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Photo by Kathleen ClarkLUNCHTIME, FRIDAY. I AM STANDING IN THE GLEAMING lobby of a 31-story marble-and-glass office building at the intersection of Wilshire Boulevard and South Grand Avenue in downtown Los Angeles. Although the real address is 624 S. Grand Ave., the '60s-modern edifice has always been known as One Wilshire. The grand title fits what has become one of the nation's premier telecommunications "carrier hotels."
Most big cities have one, a high-rise where international and local Internet and telephone companies meet, where huge data switches chat with other switches to goose traffic along the Information Superhighway. In New York City, it's 60 Hudson St.; in Seattle, the Westin Building; in Dallas, it's Bryant Street. San Francisco has Brannan Street, and Miami has New World Tower. Los Angeles' prominence in telecommunications is little-known, but the city has the highest concentration of info companies and equipment in the nation. One Wilshire is the epicenter of the city's telecom explosion.
In the corner, pianist Barry Thomas presses out the power chords from The Phantom of the Opera. The only spot of color comes from a towering floral arrangement in brilliant reds and greens. I am meeting with Mike Kernan, L.A. operations manager for one of One Wilshire's top tenants, STAR Telecommunications. Though hardly a household word, STAR is a major player, one of the U.S.'s largest international wholesalers of telephone and data-traffic services. Kernan has promised me a tour of STAR's 22,500-square-foot Network Operations Center, or NOC. This command post is the telecom equivalent of air-traffic control at the airport, just without all the people. I'm also hoping for a look at the Meet Me Room, One Wilshire's colorfully named central junction, where all the planet's Internet and phone companies come together and shake hands.
Kernan greets me with a smile and a firm handshake, and asks to see my press credentials. "Security is a real issue for us," Kernan says. "There are cameras throughout our facility which are directly monitored by our security department at company headquarters in Santa Barbara." With his black collarless shirt, black vest, black slacks, gold earring and watch, and black loafers with gold buckles, he looks like he should be at the shiny black grand piano, not escorting me past racks of technical equipment. "Actually, I got my start at the Ohio School of Broadcasting Technology in Cleveland, and I am a musician," he explains. "My wife, Monique, and I own a recording studio in Victorville." Kernan has been in telecom for 17 years; he travels with a small receiver tucked inside his ear to maintain constant phone communication with every corner of STAR's operations.
We first drop by STAR's Tech Room A, where employees are testing and tuning up circuits between Los Angeles and foreign cities. A board displays current projects, including a data circuit from Los Angeles to Lahore, Pakistan. "We're working with WorldCom on that one," says Kernan. STAR has standing capacity with telephone companies in 51 countries, including Telstra in Australia, IDC in Japan and Alestra in Mexico, and an ownership interest in 17 transoceanic fiber-optic cable networks.
Then it's on to the NOC, "the largest network-control center in Los Angeles," says Kernan. The heart of the facility is the back-to-back domestic and international telephone switch manufactured by equipment giant Nortel. "We handle well over 1 million phone calls a day," Kernan says. He leads me past rows of humming equipment cabinets bathed in a rush of cold air. Telecom equipment does not like heat. The lights on this equipment start blinking erratically when the temperature rises. To keep the machines comfortable, One Wilshire management provides more than 2,000 tons of air conditioning. Caterpillar generators hold 10,000 gallons of fuel -- enough to make sure the STAR NOC's lights stay on even if the rest of Los Angeles is dark.
Twenty-two employees work in shifts around the clock to knit together STAR's global data network. STAR's international gateway switches in Los Angeles, New York and Miami connect the U.S. to the top 20 countries phoned by Americans. STAR customers include the top 12 long-distance carriers, including AT&T, MCI and Sprint. STAR also offers retail phone service through acquisitions such as PT-1, offering prepaid calling cards, and its own companies CEO Telecommunications and ALLSTAR Telecom. The company also offers "co-location" space in its equipment racks to carriers such as InterPacket Group Inc. of Santa Monica, which provides the L.A. Internet connection for foreign Internet service providers.
Kernan's face lights up when he opens the door to the conference room adjoining the NOC. "This is really something in here," he says. "The sales guys use this room when they want to impress somebody." The conference area has surround-sound, two-way video and touch-screen controls. With a push of a button, an opaque wall melts into transparency, revealing the monitoring consoles, world maps and illuminated system displays of the NOC next door.
"Chris asked me if I could build the NOC and conference room for $100,000," says Kernan, referring to STAR CEO Christopher Edgecomb. "I said no, but I brought it in under the $2 million budget."
Kernan previously worked with Edgecomb at the telephone firm WCT, and has been with STAR "since the beginning" in 1995. He and Monique were invited last September to Edgecomb's legendary wedding on a ranch near the company headquarters in Santa Barbara. ã Edgecomb spent $7 million on the party, according to a close friend of the couple. Private jets brought in guests from around the country, and Jay Leno hosted a show with fossil rockers Rod Stewart, Journey, Christopher Cross, REO Speedwagon and David Crosby.
"Working with Chris has most definitely been a good ride," Kernan grins.
ONE WILSHIRE BECAME L.A.'S TELECOM hotel in the early 1980s almost by accident. Facing deregulation, Pacific Bell made a decision to ban competitors' connector switches and circuits from its central office at 400 S. Grand. MCI needed a rooftop microwave site, so it turned to One Wilshire, one of the tallest buildings in downtown at the time. Thus, a multimillion-dollar real estate business was born.
