In this blog I discuss Landlords of the Internet: Big data and big real estate by Daniel Greene (Sage Publications, 2022)

Landlords of the Internet: Big data and big real estate

My notes on this paper are available here.

The Internet Is Real and Physical Infrastructure

… it is not software developers in control, but firms like Equinix and Digital Realty; whom I call internet landlords. At the core of the new economy is one of the oldest: real estate.

“The internet.”

I bet I can tell you what comes to mind. The usual suspects, the world wide hardware and software giants of legend. Wall posts, DMs, weird catz, virality.

What you are less likely to free associate is all of the physical infrastructure of the actual interconnected networks that make up the internet. The stuff that gets abstracted away - the servers, the fiber-optic cables, the climate control systems.

All that and the buildings they’re all housed and hooked up in for data to go zooming on through as it whizzes around the world.

I.e., the real estate.

“The physical assets at the core of the internet, the warehouses that store the cloud’s data and interlink global networks, are owned not by technology firms like Google and Facebook but by commercial real estate barons who compete with malls and property storage empires.”

The Rise of the Internet & the Rise of Commercial Real Estate

Landlords of the Internet looks at the role of US commercial real estate barons in the growth of the commercialized and privatized internet over the last 30-odd years. Greene argues that the landlords have shaped “ how the network of networks that we call the internet physically connects, and how personal and business data is stored and transmitted.”

While we all love to reminisce on the “Wild West” of the early internet, the author describes how its expansion was led behind-the-scenes by the real estate and property state at the bedrock of American capitalism. And what’s more, over the years the intangible internet has formally taken on a physical life of its own as a defined financial asset - a Real Estate Investment Trust (REIT).

In 2015, Equinix and other data center and infrastructure providers were converted to REITs. What is remarkable and history-making about this is that “Doing so required convincing US tax authorities that their tenants were not primarily purchasing specific services or technologies but were renting out space on the internet equivalent to the space other REITs rented in malls or storefronts – real estate.”

This may be an academic paper, its historical arc of the evolution of the US internet from a government research project to privatized network to real estate asset gives it a much more story-time feel. Greene recounts,

“Telecommunications executives and more traditional real estate investors poured into the industry during the dotcom boom. The latter came to dominate after the bubble burst, as private equity cash poured into the market. As Web 2.0 drove up the demand for data storage, the market consolidated, and internet landlords transformed their firm and its cables, servers, and warehouses into financial assets themselves – REITs.”

 

The Traditional Industry Behind the Disruptive

Landlords of the Internet highlights how a stalwart industry is a more powerful backbone trumping even the biggest of Big Tech behemoths, many of whom “lease more than 70 percent of their hyperscale data center footprint from commercial data center operators’ (Sverdlik, 2019).”

To underscore the importance of the physical internet and its landlords, Greene brings up the importance of TCP/IP, a computer protocol (i.e., a computer language) that made the internet possible because it allowed multiple computers to communicate on a network, no matter their make or model. However, he quickly points out, “But just because these networks spoke the same language did not mean they could converse. That demanded physical interconnection.”

What he’s saying is, without real estate, there’s no place to interconnect computers or play house to data. And without real estate to lay and connect infrastructure, there is no internet.

Some highlights I found enticing:

Rather than rebutting internet evangelists’ stories of a weightless, seamless network, this literature allows us to approach the cables and cages of internet infrastructure as yet another ‘boring thing’ that, like bridges or telephone books, conceals deep social conflict (Star, 1999).

Senator Al Gore had long envisioned a commercialized internet as an ‘information superhighway’, a logistical network to support 21st century US capitalism, as the interstate system did for postwar US capitalism (Greene, 2016).

By 2006 … and internet landlords were reaping the rewards of a new boom in internet advertising revenue. At this time, communication was supposedly being democratized through Web 2.0; the 2006 TIME Person of the Year was ‘You’. But the infrastructure undergirding this boom was increasingly under the control of a few large landlords.

User-generated content was key to this surge in demand for internet landlords’ space. Selfies need a physical home, even if users never saw it.