Data Center Firms See Growing Opportunity In Edge Markets
As the U.S. data center industry evolves, more developers and providers are seeing big opportunities outside of first-tier markets.
Edge data centers — loosely defined as smaller facilities located closer to end users outside of major urban centers — are multiplying as demand grows for faster, more reliable cloud services. According to research firm Global Market Insights, the market for edge data centers is poised to grow from $5.5B in 2019 to $20B by 2025.
Data center providers like EdgeMicro, a colocation firm focused on edge markets, are strategically expanding their reach to include smaller, underserved cities. Last year, Denver-based EdgeMicro built containerized, “micro” data centers in Cleveland and Indianapolis, adding to existing offerings in Austin, Tampa and Raleigh. The company is considering future sites in Memphis, Houston and Pittsburgh. Those small, modular facilities offer space in increments as small as a quarter-rack, which adds flexibility and scalability for its customers, according to EdgeMicro.
“These units are not very big — eight-10 customer racks each — so we can be a little more flexible in where we build them,” said Jason Bourg, vice president of revenue and strategy at EdgeMicro. “We do our due diligence: Where are the fiber routes in town? Where do the long-haul and metro fiber networks reside? We look for addresses that overlap where those fibers intersect.”
EdgeMicro’s existing clients play a role in driving the company’s expansion plans, and given the small size of its micro data center offerings, the company can be nimble in accommodating them.
“[Our clients] look to holes in their networks and say, ‘I need to be in Kansas City, or Raleigh, or Austin,’” Bourg said.
Compare that to the years-long feat of developing a large data center campus — from land acquisition, planning, design, construction and ongoing management — and it’s no wonder that edge data centers hold appeal both for developers and smaller enterprise clients.
"The definition of edge is evolving,” said Loren Long, co-founder and head of development at DartPoints, a developer and operator of edge colocation and interconnection points. “You have the content on one side and eyeballs on the other, and everyone else is part of the conduit to make that happen.”
With the goal of building out a regional, edge-focused data center network, Texas-based DartPoints recently acquired Metro Data Centers, a data center services firm serving Central Ohio. The company plans to expand its infrastructure in secondary markets across the Southwest, Southeast, Upper Midwest and mid-Atlantic regions.
There’s ample opportunity for edge data centers, Long said, and the demand equation often boils down to economics.
"I look for inefficient telecom hot spots, which are indicative of a community that has a higher-than-average cost per megabit,” Long said. “That highlights an economic inefficiency that can be improved.”
Alongside soaring internet usage, price per megabit has plummeted over the past several years. According to the Internet & Television Association, the price per megabit per second in the U.S. dropped 92% between 2008 and 2018. But the price of internet access varies widely by geography, with users in rural, less populous states generally paying higher prices.
The federal government is aiming to blanket more of the country with modern broadband, recently allocating $9.2B to Charter Communications, SpaceX and others to build out rural digital infrastructure. That new infrastructure will encourage more networks and services to enter those markets, increasing competition as well as opportunities for interconnection providers.
Omaha-based data center and interconnection provider 1623 Farnam sees an increasingly important role for interconnection points, particularly along East-West and North-South telecom routes. It recently launched a $40M expansion of its Omaha facility, which sits in proximity to hyperscale data centers and the largest Google Cloud node in the U.S.
“Omaha is right in the middle of the U.S., so we consider ourselves to be the edge,” 1623 Farnam President Todd Cushing said.
DartPoints' Long compared the country’s rapidly evolving digital infrastructure to a neural pathway that requires an ever-growing array of fiber networks, internet service providers, content delivery networks, data centers and interconnection points to work in harmony.
“Edge data center doesn’t compete with a core data center any more than a municipal road competes with interstate; they’re all needed,” Long said. “One has to feed the other.“
CORRECTION, FEB. 19, 11:40 P.M. PT: A previous version of this story included the names of cities where EdgeMicro is considering building containerized data centers among a list of cities where it did so last year. The story has been updated.