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January 12, 2005 -- (WEB HOST INDUSTRY REVIEW) -- Recent communication from colocation provider Redbus Interhouse to customers indicate that the company plans to raise its prices from £350 per month to £550, a move that comes just a few months after its merger with rival TeleCity (telecity.com). The company is also planning corresponding price increases for power and space.
Tim Anker, director of the Colocation Exchange (colo-x.com), an independent market for colocation space, says the move is "hardly surprising" since TeleCity had been charging 20 to 30 percent more than Redbus when they were competing. He believes the move could also be a deliberate attempt by Redbus to get rid of their weaker and more price-sensitive customers in favor of high-end corporate clientele.
Redbus had been well known for having some of the lowest colocation prices in Europe, a fact not lost on many competitors, who have complained about the drag on prices. The London-based company also offered short, even month-long contracts, Ankers explains, which attracted smaller, startup Web hosting companies.
Anker believes the price increase has far-reaching implications for Web hosts and the data center industry.
"This is a seismic event and shifts the whole playing field with respect to pricing," he says. "I'm afraid the halcyon days of flexible terms and incentives for buyers are well and truly over."
Some Web hosts that are customers of Redbus, Anker says, will attempt to pass the cost on to their customers while others will take the hit to their margins. An interesting development, he says, is the increased interest from small and medium-sized providers in building out their own facilities. "The self-build option may come back into the thinking of many providers."
The immediate effect, however, will be a ripple effect of upward pressure on prices, Anker says. And with prices moving up and facilities in London filling up quickly, other European markets are likely to benefit.
"Frankfurt is the most obvious good value location within the European marketplace," says Anker, "but I still expect the markets in Paris, Amsterdam and Dublin, that are less tight than London, are all going to benefit to a degree."
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