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When you think of data centers, you probably imagine a giant server farm in a rural area where electricity is cheap and tax breaks are plentiful. Big tech companies like Google, Amazon Web Services, Microsoft, and Meta have deployed millions of square feet of server space in places like Northern Virginia or Hillsboro, Oregon. But now, to reduce latency, companies are increasingly knitting nodes in their networks into the fabric of cities. For example, the One Wilshire building in Los Angeles, which used to house a network of law firms, is now one third of all internet traffic between the USA and Asia.
For the uninitiated, these urban physical internet nodes probably don’t look like much. And this is by design. Equinix, the largest owner of colocation data centers with 10.9% of the world market, operates data centers that should generally not go unnoticed. In Dallas, the company owns a sprawling industrial building just outside of downtown that doubles as a data center hub and headquarters for a nonprofit college. In Tokyo, the operation is largely run on several floors within the city’s sea of skyscrapers, “so you wouldn’t even know it was there,” says Jim Poole, the company’s vice president of business development. Equinix is building a new data center in Sydney, Australia, in an expressionist style that is no different from the city’s famous opera house. And Equinix built a moat around one of its facilities in Amsterdam—given that Amsterdam is a city of canals, less than safety, Poole says, to fit the building into its surroundings. “For the most part, people are trying to make their buildings fit for the environment,” he says, adding that sometimes local regulators need it.
The demand for such facilities, especially in city centers, is growing rapidly: last year, spending on co-location data centers increased by 11.7%. The biggest cloud companies are not far behind. Amazon Web Services brings scaled-down data centers, called Local Zones, closer to large population regions; so far, placed them 32 cities across the USA. The trend has even caught the attention of Walmart, which could launch soon. hire sections of their superstores to host data centers for third-party companies.
Poole says one explanation for the flurry of demand is that consumers themselves are changing. As most of our lives have become online, “people’s tolerance for latency has continued to decline,” he says. The main drivers are apps where a millisecond latency can be critical: you may not notice a quarter-second lag on Netflix, but if you’re using an online sports betting app, trading stocks, or participating in a multiplayer game, you will definitely notice it. A game like Fortnite.
For example, companies like Google, Amazon, and Microsoft are betting on cloud gaming that includes streaming games over the internet without a console or phone to provide processing power. However, many popular games such as first-person shooters “require a lot of fast response time and therefore really fast connectivity,” says Jabez Tan, head of research at Structure Research. And games like this won’t work on a streaming service without the help of multiple data centers.
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