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21st Century Commerce Hubs

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April 1, 2000

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21st Century Commerce Hubs

Posted: 04/2000

21st Century Commerce Hubs
Teleports Help Carriers, ISPs Go Global
By James R. Dukart

Teleports–they may sound like something out of “The Jetsons" or “Star Trek,” but chances are one is being built somewhere near you.
The savvy carrier who offers advanced telecom services in the coming years is best advised to find out where the
nearest teleport is,
and to look at the
competitive advantages that come from docking to one of these 21st
century commerce hubs.

The word “teleport” is new enough that you will not find it in most dictionaries. A contraction of “telecommunications” and “port,” a teleport shares a few similarities with its semantic cousins, the airport and the seaport. As with airports and seaports, teleports serve as the nexus of commerce; but, while an airport hosts planes and a seaport sees its share of ships, teleport traffic consists of voice, data, video and multimedia communications.

Teleport traffic arrives and departs via satellite, microwave, cable, narrow- and broadband telephone wiring and terrestrial wireless networks.

The New York City-based World Teleport Association
(WTA, www.worldteleport.org

calls teleports “the intermodal hubs of the broadband world, connecting satellite circuits with terrestrial fiber optic microwave circuits.”

Lou Zacharilla, director of global marketing and consulting services for the WTA, says teleports form “the essential infrastructure for the weightless cargo” of the Information Age. He points out that most major U.S. cities have or are developing teleports, and more than 50 developments in Europe use the name “teleport.”

So Misunderstood

“Teleports are an essential but little understood industry,” says Robert Bell, executive director of the WTA. For many years, they were a one-customer industry–the major broadcast and cable television networks used them to beam live news or sporting events around the globe.

“When we always used to see Jim McKay at the Olympics, that was what teleports were about,” Bell says. “It started out with the dish-heads and broadcast stations, but in the mid-’90s, the Internet came along and changed the universe.”

These changes came about because of the booming Internet services. Bell says although the bulk of teleport revenue comes from broadcast and cable television services, that could change during the
next decade.

Internet services represent the fastest growing segment of the teleport business by far, growing between 30 percent and 50 percent a year, Bell says. Other satellite television services are seeing an average growth of between 4 percent and 6 percent.

Another example of an established teleport
makes the conglomeration of satellite dishes look
like a base to search
for extraterrestrials.

Carriers and ISPs are turning to teleports to provision Internet via satellite, particularly in cases where there is a need to offer high-speed broadband access across continents or around the globe.

Carriers might recognize the term teleport in one of the country’s most successful competitive carriers of the past decade–Teleport Communications Group Inc.
(TCG, www.tcg.com), now part of AT&T.

TCG grew out of the granddaddy of all teleports–the regally named The Teleport, which began as an economic development project of the Port Authority of New York and New Jersey in 1985. Built with $70 million of Port Authority money, The Teleport actually was an office park on New York’s Staten Island. Merrill Lynch
(www.ml.com) and Western Union (www.westernunion.com)
created it to handle the park’s communications infrastructure.

Called the “Communications Gateway to the Word” is the Washington International Teleport located in the nation’s

TCG built a satellite ground station in the park and connected it via fiber to all the park’s buildings. It also went underwater to connect to Manhattan and Brooklyn.

Merrill Lynch added its worldwide data center to the park, and several other telecom and computer companies soon followed.

Today, the site houses five fully leased buildings at above-market rates. It employs 2,100 jobs and has produced a positive cash flow for the Port Authority for the past 12 years.

TCG,didn’t fare too poorly either. In the mid-1990s, AT&T bought the company for approximately $11 billion.

One economic model for the near future could be that as global Internet services grow, teleports will spawn new competitive carriers. An even more likely model is that carriers will seek out teleports as long-distance broadband partners and as hosts and collocation partners.

Internet in the Sky

Demand for teleports in the United States is booming as companies seek to connect overseas ISPs to the U.S. Internet backbone. Merrill Lynch, for instance, projects satellite transmission of Internet backbone services will grow from $6 billion in 1998 to $19.7 billion by 2008.

Merrill Lynch also says the delivery of local loop services via satellite will grow from $70 million in 1998 to $30 billion in 2008.

(www.intelsat.int), one of the largest global satellite firms, says that in 1998 roughly 7 percent of its revenue came from transmitting Internet traffic. That amount has at least doubled in the past two years.

PanAmSat Corp.
(www.panamsat.com), a major U.S. satellite firm and teleport operator, predictsby 2009, 20 percent of the world’s Internet traffic will move by satellite.

Teleport operators are beefing up to meet this demand. For example,
tele-port operator Teleglobe Communications Corporation (TCC, www.teleglobe.com)
announced in 1999 a $5 billion expansion of its terrestrial and satellite networks, aimed at providing Internet connections to more than 100 countries.

The company says revenues attributed to Internet traffic have grown more than 120 percent within the past year, while the company’s customer base has more than doubled. Teleglobe’s expansion will increase its Internet access bandwidth by more than 200 percent, and the company estimates that 95 percent of the new satellite circuits it installs are devoted exclusively to carrying Internet traffic.

Bob Collet, vice president and general manager of data services at Teleglobe, says the company’s customer base includes more than 700 established and emerging telecommunications carriers and ISPs in more than 100 countries.

“The customers of our customers make up between 12 and 14 percent of the world’s Internet traffic,” Collet says.

