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Opcenter: Collocators Do Carriers' Cyberlifting

Channel Partners

August 1, 2000

7 Min Read
Opcenter: Collocators Do Carriers' Cyberlifting

Posted: 08/2000

Collocators Do Carriers’ Cyberlifting
By Ken Branson

If, as the conventional industry wisdom holds, you can’t have too much bandwidth, then a corollary is this: You can’t have too much collocation space.

Collocation used to be a simple matter of putting a competitive carrier’s equipment in a cage in an incumbent carrier’s CO. The idea was to connect to the frame in the CO, and to the customers whose lines came into that frame.

It’s not that simple any more, but it is very profitable.

All sorts of companies now need to be near the fiber and the bandwidth that carriers offer. So companies are building facilities to bring them together.

At first, carriers built data centers to house the equipment of other carriers, ISPs, ASPs and all sorts of Internet-centric content providers. Now, carriers are being challenged by
carrier-neutral collocation companies, which suggest that no dot com worth its domain name should anchor itself to any single carrier.

At the moment there appears to be plenty of business for both. In the United States, between carriers and carrier-neutral collocation companies, the largest markets (where the fattest bundles of fiber are) have been just about covered, and the secondary and tertiary markets are being developed.

In Europe, where collocation space was all but impossible to find a year ago, carrier hotels are being fitted out in the largest markets, and carriers and carrier-neutral collocators are opening centers in those carrier hotels.

Asia and Latin America are not far behind.

Plenty of Business

“What’s new in the business is that there’s plenty of it,” says Peter Hannaford, CEO of Waterfields Group Ltd.
(www.waterfields.co.uk), whose subsidiary, Waterfields Tech, designs and builds telco hotels–called carrier hotels or telehouses in Europe.

Waterfields provides carriers and carrier-neutral collocators for customers. “We’re being inundated with requests from all over Europe,” Hannaford says. “It’s still happening in the UK, and very much in Europe
and beyond.”

It’s no surprise that everybody and his second cousin wants a web presence, but relatively few companies selling in the electronic economy have the resources or the inclination to do the heavy cyberlifting themselves. They need someplace safe and temperature controlled to park their servers and to run those servers and manage the network they’re attached to without any intervention unless it’s absolutely necessary. They haven’t the time or the capital to do otherwise.

“Everybody is outsourcing everything,” says Jay
Adelson, CTO of Equinix Inc. (www.equinix.com). “The needs of content providers demand a quality facility that gives them strategic flexibility.”

Carrier vs. Carrier Neutral

The standard argument for collocating your equipment in a carrier’s facility is: You’re right on top of the fiber, and our network is state of the art and goes everywhere you need to go.

The standard counter-argument from collocators is: Well, duh, you’re right on top of the fiber. But you’re only on top of the one carrier’s fiber. What if, God forbid, his network goes down? What if there’s something about the service you don’t like or want to change? How are you going to get your gear out of there and take it somewhere else without losing customers? And what about price? You think the carrier is going to give you a break? We don’t think so. Once you’re leg-ironed to his hub, you belong to him.

Chart: Major Neutral Collocation Providers

The arguments are specious and self-serving to some extent; yet, they also are at least partly true. It is necessary to be as close to as much fiber as you can get. Carriers do want to keep ISPs, ASPs and even other carriers on their networks.

However, it appears that it’s possible to get close to lots of fiber without collocating with a carrier, and it also appears that some carriers have come a long way toward meeting some of the collocator’s objections.

To consider closeness to fiber, it’s necessary to review a little history. The original telco hotels in the United States–60 Hudson St. in New York, for example, or 1 Wilshire Blvd. in Los Angeles–became telco hotels largely because they happened to sit, literally, almost on top of a big knot of optical fiber. They met the structural requirements and their rents were relatively low because their landlords were relatively clueless about what that fiber meant.

When they filled up, or when their landlords demanded more rent without offering upgrades in service, new satellites sprang up across the street and down the block, occupied by companies that needed to be close to fiber, but also needed value-added services, better security and more space.

