internet content hosting

This page considers the history of internet content hosting in Australia and New Zealand.

It covers -

• the internet content hosting sector
• the dot-com boom
• post-boom consolidation
• statistics and industry concentration

There is a broader account of the internet in Australia as part of the net profile elsewhere on this site.

     the ICH sector

As noted in the Network & GII guide on this site, hosting for sites on the net was initially provided by academic institutions, by site owners (whether individuals, SMES or larger organisations) and by internet service providers as part of general connectivity services. Hosting by an ISP is still the case for most small entities; Telstra for example hosts several thousand commercial and non-commercial sites.

The growth of large-scale electronic commerce, accompanied by forecasts about connectivity needs, drove the emergence of specialist web hosting enterprises, variously tagged as 'web hotels', 'server farms' and internet content hosts (ICHs). ICHs reflected technical demands, patterns in IT outsourcing and perceived economies of scale.

Some simply provided space on their servers, with clients essentially renting disk space on the operator's machine. Others offered more comprehensive packages, with the hardware of several corporate clients being relocated to a special facility (eg including advanced security, power, cooling and bandwidth) and supported by specialist staff. Those packages often featured metrics and application support.

     the dot-com boom in Australasia

By the late 1990s, keeping pace with developments overseas, Australia appears to have had around 360 ICHs, with around 60 in New Zealand.

Most were small, with only a handful of corporate clients, few specialist staff and facilities that were often inferior to those of the major carriers. However, others involved substantial investment. The 41,575 square metre Ultimo server farm of Global Switch (founded 1998, subsidiary of UK property developer) reportedly cost $160 million.

Predictions in the late 1990s regarding the size of the Australasian ICH market in 2003-05 ranged from $180 million to $3 billion, resulting in something of an ICH bubble as local and overseas entities acquired competitors and built new facilities.

'Overbuilding' of ICHs was one feature of the telco boom. In 2001 traffic specialist Telegeography for example estimated that around 50% of 16 million square feet of carrier-neutral co-location space was unoccupied. It had identified 287 facilities in what were characterised as the world's top 50 wired cities (with 26 web hotels in New York City, 19 in Los Angeles, 17 in San Francisco and 16 in London).

     post-boom consolidation

Forecasts of annual growth of 40 to 60% haven't been substantiated and as a result there's been substantial discomfort for many ICHs, several of which have been absorbed by competitors or sold facilities at a substantial discount.

Exodus Communications (19% owned by Global Crossing after acquiring its GlobalCenter arm in 2000) established a purpose-built hosting facility at North Ryde, later sold at significant discount to Fujitsu. Its overall investment in three facilities in Australia is estimated at $100 million. At the time of its collapse it reported assets of US$5.98 billion, liabilities of US$4.44 billion and 44 data centres with an aggregate 5.6 million square feet. WorldCom made a similarly ambitious investment in the region.

Adelaide-based ICH Hostworks (which in 2003 claims to host "over 15% of all Australian Internet site content") was founded in 1999 and acquired the data centre arm of the Ngapartji Multimedia Centre, handling hosting for the NineMSN network. It acquired the Australian arm of US ICH InterPath in 2001 for around $2.9 million. In turn it was acquired by Broadcast Australia (Macquarie Communications Infrastructure Group) for $68.9 million dollars in 2007.

Brisbane-based WebCentral claimed 20% of the market and has been identified by some as the largest local ICH, with upwards of 40,000 accounts. It was acquired by Melbourne IT in May 2006 for $61 million. WebCentral at that time had annual revenue of around $60 million and EBIT of $5.5 million.

Telstra, the dominant telecommunications group, supposedly has around 10% of the market (with most accounts attributable to its Bigpond ISP arm), followed by Telecom NZ subsidiary Connect.com and OzHosting, a subsidiary of Destra (formerly ehyou.com).

OzHosting illustrates developments in the sector: it absorbed five ICHs between December 2000 and 2001 (including managed hosting specialist Ice-Blue, Super-Hosting, iAsiaWorks and Domains N Servers) for a total of 10,000 domains. Its acquisition of WebTrader is reported as costing around $1.2 million.

US group Hostway entered the Australian market in early 2003 after expansion into South Korea, the UK and the Netherlands (with around 300,000 customers). It acquired Australian ICH Dedicated Hosting (with around 1,000 customers and 2,000 domain names) before buying the co-location arm of GlobalHost. (The latter's virtual hosting arm was acquired by Destra.)

     statistics and industry concentration

In discussing internet metrics and the dot-au and dot-nz domain spaces we have noted that the number of registrations is not directly equivalent to the number of active sites attributable to a specific space or to a particular country.

Some names are registered but not used. Some organisations and individuals use gTLD rather than ccTLD names (eg have a site identified with a .com rather than a .com.au or a co.nz). Hosting is not restricted to a particular country: an Australian site might be hosted in Alaska, Singapore or Finland. Similarly, the server hosting a gTLD site might be located in Auckland, Brisbane or Adelaide.

Those complications (and the sparseness of information from some ICHs) mean that it is not possible to provide a definitive map of what is being hosted where.

The numbers suggest, the leading ICHs appear to account for over half the dot-au commercial domain name sites and a large number of other sites.

Media coverage, annual reports, parliamentary papers and personal communications suggest that many government sites are hosted by commercial ICHs.




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