ALABAMA REAL ESTATE JOURNAL

What Is Connecting Businesses and Real Estate Before and During COVID-19?

The COVID-19 outbreak came during our most technologically advanced age; however, there are some decades old infrastructure items that are keeping us connected today – and vital to our reconnection post COVID-19. The first “connection” may surprise you. It is under-ocean internet cables. They are the backbone of the internet, as seen in Bloomberg’s May 4th chart/graphic of the day depicting the “more than 700,000 miles of aging deep-sea cables still doing most of the internet’s heavy lifting today.” While satellites are top of mind today for most of us – especially in Alabama, Florida, Texas and Colorado with monthly space satellite launches – the under-sea cables actually connect us more than satellites and are vital to our “shelter in place” connectivity, Zoom, Netflix streaming, and supply-chain logistics during COVID-19.

According to Telegeography, the bulk of the web is transmitted underneath the ocean via a vast series of submarine wires. These communication networks have taken the past decade and the COVID-19 generated surge in demand mostly in stride, and even have ability to add to the capacity of the cable networks to handle traffic growth. Telegeography is a fascinating resource that tracks our network usage and traffic volumes. A few statistics worth noting from their most recent reporting reinforce how our networks and internet infrastructure have been able to absorb phenomenal increases in activity during COVID-19. The Huntsville community in particular can appreciate Telegeography and what it means to its high tech and defense businesses.

Key Telegeography Internet and Streaming Traffic Statistics during COVID-19 and Shelter-in-Place Orders

Gaming Traffic: Playstation and XBox account for 7.5% of all traffic in the Americas. (May 4, 2020 update)

Bell Rural Internet: Bell internet data volumes have increased as much as 60% during the day and 20% in the evening. Landline and wireless voice traffic have surged by up to 200% at peak times while conference calling is up 250%. (May Data Report)

Verizon Network: According to the latest Verizon Network Report, overall data volume across its networks has increased 19% compared to pre-COVID levels. While data usage remains at elevated levels, the changes in how people are using the network has stabilized. (End of April Data report)

Akamai Network Traffic: Akamai is a company covered in a WIN earnings update for Q1 for its importance in powering city, county and state government networks and boosting speed for clients like Verizon and Netflix. They’ve seen network traffic increase 30% over the past month, but more significantly, Akamai saw network traffic had doubled year-over-year (March 2019 to March 2020).

The challenge post shelter-in-place orders and geographic lockdowns across the world will be funding the needed maintenance and support for this massive under-ocean network of cables – especially as we all advance to 5G. These under-ocean internet cables are advanced in age and require maintenance. One question Post COVID19 is whether countries and owners of these networks will have the budgets and CapEx to maintain, upgrade and keep us connected.  Under-ocean internet cables and internet networks are vital links that we all rely on globally and in our CRE industry. Can, for example, supply-chain logistics function without this infrastructure?

Another important industry to consider is commercial airline aviation. Not all business can be conducted over the internet, and once physical distancing restrictions are lifted people will begin to travel across the country or abroad for business or other personal reasons on commercial airlines. When we conduct trade and depend on supply-chain logistics, we depend on air cargo to import vital materials like auto components to BMW in South Carolina or Mercedes in Alabama. When we need vital PPE manufactured outside the U.S. or medicines to combat coronavirus, again we rely on air cargo. And what makes this work is the U.S. and global airline industry and the vast networks of airports. When 95% of that traffic comes to a halt and Warren Buffet speaks pessimistically about the future of this industry, the stocks plummet (7%-10% alone on May 4, 2020, following the annual Berkshire Hathaway meetings). And related travel industries and companies follow suit, such as Hertz car rental company revealing it is contemplating bankruptcy in their latest earnings (May 4 2020).

Recall the “Dem Bones Hip Bone is connected to the Leg Bone” WIN feature from April 1, 2020, highlighting the skeletal infrastructure of an economy and the importance of understanding how the commercial aviation and airline industry bone is connected to the supply-chain and air-cargo bone – which is connected to the under-ocean internet cables spine to transmit the logistics signals. The commercial airline industry bone is a critical element to our connected economy. It must get reset post COVID-19 to keep us physically connected and enable the global economy to stand up straight again. Municipal airport bonds, aircraft financing, tens of thousands of direct and indirect airline jobs, air-cargo logistics for everything from PPE, medicine, and auto components are also connected to the airline bone which is integrally connected to the logistics hip bone. As we digest the annual Berkshire Hathaway meeting pronouncements and visit the TSA Passenger Throughput site for the latest numbers, appreciate the importance of this connectivity point for business and our commercial real estate ranging from hotels and rental car centers to offices for multi-national companies and tourist destinations such as Disney in Florida and California,  New York, Las Vegas, and the sugar-like beaches of the Gulf Coast from Alabama to the Florida Panhandle.

Despite the challenging earnings numbers from the energy industry last week and travel and transportation industry this week, there is one encouraging figure: the TSA Passenger-Throughput has doubled from a week ago (85,000) to 170,000 on May 3, 2020.  A lot of it is due to the reopening of states and commencement of “essential travel.” Hopefully over the summer this figure will climb back to at least half the pre-coronavirus 2.3 million passengers per day – and more by the holidays and year-end 2020. The U.S. has some work to do regarding international travel with more than one-third the number of global coronavirus cases (1.2 million of the 3.6 million total, according to Johns Hopkins University May 4, 2020) – or more than five times the next highest tally (Spain with 220,000 cases)

Facebook
Twitter
LinkedIn
Email
X