What does Digital Realty’s acquisition of Telx mean for the colocation market?

16 Jul 2015

Wholesale colocation data centre operator Digital Realty Trust yesterday confirmed its widely anticipated acquisition of retail provider Telx, and with the transaction will come a profound shift in the colocation market. Not only will Digital Realty transition from a mainly wholesale player with supplemental retail offerings to a provider that is firmly entrenched in both sides of the market, but the company will now compete more directly with one of its biggest customers, Equinix.

Data from TeleGeography’s Colocation Database reveal that Digital Realty already has a behemoth footprint, with more than 115 sites and 22.8 million square feet of data centre space globally. While Equinix has nearly as many sites, its footprint is less than half as large, at 10.1 million square feet. Telx is a much smaller player, with 1.3 million square feet of data centre space at 20 sites across the US, but it has a prime retail position in a number of key markets. As a wholesale customer of Digital Realty, Telx’s footprint overlaps with that of its new owner in eleven buildings, or more than half of its sites. Nonetheless, the remaining nine non-overlapping sites still bring nearly one million square feet of new retail colocation space to Digital Realty.

Telx’s assets provide Digital Realty with high-value interconnection points in cities like Miami, Dallas, New York, and San Francisco. However, what is truly extraordinary is the degree to which the acquisition brings Digital Realty into head-to-head competition with Equinix in the retail colocation market. Equinix has colocation sites in 14 of the same buildings as Digital Realty, Telx, or both, including 36 Northeast 2nd in Miami, 2323 Bryan in Dallas, 111 8th in New York, and 350 East Cermak in Chicago. Signaling a direct attack in the interconnection market, Digital Realty has obtained Open-IX certification at 111 8th, where its customers can also interconnect with Open-IX partners AMS-IX and DE-CIX. The company is also in the process of obtaining the certification for its facilities in Ashburn, another location where Equinix is a customer.

‘Coming hot on the heels of Equinix’s acquisition of TelecityGroup, the impending Digital Realty-Telx merger signals an era of intense consolidation in the retail colocation market, both in the US and in Europe,’ said TeleGeography analyst Jonathan Hjembo. ‘It also accelerates the end of the traditional delineation between wholesale and retail, as operators diversify in both markets.’

Having plunged into the US retail market, perhaps the biggest lingering question is when and how will Digital Realty do the same in Europe. As it predictably snapped up Telx, so perhaps it will now set its sights on a company like Interxion.

TeleGeography’s Colocation Database is a comprehensive online guide to colocation service providers and sites around the world.

To speak with an analyst, please call +1-202-741-0042 or email press@telegeography.com.