-valuable facilities on the market. At the same time, these providers are returning to their roots and focusing on the network by acquiring more fiber and introducing strategic services that businesses want.

Here are 10 signs that point to telecom turmoil in the market.

1. Verizon Mulls Data Center Sale, Exits Public Cloud

On its fourth-quarter earnings call in January, Verizon CFO Fran Shammo said the provider was evaluating the potential sale of its data centers. Its data center business includes 48 facilities that it purchased from Terremark for $1.4 billion in 2011. In February, Verizon sent out letters telling its customers it would be closing its public cloud platform.

2. Windstream Sells Data Center Business To TierPoint

Windstream was one of the first carriers to get back to its core voice and networking business, selling off its co-location and hosting business for $575 million to St. Louis-based TierPoint in November 2015. The deal included more than 20 data center facilities that Windstream had scooped up when it acquired Hosted Solutions for $310 million in 2010.

3. CenturyLink Explores Data Center Asset Sale

During its third-quarter 2015 earnings call, CenturyLink President and CEO Glen Post said the carrier would be exploring options for its data center operations and co-location business. In the fourth quarter, CenturyLink said that a number of parties were interested in the data center assets.

4. AT&T Inks Deal With IBM

In December 2015, AT&T forged a deal with IBM for it to take over its managed application and managed hosting services business. This would also include AT&T's data center facilities where the hardware resides. Its data center facilities and managed services business reportedly were worth $2 billion.

5. Carriers Turn Attention To Strategic Services

Large telecom providers are taking advantage of their footprints by rolling out strategic services that leverage the network. Verizon and CenturyLink debuted managed security offerings for business customers. AT&T is pushing its mobility portfolio with its new IoT platform that recently became available to the channel and uses its 4G network. Comcast says its latest Docsis 3.1 modem-based Internet service lets end users hit gigabit speeds without being on a fiber network.

6. Carriers Consuming Other Carriers

Several carriers have acquired competing telecoms with robust fiber footprints. In February, Verizon acquired XO Communications' fiber-optic network business in a deal worth about $1.8 billion. Zayo Group at the end of 2015 acquired Canadian communications provider Allstream for about $348 million, (CA$465 million), adding more than 18,000 route miles to its existing fiber footprint. Zayo also scooped up fiber and data center assets from Dublin-based telecommunications provider Viatel for about $107 million.

7. Google Shakes Up Carrier-Controlled Fiber Market

Google threw its hat in the network infrastructure ring by rolling out a fiber network in several U.S. cities, giving carriers in those markets a run for their money. Today, Google Fiber is available or will be available in a number of markets in which it competes with Comcast, AT&T and Time Warner Cable's fiber networks.

8. Carriers Introduce Value-Added Services

Just because many of the large telecoms are moving out of the data center and co-location business doesn't mean they are giving up on cloud. Several have introduced value-added services around the popular cloud providers' Infrastructure-as-a-Service offerings that were once viewed as the competition. Verizon, Comcast and AT&T are now offering private connectivity offerings to some of the largest cloud providers, such as AWS, Google and Microsoft Azure.

9. Carriers Make Grab For More Wireless Spectrum

The Federal Communications Commission's highly anticipated 600MHz auction began in late March -- a process that could take three weeks to upward of two months. This auction will allow smaller players such as T-Mobile and Sprint to snatch up some spectrum to better compete with AT&T and Verizon. While T-Mobile U.S. is expected to be the most aggressive bidder, AT&T and Verizon are also expected to bid around $10 billion to $15 billion for licenses.

10. Telecom Giants Join Facebook's Open Compute

Carriers have been among the biggest buyers of IT hardware, but now, some are signing on to Facebook's Open Compute project in an effort to lower infrastructure costs and run more efficiently. In January, U.S.-based AT&T and Verizon, German carrier Deutsche Telekom, British mobile network operator EE and South Korea's SK Telecom signed on.