One hallmark of markets that are deregulating, driven heavily by technology innovation or able to use new forms of virtualization is that the barriers that keep competitors from entering a market fall. The colloquial way of expressing this is the statement “firms outside our industry now are entering it.”
Consider one example, namely the revenue Equinix earns from interconnection services.
In the fourth quarter, Equinix reported 447,600 interconnections. Most of those were traditional cross connects inside Equinix facilities. But 11 percent of those interconnections were of the wide area network sort that traditionally have been sold by communications service providers.
In fact, the notion of “networking” arguably supersedes earlier language about “colocation” or “rack space”as the primary business function.
Over time, more such interconnections might be virtualized. In the pre-internet era, data charges were based on both capacity required and the distance data has to travel. These days, charges are set based on capacity per port or connection, on a distance-insensitive basis.
Logically, if interconnection is based on capacity and distance, then whether two domains are interconnected by a local area network or a WAN connection should not matter. Products sold still make a distinction between cross connects in a building and interconnections across a WAN.
That might change in the future, as more interconnections between domains increasingly are a matter of virtual functions between locations rather than use of dedicated cables between servers. Edge computing, for example, should hasten that trend.
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