Surf, Don't Call

You don't have to be a rocket scientist to realize that the new federal "Do Not Call" web site would be flooded with traffic upon its launch. Neverthless, the site was barely accessible for large parts of its first day online Friday, as Americans weary of being bombarded by telemarketing calls during dinner sought to register their phone numbers. By noontime the DoNotCall.gov site was receiving more than 1,000 visits per second, according to media reports. "Even in our worst-case scenario, there is a lot more traffic than we expected and we are adding more servers to alleviate the congestion," said and FTC spokesperson. By day's end, the site had managed to register 735,000 phone numbers, which must be deleted from most telemarketers' databases by Oct. 1.

Consumers feel empowered by the service, and appear likely to support an opt-out program for junk e-mail, according to one survey, which said 83 percent of respondents would like to see a similar Government-sponsored program targeting Spam. The problem is that Spam is largely an underground industry, in which the actual villains are hard to find, much less regulate. ISPs, who are easier to find, should keep on their toes amid the growing legislative interest in Spambusting.

Almost Like Old Times

Back in February of 2001, an overflow crowd of more than 600 people packed a Manhattan meeting room at an IMN conference to discuss the business of carrier hotels. It was probably the high-water mark for data center conferences, as subsequent industry events drew progressively smaller crowds.

Fast-forward to Tuesday's TelX Customer Business Exchange. An overflow crowd of more than 400 packed a Manhattan meeting room at 60 Hudson Street to discuss doing business in carrier hotels.

As the event got underway, TelX CEO Rory Cutaia welcomed the cell phones ringing during his comments. "We're here to do business," he said. "Leave the cell phones on."

There was something in the air, and it was more then the beeping and chirping of cell phones. It was excitement, and that's something that's been sorely missing from this sector.

It's understandable if a "bunker mentality" has prevailed in recent years. The order of the day has been bankruptcies, stock price collapses and RIFs - short for "reduction in force" and the successor to "rightsizing" as the euphemism of choice for layoffs. Positive trends bring mixed emotions, with a healthy dose of skepticism accompanying any optimism.

There was room for that at the TelX event. More folks were selling than buying. The sales cycle remains lengthy, as companies take time to consider their options and seek broad internal approvals on spending. And competition on pricing is fierce, with customers willing to play one provider off another in pursuit of the best deal.

But there was also plenty of evidence of a modest revival. Most people I spoke with said they've seen a discernable uptick in activity in the past three months. Building owners say they're seeing requests for larger chunks of space than six months ago (a trend we've also seen in site location inquiries at Node Com).

And as we note in our story today, stocks of hosting and network services firms have soared in recent weeks. Savvy value investors like Warren Buffett, Carl Icahn and Wilbur Ross are plowing hundreds of millions of dollars into telecom. Huge financial firms are also driving demand for data center sales.

At Tuesday's event, Cutaia joked that a roving video camera was on hand to film a new reality series. "It's called Telecom Survivor," he joked.

There were plenty of Telecom Survivors at 60 Hudson Tuesday, and there's plenty more that read this site. You've hung in there for the same reason as the "castaways" on the CBS reality show - the belief that if you're tough enough and determined enough for long enough, there's a reward ahead.

Network Readiness

There's been a lot of speculation since Sept. 11 about whether a major telecom facility would ever be targeted by terrorists. AT&T is going a step further today as it begins a five-day network disaster recovery drill. The exercise will test the company's response to a simulated disaster that destroys a Chicago telephone switching center.

AT&T has invested more than $300 million in its disaster recovery program, which includes a team of more than 100 managers, engineers and technicians, as well as a fleet of more than 150 self-contained trailers housing the equipment and components of an AT&T switching center.

"The scope and scale of AT&T's NDR drill is unique in the industry," said AT&T Business Chicago regional vice president Tim Akers. "But the investment we're making helps ensure our people and our network can provide, even in the event of a disaster, the availability, recoverability and security of our customers' services, applications and data."

Since 1990, the NDR team has been activated 12 times in response to disasters, including Hurricane Andrew in 1992 and the Northridge (LA) earthquake in 1994. In the wake of the Sept. 11 attacks on New York City, most AT&T local business service in southern Manhattan was restored in 46 hours, and AT&T business customers were ready for the re-opening of the New York financial markets the week after the disaster.

Moment of Opportunity

I often get calls from reporters researching stories about data centers, who inevitably end up on the CarrierHotels.com site. These calls increase when a major player files for bankruptcy or closes facilities. Gloom and doom makes for good headlines, but often leaves part of the story untold. That's the case with today's Wired story, which quoted myself as well as Joe Suppers of Node Com. As reporter Joanna Glasner noted, there are many data centers for sale, and C&W and Sprint will place additional pressure on a struggling market. But make no mistake: this is a moment of extraordinary opportunity for data center acquirers.

