Trillion-Dollar Infrastructure Bill Promises ‘Significant’ Changes For U.S. Data Centers
If signed into law as expected, the Infrastructure Investment and Jobs Act would direct more than $130B in federal spending toward digital and energy infrastructure programs that industry insiders say could dramatically change where and how data centers are built.
Although the words “data center” appear just once in the bill’s 2,702 pages, the bipartisan legislation’s impact may be felt across every aspect of the industry, reshaping approaches to everything from cryptocurrency mining to workforce training.
“I don’t think there’s any doubt that the impacts on the industry are potentially significant,” said Greg Riegle, managing partner at McGuireWoods' North Virginia practice. “The industry as a whole has always pushed resiliency, stability and, increasingly, sustainability in the industry and the networks that support it, whether power or fiber, so I think the objectives of the legislation are well aligned.”
While the Biden administration’s marquee legislation must still go through the House reconciliation process — and possibly a contentious budget battle before landing back on the president’s desk — most experts agree the infrastructure bill will see few substantial changes before its expected passage.
According to industry insiders, these are the top four takeaways from the infrastructure bill for data centers:
More Internet Users Means More Demand For Data Centers
The infrastructure bill aims to dramatically increase the number of Americans with access to broadband internet, and that would mean a flood of demand for data center operators.
Much of the language framing the more than $65B allocated to digital infrastructure addresses what is known as the digital divide. Roughly 10% of the U.S. population — mostly in rural and low-income areas — does not have access to high-speed broadband.
If passed, the bill’s digital equity initiatives would provide $100M to each state to build out optical fiber and 5G networks, with the requirement that broadband services are extended to new areas. Along with additional funding for programs to increase connectivity in rural areas, the bill also creates a direct-to-consumer subsidy to help low-income individuals pay for high-speed internet service.
If successful, these measures would create tens of millions of new internet users using social media, gaming and watching videos on YouTube. And that subsequent surge in data needs to be processed and stored somewhere.
“Right now those people are using dial-up. They couldn’t stream a Netflix movie over dial-up but they’re going to be able to do that now,” said Mike Rechtin, head of Seyfarth’s data center services group. “That means Netflix needs to increase the number of servers, and those have to end up in a data center someplace.”
New Fiber, New Markets
An unprecedented build-out of fiber optic and other broadband infrastructure would open up new regions for data center development.
In addition to the funding allocated in grant funding allocated to states to improve digital access, the infrastructure bill designates $1B for middle-mile connectivity grants — broadband infrastructure that does not connect directly to an end-user, such as fiber connections to data centers, cable landing stations and other digital equipment. These are typically awarded to private enterprises, governments or public-private partnerships.
“It opens up the ability to put some size of data center anywhere,” Seyfarth’s Rechtin said. “Right now putting in fiber is super-expensive, and to do that with a bunch of different providers is prohibitive, and this is going to take the element of cost out of it.”
A denser network of optical fiber across the U.S. would spell new opportunities for data center development, industry insiders tell Bisnow.
While there is disagreement about whether the infrastructure act is likely to lead to new regional data center hubs around the country, experts agree that there is likely to be an immediate opportunity in the areas surrounding data center hubs like Northern Virginia’s Loudoun County.
“It’ll take the pressure off these super-dense environments and open up new pockets of data center development that can pop into the existing mega-network nearby,” Rechtin told Bisnow.
“These are markets that might not even exist yet, but now you’ll be able to draw the circle farther out from a place like Loudoun County because this will enhance their ability to connect into major networks without latency problems.”
More Reliable, Greener Energy In More Places
A torrent of funding slated for improvements to power grids and renewable energy may be more significant for data centers than new fiber, some industry leaders tell Bisnow.
“The perspective I’m hearing from my clients is that it’s not just the direct investment in broadband, it’s the larger investment in the power grid,” McGuireWoods’ Riegle said. “From an industry perspective, a strong, resilient grid is foundational, so this part of the bill is enormously important to the industry.”
The administration’s plan pours $73M into shoring up the nation’s power grid. In a year in which data center operators have contended with grid failures in large markets like Texas and California, leaders across the industry say they are acutely aware of the reduced costs and lower risk that would come with a more resilient grid.
Others point to the infrastructure bill’s ample funding for green energy infrastructure and innovation. Access to renewable power has become a primary consideration in siting data centers as hyperscalers, cloud users and colocation tenants aim to reduce the carbon footprint of their data, according to Cushman & Wakefield’s Senior Research Manager for Data Center Insights Kevin Imboden.
According to Imboden, green energy subsidies in the administration’s bill will help bring renewable power to areas that currently have little, which could prompt data center development in those areas.
“A lot of the largest markets don’t have consistent renewable power, so having renewable infrastructure being built in what will probably be a lot of major metropolitan areas is going to be very helpful for future data center builds,” Imboden said.
"There’s going to be all kinds of incentives that are going to help make that happen.”
Confusion For Cryptocurrency Miners
No one can seem to agree on what the infrastructure bill means for the future of U.S. cryptocurrency miners.
Passage of the infrastructure bill was delayed for more than a day by the debate over an amendment with tax reporting implications for cryptocurrency miners. And while cryptocurrency advocates were not able to amend the act to their liking, many celebrated the presence of cryptocurrency-focused provisions in the bill as a sign of the sector’s growing legitimacy and permanence.
Yet, experts said the broader infrastructure goals of the Infrastructure Investment and Jobs Act is what the cryptocurrency community should be paying attention to. There is widespread disagreement as to whether the massive government investment in broadband and power will bring opportunity or spell doom for U.S.-based miners.
“You’re going to see a whack-a-mole with the cryptominers,” Imboden said.
According to Imboden, there is a fundamental conflict between the economic goals of a publicly funded infrastructure project and cryptocurrency. He said that many in the data center industry view cryptominers warily because of their enormous power usage, which will likely lead to those operations struggling to find footholds in large markets if public money is used to build out the infrastructure.
“If some of the renewable power that’s going to be created, if that brings down the cost of power and miners go to those markets, that’s not going to be something the government wants to see,” he said.
While Rechtin agrees that miners may not find many opportunities around data center hubs, the massive deployment of fiber to rural areas could open opportunities for crypto. Newly connected rural areas may not have the multiple fiber connections required for a regular data center, but occasional downtime is not an existential disaster for a cryptominer.
“Get these people where they should be, which is midsized data centers that we can build in the middle of nowhere,” he said. “They’re lower cost and you don’t need the resiliency or redundancy for power and things, so I think they’ll fit in really nicely.