By Frank Whitman
Citadel Pacific, the investment management company, recently announced the launch of Guam Exchange. The new company is carrying out plans to establish Guam as an information and communication technology hub in the Pacific.
"Guam Exchange’s mission is to promote Guam as a regional ICT hub for data center, subsea cable and internet infrastructure,” Citadel said in a Jan. 22 LinkedIn post. Citadel is the parent company of internet provider IT&E.
The company is also operating the first commercial internet exchange point on the island, Guam IX, the company said.
Guam Exchange is in the process of a $20 million retrofit of about half of the IT&E headquarters building in the Harmon Industrial Park to be the “first open access, Tier III compliant data center on Guam,” said Chris Pennisi, chief operating officer of Guam Exchange.
The Harmon project is considered the first phase of its plans and is expected to be completed in June. If Phase 1 is successful at attracting users, the company will develop and expand into an adjacent lot that Citadel also owns.
One way the company plans to make its data center attractive to customers is by not charging entry fees – providing open access - to use the facilities. Such fees are a common practice in the telecom industry. Pennisi is a champion of open access.
“There’s all these cables that are coming to the island, but there are very few end-use customers,” he said. “There are not a lot of tech companies or gaming customers that are actually there on the island using the assets. There’s an entire ecosystem that could be in Guam that is not in Guam because the fees to get in and out of the island traditionally have been too high.”
Pennisi said he pointed out to Citadel leadership that “the valuation on building a data center ecosystem is way bigger than trying to charge higher fees on the fiber backhauls.”
Several factors work in Guam’s favor as a prospective ICT hub. Among them is the dozen or so fiber-optic cables that already land in Guam and the “much larger ones coming down the pike over the next three or four years.”
“Our facility in Harmon is connected to all the domestic cable landing stations,” he said. However, the cables are disaggregated as landings are located in Tumon, Piti, Tanguisson and Alupang among other sites so a customer who wants to access cables today would have to meet with each cable operator separately. “It’s just too costly,” Pennisi said.
“So I’m saying, ‘Let’s attract the cable operators to extend their cables into our facility, leveraging IT&E’s fiber,’” he said. “It’ll make it much easier for end users to physically interconnect with any cable they want by simply a fiber cross-connect within the facility we’re going to own and operate.”
Heightened tensions between China and the U.S. provide another reason for the increased use of Pacific cables through Guam. It had been the practice for cable traffic between Asia and the U.S. to pass through the South China Sea as it traveled from Singapore to Jakarta to Hong Kong to Tokyo and across the northern Pacific to North America. The farther north they make the crossing, the shorter the distance.
Because of the vulnerabilities in the South China Sea, the American tech companies cannot afford to route cables through there, Pennisi said. The companies now route their cables from Singapore to Jakarta to Manila to Guam and then to the U.S., which adds cost and latency due to the longer distance of the southern route.
“If all these cables are going to start routing through Guam or around Guam as a direct result of the China tensions, this is the opportune time to open Guam as a viable networking hub,” Pennisi said. Such moves will not happen overnight though, as it takes years to plan an undersea cable. “If something happens, it permeates for a half-decade or so.”
The move away from the South China Sea will continue over several years. “Guam will benefit from that for the next half-decade at a minimum, regardless of what happens with U.S.-China relations.”
The company has been studying the feasibility of a cable landing on the eastern side of the island. All current landing sites are on the western side, where the island geography is more favorable. While the need for a west coast landing is not imminent, company officials believe it will likely happen eventually. “We just want to be a viable option to facilitate more cables landing there,” he said. It is not part of the company’s business model.
“We want to open things up on the island as much as possible,” he said. “Our main source of revenue will be through the data centers and selling space.”
Guam Exchange recently hired Jose Santiago, formerly a network engineer at the University of Guam. “He’s one of the few guys on the island who really knows peering," Pennisi said.
Santiago built a small internet exchange at the University of Guam. "The reason he came over is because he understands our vision that Guam could be a much bigger internet sharing point and we have the resources and the know-how to build this up. So I think he’s going to be a point of how this whole thing is built," Pennisi said.
Santiago expounded on the significance of his new job. “In my role as the senior manager of Interconnection Strategy I will be responsible for building the internet exchange point, Guam IX,” Santiago said.
“Guam IX will be the nexus of connectivity at Guam Exchange, and by extension
facilitate interconnection network capacity for Guam via the various submarine fiber cables landing on Guam. By bringing the internet closer to Guam by way of edge POP content service providers, we aim to transform the digital ecosystem and create faster and better internet for the region.”
Pennisi said he’s not sure the public has a clear picture of the level of investment that’s coming into the island.
“We’re trying to leverage that infrastructure and localize as much as possible,” he said. “It will improve the performance of the internet locally and it will spur opportunities down the pike for locals who want to get into the tech industry. I think that if we do our job correctly, Guam will punch above its weight in terms of being a regional internet peering hub and that will definitely help the surrounding Pacific islands. And it has the potential to go beyond that in terms of the outlook for Guam and the region.”
Citadel is headquartered in Manila and, among many other holdings, is also the parent company of IP&E Holdings, owner and operator of Shell gas stations in Guam, the Northern Mariana Islands and Palau.
