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Carrier Hotels: The Unsung Critical Part of Broadband Connectivity

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Today’s blog talks about a critical part of the broadband network that most people don’t know about—carrier hotels. These are locations that have been created for the specific purpose of allowing carriers to connect to each other.

The need for carrier hotels became apparent in the year after the passage of the Telecommunications Act of 1996. That new law allowed local competition for telephone service. New competitive exchange carriers (CLECs) had to tie their network into the public switched telephone network (PSTN), which was largely controlled by the big Bell Telephone companies and a few others.

The big telcos purposefully made it ponderous, expensive, and time-consuming to collocate inside a telco central office. The interconnection agreements between a CLEC and a telco were several inches thick, and the rules related to collocation and interconnection were over fifty pages long—and the telcos meticulously adhered to every rule. The telco got to approve the use of every piece of equipment that went into their space—and that meant only using the brands of gear that the telcos used. CLECs had to pay an expensive telco employee to accompany them every time they visited their equipment. It could easily take nine months to a year to establish a single new collocation.

A few smart entrepreneurs came up with the idea of creating a collocation space very near major telco offices. The language in the 1996 Act allowed CLECs to request collocation at any technically feasible location. It took a few fights at state commissions to allow collocation outside of Bell offices, but regulators universally agreed that was the intention of the 1996 Act. Once the use of external collocation sites was blessed, carrier hotels sprang to life and thrived.

Carrier hotels make money by selling collocation to carriers. All types of carriers come to the carrier hotels—long-distance carriers, CLECs, ISPs, wireless carriers, cable companies, major content providers, and specialty carriers of all types. A big carrier hotel in a major city houses hundreds of domestic and international carriers.

There are a number of benefits for carriers to locate in a carrier hotel. The most obvious is to make it easy to connect to other carriers and services. In today’s environment, an added benefit is the high degree of security at the typical carrier hotel. Carrier hotels are convenient places to exchange vast amounts of data.

The typical carrier hotel is also connected to multiple major fiber routes, so it’s an easy place for carriers to jump onto transport routes provided by fiber owners or companies that have leased or bought fibers on major fiber routes.

Another industry function provided by the carrier hotel is to create competition that holds down prices. There is fierce competition in the biggest carrier hotels for bandwidth, transport, and other services, and prices are kept competitive by having multiple carriers willing to provide the same service to carriers.

A lot of the traffic that we think of as the “Internet” changes hands in carrier hotels. The direct fiber connections within the hotel allow for keeping bits moving in the most efficient manner. A given carrier might interconnect with a dozen or more other carriers to hand off specific subsets of data.

It’s rare for a carrier hotel to hit the news. The most famous event at a carrier hotel occurred at the carrier hotel at 60 Hudson Street in Manhattan. That location was knocked out of service by the attack on the neighboring Twin Towers on September 11. The carrier hotel went dark, contributing to widespread broadband and cellular outages, particularly in New York City. The good news was that the carrier hotel was up and running by 9:00 AM the following morning.

By Doug Dawson, President at CCG Consulting

Dawson has worked in the telecom industry since 1978 and has both a consulting and operational background. He and CCG specialize in helping clients launch new broadband markets, develop new products, and finance new ventures.

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