Best of the ISP-Lists

How Neutral is Carrier Neutral?

Members of the ISP-Colo list discuss the evolution of carrier neutral colocation facilities.

[September 6, 2000]

On the ISP-Colo list in August, JM asked a simple question:

"What exactly does the term 'carrier neutral' mean? Am I correct in understanding that it describes a facility which doesn't sell bandwidth? I'd always been under the impression that a key component of the business model of a colo facility was to resell bandwidth."

SD provided the historical context:

"Some carriers with excess space in their facilities used to allow customers to lease racks very cheaply, assuming they would buy circuits from the carrier. Instead, those customers started buying cheaper circuits from other carriers. Not liking this turn of events, carriers started prohibited customers from bringing in 'outside' circuits. And so, enter 'carrier neutral' facilities. The concept behind a carrier neutral facility is that with several carriers at the same location, competition leads to better discounts on circuits. Pretty soon, though, I'm sure 'carrier neutral' will become a marketing term devoid of all meaning."

Others seconded SD's concern that the definition is getting a little stretched:

[JS observed] "There are definitely carrier neutral facilities that have their own networks, but the question then becomes 'How neutral?' If they are investing in infrastructure, they're probably going to favor that network to some degree."

[JB agreed] "If the neutral facility is reselling bandwidth services, they're no longer neutral; they will have a bias towards the provider with the biggest kickback or commission. In order for a true carrier neutral colo facility to be neutral, their offerings have to be neutral, which means they don't resell anything."

Finally, a number of respondents noted that the nature of the market is shifting:

[SC noted] "Some folks make their money in the real estate itself as opposed to bandwidth."

[JB concluded] "With the price of bandwidth falling, the only revenue-generating area left for the colocation business is the service of colocation. Let's see where Exodus, and the other big players will be in 3-5 years, or at least how their pricing models will change."

—End