Data Centre Network Revenue Models
Executive Summary
Key Takeaways
- ✓ Network revenue extends beyond individual cross-connect fees to include carrier density, internet exchange or peering point participation, and the broader network ecosystem value a facility develops over time.
- ✓ A facility's network ecosystem value should be modelled as a self-reinforcing driver, more carriers and interconnected tenants make the facility more attractive to new network-dependent tenants, distinct from the cross-connect fee revenue that ecosystem also generates.
- ✓ Network density can support premium base space/power pricing independent of cross-connect fee revenue itself, since network-dependent tenants often pay more for a well-connected facility regardless of how many individual cross-connects they order.
- ✓ Internet exchange or peering point hosting, where present, should be modelled as a distinct revenue and ecosystem driver from standard cross-connect fees, given its different commercial structure and its particularly strong ecosystem reinforcement effect.
Objective¶
This guide sets out how to model data centre network and interconnection revenue in depth within Data Centre Financial Modelling, extending beyond the per-connection cross-connect revenue mechanics.
Beyond the Cross-Connect Fee¶
Network revenue extends beyond the individual cross-connect fee to include carrier density, internet exchange or peering point participation, and the broader network ecosystem value a facility develops over time. A model limited to per-connection cross-connect fee revenue misses this broader, self-reinforcing ecosystem dynamic.
Network Ecosystem Value as a Self-Reinforcing Driver¶
A facility's network ecosystem value should be modelled as self-reinforcing: more carriers and interconnected tenants make the facility more attractive to new network-dependent tenants, who in turn add to carrier density and ecosystem value. This dynamic is distinct from, though it generates, the underlying cross-connect fee revenue itself, and should be tracked as its own growth driver in a mature or maturing facility's model.
Network Density and Premium Base Pricing¶
Network-dependent tenants, for example those requiring low-latency connectivity to specific carriers or financial exchanges, often pay a premium for space and power at a well-connected facility regardless of how many individual cross-connects they personally order, since access to the ecosystem itself carries value independent of the fee-generating connections. This premium should be reflected in the base pricing assumption for network-dense facilities, not solely in the cross-connect revenue line.
Internet Exchange and Peering Point Hosting¶
Where a facility hosts an internet exchange or peering point, this should be modelled as a distinct revenue and ecosystem driver from standard cross-connects, given its typically different commercial structure, port fees or an alternative billing basis, and its disproportionately strong reinforcement of the facility's broader network ecosystem value.
Common Construction Pitfalls¶
Network revenue limited to per-connection cross-connect fees. Misses the broader ecosystem value and its effect on both fee revenue growth and achievable base pricing.
No premium reflected in base pricing for network-dense facilities. Understates the commercial value of network density beyond the cross-connect fees it generates.
Internet exchange hosting blended into standard cross-connect revenue. Obscures its distinct commercial structure and ecosystem effect.
Recommended Practices¶
- Model network revenue as encompassing cross-connect fees, carrier density, and ecosystem value together.
- Reflect network density as a premium driver in base pricing, not solely in cross-connect fee revenue.
- Track internet exchange or peering point hosting as a distinct revenue and ecosystem line where present.
Continue Reading¶
Related Pillars¶
Related Technical Guides¶
Related Glossary¶
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Frequently Asked Questions
How does network revenue modelling differ from cross-connect revenue?
Cross-connect revenue is the recurring per-connection fee itself. Network revenue modelling considers the broader picture, carrier density, internet exchange participation, and the ecosystem value that attracts network-dependent tenants and can support premium base pricing beyond the cross-connect fees alone.
What is network ecosystem value and why is it self-reinforcing?
The commercial value a facility gains from having many network carriers and interconnected tenants present. It is self-reinforcing because a facility with more carriers and tenants becomes more attractive to additional network-dependent tenants, who in turn add to the carrier density and ecosystem value, a dynamic a model should reflect rather than treating network revenue as a flat, independent fee stream.
How can network density support premium base pricing?
Network-dependent tenants, for example those requiring low-latency connectivity to specific carriers or exchanges, often pay a premium for space and power at a well-connected facility regardless of how many individual cross-connects they personally order, since access to the ecosystem itself has value independent of the fee-generating connections.
How should internet exchange or peering point hosting be modelled?
As a distinct revenue and ecosystem driver from standard cross-connect fees, since it typically has its own commercial structure, port fees or a different billing basis, and disproportionately strengthens the facility's broader network ecosystem value relative to a standard cross-connect.
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