Genband's Walsh: ILEC TDM voice Central Offices find new lives as data centers

ORLANDO, Fla.--Traditional telcos may be seeing their voice service revenues continue to decline every quarter, but the cost of running and maintaining these aging networks continues to rise.

Speaking during the Genband Perspectives 15 conference, David Walsh, CEO of Genband, said that service providers have an opportunity to cut those costs, while creating new business models like data center services out by migrating to an all-IP platform.

"There are 30,000 Central Offices (COs) in North America and probably two-thirds of them are not needed anymore," Walsh said. "There is an opportunity to do a number of things with them, including monetize the real estate and the second is to convert them into data centers to handle an emerging set of applications."

Besides seeing revenues decline, the cost to power legacy COs continues to rise. Today, $63 billion is spent on powering these COs.

According to industry estimates, there are 30,000 COs that house TDM-based equipment in the United States. Legacy COs consume 350 billion kilowatts of power a year, which translates into 30 power plants and produces 1.3 billion metric tons of carbon dioxide emissions.

For every $2 spent on energy in the CO, half is spent on powering equipment and the other half is spent on cooling it. By reducing communications energy by 50 percent, U.S.-based service providers could save over $31 billion a year on energy costs.

"One of the benefits to making the shift to IP is reducing power, which is the largest cost associated with running the PSTN," Walsh said. "The PSTN is probably the biggest power hog in the whole world and was not built thinking about power because when it was built, power was not expensive."

Already, the TDM-to-IP conversion is taking place in various carriers' networks and creating interesting results.

While he could not reveal the customer's name, Walsh said Genband was able to compress 275 frames of PSTN equipment down to one rack for one of its ILEC customers.

"In one customer implementation we did we compressed 275 frames of equipment to one rack, creating huge power and space savings," Walsh said. "That's allowing a lot of carriers around the world to be able to collapse this stuff and migrate it or sell or monetize these real estate assets."

Meanwhile, Verizon (NYSE: VZ) and FairPoint Communications are finding new uses for their old COs. Following the aftermath of Hurricane Sandy, Verizon had to take out all of its damaged TDM-based equipment, convert and recreate it to IP in New York City, for example. This gave Verizon the opportunity to reduce its network footprint and monetize the building for real estate uses.

"I was reading the New York Times a month ago and realized the picture I was looking at was the West Street Central Office and what it would cost if you wanted to buy condos in that space start in the low millions," Walsh said. "It's amazing the value of the real estate assets that the carriers own today and how they're being repurposed."

Likewise, Verizon made a similar move with its Pearl Street CO in New York City. By converting all of its TDM network to IP, it reduced its network footprint in the building and then sold it off to a data center provider.

However, Verizon is not the only telco repurposing its aging COs into data centers and for other uses.

FairPoint converted two of its COs into data centers over the past year in both Laconia and just last month in Manchester, N.H. In the Manchester data center, FairPoint is attracting customers that are either trying to expand their current data centers, don't have the space or are looking to build an initial center with a third-party provider.

By making this change, FairPoint told FierceTelecom in a previous interview it can pursue new revenue opportunities, including data center storage and cloud-based disaster recovery.

Looking beyond New Hampshire, FairPoint plans to target other regions for similar initiatives in other northern New England states. Such a strategy makes sense, particularly as the company continues to see its local PSTN revenue decline every quarter.

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