Colocation cost calculator
Colocation is sold by the kilowatt. What you pay for is the kilowatt you reserved, not the one you used.
Enter contracted power, rack and cross-connect fees and what you actually draw. The calculator returns the monthly and annual bill, the effective cost of each kilowatt you use rather than each one you reserved, and the value of the capacity sitting stranded between the two.
Stranded capacity is where colocation budgets quietly leak. A contract for 50 kW at a steady 32 kW draw is paying a third again for every usable kilowatt, and nothing on the invoice says so.
Worked example — 50 kW contracted, 32 kW drawn
Ten cabinets, four cross-connects, at mid-market rates.
- Contracted power — 50 kW. Committed capacity, billed whether or not it is drawn.
- Power rate — 150 $/kW/month. Monthly charge per contracted kilowatt. Regional ranges vary widely.
- Cabinets — 10 racks. Cabinets or equivalent space billed separately from power.
- Space rate — 400 $/rack/month. Set to zero where the contract bundles space into the power rate.
- Cross-connects — 4 links. Physical connections to carriers or other tenants in the facility.
- Cross-connect fee — 250 $/link/month. Recurring charge per cross-connect.
- Average power drawn — 32 kW. What the deployment really uses on average across the month.
Monthly cost: $12,500 — $150,000 per year at 64% power utilisation
| Power 50 kW contracted at $150/kW | $7,500 /month |
|---|---|
| Space 10 cabinets at $400 | $4,000 /month |
| Cross-connects 4 links at $250 | $1,000 /month |
| Cost per contracted kW All charges divided by the capacity reserved | $250.00 /kW/month |
| Cost per kW actually used The number that belongs in a comparison | $390.63 /kW/month |
| Effective cost per kWh delivered Total bill spread across the energy the deployment consumed | $0.535 /kWh |
| Stranded capacity $32,400 per year for capacity reserved and not used | 18.0 kW |
Formula
Monthly = (contracted kW × power rate) + (cabinets × space rate) + (cross-connects × link fee)
Effective cost per used kilowatt divides that total by average draw rather than by contracted capacity, which is the comparison that survives contact with an invoice. Energy is spread over 730 hours, the average month.
What usually sits outside the monthly rate
Recurring charges are the easy part of a colocation comparison. These are where quotes stop being comparable.
| Item | Typical treatment |
|---|---|
| Installation and fit-out | One-time, often negotiable, sometimes amortised into the monthly rate |
| Remote hands | Hourly, with a minimum increment and out-of-hours multipliers |
| Metered versus committed power | Either billed on draw with a floor, or committed with overage penalties |
| Power escalators | Annual uplift clauses, or pass-through of utility rate changes |
| Bandwidth and IP transit | Separate from cross-connects; usually committed with burst pricing |
| Exit and de-install | Notice periods, restoration obligations and equipment removal |
Contracted power is the unit of account
A colocation provider sells capacity it must build, cool and reserve whether or not you use it. That is why the commitment rather than consumption drives the bill, and why the headline dollar-per-kilowatt figure means little without knowing how much of that kilowatt the deployment actually uses.
The practical consequence is that utilisation is a cost lever equal to price. Raising average draw from 60 to 85 per cent of contracted capacity lowers the cost of each usable kilowatt by roughly a third, without renegotiating anything.
Low density costs twice
When space is billed separately, spreading a load thinly across many cabinets pays the cabinet fee repeatedly for power that a smaller footprint would have carried. In the worked example the space charge is comparable to the power charge, which is the signature of a deployment that could be consolidated.
The counterweight is that consolidation raises per-rack density, and the facility has a limit on what a single cabinet can be fed and cooled. The density calculator is the other half of this decision.
Comparing quotes honestly
- Normalise to cost per kilowatt actually used, not per kilowatt contracted or per cabinet.
- Add the one-time charges into the first-year figure, then compare both the first year and the steady state.
- Read the power billing model: committed, metered with a floor, or metered with overage penalties are three different risks.
- Price the cross-connects properly. In a carrier-dense facility they are a recurring charge that grows with every new connection.
- Check the escalator clause. A three per cent annual uplift over a five-year term is a material part of the total.
Frequently asked questions
How much does colocation cost per kW?
Rates vary widely by market, density and contract size — roughly $100 to $250 per kW per month is a common band for retail colocation, with wholesale deals materially lower per kilowatt and small single-cabinet deployments materially higher. Always compare on cost per kilowatt actually used.
Is colocation billed on contracted or actual power?
Most retail contracts bill on committed capacity, because the provider has to reserve cooling and distribution for it. Some are metered with a minimum floor, and some bill committed power plus overage. Which model you are on changes the value of improving utilisation.
What is stranded capacity in colocation?
It is contracted power you pay for and do not draw. A 50 kW commitment at 32 kW average use strands 18 kW, and at $150 per kW per month that is $32,400 a year for capacity nobody used.
What is a cross-connect and why is it billed monthly?
A cross-connect is a physical cable between your equipment and another tenant, carrier or the facility meet-me room. It is billed monthly because it occupies pathway, panel ports and support in a shared facility, and in carrier-dense buildings those fees add up faster than the space charge.
Is colocation cheaper than cloud?
For steady, predictable load at reasonable density, colocation usually wins on cost per unit of compute; for spiky or short-lived workloads it usually does not, because the commitment is fixed and cloud capacity is not. The comparison also has to include hardware, staff and refresh, none of which appear on a colocation invoice.
How do I lower my colocation bill without moving?
Raise utilisation of what you already committed to, consolidate into fewer cabinets where the facility density limit allows, audit cross-connects for links that nothing uses any more, and check the escalator and renewal terms before they roll over automatically.
Where this calculation stops
This models recurring charges only. Installation, remote hands, bandwidth, escalators and exit costs frequently decide which of two quotes is actually cheaper, and none of them are in the arithmetic above.
Rates here are inputs, not a market survey. Pricing depends on region, power availability, contract length, density and how much capacity the provider has left to sell.