By any measure, the global bandwidth market is thriving. International bandwidth demand has nearly doubled from 2020 to 2022, and has now reached 3.8 Pbps.
Meanwhile, the lit capacity on major submarine cable routes continues to soar, keeping pace with demand.
How? Is the network getting faster?
Not quite. Think bigger highway, not faster cars.
The pressures of supply chain disruptions, electricity price volatility, and government intervention are impacting prices in the global colocation market.
As we continue to move through 2023, here are a couple of trends to keep an eye on.
By our 2023 estimates, the Washington metropolitan area—or more specifically Northern Virginia (NoVA)—dominates as the world's largest data center market.
With more than 22 million square feet of operational capacity, NoVA is 30% larger than the next-biggest data center hub, Tokyo.
What else does the most recent update to our Data Center Research Service tell us?
Recently, we’ve been closely monitoring the intensifying pressures of insatiable demand and supply constraints in key data center markets.
Supply constraints have come in the form of both short-term and long-term challenges.
In the short term, supply chain disruptions have hindered development timelines. On the long-term side, regulators and utility providers have begun taking a hard look at the data center sector and how to grow it sustainably going forward. In some cases, these entities have severely disrupted development during the interim period.
None of these challenges have been resolved. And as we move through 2023, another major disruptive component has been added to the mix—the accelerated growth of generative Artificial Intelligence (AI).
The global data center market is under an unprecedented squeeze as we move into 2023.
On one hand, we have a long-term challenge surrounding the sustainability of the industry’s growth trajectory in essential hub markets. On the other, we have an acute short-term problem with energy prices in the colocation sector.
These issues combine to create an uncomfortable phase in the market right now.
There’s a remarkable sense of uncertainty in the data center sector right now.
Some of the biggest global markets have seen unprecedented disruption to data center development as regulators and utility companies attempt to work through critical issues surrounding the long-term sustainability of the industry.
At the same time, the war in Ukraine has fueled tremendous volatility in European wholesale power prices, bringing further stress to an industry that’s fundamentally dependent on vast amounts of power. Let’s unpack the current situation.
It is said that only three things are certain in life. The future of the global bandwidth market is not one of them.
Beyond persistent demand growth and price erosion—the two most predictable trends—operators will have to navigate the major uncertainties of an evolving sector.
According to our freshly updated Global Bandwidth Research Service, these key factors will impact the long-haul capacity market in the coming years.
The colocation data center sector is characterized by remarkable price stability—remarkable in that such external pressures as a global pandemic, geopolitical uncertainty, and regulatory restrictions have failed to dramatically sway prices in one direction or the other.
To be sure, there are sometimes short-term movements, but over the span of several years, collective rates shift only slowly from their baseline.
Let's delve into the key aspects of colocation pricing.
As we publish the latest update to our Data Center Research Service, the COVID-19 pandemic continues to turn the global marketplace on its head.
Network and data center services have never been more critical to connect a world in relative isolation. That's why we supplemented our 2020 data center site survey by asking global data center operators for their assessment of the pandemic's impact on their operations as of September 2020. (We shared some preliminary findings earlier this year.)
Here's the latest report.
In our research, we think a lot about the nature of interconnection.
And in our ongoing effort to gauge the impact of the COVID-19 pandemic on global networks, we wanted to highlight what’s happening in the nodes where interconnection takes place—data centers.
We spoke with experts across the market to get a sense of how they’re working through the crisis. They gave us insight on how the situation is affecting demand, operations, supply, and new construction.
