Telx: The Interconnection Company

Telx is expanding its data center network to support the growth of its core interconnection business.

Tesh Durvasula proudly describes Telx as "the interconnection company." Durvasula, the chief marketing and Business Officer of Telx, acknowledges that his company may not have the visibility of the two public companies specializing in interconnections, Equinix (EQIX) and Switch and Data (SDXC). But Durvasula says Telx has more interconnections than either of its rivals, despite having a far smaller data center footprint.

Durvasula won't give exact numbers for his company's interconnections, citing Telx' status as a private company. But he says Telx has more cross connects that the published numbers for Equinix (19,511) and Switch and Data (19,797), suggesting that Telx has more than 20,000 cross connects in a data center footprint of close to 400,000 square feet of data center space.

That interconnection density is a legacy of Telx' role as the network clearinghouse at 60 Hudson Street, one of the premier carrier hotels in Manhattan, where it helped telecom carriers exchange traffic. In 2004 the company acquired 56 Marietta, the leading carrier hotel in Atlanta. In late 2006 Telx was bought by private equity firm GI Partners, and has since acquired the NYC Connect meet-me-room operations at 111 Eighth Avenue (New York's other major carrier hotel) and also manages the meet-me-rooms at 10 facilities owned by Digital Realty Trust.

Having a new owner with deep pockets has accelerated the evolution of Telx beyond its historic base in the telecom industry. "Telx was traditionally a carrier-focused business when we were purely 60 Hudson Street," said Durvasula. "When we expanded into Atlanta we started to shift from an interconnection play into collocation, which made up a good portion of our revenue after 56 Marietta. It was an expansion into more of a national presence."

Telx now operates 14 sites in nine markets, serving more than 500 customers. While its colocation service has grown in recent years, Telx sees colo primarily as a means to an end, leasing most of its space to interconnection customers, who tend to have a different profile than hosting providers or enterprise data centers.

"Are we going to be high-density server focused?" said Durvasula. "No. We're not looking at space with racks at 200 and 300 watts per square foot. But if you're looking for a 100 to 800 foot cage at 80 to 125 watts per square foot, absolutely we are your provider."

Telx has plenty of enterprise customers, however, who use its meet-me-rooms to choose among dozens of connectivity and voice providers, seeking to save money by selecting the best routes and prices. "We work with companies looking to arbitrage their network connection," said Durvasula. "In simple terms, they want choices."

Durvasula said Telx is coming off a record three months of growth in revenue from cabinets, cabinets sold and interconnections. The company's most recent expansion in Dallas, where it acquired 21,000 square feet of space at 8435 Stemmons Freeway late last year. The deal follows the company's expansion in its existing Dallas facility at the Univision Tower Building at 2323 Bryan Street, where Telx doubled its presence to more than 11,000 square feet of space. Telx will link the two facilities, enabling customers in the new Stemmons site to access more than 70 networks through the Telx Meet Me Room at 2323 Bryan.

There's more growth to come, according to Durvasula. "Network expansions are already in the budget," he said. "We're looking for space in the five to 10 to 20,000 square-foot range. It's a much more conservative approach. Because we grow the interconnections quickly as we add a cabinet, we don't need to add hundreds of thousands of square feet to be successful. In a capitally constrained market, it's a good place to be."