It's true that few hosting companies are seeking large data centers. But that's not where the action is. Many of the data centers now on the market will make excellent disaster recovery centers for enterprise companies. Wall Street has figured this out, and a growing number of financial firms are shopping for quality data centers.

The current market conditions expand that opportunity. It's not only Wall Street that needs to invest in business continuity. Joe Suppers likens it to insurance - you may think you can get by without it, but if disaster strikes you could be out of business. After the Sept. 11 attacks, most large data-intensive corporations vowed to take steps to enhance their disaster recovery efforts.

Yet it was a much smaller group that followed those promises with action. Recent surveys on disaster recovery by mi2g and Robert Half Management Resources reinforce earlier findings that between 30 percent and 50 percent of corporations lack a thorough disaster recovery plan. That's not because they think it's a dumb idea. It's because they think they can't afford it, especially in today's economic climate.

That may have been true when folks were spending $60 million to $100 million to build data centers. If a company has a need for a mission-critical facility, the resale prices on these buildings offer a compelling case for action. That's why we've seen an acceleration of deals in the last six months, and why there are more in the pipeline in the months to come.

It's easy to look at the industry today and see the glass as half empty. But in years to come, the companies that are buying data centers may well look back and see the glass as half full.

For AT&T, Late Is Great

It's hardly news that hosting and colo providers are eager to sign up companies hosted by Cable & Wireless and Sprint. A bunch of providers have been hustling to get in front of these customers since the June 4 announcement that C&W was exiting the US market. This has received scant media coverage, except for our site and a couple of other hosting publications. Until today, when AT&T announced a fairly benign promotional package offering one month of free hosting. Suddenly, the media is mobilized! A blizzard of coverage ensues, almost none of which mentions anyone besides AT&T.

AT&T's announcement was covered by The Financial Times, Business Week (via C/Net), and InternetNews.com . You'd think AT&T had invented the idea of chasing stranded hosting customers. Only InternetNews mentioned any other companies, and only one (NaviSite).

What's amazing about all this coverage is that AT&T is late to the game. How late? If you only count the companies using major press release services (Business Wire or PR NewsWire), AT&T was the ninth company to announce such a promotion. They trailed NaviSite (June 6), Cogent (June 6) , Digex (June 9), NEXL (June 9), Globix (June 12), AboveNet (June 16), Switch and Data (June 16) and RagingWire (June 16). Many of these providers' offerings equal or exceed the one free month that AT&T is offering.

I'm not knocking AT&T for trying, mind you. But some days I'm just amazed how the media works.

IT Conversations

Ready to download some expertise? Author and hosting consultant Doug Kaye has launched IT Conversations, which offers streaming audio interviews with newsmakers in the hosting and web services sectors. Interview subjects in the service's first week included Amazon.com Web Services Evangelist Jeff Barr, Ramp^Rate CEO Tony Greenberg and Phil Windley, former CIO of the state of Utah.

Last week I sat with Doug for an IT Conversation about the consolidation in the data center market in the wake of the departure of Cable & Wireless and Sprint from the US hosting market. You can listen to our discussion on the IT Conversations web site. All files are in MP3 format. "Stream them to your desktop or laptop, or download them into your MP3 player and listen to them while you drive, workout, or sit on the beach with that margarita," says Doug.

Doug is the author of Strategies for Web Hosting and Managed Services and has a new book on web services, Loosely Coupled. Doug also maintains several weblogs on web hosting and web services.

Scale and Profitability

In the last eight days, Cable & Wireless and Sprint have abandoned the US hosting market, saying their data centers won't make money anytime soon. This comes just two months after Level 3 divested Genuity's hosting customers and data centers to Computer Sciences, saying the operation was losing $5 million a year. Can anyone make money in the hosting business? That depends on the answer to a second question - is your cost structure manageable?

Hosting revenues are constrained, with a slumping economy and tough competition in the hosting market. There's no breakout on the short-term horizon, either. Yet a significant number of hosting and colocation providers report that they are profitable.

What distinguishes these operations from their unprofitable counterparts? In most cases, it's the size of their data centers. The companies exiting the hosting market are, by and large, the ones who built the biggest. The eight data centers Sprint will close total 800,000 square feet, including at least two sites larger than 150,000 square feet. Cable & Wireless' operations include a 230,000 square foot Internet Solutions center in Reston, Va. and a 200,000 square foot presence in Weehawken, NJ.

