Posted: 09/2001

Never Mind the Spelling, It’s How It’s Delivered
By Tom Payne

Collocation is one of the most critical and misunderstood services in the telecommunications industry. Collocation is a combination of real estate, civil engineering, electrical engineering, facility management and the standard bits and bytes of telecommunications fare.

“What should one look for in a suitable collocation space?” “How much should I spend?” “How the heck do you spell it?”

These are a a few of the many questions I get daily as my company’s designated “colo guy.”

Compared to SONET, IP and waves, information on collocation is sparse. Granted, rack counts, square footage, amps and conduits do not sound as exciting as packets, bytes and light waves. However, a network without collocation facilities is like a car without seats; the engine is there, but the car is not fully functional.

Because suitable collocation is essential to the telecommunication industry’s long-term viability, I have defined eight fundamental tenets regarding collocation and what constitutes quality collocation space.

Spell it consistently. One of the most frequent questions regarding collocation is “How do you spell it?” It’s spelled at least five different ways, but it doesn’t matter which version is used as long as your company spells it the same way consistently. After all, the real concern is how collocation is delivered.

Use it to save cash and increase bandwidth control. Collocation’s origins began as IXCs and CAPs emerged to compete with the original Ma Bell. Carriers then, as now, needed somewhere to house their equipment so they could use and manipulate the bandwidth they were buying.

Before AT&T’s 1984 breakup, the Bell companies rarely considered, much less honored, carrier requests to collocate equipment in their COs. Because of the high cost of

carrier-grade facilities, these carriers were better off financially and operationally if they could house their equipment in their provider’s PoP rather than constructing their own facilities. Recognizing this as a competitive advantage, the IXCs and CAPs began leasing space in their PoPs for carrier equipment. Thus a new industry product, collocation, was born. It is defined as the leasing of high-availability space and power within a facility for operating telecommunications equipment.

It is important to note that collocation rarely is offered as a stand alone product. It is a value-add that is available to carriers that have purchased capacity on the network. Collocation exists to facilitate the purchase and the use of a carrier’s bandwidth by its customers. The benefits for the customer are reduced cost and facilitation of the purchase and use of bandwidth services.

Take care in selecting a collocation provider. As noted, IXC (long-haul) carriers and CAPs (local) often provide collocation in conjunction with capacity agreements. Emerging recently have been a new breed of high availability “space vendors” that have attempted to meet the needs of carriers by offering collocation without providing bandwidth. The proliferation of these companies has been remarkable, attesting to the high demand for collocation.

More than 40 companies were in the “collocation only” business at the beginning of 2001. Some were real estate companies that already owned existing buildings where carriers had built PoP space. Others represented a new breed of carrier-neutral collocation providers that essentially built PoPs without a backbone network with the intent to lease for collocation.

However, many of the “new breed” companies made a critical error: They assumed there was a potential for profit by removing carriers from the equation. Consequently, they delivered a product they did not understand fully. What they failed to realize is that collocation is not just about space and power–it is also about reliability, bandwidth access and access to end users. The folly is evident in the now unused millions of square feet of collocation space these companies built, many of which now are defunct.

Balance the economics of cost vs. build. The cost of building out carrier-grade facilities is exorbitant–between $300 and $500 per square foot, exclusive of the lease and equipment costs. Addition-ally, most telecommunications equipment still requires 48V DC power and adherence to stringent environmental specifications. Unless there is need for at least 1,000 square feet, it is almost always better to lease racks and power than to build.

Do not confuse collocation space with data center space. Hoping to lease their space, the big data center providers and carrier-neutral collocation providers have tried to convince everyone that collocation and data center space are one and the same. This is not true.

Collocation supports the operation of a customer’s network. Carrier collocation space is almost always located in the heart of a telecommunications hub, like a carrier hotel or a network access point (NAP). This is because of the distance-sensitive nature of local networks. Collocation providers attuned to this issue will save their customers extensive capital since it is not uncommon for local access charges to comprise between 40 percent and 60 percent of the total long haul bandwidth services cost.

Conversely, data centers focus on hosting equipment that may not have to be connected to multiple carriers, and in many cases are not. Additionally, a lot of the “Big Iron” (i.e., mainframes and storage silos) traditionally housed in data centers does not fit into the floor plans of many carrier PoPs that are focused on supporting rack-mounted equipment.

Recently, the space and footprint requirements for “Big Iron” have declined as large, massively parallel systems have become more modular in design. The bandwidth requirements for these systems have skyrocketed, resulting in greater need for more bandwidth and, thus, more carriers in traditional data center space. These trends are blurring the differences between collocation and data centers. However, if you are a carrier, you are almost always better off in true collocation space because of its accessibility to the provider’s backbone, proximity to various local access providers (i.e., CAPs & CLECs) and access to the all-important bandwidth end users.

