Report: Colo Vacancy Rate 55 Percent
New TeleGeography data finds wide swings in quality of facilities

August 29, 2001 --Fifty-five percent of the carrier-neutral colocation space in the U.S. was vacant as of midyear 2001, according to a new study from the telecom research firm TeleGeography.
But that space glut hasn't had an equivalent impact on pricing, according to TeleGeography, a Washington, D.C.-based unit of Band-X Ltd.
"We've seen that colocation is far from becoming a commodity," said Tim Stronge, TeleGeography's Director of Research. "One colocation center can have a very different configuration than another facility located just around the block."
The survey was based upon data from 287 carrier-neutral colocation facilities in 51 markets around the world, including 148 facilities in the US and Canada.
According to TeleGeography, buyers of colocation may have a difficult time finding what they want at a competitive price, despite the large amount of available space. Average rack prices in the US have remained in the neighborhood of $1,000 a month, despite the tough market conditions.
That's because not all colocation facilities are created equal, and providers in fiber-rich cities continue to be able to charge more for their space.
"Carrier-neutral colocation centers in dense telecom hubs ... can price their services at a premium over facilities in relatively sparse areas of connectivity," said the 450-page report, titled "Colocation 2002."
The wide range of facility quality means colocation users need to shop carefully, educate themselves about the characteristics of a mission-critical facility, and ask the right questions, according to Paul Melton, a research analyst at TeleGeography.
"A lot of users are still not in-tune with what they need to be asking," said Melton.
The research found, for example, that while a majority of colo sites use high-tech fire suppression systems, 16 percent still employ traditional water sprinklers that can damage equipment. And although nearly all facilities assist with equipment installation, nearly 20 percent offer no follow-on monitoring service for that equipment.
The data suggest the consolidation in the market may intensify, with smaller colocation providers facing pressure to compete with data center chains with deeper pockets and more staff.
"It's going to be difficult for smaller providers to keep up," said Melton. "If they want to compete, they're going to have to upgrade their facilities or find a way to differentiate themselves by offering managed services."
Not surprisingly, New York City had the highest "fill rate" for its colocation facilities, followed closely by San Francisco and Los Angeles.
For purposes of its study, TeleGeography defined "carrier-neutral" as providers that allowed multiple fiber providers in the building, and had no requirement that colocators purchase bandwidth from a particular carrier.
TeleGeography publishes reports, databases, and maps used by communication companies, consultancies, and financial institutions in over 100 countries.