Zayo’s zColo Buys a DC in Vegas

January 3rd, 2012 by · 20 Comments

Of course, it had been a whole quarter since the 360Networks deal was announced and a month since it closed, so Zayo Group (news, filings) naturally kicked of 2012 with its 18th acquisition. The company’s zColo division has bought MarquisNet’s Las Vegas data center business.

The deal gives zColo a 28,000 square foot data center in Las Vegas, located at 7185 Pollock Drive.  Zayo be extending fiber into the facility of course, as the company has an extensive presence in Las Vegas that it picked up from AFS who bought it from IDACOMM a couple years earlier.  zColo’s space and interconnection business derives mostly from the former Fibernet Telecom Group and its Meet-me room at 60 Hudson in New York. But they have been expanding the business across the country, now operating 12 data centers in 11 markets.

Financial details were not disclosed, but as with Internap’s purchase today it’s already a done deal.  Of course, today’s M&A poll might be thought of as slightly moot, but this is a relatively small deal for Zayo and I don’t think it changes their appetite.

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Categories: Datacenter · Mergers and Acquisitions

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20 Comments So Far

  • Carlk says:

    I am beginning to develop an image in my mind that Dan Caruso is William Wallace of Scotland, standing up against English Tyranny. Working the countryside one territory at a time.

    Dan, are you SEVEN FEET TALL? 🙂 You were one of me three bets, but I receive no prize.

  • Rob says:

    I’ve heard that Marquisnet was on the block for a while now, but hearing that Zayo is the buyer really kind of surprises me. Both Zayo’s metro network and the long haul network they acquired in the 360 deal are heavily centered around SwitchNAP’s NAP2 interconnection facility, and SwitchNAP takes a very dim view of anyone trying to compete with them in the Las Vegas market – just take a look at the “Cross-Connects” and “Connection Pathways” sections of the SwitchNAP AUP for a few examples. It will be interesting to see how this one shakes out…

  • Anony says:

    Could be a calculated bet for online gambling traffic to pick up since the Fed approved it last week? More to come on the online gambling front?

  • Rob says:

    I have my doubts about the gaming aspect – the facility itself is pretty much full and out of power, so it’s not as if you could easily add large online casino customers without significant upgrades to the facility. I think there were a number of attributes that contributed to the deal. First, it was a mostly full, profitable facility with good cash flow; second, the facility can serve as a DR to enterprise customers on the west coast; and third, Zayo / 360 have definitely run into some issues trying to service other wholesale clients / 3rd party IDC’s since their infrastructure is based at SwitchNAP, who doesn’t like to play nice when it comes to allowing carriers in their facility to service other datacenters in the area.

    • Rob Powell says:

      Rob, thanks for that perspective on Vegas, I don’t know much about SwitchNAP and the local market there. But if they are as protective as you suggest, it sounds as if Zayo smells an opportunity to shake things up.

  • Rob says:

    I can’t really see Zayo competing with SwitchNAP on the colo side – Marquisnet is a 20,000 sq ft facility that is probably at 90% capacity or higher, vs. SwitchNAP who has hundreds of thousands of square feet of colo space, and it supposedly aggressively building out more. Other than the obvious benefits of owning an asset with nice cash flow and profits, I think their primary aim is wrestling away SwitchNAP’s stranglehold on bandwidth / transport / interconnection in Las Vegas – it kind of fits with Zayo’s model of operating MMR’s and interconnection facilities, and it’s the only way they will ever be able to truly leverage the 360Networks assets they now own in Las Vegas. That’s where I see the most growth potential in the deal, along with the possibility of some decent revenues providing DR for enterprise customers in California.

    • Rob Powell says:

      I didn’t mean to suggest Zayo was looking to compete for raw colo space, that’s not their turf. But rather if the interconnection market in Vegas is as strangely configured as you suggest, that Zayo senses an opportunity to attack it by regularizing it. If the Vegas DC market is becoming more important, it seems unlikely that any such stranglehold can be maintained for long.

