AWS Direct Connect SiteLink is a new capability of AWS Direct Connect that allows users to create connections between their on-premises locations, including branch offices and data centers, through the AWS global backbone network. Although SiteLink is simply billed as a new “capability” or “feature”, the widespread uptake of SiteLink could have far-reaching implications on data centers, including the possibility of commoditizing carrier hotels.

Over the past few years, as more and more applications have shifted to the cloud, the cloud service providers like Amazon Web Services (AWS) have gained greater importance, relative to multi-tenant data center operators. In particular, this theme has been showcased in the commoditization of wholesale and hyperscale data centers – where development yields are being pushed lower and renewal rental rates on like-for-like hyperscale leases continue to decline, by mid-teens percentages, from legacy pricing levels.

Now, with the introduction of AWS Direct Connect SiteLink, the shift towards commoditizing network-centric carrier hotels is beginning. Instead of purchasing transport services that essentially trace AWS’ global backbone network, users are going directly to the source, with AWS Direct Connect SiteLink.

With this background, Dgtl Infra first provides an overview of AWS Direct Connect, which is necessary in order to understand SiteLink. Subsequently, we review AWS Direct Connect SiteLink, including its benefits and the drivers behind its creation. Finally, we highlight the implications of AWS Direct Connect SiteLink on multi-tenant data center operators – particularly those with carrier hotels.

AWS Direct Connect – Bypass the Public Internet, Connect Directly to AWS

Amazon Web Services (AWS) has 108 Direct Connect locations, available in 32 countries, located across Africa, the Americas, Asia-Pacific, Europe, and the Middle East.

Direct Connect provides a way for customers to physically connect to the AWS backbone network, through a Direct Connect point-of-presence (PoP).

AWS Direct Connect PoPs reside in multi-tenant data centers of interconnection-focused operators including Equinix, Digital Realty, and CoreSite. More precisely, the following are select examples of important AWS Direct Connect PoPs globally:

AWS Direct Connect Locations / PoPs

  • United States: Equinix (CH2, DA2, DC2/DC11, LA3, MI1, NY5, SV5), Digital Realty (ATL1, Westin Building), and CoreSite (DE1, LA1, NY1, SV2, SV4, VA1)
  • Canada: Allied Properties (Toronto), Cologix (MTL3, VAN2), eStruxture (Montréal)
  • EMEA: Equinix (AM3, DX1, FR5, HE6, LD5, MA3, MD2, ML2, MU1, PA3, SK1, WA1), Digital Realty / Interxion (Docklands, AMS7, CPH2, DUB2, FRA6, MAD2, MRS1, PAR7, STO1, VIE2, ZUR1)
  • Asia-Pacific: Equinix (HK1, OS1, SG2, TY2), Global Switch (Singapore), SUNeVision / iAdvantage (Mega-i), NTT (Jakarta 2)
  • India: Equinix (MB1), STT (Chennai, Delhi, Hyderabad)
  • South America: Equinix (RJ2, SP4)
  • Australia: Equinix (SY3), Global Switch (Sydney), NEXTDC (C1, M1, P1, S2)

Service

AWS Direct Connect is a cloud service that links a user’s internal network to an AWS Direct Connect location, over a standard Ethernet fiber-optic cable, bypassing the internet. As shown below, a physical connection is made between a user’s on-premises locations, which can take the form of a data center or branch office, and an AWS Direct Connect PoP:

Historically, when users needed direct connectivity between their data centers or branch offices, they had to rely on the public internet or costly and difficult-to-deploy fixed networks.

Instead, by connecting directly to AWS, users can improve their application performance and consistency, while achieving lower-latency. This is because, while in transit, network traffic remains on the AWS global backbone network and never traverses the public internet.

Overall, AWS Direct Connect helps users create private connections, which, in turn, provides the best path for users to bring their workloads into an AWS Region. However, Direct Connect, in isolation, previously did not allow users to route between Direct Connect PoPs, and therefore, between their on-premises networks – and this is where SiteLink comes in.

AWS Direct Connect SiteLink – Private Network Between On-Premises Locations

SiteLink makes it easy to create private network connections between on-premises locations, such as branch offices and data centers, by connecting them to AWS Direct Connect points-of-presence (PoPs) globally.

Low-Latency

By linking their on-premises locations, users can send data traffic back-and-forth between AWS Direct Connect PoPs, over the shortest path on the AWS global backbone network – bypassing an AWS Region for routing. Therefore, users no longer need to connect through the closest AWS Region and manage / configure an AWS Transit Gateway for site-to-site network connectivity.

The following diagram depicts how users connect multiple sites using SiteLink. The data flows between AWS Direct Connect PoPs without going through an AWS Region.

AWS Direct Connect SiteLink

For example, these direct connections are important to certain customers that have latency-sensitive workloads, which require latency as low as two milliseconds.

Deployment

Once an on-premises location is connected to AWS Direct Connect, users can enable or disable SiteLink for that location in minutes, for both dedicated and hosted connections. Importantly, distinct use cases can take advantage of how quickly and flexibly SiteLink can be turned on or off.

For example, if a user needs to replicate a workload that it has at one data center, onto another data center in a different location, then the user could simply enable SiteLink, replicate the workload, and then turn off SiteLink immediately.

