Roger Montgomery posted notes on a NXT presentation this week,...

Roger Montgomery posted notes on a NXT presentation this week, and came away with the concern that data centres are commodities. They are interchangeable, so have no moat. He also worried that US-based DCs entering OZ would squeeze NXT's margins (because they are commodities). Montgomery's posts can be influential, which might account for NXT's slight sp dip this week.
http://rogermontgomery.com/quick-byte-1-next-dc/

But Montgomery's belief that DCs are commodities seemed at odds with my understanding of the industry, so I investigated further. Maybe I have a confirmation bias, but the evidence opposes Montgomery's view. Specifically:

1. DCs differ in technological advances. NXT has a research group which has, for example, helped to develop (with Piller in Germany) modular roof-top diesel uninterruptible power supply units. If companies have research, they are potentially developing differentiated products (e.g. CSL, Google).

2. DCs differ in service quality. NXT has 3 of only 11 UTI Tier III Certification sites in OZ. This verifies lower risk downtime (even when parts of the plant are shut down). Reliability is a key DC differentiator.

3. DCs take time and serious money to build. e.g., Perth's P1 cost $80M and one year to build, and this speed was possible only because NXT had built others using the same building partner (FDC). Competitors might take longer and at higher cost without replication efficiencies. See:
http://www.thebuilderschoice.com.au/magazines/2014/2014-03/index.html#/34/

4. NXT's national footprint is a differentiator. TLS and NXT say many clients want diversified infrastructure. Maybe they want redundancy, faster local speed, or less risk if something breaks between cities. Even if others eventually build a national infrastructure, it takes time and money (see #3).

5. Ecosystems create monopolies. NXT is building an ecosystem of clients and partners within the building, which enables more efficient, reliable cross-connects. NXT may also have ecosystem advantage due to its neutrality. Ecosystems are major differentiators in many technology businesses (e.g. Apple and Google app stores; Facebook).

6. NXT is not/less subject to foreign gov't obligations. US-based providers may have Patriot Act obligations, which potentially allows the US to secretly look through data, even at overseas locations. Recent US gov't data search raised this alarm, but no one knows if the Act will be applied to overseas operations. However, it's enough of a concern that Verizon wrote about this to assure clients.

Overall, it is reasonable to conclude that DCs are NOT commodities due to moat-like differences in reliability, speed, ecosystem connectivity, legal requirements, and other factors. Some clients might not care about any of these differentiators, but the evidence seems to suggest they do care.

As always, please DYOR. these are just facts I found along with my imperfect interpretation of them.