Consider key features when shopping for collocation:

* Location–A poorly placed collocation facility can cost a customer thousands of dollars, if not tens of thousands, per month. This is far beyond any savings that might be realized by renting cheap racks. As noted, local-access charges for a customer can be enormous compared with the cost of the IXC or “city-to-city” portion of a circuit. For example, a reasonable monthly price for an average DS-3 long-distance circuit is between $30 to $40 per mile, while the cost of a local loop for that same DS-3 costs between $1,000 to $3,000 per mile in most cities. With these economics, it is easy to see why saving $500 per rack on collocation could cost tens of thousands of dollars in the long run.

* Real Estate–If applicable, investigate the collocation provider’s lease with the building landlord. Verify that the lease gives the provider the right to construct any key facilities required to efficiently operate your business.

* Civil Engineering–How is the facility built? Is it up to carrier-grade standards? The recognized authority on telecommunications construction standards is Telcordia Technologies Inc. ( Telcordia provides standards documentation that represents decades of experience in building and operating high-availability facilities, such as COs and PoPs. Telcordia’s G.1275 is an excellent reference for PoP construction standards.

* Electrical Engineering–Assess how the power systems are designed and implemented. They must be redundant and easy to use. Verify that appropriate safety and ease-of-use measures have been taken. Is AC and DC power available? Can the provider grow the power plant? Is the power-planning infrastructure in place to ensure that future needs are met? Telecordia’s G.1502 is an excellent reference for a detailed list of considerations related to collocation electrical power requirements.

* Facility Management–Verify how the facility is operated. Confirm that “real” security exists–not just a bunch of rules that no one understands or follows. Are the standard operating procedures clearly documented? How are they enforced? Can technicians access the facility around the clock? Is the facility clean and professional-looking?

Avoid being taken to the cleaners. Generally, $1,000 to $1,200 per month, per rack is a heck of a deal. If the cost is less, then check to see if some costs are hidden or being absorbed in higher-capacity rates. Around $1,850 is usually the list price for collocation racks; this may be discounted based on the amount of additional services purchased. At these rates, some AC or DC power should be included with the rack, usually expressed as electric current or amps. Twenty to 30 amps per rack is common; anything less is insufficient.

The two main “gotchas” that usually burn carriers on collocation costs are:

* Power–Because the margins are so thin on per-rack charges, some collocation providers charge a “per amp” amount for what is known as the “A” power feed, and another “per amp” charge for the “B” feed. Pricing power in this fashion is nonstandard and allows some providers to charge customers more while delivering less service. Since power redundancy is usually a prerequisite for collocation, many do not ask or notice the charges for A and B power feeds have been separated, and they realize too late that they are paying twice what they anticipated for power.

* Operations–Most collocation providers offer some ability for carriers to use the provider’s on-site technicians. However, a disturbing trend is the requirement to buy a “minimum” amount of technical assistance with each rack per month, whether the carrier needs it or not.

Confirm reliability. Do not take the collocation provider’s word for it. The No. 1 feature carriers look for when buying collocation is reliability. Reliability does not occur by accident, and it is not a permanent fixture that can be installed after a facility is designed. A collocation facility must be designed for, and operated daily with reliability in mind. Generators, HVAC units, batteries and rectifiers must be maintained and tested to ensure the facility is ready for a disaster.

Would you buy a used car without checking under the hood? Of course not. However, many carriers enter into long-term collocation leases after asking one question about reliability and then accepting as gospel the provider’s “Yeah, it’s reliable.” The best rule of thumb is to ask the hard questions up front before “accidentally” finding the facility’s single point of failure.

One telltale sign for how well a facility is maintained is how the preventive maintenance inspections (PMIs) are planned and conducted. PMIs are a daily aspect of life for a collocation provider that is working to provide superior services. Despite being a basic requirement for quality collocation space, it is amazing how many providers can’t produce a PMI checklist. When shopping for collocation, ask to see the providers PMI checklist (what they routinely inspect and how often they conduct the inspections). Also, show up when a PMI inspection is sheduled and watch how the technician conducts it.

Understanding the cost benefits, operational bonuses, and price advantages of well-done collocation can save carriers thousands of dollars in access costs, prevent hours of network downtime and lead to sizeable price advantages from reduced facility costs.

Tom Payne is the senior manager of collocation services for AFN Communications (, a

facilities-based network services provider that delivers carrier-class data transport products to underserved and primary markets. He is a member of the AFN marketing team, with responsibility for design, implementation and management of AFN collocation and local-access product lines. Payne is a seasoned telecommunications professional with more than eight years of experience covering several areas, including collocation services, local access, managed-telecom services, private-line services and telecommunications facility site selection. He can be reached at

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