In the last two years information consumption on the internet has exceeded the preceding 28 years by a factor of 100. Demand for data centres generally has generally risen as the amount of data consumed keeps rising.

Many of the more prominent data centres have been built in rural areas. But one ASX small cap, data centre operator and builder DXN (ASX:DXN), has a flagship site at Sydney Olympic Park.

It says the world needs more data centres in urban areas. Without them, promises of internet-powered technologies like autonomous vehicles and delivery drones won’t be possible.

This is because they need minimal ‘latency’, which is the delay before a transfer of data begins following an instruction for its transfer.

“You’re seeing a huge demand uptick that’s being driven off increasing speed at which people can consume data,” CEO Matthew Madden told Stockhead.

“Machine communication is the next wave of the internet and that relies on a lower latency connectivity aspect. That means that information has to be closer to where it is being consumed — what we call the last mile.

“Think about an autonomous vehicle driving and needing to make decisions. That information needs to be close at hand to make decisions like braking, for example. Or we could be talking about Amazon releasing drones that deliver shopping to people’s homes.

“In order for those sorts things to occur there needs to be low-latency and that’s the part that the edge data centre plays. That’s where we’re positioned, not as a competitor but complementary part to the system and how it fits all together.”

We may not be seeing drone deliveries or self-driving vehicles in cities yet, so Madden pointed to  Zoom (NYSE:ZM), the highflying video conferencing service, as a current example.

“If you’ve been using Zoom, you’ll see in a broad sense, varying levels of people’s performance,” he said.

“You’ll see some frames frozen, some frames that are active, some where people are speaking and their voice is jittery — it’s all a direct result of latency.

“The way latency is solved in the internet is the information being presented closer to where it’s being consumed.”


Data centre demand is booming

Naturally, the company has seen surging demand since COVID-19. But DXN’s focus on latency means it sits in a different space to competitors which may have seen similar surges.

“We sit in what’s called the aggregation data centre space or the edge data centre space,” Madden said.

NextDC (ASX:NXT) fills the role of what you’d call a hyper-scale data centre. They host large cloud providers like Microsoft or Amazon in their data centres and then have co-location customers that connect into those data centres.

“Our data centre in Sydney Olympic Park is the most centrally located in the Sydney Basin. That means it has the lowest latency to all of the data centres in Sydney.

“What being low latency means is we can provide an alternative to other operators like Equinix (NYSE:EQIX) or NextDC for customers that want to have co-location and not pay hefty fees associated with that.

“So we’re a bit more of a lower-cost alternative to those providers but by the same token in a well positioned location.”