American Tower sees early promise in billion-dollar edge compute opportunity

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Edge compute comments were focused was on the U.S. marketplace, but American Tower also has an international portfolio and CEO Tom Bartlett said the exact same approach can be duplicated globally. (Getty Images)

As American Tower readies for C-band deployments and the start of Dish Network’s 5G buildout, the tower company also is looking further ahead to mobile edge compute opportunities.

“Scale deployment of a true mobile edge remains several years away, but in our view the TAM [total addressable market] could be quite significant, running well into the billions of dollars annually,” said American Tower CEO Tom Bartlett during Thursday’s first quarter earnings call.

Efforts include six ongoing small-scale distributed compute trials at tower sites. American Tower also has a Colo Alt data center in Atlanta, which was recently expanded, that Bartlett said “continues to outperform” expectations. While the opportunity is still in the future, American Tower is having conversations with data center and cloud players about optimizing needs for the 5G edge.

RELATED: American Tower: Neutral host most efficient for edge deployments

“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,” Bartlett said.

American Tower has emphasized before that some of its 43,000 U.S. tower sites are well suited for mobile edge compute, with ready access to power, fiber, and carriers often already on site. Much like its tower business, it also believes a neutral host model that brings together multiple cloud players and carriers in one location is the most efficient way to deploy the mobile edge compute long-term.

As for key drivers of demand, Bartlett pointed to “the emerging need for incremental cloud RAN locations and lower latency applications processing in a 5G environment.”

Data centers currently dispersed in a regional framework will need to be complemented, he said, by new micro edge data center architecture as increased data processing is needed at the edge to support low latency.

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While American Tower thinks edge compute can enhance the economics of its U.S. macro tower business and Bartlett said industry data points suggest a “meaningful, scalable opportunity” over time, the company remains disciplined in terms of deploying capital.

“Our preliminary assessments indicate that the edge opportunity fits nicely into our framework, but we will need to prove out this thesis going forward,” he noted.

The comments were focused was on the U.S. marketplace, but American Tower also has an international macro portfolio and Bartlett said the exact same approach can be duplicated globally. 

O-RAN impacts

The ongoing shift toward cloud RAN and open radio access network (open RAN) architectures also align with opportunities for edge compute, Bartlett indicated, as the baseband unit at the base of tower sites is separated out into the distributed unit (DU) and centralized unit (CU).

From an open RAN perspective, “that’s giving our customers the ability, and us, to be able to look at where in fact we might be able to expand and be able to enjoy some of this additional compute capability that’s going to exist out at the edge as the 5G experience becomes more prevalent throughout the country,” Bartlett said.

A cloud ramp in the distributed unit portion of the network is part of why disaggregation is so important, according to Bartlett. “If we can bring in 500 kilowatts of power into a particular site with a number of shelters that exist in the site to be able to load up racks and servers...we think that we can enjoy some significant opportunity upside here from this whole initiative,” he stated.

RELATED: American Tower enters Dish mix, reaches lease deal for up to 20K sites

American Tower is pursuing neutral host model compute opportunities on two fronts. One is distributed compute, with enterprise workloads moving to an off-premises public cloud in a hybrid solution.

That isn’t as meaningful financially, but Bartlett noted that mid-sized enterprise accounts have been successful and that they’re significant in the sense the tower company can learn what kind of experience and needs customers are going to be looking for.

The bigger opportunity is on the mobile edge compute side, he said. Verizon over the couple of years has been pursuing mobile edge compute, including public and private MEC with AWS and Microsoft. American Tower has Memorandums of Understanding (MOUs) with multiple parties that are focused on bringing solutions to operators, and other agreements focused on cloud service providers.

RELATED: AMT CTO cites telco cloud conversion as catalyst for tower edge data centers

Q1 earnings:

  • American Tower saw leasing applications tick up in Q1, and increased its 2021 outlook for services revenue to $175 million from $120 million.

New Street research analysts expect the acceleration in services activity to “coincide with higher organic growth later this year; and, with cash leasing revenue from the Dish MLA commencing next year, higher organic growth in 2022.”

  • Property revenue grew 7.9% to $2.13 billion and organic tenant billings grew 7.8%.
  • Adjusted EBITDA grew 13.3% year over year to $1.44 billion. Consolidated adjusted funds from operations (AFFO) grew 23.8% to $1.12 billion.
  • In Q1 American Tower spent about $115 million to acquire 116 new sites including 48 in the U.S. and 68 in Latin America.
  • Expects to close on its pending $9.4 billion purchase of Telefónica’s Telxius division, comprised of 31,000 sites in Europe and Latin America, during the second and third quarter.