Japan’s KDDI bought the nerve centre of the Canadian internet nearly a year ago and now has expansion on its mind.

Growing business within its three tightly linked data centres in downtown Toronto, then to a fourth or fifth site in Toronto, and then to other major Canadian cities, is in the plans, said Satoshi Adachi, the CEO of the subsidiary KDDI formed for its investment in this country.

With occasional shorter stints in Tokyo, Adachi has spent most of his recent career in the United States. He moved to Toronto from Dallas, keeping his title as vice-president of KDDI America as he took on responsibilities for Canada. The telecom conglomerate owns the Canadian operation through Telehouse, a global subsidiary that operates data centres and related digital infrastructure.

In an interview with The Logic, Adachi said Telehouse and KDDI both plan to nearly double their revenue by 2030 and its new Canadian operation is part of the strategy.

“This is a really important business portfolio of KDDI as a whole, and Telehouse as a whole,” he said.

The core of Telehouse’s Toronto properties is 151 Front St. W., a “carrier hotel” where multiple telcos and giant bandwidth users link their networks. Tenants include Bell, Rogers and Telus, banks, insurance companies, Amazon, Akamai, Blizzard and Tencent.

“It’s the hub of everything that hits all the eyeballs on the internet in Canada,” said Andy Fenton, Telehouse Canada’s director of sales and marketing.

There and in nearby facilities at 250 Front St. W. and 905 King St. W., tenants also pay for more typical data-centre services, installing racks of servers under Telehouse’s care when the clients want their processing power to be as close to their interchange points as it can be. 

Telehouse acquired the three sites from Allied REIT in a $1.35-billion deal. Allied is primarily in the office realty business and decided to offload the facilities to pay down debt; Telehouse specializes in data centres.

Adachi compared the Toronto properties to Telehouse’s campus in London’s Docklands district, where it hosts the London Internet Exchange and affiliated data centres in four sites.

“That’s currently similar to the Toronto assets. There are three assets [here] already. This is really appealing to me,” he said.

Canadian domestic business is increasing as governments spend on extending broadband internet connections to more remote parts of the country, said Fenton.

Beyond that, the short-term plan is to pitch U.S. and Asian telcos and content companies on the value of connecting more directly to Canadian customers via Toronto, Adachi said. “They are really interested in our assets.”

And then there’s artificial intelligence.

“We’ve been doing this a long time,” said Fenton, a veteran of Cogeco and Bell. “I go back to the ’90s, pre–dot-com meltdown era in this space. I haven’t seen anything quite like it in terms of the significant, technical revolution that’s driving the industry in a certain direction.”

For now, he said, much of the demand AI puts on the data-centre industry is served by facilities in suburban or more remote areas. The computing power needed to develop and train AI models can be practically anywhere, and the companies doing it will naturally favour cheaper sites. As AI becomes more widely used, though, speed and responsiveness will be more important.

“They’re not feeding eyeballs and queries at this point,” Fenton said. “As that flips, I think we’re going to start to see much more demand at the edge, which is where our properties are going to be.”

But getting those properties ready for mass adoption of AI will take some work, he acknowledged. A typical server cabinet today might need 10 kilowatts of electricity and equivalent cooling capacity to keep the circuits from frying. AI chips are much more demanding.

“We’re hearing requests for 45 kilowatts per cabinet. We’re hearing requests for 125 kilowatts per cabinet, liquid-cooled,” Fenton said.

Telehouse’s Toronto facility is connected to a multi-building cooling system that draws cold water from Lake Ontario, so it has a leg up, but keeping up with demand for both power and cooling will be a job for just about everybody in the data-centre business, he said. “Generally speaking, you’ve got requirements that these properties that were built some time ago just weren’t ready for.”

When Allied REIT put the Front Street carrier hotel on the market, tenants such as indie internet provider Beanfield worried that a buyer might favour certain customers or even compete with them itself.

Telehouse has a varied array of tenants, who compete with each other but also need to work together, and Telehouse has to maintain good relations with them. “It’s unique, being a carrier-neutral data-centre business operator,” Adachi said. “We are both participating in the creation of a digital economy. So our stance is to keep being neutral.”