When noncarrier tenants began to come in and demand value-added services, carriers like the former Frontier Corp. (now owned by Global Crossing Ltd.,
www.globalcrossing.com), leased entire buildings, or large parts of buildings, and built data centers to accommodate them.

Those carriers now offer all sorts of value-added services, so that their tenants can have anything from space in a cage to full-managed network services.

Collocation companies offer the same services–and offer connections to several carriers. So the carriers and collocators compete on service and/or price, but not on access to fiber.

As to the possibility of losing everything when a host’s network dies, at least some carriers provide fiber links to other networks.

“We also have other transit providers in [our data centers], for redundancy purposes,” says Tony
Tomae, vice president of Internet and data services at Broadwing Communications Inc.

But, as an executive at a competing carrier puts it, “We do not invite WorldCom Inc.
[www.wcom.com] into our facility for the purpose of selling bandwidth to our customers.”

Aha, say the collocators, that is precisely the point.

“Neutrality is key to [our] value proposition,” says Equinix’s Adelson. “We hammer on it over and over again, but we really do think of ourselves as creating value by allowing our customers to interact with each other. It’s not about the bandwidth we sell.”

Many collocators see themselves as a sort of electronic village square, or maybe village market, where people who need bandwidth meet those who have it and can be connected as quickly as possible.

For example, Exodus Communications Inc.
(www.exodus.net) has launched what it calls the Exodus Alliance Exchange to promote business-to-business activity between the 700 companies that have signed up as
"partners"and Exodus’ 2,800 customers.

An Exodus spokesman says partners will have access to information about its customers, who in turn will be able to contact the partners quickly for exactly what they need.

All this grew out of vendors installing customers’ servers in Exodus data centers and chatting through the cage wall, says spokesman Jay Mejia.

“So the person installing Hotmail’s equipment might say, ‘Hey, these people are going to give away free e-mail! Think that’ll work?'” Mejia says.

There are people engaged in the heat of battle over the issue of carrier neutrality who still see the other side. Equinix’s Adelson, for example, understands an argument for going to a carrier’s data center.

“I think that from the consumer to Amazon.com Inc.
[www.amazon.com], it’s an average of 17 hops,” he says. “That’s 17 points of failure. So, if you’re a new business, going to the carrier hosting facility makes a lot of sense. If, on the other hand, you’re an established e-commerce business with some size, that dependence on a single source will kill you.”

Paul Vixie not only sees both sides; he is on both sides. As senior vice president of Internet services at Metromedia Fiber Networks Inc.
(www.mmfn.com), he is responsible for AboveNet
(www.abovenet.net) and Paix.net Inc. (www.paix.net).

AboveNet is not carrier-neutral; Paix.net is, Vixie insists.

MFN’s main business is selling metropolitan dark fiber, and AboveNet very much is harnessed to that wagon.

“MFN acquired AboveNet last year, and the purpose for them is to be a point of sale for the bandwidth product,” Vixie says. “But Paix, which was bought by AboveNet before we bought AboveNet, is a neutral collocation company.”

The two subsidiaries go after some
of the same customers, but not for the same applications.

“Paix [centers] are small,” Vixie says. “You can put them anywhere. You would not see a customer go there to outsource their own data center; they’re just too small. None of their customers has 20 racks; Paix [centers] usually have less than 1,000 racks in a city, or about 25,000 square feet. AboveNet starts at about 200,000 square feet.”

Waterfields’ Hannaford, who has carriers and neutral collocators for customers, draws in his breath sharply when asked which choice he’d make if he were an e-commerce business trying to decide between them.

“If it was me, and I was a potential tenant, and there were two identical data centers offering the same facilities and the same price, I’d go with the neutral one, because you never know what’s ’round the corner,” he says. “Of course, when I’m in one of these [carrier] sites, and I’m hooked up and alight, I may not want to move for awhile.”

Ken Branson is business and finance
editor for PHONE+ magazine.

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