Additionally, given the ease of enabling and disabling SiteLink, the feature can be used to create a transient private network for connecting to partners and third-parties. Transient private networks are useful for exchanging data between parties when a long-term connection is unnecessary or too costly.

Port Speeds

AWS Direct Connect port speeds range from 50 megabits per second (Mbps) to 100 gigabits per second (Gbps). Therefore, users can right-size their connection to any particular location. For example, a user’s corporate headquarters could have a 100 Gbps connection, while a small branch office could have a 50 Mbps connection.

On-Demand

AWS Direct Connect SiteLink uses elastic, pay-as-you-go pricing with no long-term commitments or recurring fees. As a result, users can build a network that grows with their business.

Global

Presently, AWS Direct Connect SiteLink is available in all commercial Direct Connect PoPs, except China and excluding GovCloud. Users can create ‘any-to-any’ connections between 2+ branch offices or data centers, even across geographic regions, and spanning multiple continents.

Drivers Behind the Creation of AWS Direct Connect SiteLink

Operators of global private networks are facing geographic constraints, rigidity in contracts, and cost challenges:

Geographic

Network operators face challenges when crossing two different geographies. For example, an operator might have a strong network, with a great provider in Europe and, similarly, they may have a strong network, with a great provider in Asia-Pacific.

However, interconnecting their Europe and Asia-Pacific networks is often a challenge for the operator. This is because the operator rarely finds a single provider that will be in all the locations that it needs.

Rigidity

Networks are often very rigid and bound by long-term contracts. Therefore, if a network operator needs to add a new location or increase / decrease capacity (e.g., for peak season) – the process is very slow, often taking months to change. Indeed, this rigidity becomes a bigger obstacle as network operators expand their businesses globally.

Cost

To solve geographic constraints and network rigidity, network operators have to create custom workarounds to interconnect networks from different providers. In turn, these issues make the network more costly to operate, increasing a company’s operating expenses.

Implications – Multi-Tenant Data Center Operators, Carrier Hotels

AWS Direct Connect SiteLink helps users quickly and easily connect multiple data centers globally using Direct Connect and the AWS global backbone network. Importantly, SiteLink is enabling low-latency and redundant connections between these data centers worldwide.

In turn, SiteLink customers do not need to purchase transport to send data traffic from one location to another. At the same time, this data traffic remains on the private AWS global backbone network and does not transit through a carrier hotel from operators like Equinix, Digital Realty, or CoreSite.

Presently, in order to achieve fast data transfer, data traffic often travels between carrier hotels – for example from Equinix DC2 in Ashburn, Virginia to Digital Realty ATL1 in Atlanta, Georgia. This is because, data entering a specific Region for routing, to be sent to another Region, is often too slow of a process.

However, with SiteLink, data traffic can be sent between AWS Direct Connect PoPs at Equinix DC2 and Digital Realty ATL1, using the shortest path on the AWS global backbone network. Therefore, with SiteLink, there is no need to purchase a transport connection between these Equinix and Digital Realty carrier hotels.

Furthermore, in many cases, data traffic may not need to travel between major carrier hotels at all, as SiteLink will provision a connection between AWS Direct Connect PoPs at the most efficient combination of its 108 Direct Connect locations. Fundamentally, by bringing data traffic onto its global backbone network, AWS is replacing the transport capability that used to come from carrier hotels. Indeed, AWS’ transport function makes carrier hotels less relevant and is commoditizing their particular locations.

Pricing

SiteLink uses elastic, pay-as-you-go pricing, with two pricing dimensions:

  1. Port Hours: per hour rate, while SiteLink is on/enabled
  2. Data Transfer Out (DTO): per gigabyte rate for SiteLink data transfer between different PoP combinations, with the rate dependent on the source AWS Region and AWS Direct Connect location. Notably, data transfer in (DTI) is $0.00 per gigabyte at all Direct Connect locations (i.e., there are only one-way charges)

Holistically, SiteLink’s architecture and dynamic pricing make the capability competitive to carrier hotels simply on the basis of cost savings – even ignoring its other benefits. For example, SiteLink can save organizations costs related to cloud data egress fees – charges when data moves in and out of the cloud – because, with SiteLink, data does not need to travel through a Region.

Threat to Carrier Hotels

AWS Direct Connect SiteLink threatens the network positioning of Equinix, Digital Realty, and CoreSite, amongst other colocation providers with a significant carrier hotel presence. Specifically, by using SiteLink, on-premises locations, including branch offices and data centers, no longer have as strong of a need to use the interconnection services of carrier hotels.

As such, the recurring and high-margin interconnection revenues of multi-tenant data center providers like Equinix, Digital Realty, and CoreSite could face negative impacts. As highlighted below, these interconnection businesses generate revenue ranging from $90m+ to $1bn+, per year, depending on the provider:

  • Equinix: $1.16bn of interconnection revenue during full-year 2021
  • Digital Realty: $360m of interconnection revenue during full-year 2021
  • CoreSite: $92.0m of interconnection revenue, on an annualized basis, based on Q3 2021 results

Moreover, because the incremental margin related to providing a new cross-connect is 90%+, the earnings impact on these data center providers would be magnified if their interconnection revenues were to decline.

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