Predictions for 2009

December 31st, 2008 by · 12 Comments

Look into the Crystal BallThere's no shortage of people out there making predictions for 2009, which means of course that there's no stopping me either.  After all, looking back on 2008 is just painful, isn't it?   So much happened that we'd all like to forget, whether in this sector or in the world in general.   For the internet infrastructure sector, I'll categorize my prophesies, err I mean predictions, as related to Fiber, Data Centers, Content Distribution, or VoIP. So now let us gaze into the swirling mists of the Fiberoptic Ball  (I upgraded my Crystal set, this one has a 100Mbps ethernet hookup:

Fiber:

  1. Icahn will finally take XO private. The stock has stagnated below $0.15 despite the summer refinancing, it is becoming hard to make the case that it is an artificial price or that an offer of, say, $0.50 would be lowballing it.  He will make the offer, and he will probably succeed.
  2. Global Crossing will buy Abovenet. This just makes too much sense to me for both sides, and GLBC seems aggressive enough now to make it happen.
  3. Level 3 will survive. They always do, one way or another.
  4. Obama will just throw money at last-mile broadband access. As much as I'd like him to fix the disaster we call the FCC, he'd have to be a bit loopy to use up his political capital banging his head against that brick wall.

Datacenters:

  1. Colocation prices will rise steadily.  Construction is slowing more quickly than demand is, the consequences are obvious.
  2. The construction slowdown will end by summer. The very first place in the internet infrastructure sector that will see money from a recovering credit market will be colocation, simply because the economics are the most favorable and the value well understood.
  3. Everyone will call themselves green yet still use more power. When energy prices were high, everyone was an environmentalist and they really meant it.  With energy prices lower again I predict that everyone will still be an environmentalist, but they won't really mean it.

Content Distribution:

  1. Akamai will sue somebody for patent infringement. Hehe, like that's a hard one.  The Limelight case will end, and their legal team will send out the next volley, probably Velocix in hopes of slowing Verizon's effort.
  2. Pricing pressure will intensify.  Simple math - too many CDNs, not enough content.  Consolidation won't happen until the pain does first.
  3. Net neutrality will be a political football, but also irrelevant. As the debate moves from the informed techno-media to the politicians and the general media, it will cease to make any sense whatsoever.

VoIP:

  1. Vonage will put itself up for sale, but find no buyers.  VoIP became a commodity so fast it isn't funny, it never got to be a cash cow so there is no long tail of cashflows here like there was with dialup at Earthlink.
  2. Ebay will sell Skype to Google.  It always made more sense there to me anyway, I could never figure out why Ebay bought it in the first place.  Skype needs a home.

Of course, I could be wrong!  🙂  Have a prediction of your own?  Leave a comment!

Categories: Content Distribution · Datacenter · Fiber optic cable · VoIP

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12 Comments So Far


  • Paolo says:

    We share the same crystal ball as far as colocation and CDN… 🙂

    I am also curious to see if someone will “help” DuPont Fabros in 2009 by buying their Santa Clara data center, for example…

    Have a great 2009.

  • Will a new standard in fiber optic patching systems be adopted? Possibly the Chameleon? It can patch 1728 fibers in a 4U chassis, a six fold increase in density over current patching systems.

  • iSiS says:

    Good Stuff Rob. I’ll chip in with some of mine:

    Wholesale IP Transit:

    – One or more of the major European carriers (Tiscali, Telia, etc) will be acquired, likely by private equity.
    – GLBX and LVLT play the pricing game and grow revenue and market share, but it costs more to earn it as margins get crushed in the wholesale sector.
    – Peering wars erupt in EMEA as Orange and DTAG go protectionist over their eyeballs.
    – Some Tier 2 players struggle mightily. I think PCCW is vulnerable here.
    – Sprint, Verizon, and ATT continue to lose wholesale market share to Level3 and Global.
    – Tata makes a market share gain.
    – I agree that XO will go private.

    Peering:

    – DECIX, AMSIX, PAIX (S&D), and even Equinix will see dramatic increases on traffic peered through their exchanges, as 10G port prices have dropped and the peering ecosystem expands.

    CDN:

    – To state the obvious, there are too many, and the CDN Pricing model is _completely_BROKEN. Consolidation will happen, it will begin very early in ’09, and it will be brutal for most.
    – Level3 will continue to gain market share on the CDN side.
    – Limelight will be acquired by a large player at $6 – $8 a share.
    – Akamai’s gross margins continue to decline as does its stock.
    – ALL major carriers begin to integrate/offer a CDN solution as part of their products. Its very likely that they’ll copy the L3 model of the transit/CDN offering (ie, a 5G commit of either transit or CDN or whatever blend you choose.

    Datacenters:

    – I agree that collocation costs continue to rise about 10 to 15% in major markets, and demand will outpace supply for “good” datacenters
    – Equinix will drive growth in peering/XC’s and their new EMEA buildouts. I am long on Equinix FWIW, so maybe a bit biased.

    I also have some content side predictions, but I’ll post those later … happy new year!

    isis

  • ruprecht says:

    Is NTT poised to do anything exciting in 2009? They seem like a sleeping giant to me.

    • Rob Powell says:

      Yes, they certainly are a sleeping giant. It remains to be seen though what it will take to really wake them up though. What about it NTT, anything big coming down the pipe? 🙂

  • Dan Caruso says:

    I’m hurt. How come Zayo isn’t in your fiber prediction.? And where is your prediction on 2009 being the year that Managed Video as a Service becomes bigger than the IPod?

    • Rob Powell says:

      Dan, you and Zayo are just so inherently dynamic and unpredictable I didn’t dare make one for fear of being embarrassed the next day!

      Actually, given the tight credit markets I sort of expect a year of internal consolidation for you guys, am I wrong?

      As for MVaaS and Envysion, I really don’t know what will happen there this year – though surpassing the iPod seems a bit of an aggressive goal!

  • 1. The recent fibre cuts between Europe and the Middle East / Asia will encourage additional routes as well as capacity opening up, both via traditional sea cables and new overland routes.

    2. Power prices, which have recently plummeted, will skyrocket at least one more time in 2009.

    3. An industry pundit (perhaps Rob Powell ?) will come forward and explain what Cloud Computing actually means to the average CIO in terms of the bottom line to his/her business.

    Happy New Year everyone!!!

  • Thor says:

    Global buys Abovenet….? Your chrystal ball needs a good wash or another upgrade. Let’s just say that prediction ain’t gonna happen.

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