Data Center

Tier 2 Data Center Market Booming

The partnership announced today between TeliaSonera International Carrier and 365 Data Centers reflects the growing demand for both bandwidth and data center capacity in the farther-flung reaches of the US. The two companies are teaming up to bring 100-gigabit connections to Tier 2 markets in which 365 Data Centers is operating. (See TSIC, 365 Partner on Tier 2 US Data Center Connections.)

In fact, 365 Data Centers is seeing such growth in these smaller markets that the company is looking to sell off its facilities in larger, more hotly contested markets, to fund both organic and acquisition-based growth in the smaller markets where there is less competition, says John Scanlon, CEO.

"We are seeing a demand for more choice and more capability in a lot of the midsized markets -- the ones not in the top 10," says Art Kazmierczak, director of Business and Network Development of The Americas for Telia Carrier .

"The demand is from a lot of our key customers, which are the broadband providers, so everything from ILECs to CLECs to cable system operators to mobile data operators, and even universities and regional research education networks. We are also seeing demand from application providers, be it cloud applications, CDNs, gaming, media, where they want to extend their services into these markets," says Kazmierczak.

The rapid growth in demand from these smaller markets is reshaping the networks and data centers that serve them, say both Kazmierczak and Scanlon. The focus of the 365 Data Centers/TSIC partnership is to bring the 100-gig connections into good interconnect locations and match it with data center capacity to make it easier for both the broadband ISPs and those delivering content and applications to meet consumer demand.

All of this is being fueled by the growth in online video content and applications, including always-on connectivity for mobile phone apps and Internet of Things deployments such as connected cars, Kazmierczak says. TSIC currently has a connected car deal with Tesla, for example. With the expectation that cloud-based apps are always available comes greater need to host content closer to the user and have the bandwidth to support that and the interconnection facilities to enable multiple broadband access players to distribute the content.

Stay up-to-date on data center strategies including connectivity in the data center connectivity section of our data center channel here on Light Reading.

"When you look at it, in the top 10 markets you find lots of data centers -- there are 60 to 70 data centers in Bay Area [San Francisco] or Ashburn [Va.] or Dallas," the TSIC executive says. "But in Tier 2 markets, you need to find a good location where you can have critical mass of interconnect -- 365 has done a good job in finding a good niche in a number of these markets, where they are the dominant player."

This kind of ecosystem that combines carrier hotel/interconnection with data center capacity so that a variety of network types -- public, private, wireless, wireline cable and satellite -- come together with access to content and applications is becoming critical to many markets, he adds.

That's a major reason why 365 Data Centers is focusing its investment in expansion in these underserved areas, Scanlon says.

"We are actively pursuing both vertical and horizontal expansion -- in markets we already exist and in new markets," he says. "There are a number of robust markets we would like to expand into. We would like to divest in hotly contested markets and move more into almost exclusively Tier 2 markets."

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

pcharles09 1/22/2015 | 12:03:03 PM
Re: Timing is right @Phil_Britt,

Also keep in mind that financial & other industry regulations keep getting more strict each year. So companies have to get into better colos to meet those SLAs & downtime/disaster recovery requirements.
Phil_Britt 1/22/2015 | 10:28:13 AM
Re: Timing is right You are absolutely right. IBM published a stat a while ago that 90 percent of all data has been produced in the last two years. With the Internet of Things, the amount of data will continue to grow. So there will be more of a need for data centers of all sizes.
Cloudnexion 1/22/2015 | 12:18:13 AM
Timing is right With the growing adoption of cloud computing, the Tier2 cities need reliable colocation facilities.   I expect to see this trend increase.  
PatKelly 1/19/2015 | 8:04:01 PM
Tier clarification Hi In the article your are referring to Tier 2 markets e.g. cities. However it could be confused with Tier 2 Data Centre classification. Good article and interesting to see them find a niche in a competitive market, which brings me to think that this is an area where telcos can play given their geographical reach with local exchanges
danielcawrey 1/19/2015 | 6:10:34 PM
Need Going in and fuliflling a need in these markets is a smart one.

I think that there's going to be huge demand for Tier 2 capabilities in the near future. People need to be close to data centers for performance reasons, especially given how important the cloud is today. 
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