TOWARDEX Newsletter: New Year and Outlook for 2014

Dear our valued customers, partners and suppliers,

It is now 2014, another year for exciting times here at TOWARDEX.  As we enter our new chapter, we'd like to assess the state of our business growth and give you an update of what we've been up to and where we think the market is headed.

Since I started TOWARDEX as a small IT consulting business and a small hosting provider, market had changed significantly and so have we.  In 2012, I've made a strategic decision to reorient the direction of our company to align our expertise closely to where our real core competencies are.  As a result, we've changed ourselves to TOWARDEX Carrier Services, focusing on providing awesome connectivity products to enterprise customers in data centers.

2013 has been a tremendously successful year for us.  Despite our small size, we've successfully managed to compete against some of the largest names in the industry in winning enterprise connectivity contracts.  We'd like to thank all of our customers, partners and vendors for partaking in what had become the best year yet in our business.

We believe strongly in that connectivity should not hinder our customers' drive for business.  Our mission of looking out for best interests of our customers will continue to drive our product strategy and technology focus as we move forward.


Thank you again for your business and giving us the opportunity to serve you.  We wish you a happy and prosperous new year!

Sincerely,
James Jun
Managing Director - Wholesale Services

Year in Review: 2013

During 2013, we've achieved several important milestones in our business:

1. We've expanded our network to reach New York, extending us beyond the boundaries of Boston Metro and reclassifying our network as a "regional tier-2 IP network."
   
2. We completed Facilities Realignment & Upgrades 2013 (FRU 2013) project on budget and on schedule, with no downtime to affected services.  The completion of FRU 2013 had quintupled our network capabilities and bandwidth capacities to reach performances unsurpassed by any other regionally sized carrier in Boston.
   
3. We've expanded our network to reach more data centers than ever before.  In particular, we've partnered with Digital Realty Trust (NYSE: DLR) and added 200 Quannapowitt Parkway data center in Wakefield, MA to our growing list of on-net facilities.  We're extremely pleased with the success we’ve had at this location last year.
   
4. We introduced Switched Digital Interconnect™ (SDI), our modular Ethernet exchange product to bring significant cost savings and flexibility to enterprise customers in data center facilities.  Since its introduction, traffic levels on SDI had gone from 0 kbps to 3.5 Gbps in just one quarter!
   
5. We've made breakthroughs for Internet peering in Boston.  TOWARDEX now reaches over 30,000 IPv4 routes via direct peering, more so than any other regionally sized ISPs based in Boston.  We added over 70 Gbps of IP interconnection capacity during 2013 to scale with our customers' increasing demand for bandwidth.  
   
   Additionally, we've worked with numerous network and content providers to help them expand to Boston, bringing a number of them to the Boston Internet Exchange (BOSIX).  We've also established private interconnections with Microsoft (MSN), Akamai and Comcast to name a few, making us the first and the only regional carrier to maintain such interconnections in New England.
   
6. We introduced GWDM/Passive Optical Networking technology to our data center customers, saving them over $128,000 in interconnection costs during 2013.  The introduction of GWDM products to our customers has allowed them to significantly reduce data center cross-connect expenses when working with TOWARDEX as their provider.  Using Passive Optical Networking (PON) technology, our GWDM/PON products allow customers to cheaply consolidate excess cross-connects and reduce interconnection costs by as much as 50% in many cases.
   
   
7. Finally, Amazon DirectConnect service is now available on Switched Digital Interconnect™.  Customers are now able to natively connect their colocation environment to Amazon AWS.  This can be accomplished through their existing connection with TOWARDEX, using our SDI service.

Our Outlook for Data Center Connectivity Market in 2014

Despite the slow economy, enterprise IT market is booming and is going through some of the most exciting changes.  Consumer appetite for data center connectivity is evolving and will become more pronounced in 2014.  We are going to make following predictions for 2014:

1. Mobility applications will drive more data center deployments.  Mobility is dominating the technology industry, and we are seeing significant uptake in new creative startups and businesses offering mobility services.  Moreover, with the latest trend in BYOD, smartphones and mobile productivity will become more important topics for many CIOs and IT organizations.  Already today, TOWARDEX is serving as the primary IP bandwidth and connectivity provider for two of the largest mobility players in Boston.
   
2. Intelligence and cohesion will play more important roles in business.  The trend of smartphones, big data and machine intelligence will change the ways companies conduct their business everywhere.  Technology verticals will become more integrated and businesses will increasingly become more intelligent in a "network-centric" manner than ever before.
   
   
3. Demand for interconnections will only get bigger.  This market will continue to grow in 2014, as interconnection products are becoming more affordable in data centers.  Businesses will demand more flexible, cheaper and faster interconnections to enhance their IT infrastructures which are increasingly becoming more network-centric.
   
