Why Colo Bandwidth Pricing Is Lowest

Want to see something that will make you jealous? Get a pricing quote for colocation bandwidth.

Sickening, isn’t it? Or is it? Sure, the cost per Mbps at the colo center is much less than you are paying to bring in the same bandwidth to your server racks. Even if you can get a serious cost reduction on your line services by using a telecom broker like Telarus, you’ll still pay less when you co-locate. Is that fair?

Sure it is. The cost reduction you find at colocation facilities comes from a couple of sources. First, there are likely to be a lot more carriers serving that facility than your building. They flock there because they know that they’ll find lots of bandwidth hungry customers all in one spot. These carriers can hear the cash registers going ka-ching! all the while they are bringing in their fiber optic lines. Of course, that ka-ching! sound is ringing in every carrier’s ear. Pretty soon they are battling to get the most customers with the highest bandwidth requirements. That drives prices down and encourages even more customers to move into the “carrier hotel,” as colos are often called.

Beyond fierce competition from multiple service providers, bandwidth costs are low because connection costs are trivial. You know the last mile connection? Yes, the line from your facility to the carrier’s closest point of presence? If you are using copper or SONET fiber, chances are that the last mile is being leased from the incumbent local telephone company. They put the cables in the ground and they expect to get paid for their use, especially if they are being used by a competitive carrier. Inside the colocation center there is no last mile. You have a hard time running a mile of cable even if you wrapped it around the building a few dozen times. That last mile is reduced to the last 100 feet, and it is often installed by colo center personnel. They simply run a drop, fiber or copper, from the carrier “meet me room” to your rack. Plug it in and you are connected.

Lots of competition and easy connections are the reasons behind those mouth watering colocation bandwidth prices. The question becomes, “how can you get in on the action?”

The obvious answer is to move to the colo facility. But what about the costs of space and utilities? They’re probably lower than what you pay now, especially if you are renting. Economy of scale keeps the cost of electricity, HVAC, security, fire suppression, and backup power at reasonable rates. You can even outsource the installation and maintenance of your equipment to the colocation center technical staff. They’re always on duty anyway. Is your staff?

Before you brush off the idea of packing up and moving your high bandwidth server equipment to a colo center, run the numbers. Compare costs of facilities and bandwidth and see which makes more sense. It can be a real eye-opener... and cost saver.