London Background Article - LONDON CALLING

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>          The London carrier neutral co-
           location marketplace is the
           largest and most diverse within
Europe and one of the largest in the world.
                                                   The situation raises a number of strategic
                                                   challenges for wholesale users: is enough
                                                   space secured for their own use? Does
                                                   contract cover offer enough protection
                                                                                                   found a facility that best met their needs to
                                                                                                   house their networking equipment, they
                                                                                                   moved in en masse. The site quickly
                                                                                                   became the de facto interconnection point
This is a result of two vital factors: London’s    against exploitative pricing? Is the existing   in the newly liberalised market, a process
role as the main hub where the exchange            stock of space of sufficient specification to   given further impetus by the decision of the
of both voice and data traffic between             meet current and likely future needs?           London Internet Exchange (Linx) to also
Europe and north America takes place and                                                           locate there in its role as initial termination
London’s position as Europe’s leading              DEREGULATION                                    point of AC1, the first “non club”
financial centre.                                  The carrier neutral co-location model in        transatlantic cable. Now only a fraction is
   Important changes are underway in               Europe was defined by the first such            still used for DR purposes, with the rest
London that are also likely to be seen in          supplier to offer a facility on the basis of    dedicated to 600 voice carriers, PTTs,
other European markets. For the first time         space only, Telehouse Europe. Telehouse         ISPs, and hosting companies.
in several years new build is taking place,        designed its first building at East India          In 1999 as the internet boom got
with a ring of new, higher specification           Dock to act as a disaster recovery (DR)         underway, there was a big increase in
facilities emerging just outside the M25.          facility for banks and dealing firms in the     market entrants. The first rival to Telehouse
The existing stock of facilities is also filling   City. However, no sooner had the facility       was known at the time as Telelinks. Its
up, which raises the question of how the           opened in 1990 than deregulation began in       Millharbour site sold quickly and the facility
existing operators are going to respond.           earnest and once those early entrants           was acquired by the American ISP and                                                                                                                      sept 05        37

     hosting company PSINet. Following this
                                                           KEY LONDON CO-LOCATION FACILITIES
     success many of those involved went on to
     launch pan-European co-location provider
     Cityreach, whose rapid rise ended in
     equally rapid descent when the company
                                                            EC1 & EC2 – The City
     went into administration in August 2001. In
                                                            City Lifeline
     the meantime Telecity, which had originally            Interexion
     begun with a Manchester facility, opened               IX Europe
                                                            Telehouse Metro
     its first London site also on Millharbour,
                                                            E14 – Docklands
     while on the other side of the Docks new
                                                            Global Switch 1
     entrant Redbus was opening the first of its            Global Switch 2
     pan-European facilities in the Harbour                 London Hosting Centre
                                                            Redbus Harbour Exchange
     Exchange complex in July 1999.                         Redbus Meridian Gate
        The Financial Times printing works at               Redbus Sovereign House
                                                            Telecity Harbour Exchange
     240 East India Dock Road was turned into               Telecity Millharbour
     an 180,000 sq ft co-location facility. The             Telehouse East
                                                            Telehouse North
     timing of this project was perfect, with
     Global Crossing looking for more space
     to terminate the newly landed AC1 and
     taking an initial third of the site during
     its construction phase. This site was
     the foundation for Global Switch, one of
     the biggest pan-European co-location

     GO WEST
     In mid 2000 a move westwards began with
     several     facilities   opening      in     the
     City area including Interxion, IX Europe
     and Citylifeline, while further west, near
     Heathrow, Digiplex, Cityreach,
     and IXEurope all acquired light industrial
     properties to refit into co-location facilities.
        Supply of co-location space in the
     London region peaked in 2002, some time
     after the stock market and internet boom            CARRIER NEUTRAL CO-LOCATION SPACE IN LONDON
     had boiled over, but the long lead times
     required to build these facilities mean it was
     hard to fine-tune supply. The reduction in
     space in 2002 came the result of a number
     of new entrants going into liquidation, and
     this was felt most obviously in the west
     London market. For instance City Reach
     had just finished a 100,000 sq ft build in
     west London when the company entered
     into administration. Several other new
     entrants also suffered a similar fate, and
     some 310,000 sq ft of space was removed
     from the market, most of it for use as
     disaster recovery facilities. This left only                                                                        Source: The Colocation Exchange

     IXEurope as the sole west London survivor.
        Today the market within the M25                 fitted out as well as other expansion space       There is no doubt that the co-location
     comprises of 15 facilities run by eight            available to the existing operators. The       market in London is vibrant today, primarily
     operators offering some 1.5 million sq ft          history of the Global Switch 2 building        driven by the needs of the corporate
     of co-location space. Sector specialist            could be the subject of a separate article,    sector. It is interesting to note just how little
     real-estate advisor CB Richard Ellis (CBRE)        but recent interest is reported as strong      new build we are seeing from the existing
     estimates a current vacancy rate of                with lettings to an impressive list of large   operators. This has once again left the door
     co-location space of only just under 10%           space users including Sunguard, Fujitsu        open for new operators to enter the
     for the London market as a whole, but this         and BT. The building is just under half full   market. Andy Ruhan, former founder and
     figure excludes unprovisioned or raw space         now, according to Julian King, commercial      CEO of Global Switch, has a new vehicle
     in Global Switch 2 which could be readily          director of Global Switch.                     Sentrum, and Sentrum is currently dealing