   The interconnection industry in 2014 will make significant move toward "upper-layer interconnections".  Ethernet-driven and virtualized cross-connects (i.e. Ethernet Virtual Circuits or 'EVCs') will make strong gains in enterprise markets, while dark fiber based physical cross-connects will increasingly compete against cheaper EVCs.  Already today, we're seeing numerous data centers moving toward European-model of interconnection services, while adopting open & fair interconnection standards.  We think that Open-IX initiative (www.open-ix.org) is really the way to go.
   
4. IP transit industry has consolidated enough now.  Price alone is no longer enough to sway customers.   Inexpensive connectivity is no longer enough to keep customers happy anymore, and it will be more true in 2014.  As enterprises are becoming more sophisticated and consumer taste is evolving, the market will increasingly demand high-performance, low latency global IP transit -- oh and by the way, at affordable prices. 
   
   Companies are increasingly looking for global IP transit providers that are fit for their business purpose, such as: reliability, low cost redundancy, low latency and direct paths as much as possible.

Our Plans for 2014

As we kick off for the new year, big things are happening here at TOWARDEX.  Here is an update on what's going on around here:

1. We will continue to deliver the best network performance for our customers at wholesale value.  We're making significant investments in our metro dark fiber infrastructure to lower the bit-mile cost while enhancing diversity and performance.   Our Wavelength Division Multiplexing (DWDM) architecture is undergoing new improvements that will allow activation of 100G waves to meet our growing backbone capacity requirements. 
   
   More dark fiber contracts and routes are being added to our metro Boston network this year.  We're also committed to building out a new IP point-of-presence at the 300 Bent Street carrier hotel in Cambridge, MA.
   
   Additionally, we will continue to make further improvements to our IP service.  More direct interconnections in Boston are planned for this year -- while some of the details are still not so public ;-), stay tuned for exciting updates in the near future!
   
2. We will add more data centers to our growing list of on-net facilities.  In particular, we will be entering the New York & NJ market this year and will be lighting new facilities in New Jersey.  Our New York POP at 111 8th Avenue will be undergoing significant capacity upgrades to handle the addition of new data centers in the NY-NJ market for our customers.
   
   In addition, we are committed to making new investments and doubling our network capacities at CoreSite and Digital Realty facilities, in response to significant product demand at these locations.  Some of our interconnection and partner interfaces will be relocated to, or closer to these facilities in order to further enhance network performance by creating more direct paths.
   
3. Migration and Upgrade for Legacy Hosting Customers.  Although we no longer offer hosting services, we will not forget about our existing customers who had been supportive of us from our early beginnings.  We are making efforts to migrate our legacy hosting customers to both Digital Realty and CoreSite data centers with enhanced service and newly modernized network infrastructure.  In order to minimize impact, we are working on these migrations in phases to ensure smooth transition.
   
4. We will provide more network options to our customers.  Given the significant growth in demand for interconnections, we will continue to partner with other carriers and service providers to bring more Network-to-Network Interconnection (NNI) interfaces to our Switched Digital Interconnect™ platform.  We're also working to add additional locations for SDI interconnections to provide more direct paths for layer-2 EVC connections.
   
   We're also committed to further enhancing our Amazon DirectConnect EVCs (including joining Amazon Partner Network) and are planning to build new interconnect locations closer to their US-EAST compute environment.
   
   This initiative is being led by our National Backbone eXperimental (NBX) project, which will establish new SDI and IP interconnection & peering sites in Washington DC, New York and Chicago markets.  First phase of NBX project is scheduled to commence deployment in April.
   
5. We will enhance automation and continue to turn-around your orders quickly.  We pride ourselves in turning around new circuit orders quickly for our customers, it has almost become a routine tradition.  We will continue to make investments to ensure that our ability to turnaround your orders and attend to your requests will become more streamlined and forever be part of your pleasing experience with TOWARDEX as we grow.
   
   Automation and machine intelligence will increasingly play more important roles in our business this year.  Smart network and autonomous provisioning technologies enable our staff to do more with less hands while saving time and reducing human errors.
   
   As part of our new investments in automation and streamlining of our processes, we've recently committed to build our new IT cage dedicated for Corporate Information Systems Network (CISN) at the CoreSite data center.  The new CISN cage will be dedicated to hosting our IT systems that will provide development & operations support for infrastructure management and automated provisioning systems.

As we start our new year, we feel strongly that the market is evolving to demand more innovation and efficiency from their IT providers.  Consumers will demand higher quality products at lower prices -- there is a saying that capitalism makes everyone rich, and we're definitely seeing the IT industry moving in that direction.  We've first seen it with the cloud, the industry had predicted the movement toward "network-centric" IT and it's now finally happening at a more rigorous pace. 

We believe we are uniquely qualified to provide the best value and service to meet the market's increasingly sophisticated and growing demand for complex connectivity requirements.  We are committed to continue investing in our network and products to deliver the best network experience to our customers.  Thank you again for your continued business and support!