In the past, infrastructure capital was not part of funding wireless infrastructure, but capital is now pouring into digital infrastructure and transactions are happening at an accelerated pace. That was what Steven Sonnenstein, Senior Managing Director at DigitalBridge Investment Management, told the audience last week at the TowerXchange Meetup Americas 2022 in West Palm Beach, FL.
The popularity of digital infrastructure has evolved from the maturation of the tower business model and technological convergence. 5G has necessitated that both towers and small cells use fiber for connectivity. Additionally, the need for low latency depends on strategically located edge computing.
“In the past, tower companies stayed in towers, data center companies stayed in data centers, and fiber would be on its own,” Sonnenstein said. “And now what you’re seeing is a lot of cross pollination, between each of these asset classes. A lot of those portfolio companies are starting to dabble into each of these adjacent sectors. A tower company might invest in edge data centers or in some fiber. And all of this brings greater touchpoints of service to their end customer.”
DigitalBridge, itself, is invested in towers, fiber, small cells, in-building wireless, and real estate infrastructure. In particular, Sonnenstein addressed the global investment firm’s investments that span the public cloud to the edge: including Vantage and SCALA hyperscalers; and AtlasEdge Data Centers, Switch, and Databank data centers.
As an asset manager of $47 billion, DigitalBridge has invested in digital infrastructure globally, including overseeing 26 portfolio companies. “The reason for this capital investment is the huge growth of data,” Sonnenstein said. “The number of connected devices, which were 20 billion in 2020, is projected to grow to 500 billion by 2030. The digital infrastructure industry is going to manage the big data created by the emergence of artificial intelligence and machine learning platforms, which are going to require high speed computing.”
“This increased level of traffic is going to require a tremendous amount of compute power, which is becoming very decentralized,” Sonnenstein said. “That compute power has to move closer to the actual objects themselves and closer to the eyeballs for the system to operate efficiently.”
Servers Move to the Edge
Currently, only 1.6 million servers have moved to the edge, which represents only 10 percent of cloud workloads. Sonnenstein said compute power will increasingly be moved closer to the edge to allow for reduced latency of those workloads. “It will allow for reduced latency and higher speeds of compute to allow self-driving cars or any type of other IoT devices that you would have out on the periphery,” he said.
On the topic of fiber, Sonnenstein called it the “connective tissue that makes all of this work.” Prior to the pandemic, DigitalBridge Group was not all that interested in investing in fiber to the home, he said, because of the shorter duration contracts and lower customer stickiness. “What the pandemic has taught us is that, quite frankly, fiber to the home or residential fiber is as much an infrastructure asset as any,” he said. “So ultimately, what we’re seeing is a tremendous build out in residential areas and a slight slowdown in enterprise fiber build out into central business districts.” Additionally, governments on a global scale are also increasing fiber build outs, he added, in order to increase economic development.
Why do they call it digital infrastructure? Whether it is a macro tower, a small cell, fiber route mile, or data center, they are all necessary to carry data, which is growing by quantum leaps every year. Sonnenstein said back in 2016, more than 80 percent of all information available on the internet was created in the previous 18 months. Today, more than 90 percent of the information available on the internet was created in the last 12 months.
“With that tremendous acceleration of data creation, we need to make sure that we have rigid, solid networks that are well invested and stabilized in order to support all this transiting traffic,” Sonnenstein said. “All of these things are bringing the whole ecosystem together, fostering a tremendous amount of investment and allowing us to continue to build on what we’ve created today.”
By J. Sharpe Smith, Inside Towers Technology Editor
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