Big current and future markets include the Caribbean and Latin America, where Teleglobe is investing $16 million in the deployment of four new antennas to serve the millions of new Latin American customers expected to flock to the Internet, he says.

In addition to simply passing broadband traffic from PoP (point of presence) to PoP, Collet says a popular service is digital video broadcast over Internet Protocol, DVB/IP, or simply DVB for short.

The DVB service is particularly popular with ISPs that need to multicast caching and replication–that is, pushing similar content to multiple sites simultaneously, he explains.

Bell adds, “Satellite is inherently a one-to-many technology. We already have in the U.S. this horrible congestion, and we are only going to increase it by pushing more content to more edge sites over fiber.”

In terms of cost and bandwidth use, Bell says satellite provides clear economic advantages over fiber.

“With satellite, it does not cost more to push to 100 sites than it does to one,” he says. “Satellite is also inherently insensitive to asymmetric traffic, so it can be very efficient compared to fiber, which is

very symmetrical.”

Services Galore

ATC Teleports (www.atcteleports.com)
Vice President for International Voice and Data Services Kay Sears says international carriers often use U.S. teleports as a hub and/or termination point for their U.S.-based business.

ATC, operates teleports in eight venues throughout North America. It has more than 112 ground stations worldwide.

“South American carriers might want to terminate in Miami, so we have a hub there, and connect via fiber to other major points of presence in the U.S.,” she says.

Carriers are interested in a whole range of voice and data services, she says. They include voice compression, voice ports and voice partition, plus “tons of IP access, fully integrated IP platforms and direct connections to the Internet.”

Another draw for carriers is that teleports provide a neutral platform for carrier services, Sears adds.

ATC often helps negotiate carrier-to-carrier agreements on behalf of its carrier clients. Smaller carriers–on the foreign and domestic sides–are looking to teleports to help provision things that are simply out of their reach, such as the satellite portion of
a network.

In terms of pushing content to the network edge, Sears says teleports are “as close to the edge as they can get. From here it is going straight out to the foreign provider.”

Bell adds that other ways exist for teleports to offer services, through a combination of satellite and fiber connections, purely terrestrial systems would find hard to match.

For one thing, much of the world continues to be either fiber-scarce or hostage to exorbitant pricing, Bell says.

“There are 70,000 islands in Indonesia, and you are never going to fiber all of that. In the Ukraine, I have heard it costs $60,000 per month for a T1 connection. What if I come in with a satellite and teleport and say I can do that for $20,000 per month?”

Making Noise

Voice telephony also is making noise in the teleport world,
Bell adds.

He explains this is mainly the case in underdeveloped nations without a telecom infrastructure. This also depends on the continued development and deployment of very small aperture transmission (VSAT) technology to make it more cost effective to deliver voice channels.

“You can create an entrepreneur in some of the villages who has a satellite phone that is essentially a village pay phone,” Bell says. “Even though it is a small sector, it is growing fast.”

Other ways in which satellite Internet transmission may beat fiber, Bell says, include instances where transmission is needed for a short time or is needed only on an irregular basis, harking back to the origin of teleports, which were created for broadcast news and sporting events around the world.

Satellite transmission also can withstand certain elements that might sometimes bedevil fiber.

“No shark ever chews through a satellite transmission, and no contractor ever runs a backhoe through it,” he says.

While satellite has certain advantages, Bell notes that for point-to-point communication in the developed world, fiber always will be more cost-effective. “From New York to London, there is a tremendous amount of fiber, the cost per bit gets real low, and it is always going to beat you on price,” he says.

All of this simply points out that satellite and fiber are complementary, rather than competitive, technologies, and is one more arrow in the quiver of advantages teleports can offer carriers.

Maybe We Should Just Live Together

Teleports aren’t just interested in carriers as customers, most welcome carrier tenants too. The Teleport in New York has been full of high-rent telecom and computer technology tenants for years.

Last October, Teleglobe announced the expansion of its collocation facilities, saying it would open expanded data centers in New York and a number of North American, European and Asian locations.

ISPs and carriers such as Telecom Italia SpA
( www.telecomitalia.it), Telefonica SA
(www.telefonica.es), Singapore Telecom (www.singtel.com),
RealNetworks Inc. (www.realnetworks.com)
and Yahoo! Inc. (www.yahoo.com) already collocate with Teleglobe at Internet access sites in London and Manchester, in England; Los Angeles, New York and Palo Alto, Calif.; and Toronto and Vancouver, Canada.

ATC’s Sears says collocation is attractive to carriers of all sizes that want to leverage advanced equipment and services within a teleport.

“We do a lot of engineering and network design,” she says. “We can help carriers operate the equipment or we can run it for them. A lot of the U.S. carriers contract us out as experts for certain parts of their international operations.”

Zacharilla adds that collocation provides benefits for everyone involved. Teleport operators get tenants who are willing to pay market rate or higher rents in exchange for access to state-of-the-art communications technologies that are vital to their business, he says.

Carriers benefit through existing technology as well as immediate accessibility to new services and technology the teleport or fellow teleport tenants roll out, Zacharilla says.

Communities also win because teleports provide thousands of jobs in relatively high-paying technology fields like telecom, computer programming, retail, food service, construction and facilities maintenance.

“It’s really an economic development play,” Zacharilla says. “Teleports serve as on-ramps to the Internet Superhighway, and they attract some of the fastest-growing companies and best jobs a community could want to have.”

James R. Dukart is a freelance writer based in Minneapolis.
He can be reached at [email protected]

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