By Philbert Shih, theWHIR.comJuly 13, 2005 — (WEB HOST INDUSTRY REVIEW) — Web hosting companies consider a variety of factors when deciding where to set up operations and locate points of presence. Connectivity, real estate costs, access to skilled labor, regulatory stipulations and market potential top any host’s list.
The tax environment is another important factor. State and national governments in the US and Europe have implemented favorable tax, financial and regulatory incentives, hoping to attract technology companies to set up shop in their backyards. Texas in particular has had a great deal of success with this approach, its pro-business tax structures and regulations turning the state into a veritable hosting hotspot.
Just to the Northeast, the state of Missouri is looking to follow in the lone star state’s footsteps. Beginning on August 28, new legislation takes effect that will give qualifying businesses up to $75,000 a year in tax credits (which can be used or sold immediately for cash) for a four-year period.
The Rebuilding Communities Tax Credit Program, an initiative that has received bipartisan support, grants these credits to telecommunications, information technology and life sciences companies that move into designated zones – generally downtown urban areas such as those in St. Louis or St. Charles.
Bandwidth Exchange Buildings, operator of two carrier hotels in downtown St. Louis, is located in one of the designated zones and is encouraging Web hosting companies to move into its facilities and take advantage of Missouri’s generous tax credits.
“It’s a great program for our tenants and the type of tenants that operate in buildings like ours,” says Robert Guller, a managing member of Bandwidth Exchange Buildings, which lobbied hard for the legislation.
Bandwidth Exchange Buildings’s two facilities total 500,000 square feet. A data center at 900 Walnut is 100,000 square feet and has been operating since 1995. It is currently at 90 percent capacity. The facility at 210 North Tucker, covering 400,000 square feet, is only a third full. Both are home to Web hosts, ISPs and telecom carriers. Missouri – and St. Louis in particular - is a potentially attractive hosting location for many reasons. Downtown St. Louis for example, offers a high concentration of bandwidth access, says Guller, and nearly all the voice and data carriers in the region have significant presences in the greater St. Louis area.
Guller says another major plus that should be especially appealing to hosts is the abundance and quality of power.
“We have nationwide, some of the lowest power costs per kilowatt hour,” he says. “And even more important is power reliability.”
Guller says the healthy supply of power can be attributed to the way the city’s infrastructure was built – as a big industrial manufacturing city. But as times changed, the city evolved into a more service-oriented economy, leaving a largely underused power infrastructure.
“We are a net power exporter, so were we to get cut off from the adjoining power girds, it wouldn’t matter. We produce more power than we actually use in our grid.”
But the best part of the deal is still the money, especially in an industry that has seen profit margins shrink progressively over the years.
“These credits are very helpful,” says Guller. “If you are a smaller Web hosting company and you spend $250,000 to $300,000 on your servers and equipment a year – which is pretty typical – and you are running real tight markets like most do, the fact that the state will hand you $75,000 - all of a sudden you are 40 percent more profitable than you thought you were going to be. That’s a good way to take your business up to the next plane.”
And it is both the financial and technical benefits that make Missouri, which has flown somewhat under the radar, a potential new hosting hotspot.
“We are on our way to becoming the US Web hosting Mecca,” Guller says.
