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As has been the case for the past year, most observers differentiate between the short-term and long-term prospects for the market.
The bankruptcy of Exodus and recent sharp slide in Global Crossing's stock has left even industry veterans somewhat shell-shocked and wondering where the problems end and the recovery begins.
But almost by definition, those who remain active in the sector believe in the long-term value of data center and colocation services. Most believe that wider adoption of broadband and bandwidth-intensive applications such as videoconferencing will lead to an era of huge demand for facilities-based data services.
"The network is in a time of change: a retrenchment from which a stronger, more viable, fundamentally altered network will emerge," writes David Prior, an analyst for PBI Media, in a new white paper on colocation.
"Colocation is not dead," Prior added. "Along with the rest of the Internet industry, colocation is metamorphosing from what it was to what it always should have been: a critical enabler of the next-generation network models."
Prior said overbuilding has been at the heart of the industry's problems.
"Hype does not make a market and, to paraphrase Jack Welch, once you have seen a bandwagon it's too late," he concluded.
Sterling Capital's Wanger said metropolitan networks are "the healthiest component of the broader market, and we expect this to continue. The dearth of connectivity in most metros is critical to righting the excesses in the long haul and data center areas."
He also sees a big future for data storage.
"Storage on the network is a potentially gigantic business and a 'when' not an 'if'" he said. "How much longer will trucks pull up weekly to professional firms to gather tapes?"
One of the biggest question marks is wireless applications, which have been widely adopted in parts of Europe but are developing slowly in the U.S.
"Colocation for wireless services still looks promising, as demand continues to grow, particularly for data, and broadband services get closer to reality," said StratSoft's Forsyth. "However, the value proposition for wireless is still being worked out, and it will take much more than 6 months for broadband wireless, particularly 3G, to get very far in the U.S."
One industry veteran said the aftermath of Sept. 11 might hold promise for second-tier markets, where growth of data services has slowed during the industry shakeout. Housing data outside major metro centers, may now seem more attractive to enterprise customers, according to John Pitek, vice president of sales and marketing at Denver-based Relera, Inc., which has 11 data centers in secondary markets.
"We used to get a lot of questions about our second-tier market strategy," said Pitek. "Suddenly, there has been a lot more interest in lower-profile markets."

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