  • Anon says:

    This is a 12+ years old site. Hard to justify much of a premium here – which is why it had been on market for years. Again, how does expensive private equity compete in the single digit cap rate world? Not sure I follow the “control the market” theory. One DC doesn’t control annoying and Vegas is not a particularly good DC market.

  • Rob says:

    First, Vegas is a much larger datacenter market than you think, and it’s a quickly growing market as well. Second, I guess you’d have to be a bit more plugged in to the market here to really understand, but in the case of Las Vegas, there is one DC – SwitchNAP – that serves as the primary carrier PoP for about 75% of the networks with any kind of presence in the city. Unlike the carrier hotels most of us are used to, however, SwitchNAP is extremely closed off when it comes to allowing other facilities to interconnect to carriers at their facility – read the sections of their AUP I referenced above. They quite literally do “control the market” to a very large degree. The Las Vegas 360Networks PoP is in SwitchNAP’s facility, and is therefore subject to those restrictions. What this means is that Zayo would have a very difficult time combining it’s Las Vegas metro assets and it’s newly acquired long haul assets to service other 3rd party datacenters and wholesale clients, since SwitchNAP simply won’t provision cross connects if they are to service a competing facility. I know about this first hand. So when the opportunity came up to buy a datacenter that solves their interconnection problems for them, allows them to sell DR to their west coast enterprise customers, and has good existing cash flow and profits to boot, why not jump on it when you are sitting on a giant pile of PE money like Zayo is?

    I got a bit of confirmation on my theory earlier today – I was told by some I have worked with at Zayo that the facility was bought because it is “strategic from a Network Operations standpoint”. My company is both a customer of Zayo and a bit of a competitor to Marquisnet, so I have a pretty heavily vested interest in finding out what the situation really is.

    • Rob Powell says:

      Sounds like you have it bracketed. Zayo’s new facility gives them an independent PoP from which to operate and hence the flexibility to serve other data centers in the metro area without running afoul of this AUP you referenced. All they need to do is run a lateral from their own fiber to their new PoP, and I don’t see what SwitchNAP can do to slow them down in serving other DCs via that metro network – which is pretty extensive.

  • Dan Caruso says:

    I think you guys might be over-analyzing this a bit. SwitchNAP is an important partner of ours in Vegas. The Marquinet facility is no threat to them, whether owned by zColo or someone else.

    zColo has an obligation to our investors to create value independently of our fiber and bandwidth businesses. zColo has a strong competency at operating mature facilities–delivering great service and strong financial performance. Marquinet acquisition plays into its strengths.

  • Rob says:


    While you (and I) believe that Marquisnet is no threat to SwitchNAP, I’m not so sure they will take the same view of the situation, given the extremely antagonistic stance they’ve taken with all of their local competitors in the past.

  • Anonymous says:

    @Dan Caruso: I see obligation to investors, strong competency of operating mature facilities, and delivering great service and strong financial performance mentioned in your post. Where does Zayo stand on keeping employee teams intact whose expertise over the years has led to the newly acquired company being a profitable co-lo enterprise?

    • Socialism says:

      @anon – sounds like you need the security of a union job. Join the CWA. Add value or get out of the way.

      • Anonymous says:

        @Socialism: unions play no part in this–human values do. Zcolo will fail in Las Vegas as their customers see that the company does not care about their individual needs–just the bottom line. You sound like one of their stockholders.

  • Anonymous says:

    Company is already failing. . .customers falling by the wayside rapidly. . .research into what made “tick” not done. Sad and incompetent.

  • Dan Caruso says:

    Hey Rob. I know you have an open policy about comments being posted on your posts. However, when someone makes disparaging remarks about a company, shouldn’t they need to identify themselves? “Anonymous” is making statements that sound factual, but are not. If he or she doesn’t identify himself or herself, I’d appreciate it if you would remove the negative commentary.

    Anonymous, if you have a legitimate concern or complaint, please contact me and we can discuss.

  • Anony says:

    Great to see a CEO of a company like Zayo take the detractors head on. That’s a true professional.

    There’s no need on this website for baseless commentary from those who hide anonymously behind the comfort of their keyboards.

  • TE says:

    I agree.

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