Cell Towers Emerging As 'Wireless Edge' For Some Data Center Developers Amid 5G Rollout

Cell towers could become vital data center real estate, with some major companies betting big on the space, but other industry giants remain skeptical.

The data center space has seen a surge of interest at the so-called wireless edge — small facilities at cell towers that can provide the fast processing necessary for an increasingly wireless, 5G future.

Executives at cell tower REIT American Tower acknowledged this week that the firm's $10B purchase of data center firm CoreSite that closed in December is effectively a bet on this vision. At the same time, industry giants like Equinix have portrayed potential investment in these facilities as an overhyped, expensive distraction, with theoretical benefits that haven’t come to fruition. Still, there is no debate as to the burgeoning interest in cell towers as data center sites, nor to the significant barriers to making the widespread build-out of these facilities a reality. 

“I’m seeing a greater interest in customers putting their compute at the base of cell towers,” said Mark Hurley, data center solution architect at Schneider Electric, speaking earlier this month at Bisnow’s National DICE Construction, Design and Development Summit. “It isn’t a fully matured market right now, because there are real challenges with putting that type of compute there.”

The surge in interest in cell towers as data center sites comes as the amount of data used by individuals and businesses has skyrocketed over the past three years. That data needs to be processed at tremendous speed, also called low latency. 

Already, much of the data that requires the lowest latency for consumers is accessed through wireless networks as more people watch streaming services like Netflix, play video games and make FaceTime and Zoom calls on their phones. 

The low latency necessary for these applications isn’t possible if all the data has to travel to a cell tower, then to a nearby data center, then hundreds of miles to a hyperscale data center before being sent all the way back. This fundamental problem has driven an industrywide focus on the so-called edge — a somewhat nebulous term that effectively refers to placing at least some of the computing for these kinds of applications closer to the end user. 

The emergence of 5G, which allows significantly more data to be transferred through wireless networks, will dramatically increase the need for this kind of edge computing, advocates say. Beyond consumer-oriented applications like video streaming, the massive investment in 5G by wireless providers is predicated on the belief that it will open up a myriad of enterprise applications, from self-driving cars to industrial robotics to the development of fully connected smart cities.

The higher speeds required for these uses would mean more computing power located as close to the end user as possible, and that means small unmanned data centers  — the size of a shipping container or smaller — at cell towers.

 “I see compute moving closer to the end user and the compute requirements getting greater, because we’re trying to solve the latency problem for these edge applications,” Hurley said. "When you start thinking about things like smart cities and autonomous vehicles, you don’t want the data that’s being generated at the edge to have to go traverse back to the cloud, process, then send something back to the vehicle before it takes action — you need compute right there happening real time at the edge, so the wireless edge [becomes] more important.” 

American Tower — a REIT that has traditionally focused on towers and other telecom infrastructure — is banking on this vision of the wireless edge. In November, the company spent $10.1B to acquire data center REIT CoreSite, which owns 25 colocation facilities across North America. American Tower Chief Financial Officer Rodney Smith acknowledged this week that the transaction was driven by a belief in the growing importance of cell towers in the data center ecosystem.

According to Smith, the interconnection points between edge infrastructure on cell towers and hyperscale or colocation facilities are going to be increasingly important, numerous and complex. In acquiring CoreSite, Smith said, the company is effectively positioning CoreSite’s data centers around their tower infrastructure to target edge-focused applications. 

“These are perfect locations to site these new cloud on-ramps and have network compute power there as well,” Smith said, speaking at a telecom conference hosted by Deutsche Bank.

“When we think of the evolution to mobile edge, that network development ... will likely require some tower and tower space," he added. "The wireless carriers will join those facilities to reduce their latency, and I think they will want those cloud on-ramps and compute power close to where their base radios are, which are all at tower sites today.”

But not all data center operators are so excited about the idea. While there is little question that there will be more data center infrastructure at cell towers, there is also widespread sentiment among some of the industry’s largest players that the growth potential of this market has been overhyped.

Count the leadership of data center giant Equinix among these skeptics. 

“At this point, we are not seeing that as a meaningful demand signal from the market,” said Equinix CEO Charles Meyers, speaking at the Citi Global Property CEO conference. “Enterprise edge use cases — far edge use cases — are just simply not materializing the way some people expect that they might.”

As the rollout of 5G has been beset by delays, adoption by the industry has also been slower than the technology’s largest boosters projected. Meyers says that widespread adoption of 5G for manufacturing and other commercial applications — and indeed the widespread rollout of 5G at all — will only occur in four or five years at best. And even then, he is not certain it will make sense for operators of large data centers to invest in tower properties.

 “We don't see a ton of strategic synergy by having those under common ownership,” he said. “We do believe that over time, we would likely work with a variety of distributed real estate owners and look to interconnect their far edge.”

Even those who are among the most bullish on the future of data centers at the wireless edge say there are many questions that need to be answered before the widespread deployment of edge data center networks becomes a reality. Placing generators at thousands of cell towers would be cost-prohibitive, says Schneider Electric’s Hurley. Avoiding outages and downtime without this kind of backup power would require a fundamental rethinking of how the industry approaches resilience, he said.

Hurley also points to the fact that minimizing energy usage is at the heart of the data center business model and relocating that computing power to micro data centers across hundreds of cell towers will inevitably be far less efficient. This is exacerbated by the fact that 5G computing is inherently harder to predict than in a hardwired system. 

“It could cost you a lot more per kilowatt to deliver capacity in these outdoor edge solutions in a small or micro data center than it does in a large or hyperscale data center where they’ve managed to get those costs down to the slimmest margins possible,” he said.

Hurley acknowledges that investment in data centers at cell towers and other far edge infrastructure is a long-term bet. But, he said, these facilities are going to be an important feature of the future data center landscape, and companies that don’t plan for that future are going to be left behind. 

“5G is coming, but the use cases can’t be fully developed and deployed until we have that 5G rolled out throughout the country,” he said. “That’s going to be years away, but we need to think about that now and how it impacts our data centers and where we need to be in the future to position ourselves to take advantage of the edge.”