Life on the Edge: A Competitive Cornucopia

CenturyLink's announcement today that it has new fiber links into five more CyrusOne data centers is just the latest in a long string of such deals, linking high-capacity telecom networks to commercial data centers.

For CenturyLink Inc. (NYSE: CTL), this is actually the twelfth CyrusOne data center and about the 300th third-party data center now connected to its network, driven mostly by enterprise customer demand for cloud service connections. (See CenturyLink Fibers Up 5 CyrusOne Data Centers.)

The flurry of activity at the edge of the network -- a loosely defined space -- is creating business models of many different types. And some companies, such as CenturyLink, are operating in multiple parts of the growth data center interconnection market.

Connecting data centers is a major source of telecom service revenues, for one thing.

"It's a big trend and it's becoming one of the most commonly requested features of a VPN sale," says Eric Barrett, director, network product management, CenturyLink, and the guy who runs their MPLS service organization. "And they don't want to connect to just one cloud, they want to connect to five, six, eight or ten."

Of course, CenturyLink operates 60 of its own data centers and would love to connect its IP service customers to those sites and sell them its cloud and IT services, he admits. "They may buy from five providers, and we may be one of them or we may not."

And most recently, there has been a shift from connecting data centers -- it's still happening but at a slower pace -- to connecting aggregation points, such as the Equinix Inc. (Nasdaq: EQIX) exchanges, Barrett notes.

At the ComptelPlus show in October, a big chunk of the discussion was all around data center interconnectivity and the shift to tying data centers and colocation facilities together, or at least getting them close.

Kurt Van Wagenen, CEO of FirstLight Fiber , which operates fiber networks in upstate New York and New England, is seeing his company's growth shift to connecting data centers, alongside the cell tower routes it has traditionally built.

"We are seeing data center interconnectivity as a driver, from customers that are both enterprises and carriers," he says. "And we are seeing bandwidth upgrades as well. A lot of enterprises are outsourcing their IT, moving the IT equipment into secure data centers and then looking for bandwidth connectivity back into their locations."

For FirstLight, the cell tower or data center becomes what is essentially the anchor tenant on a fiber run, from which other businesses can then be served with direct connections.

Edward Henigin, CTO of Data Foundry , a Texas-based firm that started as an ISP but grew into running data centers and offers colocation, sees a kind of convergence happening at the edge of the network, where two edges are coming together. In a panel discussion at ComptelPlus, he says the customer edge and the service provider edge are moving closer to each other, and in some cases, collapsing.

"We have been servicing Internet to businesses and we see them moving their edge from their offices to the colo cloud," he commented. "Meanwhile, service providers are pushing down toward the customer, and the two edges are coming closer together."

In many respects, Equinix is one of the places where those two edges converge, said Sindhu Payankulath, its VP of global network engineering and operations, on the same panel. "Equinix is letting people connect by bypassing the middleman," she noted.

There was a time, Henigin said, when Data Foundry had to beg service providers to connect its data centers, "now they are our best customers."

The interest in running fiber to the data center is based on customer demand, notes CenturyLink's Barrett. Enterprises are looking for those connections and their telecom service providers are taking note. CenturyLink bases its decision on which third-party data centers to connect next on which ones are most requested by its enterprise customers.

Those connections are getting fatter -- many are 10 Gbit/s today and the demand is just starting to ramp up for 100 Gbit/s, he notes.

Of course, not all edge strategies are based around cloud connections for enterprises. EdgeConneX Inc. has built its data center strategy around putting small footprint data centers right at the edge for network operators -- primarily cable companies -- that want to store content closer to the customer, notes Phill Lawson-Shanks, chief architect & VP of innovation.

In the past two years, the company has built 23 such facilities in the US, mostly in Tier 2 cities. "We build data centers people don't expect to find them," he said, in an interview at ComptelPlus. Customers pay based on footprint and power consumption.

Cable operators need to cache content closer to their customers and once the data centers are in place, Internet companies often use their caching capabilities as well, he says. So the variety of customers is growing.

But even building data centers where they aren't normally found, EdgeConneX looks for interconnection. "We always build them so they are smack on top of network routes, so there is dual entry for redundancy and dual meet-me rooms," Lawson-Shanks said.

— Carol Wilson, Editor-at-Large, Light Reading