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By Rich Miller
Carrier Hotels Editor
Posted Mar 1, 2004
eXchange @ 200 Paul is a provider of carrier hotel space and colocation space in our owned facilities. These tend to be two different industries with somewhat different demand characteristics. With respect to telecom, it appears to be out of "intensive care" but still recovering. We see more activity and an increased willingness to "consider" telecom commitments in 2004. But capital expenditures are still a major obstacle, even when there is a confirmed revenue opportunity associated with the build-out.
2. How have bankruptcies and their outcomes affected the competitive landscape? Has it been more or less disruptive than you expected?
For telecom, less disruptive so far. We have few competitors in the Western U.S. for our core interconnect facilities. We do see lower circuit pricing from post-Chapter 11 telecoms (who have extinguished debt), but these formerly bankrupt companies seem to be lacking ops personnel and capex budgets to be truly price-disruptive competitors. Although circuit prices have certainly continued to decline.
For colocation/data center space, the bankruptcies and dislocations continued throughout 2003. This sector has been hit harder than I would have expected. Still, there are signs of optimism, as fewer "retail" competitors remain in any given geographic area.
3a. For landlords and property owners: What's your assessment of the current market for leasing of data center space? What trends are you seeing in demand for space and lease rates?
It's still looking pretty dismal for most owners. Enterprises will hopefully take large blocks of second generation data center space in 2004. At the retail level, there are fewer suppliers of cabinets and cages in operational colocation centers. We see retail prices for cabinets and cages starting to stabilize, while wholesale prices for large blocks of data center space (to be managed by the enterprise/user) continue to be offered at (or near) shell rents as if no data center improvements have been made to the space.
3b. For service providers and analysts: What's your assessment of current demand for data center services? What products and services are getting the most customer interest?
Demand for retail data center services is still weak but starting to improve. eXchange @ 200 Paul is not a typical colo provider because we operate a Core Interconnect Facility with over 40 carriers in our Meet Me Room. Consequently, we have interest among customers who demand true global connectivity from a wide variety of telecom and IP providers. As such, we do not have too many competitors.
Customers want to know that their colo service provider is financially stable, able to maintain the infrastucture, and able to continue delivering the contracted services well into the future. Carrier neutrality is also very important. Customers want to know that they will not be artificially restricted from gaining access to the broadest range of carriers.
4. Give us your outlook for 2004. What are the key trends you see affecting the industry?
Our views are tempered by the fact that we provide both carrier hotel and colocation services in our owned facilities. Because of this combination of services and our conservative balance
sheet, we are optimistic about our business activity in 2004. However, if we just provided colo space with say three to five carrier POPS, then I would be very worried about the next 12 to 24 months.
With respect to colocation, key trends will be further consolidation, with fewer survivors. Those providers who are committed to spending money to insure quality and reliability of services will eventually prosper.
On the telecom front, we look for no more than 15 metro or regional Core Interconnect Facilities in the U.S. This means that there will be continued removal of marginal carrier hotels from the competitive market place. Any facility that doesn't have a wide variety of fiber providers, metro networks, and IXCs already in place is probably not going to survive as a true carrier hotel.
© 2004 Carrier Hotels, Inc., 116 Village Boulevard, Suite 200, Princeton, NJ 08540
http://www.carrierhotels.com -- Phone: (609) 243-7525
http://www.carrierhotels.com/news/2004/Mar/01/qa_john_wilson_exchange_print.html
Q&A: John Wilson, eXchange
By Rich Miller
Carrier Hotels Editor
Posted Mar 1, 2004
As a founder of eXchange @ 200 Paul, John Wilson was an early developer of carrier hotel and colocation facilities. He has 30 years of experience in real estate and has an economics degree from Georgetown University and a MBA in corporate finance from The University of Michigan.
eXchange @ 200 Paul is a provider of carrier hotel space and colocation space in our owned facilities. These tend to be two different industries with somewhat different demand characteristics. With respect to telecom, it appears to be out of "intensive care" but still recovering. We see more activity and an increased willingness to "consider" telecom commitments in 2004. But capital expenditures are still a major obstacle, even when there is a confirmed revenue opportunity associated with the build-out.
2. How have bankruptcies and their outcomes affected the competitive landscape? Has it been more or less disruptive than you expected?
For telecom, less disruptive so far. We have few competitors in the Western U.S. for our core interconnect facilities. We do see lower circuit pricing from post-Chapter 11 telecoms (who have extinguished debt), but these formerly bankrupt companies seem to be lacking ops personnel and capex budgets to be truly price-disruptive competitors. Although circuit prices have certainly continued to decline.
For colocation/data center space, the bankruptcies and dislocations continued throughout 2003. This sector has been hit harder than I would have expected. Still, there are signs of optimism, as fewer "retail" competitors remain in any given geographic area.
3a. For landlords and property owners: What's your assessment of the current market for leasing of data center space? What trends are you seeing in demand for space and lease rates?
It's still looking pretty dismal for most owners. Enterprises will hopefully take large blocks of second generation data center space in 2004. At the retail level, there are fewer suppliers of cabinets and cages in operational colocation centers. We see retail prices for cabinets and cages starting to stabilize, while wholesale prices for large blocks of data center space (to be managed by the enterprise/user) continue to be offered at (or near) shell rents as if no data center improvements have been made to the space.
3b. For service providers and analysts: What's your assessment of current demand for data center services? What products and services are getting the most customer interest?
Demand for retail data center services is still weak but starting to improve. eXchange @ 200 Paul is not a typical colo provider because we operate a Core Interconnect Facility with over 40 carriers in our Meet Me Room. Consequently, we have interest among customers who demand true global connectivity from a wide variety of telecom and IP providers. As such, we do not have too many competitors.
Customers want to know that their colo service provider is financially stable, able to maintain the infrastucture, and able to continue delivering the contracted services well into the future. Carrier neutrality is also very important. Customers want to know that they will not be artificially restricted from gaining access to the broadest range of carriers.
4. Give us your outlook for 2004. What are the key trends you see affecting the industry?
Our views are tempered by the fact that we provide both carrier hotel and colocation services in our owned facilities. Because of this combination of services and our conservative balance
sheet, we are optimistic about our business activity in 2004. However, if we just provided colo space with say three to five carrier POPS, then I would be very worried about the next 12 to 24 months.
With respect to colocation, key trends will be further consolidation, with fewer survivors. Those providers who are committed to spending money to insure quality and reliability of services will eventually prosper.
On the telecom front, we look for no more than 15 metro or regional Core Interconnect Facilities in the U.S. This means that there will be continued removal of marginal carrier hotels from the competitive market place. Any facility that doesn't have a wide variety of fiber providers, metro networks, and IXCs already in place is probably not going to survive as a true carrier hotel.
http://www.carrierhotels.com -- Phone: (609) 243-7525