Today One Wilshire is sold out -- no more room at the inn. "We're focusing on providing services to our existing customers," says Mark Messana, project manager for Paramount Group Inc., which manages One Wilshire. "Our customers always want more power, connectivity, roof access."
To illustrate, Messana ushers me into the Meet Me Room. The tiled floor is raised and shiny; the tiles lift out so the underlying cables can be serviced easily. Equipment cabinets and locked chainlink cages stand in rows. Overhead, metal cable trays circle the equipment racks like a suspended cog railway. It's silent, save for the whirring of equipment fans. The only signs of human habitation are a yellow mop and a bucket left behind by a janitor. "Nothing to it, huh?" says Messana, sensing my bewilderment that this small, sterile room plays such a major role in telecommunications. Nobody said the phone business was sexy.
STAR is about to install a second fiber network system to connect its 11th-floor NOC to the fourth-floor Meet Me Room. However, with no more floor space available for a new switch, the company has made a unique arrangement: Paramount will give the telecom giant empty conduit pipes connecting the Meet Me Room to a nearby building -- 530 W. Sixth St. STAR will place a huge domestic switch on West Sixth and pull fiber cable back to the company's international switch in One Wilshire, tying together the whole operation. "No one else in the country ties buildings together like this," says Messana. "We also connect to 611 and 700 Wilshire and 800 S. Hope."
STAR isn't the only telecom player searching for an empty stable to bed down equipment. The overflow demand for telecom space has turned no less than 15 buildings in downtown Los Angeles into Mini-Me One Wilshires. From a bird's-eye view, you can see the miles of new asphalt where trenches were dug to lay fiber-optic cable along Fifth, Sixth, Seventh and Eighth streets, South Grand, Wilshire, Hope, Olive and Flower for companies including PacBell and GTE. The Los Angeles Department of Water and Power, and Southern California Edison, realized windfalls by building fiber networks in their rights of way.
The rush for downtown telecom space has created a niche real estate specialty for companies such as Telecom Real Estate Services (TRES), which offers space at 600 W. Seventh St., the old Robinsons-May department store headquarters. It's now called Carrier Center L.A. The old bank building at 530 W. Sixth St. is known as Telecom Center. With the rising demand comes higher prices. Regular class-A office space in downtown Los Angeles goes for $20 to $25 annual gross per square foot; the rate for telecom space is $30 to $35.
Bill Peckovich was one of the first in L.A. to see the telecom real estate boom coming. After graduating from UCLA in 1983 with a B.A. in economics, Peckovich went to work for CB Commercial Real Estate. A 1986 trade-magazine article got him interested in Chicago Fiber Optics. He sent a steady stream of news clippings and business forecasts trying to woo the Chi-town company to L.A. Three years later, the phone rang and Peckovich was hired by Metropolitan Fiber Systems (MFS), a major national fiber-optic leader that had bought out Chicago Fiber. Peckovich found MFS (which was subsequently purchased by MCI WorldCom) its first space in the old Pacific Financial Building at 800 W. Sixth St.
IN 1994, PECKOVICH ATTENDED A LECTURE by USC professor Jon Goodman, now the executive director of EC2, a media-start-up incubator. Inspired, Peckovich quit CB and co-founded a telecom real estate partnership, Markley Stearns. In late 1998, Peckovich struck off again with his cousin, George Sarcevich, a Princeton man who had worked at Bear Stearns. Their new company, IX2, took offices in the Garland Building at 1200 W. Seventh St., across the freeway bridge from downtown, and started leasing telecom space there.
The building was uniquely suited to telecom. Built in 1983 by First Interstate Bank at an astronomical cost of $350 million, the Garland originally housed the third largest data center in the country, processing $90 million in checks each day, and controlling the bank ATM network for 13 Western states. Security was so tight it squeaked.
"Downtown L.A. has become a premier interconnection point," says Peckovich, seated at his desk in white T-shirt and jeans. "But my idea is a neutral co-location space where telecom carriers can pass their traffic. With One Wilshire full, a particular carrier dominates many of the telecom buildings in downtown and their co-location customers are encouraged, through pricing, to use the incumbent carrier network to pass their traffic. I let them connect to whomever they want."
IX2's space is connected by separate data circuits to PacBell, WorldCom and AT&T Local Services, as well as to IX2's cages at One Wilshire on the 16th floor and in the fourth-floor Meet Me Room.
This September, Bank of America is relocating its seven-state mail and cash operations to Lower Level Three of the Garland, creating the largest cash vault west of the Mississippi. "That means the tear gas, machine guns and grenades are coming back," says David Paul, the building engineer. The security system already includes card-key access and 64 exterior cameras, as well as enough generator fuel to run the building for almost 30 days.
IN IX2'S OFFICE ON LOWER LEVEL 2, Peckovich occasionally spits into the trash can under his desk. "I started chewing tobacco when I was on the crew team in college," he says sheepishly. "Now I can't quit." Peckovich keeps a desktop photograph of himself surfing in Fiji. He stands on the nose of his board, atop a perfectly curled 8-foot wave. The metaphor couldn't be clearer: Peckovich is riding the monster swell of the future, the telecom wave.
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