Long Road From Cuba: Manny Medina, CEO of Terremark (Part 2)

SM: When did you start getting into the data center business?

MM: The more we got involved in the telecom hotels, the more in love I became with the data center business. All the folks who were renting space from us, such as Global Crossing, were operating data centers. Because of that I started learning the data center business. At that point I was also fascinated with the Internet. I wanted to play more in the actual development of the Internet. That was the origin.

We excited the telecom hotel business right around the end of 1999. I felt that it was too hyped up. There is nothing special about it. Anybody who had an old warehouse could dust it off and make it a telecom hotel.

SM: It became a commodity business?

MM: One hundred percent. Having had the advantage of having been in the space business, I knew that if the IRRs were high enough, any capital would chase it and there would be an oversupply. We excited that business before that happened, and became fully concentrated on the data center business. At that time we had already planned a project in downtown Miami called the Network Access Point of the Americas. At the same time, the telecommunications industry, which we were very involved with now, needed a new exchange point.

In the late 1990s there were billions of dollars spent building the infrastructure surrounding South America. However, South America was the only continent that was not physically looped with fiber optic cable. You cannot have significant penetration of the Internet or use applications which require bandwidth without fiber optic. Satellites are very efficient, but they are very expensive.

When funding was easy for telecommunication companies, they used the opportunity to fund themselves and lay all the cable. They were tripping over each other trying to get cable down. It was a gargantuan infrastructure project. They were looping the entire continent, and there were dozens of systems racing to the finish, touching every major point in the Atlantic coast, the Andes, the Pacific coast and everywhere else.

All these cable systems had one thing in common. They all landed in South Florida between Boca Raton and Miami. The telecommunications industry came together and created the Network Access Point of the Americas. That was to be designated as the exchange point, which is like a major airport. All the telecommunications carriers come together at one point so that they can exchange traffic among themselves.

The telecoms came together to select the company that would own and operate the exchange point that would serve as the focal point to exchange traffic between North America, Latin American, the Caribbean, and Europe. There were a lot of companies that bid on a very competitive proposal, and there were over 20 companies that responded. At the time, we teamed up with a company called Telcordia, which had engineered two of the original Network Access Points. We won the right to build and operate the Network Access Point of the Americas.

This was the genesis of a new face of the company. We came up with a unique business model. We were going to use the exchange point of 35 carriers in a single facility, thus cutting out the local loop, while adding a full suite of managed IT services. That was the original concept of the model.

This segment is part 2 in the series : Long Road From Cuba: Manny Medina, CEO of Terremark
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