38    sept 05                                                                                                                  capacity magazine

     with a queue of blue-chip corporate clients        of our growth is coming from our existing                  from simply pricing by the foot or cabinet
     desperate for suitable data centre space in        client base.”                                              towards charging for power and cooling
     the company’s new 80,000 sq ft facility just          So there is not going to be an immediate                capacity, with electricity charges directly
     outside the M25 in Camberley, Surrey. This         space crunch in London, but all operators                  related to client usage.”
     facility, a former Nokia base station factory,     are looking at where they go from here.                       Put simply, current pricing doesn’t seem
     is setting the standard for what is likely         Peter Morgan Hare, business development                    to support the cost of the new, higher
     to become a new wave of facilities and             director at Telehouse Europe, says that                    specification facilities the market is
     we expect to see a ring of new, large              “current pricing levels don’t support an                   requiring. Most operators appear reluctant
     facilities all round London, designed to           attractive business case for the build out                 to commit to a new facility without some
     meet the specific needs of the corporate           required”. And this from the only operator                 form of anchor tenant to reduce the risk.
     marketplace. Sentrum’s Camberley site              in the sector generating a pre-tax profit.                 While there is no space crisis yet, with a
     can offer as much power as 2,000W or               Morgan Hare wonders if prices may have                     lead time of six to 12 months to bring a
     2,500W a metre in some areas, four or              to rise or if indeed the pricing model itself              new facility online, the decision point is fast
     five times the amount offered in most              might change: “We may see a move away                      approaching if a crisis is not to emerge. ■
     Docklands facilities. Andrew Jay, head of
     technical real estate at CBRE comments:
     “Our data centre clients are now buying
                                                          TOP 5 HIGHEST CAPACITY INTERNATIONAL HUB CITIES
     power, not just space.”
                                                          Rank                 City,Country                        International Internet, Bandwidth (Mbps)
        The implication of this latest phase of
                                                          1                    London, UK                                                                 1,071,326
     activity is that we are likely to see a two-tier
                                                          2                    Paris, France                                                                682,517
     market develop in London. The Docklands
                                                          3                    New York, US                                                                 603,304
     and City facilities remain well placed to act
                                                          4                    Frankfurt, Germany                                                           470,927
     as interconnection facilities, offering access
                                                          5                    Amsterdam, Netherlands                                                       451,935
     to dozens of carriers but not well placed
     due to their physical proximity and relatively       Notes: Figures represent internet bandwidth connected across international borders to consolidated metropolitan
                                                          statistical areas or equivalents as of mid year. Domestic routes are excluded.
     poor power availability to meet the
     corporate data centre needs. The new                 Source: Telegeography Research

     wave of facilities is just beginning to appear
     around the M25, where power can be
     found and the physical distance from head            IN A NUTSHELL
     office meets the business continuity
     planning needs of the big users. All these           > What is carrier neutral co-location?
     facilities need fibre, giving rise to possible       Carrier neutral co-location is the provision of technical space, sometimes called data
     new opportunities for both metro and long-           centre space, or raised floor space on the basis of space only, that is, without having
     haul operators.                                      to take any network or bandwidth commitment from the facility operator. A number
        But this is not to say the existing               of “carrier neutral” co-location providers do in fact offer bandwidth these days, mostly
     operators in the traditional locations are           in the form of a managed IP service, but this is offered only on the basis of an
     feeling left behind. Both Interxion and              optional, not must have, service. Clients are still able to choose from which ever
     Redbus are now bringing on line new                  network or supplier they choose.
     space that had been left unfitted during the
     downturn. All operators report that they             > What makes a good colo site?
     continue to see solid growth across all              There are three key factors that must be present to create a “good” facility: the
     their client sectors such as ISPs, hosting           standard of the fit-out; the presence of good network choice; the presence of other
     providers, systems integrators, carriers and         customers.
     smaller corporate clients. Indeed Anthony
     Foy, group MD of Interxion is seeing steady          > What about power?
     quarter-on-quarter growth across most                Power has become the co-location industry’s biggest headache as equipment gets
     European locations. “A number of factors             smaller and more powerful. More power also means more cooling (which in turn
     are combining together to drive the market           needs more power). At the same time power costs have surged strongly over the
     right now, not just the demand for business          past few years, so creating a “double whammy” effect of rising usage and rising cost.
     continuity. We are also seeing a new wave            Most European facilities were built to provide 300W to 500W per metre. The new
     of IT investment that has built up since the         wave of facilities now appearing around London, are being specified to offer 1,000W
     Y2K investment cycle and this is also                per metre or even 2,500W per metre.
     coinciding with demand for new, high
     capacity servers.” Simon Neal, managing              > What about consolidation?
     director at Redbus UK, adds: “We’re                  With six companies operating 39 facilities across the six key markets in Europe, the case
     seeing steady growth across all our                  for consolidation is fairly clear and the synergistic benefits should not be hard to realise.
     markets and price discounting is in                  The recent Telecity takeover is clearly the first major step in this process. After spending
     the past. We’ve scope to bring on a                  nearly £60 million acquiring Telecity, Inhoco is clearly placing a very serious marker that
     further 20,000 sq ft in the Docklands                big changes are afoot in the European carrier neutral co-location industry. ■
     and it’s interesting to note how much

40    sept 05                                                                                                                                  capacity magazine

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