Sprint, C&W and Level 3 have all done the math and decided that current demand for web hosting services simply cannot support the cost of maintaining large data centers. "From our perspective, the long-term cost associated with being a primary player in this business far outweighs the return," Sprint told its employees in a memo.

Sprint is setting aside up to $175 million to pay for customer migrations and lease terminations. A number of its hosting centers are housed in multi-tenant buildings - making it difficult to market the space to enterprises shopping for disaster recovery facilities, who have a strong preference for stand-alone sites offering enhanced perimeter security.

Cable & Wireless is looking for potential buyers for its US operations. Plenty of hosting providers would like to have revenue from enterprise companies, which comprise most of C&W's remaining customer base. But few hosting firms are still shopping for data centers of 100,000 square feet or more. That market for these larger facilities is being driven by business continuity requirements, which is a much more active market these days.

Customers Up For Grabs

With Cable & Wireless planning to exit the US hosting market, several competitors have stepped up their customer acquisition efforts, hoping to attract C&W customers who may be tired of uncertainty. In the last two business days, Navisite, Cogent and Digex have all rolled out "migration packages" offering incentives for new customers.

The scramble for displaced customers intensified with the apparent collapse of New Jersey hosting firm Datapeer, which may have had as much as 42,500 square feet of data center space and 600 servers, according to media reports. This prompted CIHost to immediately purchase Google text ads that pop up on keyword searches for "Datapeer," offering three months free and "instant setups."

While Datapeer customers have no choice but to seek out new quarters, C&W customers may wait and gauge the interest from potential buyers before deciding whether to seek another provider. If one emerges, it'll be the third owner for most of these data centers.

But then again, my two local banks have changed hands four times apiece since I opened my accounts. The changeover is never as smooth as advertised, but it's often less work than switching accounts to another bank - which would probably be bought next week, anyway. Advanced data hosting and banking are different businesses, but amid the churn and sign-changing, the customer psychology may not be much different at this point.

Most of C&W's customers know their options, which will only get better as competitors keep raising the ante on the number of free months they'll extend to new clients. A key decision point is whether suitors for C&W's American business have any use for the data centers themselves, or just want the customers.

Fire at RackShack

Rackshack weathered a transformer explosion and fire at at its Houston data center Monday evening, according to Rackshack "head surfer" Robert Marsh. The company, a unit of Everyone's Internet, is one of the industry's largest dedicated server providers with more than 8,000 servers. "Our internal systems switched us initially to battery power and then to power off of our generators that are onsite," Marsh said in an announcement on the company's website, which included pictures of the fire and emergency response.

"These generators carried us through the crisis and continue to carry us now," said Marsh in a message posted Tuesday. "As a precaution only, we immediately dispatched two additional generators to serve as backup in case one of our generators failed."

The company's performance, coming just a week after a data center fire knocked NAC.net offline, was noted by industry observers.

"Amazingly, given the pictures of the fire, they seem to have prevented it from affecting their network performance which, at least for Rackshack's own site, is no different from any other day," noted Netcraft, which monitors uptime for Internet providers.

The Rackshack staff made the most of the time on site. "We performed some routine maintenance tonight, as several senior network engineers were present at the datacenter due to the power emergency," noted CTO Randy Williams in a post on the company's customer forum.

Streisand Targets Colo

Celebrity Barbra Streisand, aghast that aerial photos of her Malibu mansion appear on the Internet, has sued a Santa Clara, Calif. colocation provider along with the operators of the web site displaying the photos. In a civil lawsuit, Streisand accuses Layer 42 of Santa Clara, Calif. with invasion of privacy and violation of California's "anti-paparazzi act." Layer 42 hosts the California Coastal Records Project, an environmental group's online photo database of over 12,000 aerial photos of the California coast.

Streisand's lawsuit seeks $50 million in damages from the defendants, who also include site operator Kenneth Adelman and the Pictopia service, which allows visitors to purchase photos of the California Coastline. Layer 42 provides hosting for Adelman's web site.

Media reports suggest Streisand's suit faces an uphill battle. It appears the photos were taken legally, and the star apparently can't invoke the anti-paparazzi law to protect photos of her house. As Adelman's web site notes, similar photos are available elsewhere on the web. Just about anyone can use the Internet to view blurry satellite pictures of their house.

But Adelman might brace himself for calls from other lawyers. In an effort to publicize its intention to defend itself, it appears the California Coastline site has republished copyrighted news stories from the SFGate.com and LATimes.com web sites, apparently by copying the HTML source code and uploading it to their servers. They even cut-and-pasted the copyright symbols, which is a nice touch.