The Colocation Contract Checklist: What to Verify Before You Ship Your Serv

Signing a colocation agreement without reading the fine print is one of the more expensive mistakes an infrastructure team can make. The contract governs everything from power allocation and cooling guarantees to who pays when a fiber cut takes your rack offline at 2 a.m. Before your equipment leaves the loading dock, you need to know exactly what the provider is promising, what they are not promising, and where the financial exposure sits if something goes wrong. This checklist covers five contract areas that most commonly produce disputes, surprise invoices, or unplanned downtime: power commitments, network terms, physical access rights, SLA structure, and exit conditions. Each contains hidden trade-offs that are easy to miss during a sales cycle but difficult to renegotiate once your servers are racked.

Power Allocation and Density Commitments

Colocation contracts typically specify power in one of two ways: allocated kilowatts per cabinet or amps per circuit. These are not interchangeable. A contract granting 20 amps on a 208V single-phase circuit delivers roughly 3.5 kW of usable power after the standard 80 percent derate. If your blade chassis draws 4 kW, you are already over budget before the server boots.

The non-obvious risk is oversubscription. Many providers sell power at the cabinet level but share upstream capacity across multiple customers. Ask directly whether your allocation is dedicated or pooled, and request the facility's power utilization effectiveness (PUE) rating. A PUE above 1.8 in a warm climate signals thermal management problems that will affect your equipment long before they appear in a provider's status page.

Require the contract to name the specific circuit breaker panel, breaker size, and redundancy tier — A+B feeds or single feed — for your cabinet. If the provider cannot specify this before signing, the allocation is not real. One media company that signed a "10 kW cabinet" agreement later discovered the facility could only deliver 6 kW on available circuits, forcing a costly mid-contract cabinet migration.

Network Terms, Bandwidth Caps, and Cross-Connect Fees

Bandwidth pricing in colocation contracts is rarely a flat monthly rate. Most providers use a commit-and-burst model: you pay for a committed port speed, say 1 Gbps, with burst traffic billed per megabit at a separate rate. Burst rates can run five to ten times the committed rate and are often triggered automatically without any alert to your team.

Cross-connect fees are the other common surprise. Connecting to a carrier or cloud on-ramp inside the same facility typically costs between $200 and $600 per month per cross-connect, plus a one-time installation fee. These charges are almost never included in the headline cabinet price and add up quickly in a multi-carrier environment.

Some contracts include a "network access fee" that applies to all inbound and outbound traffic regardless of which carrier you use, effectively taxing your own private circuits. Read the definitions section carefully for terms like "facility bandwidth," "transit," and "exchange traffic." Before signing, ask for a sample invoice from a current customer with a similar traffic profile. If the provider refuses, negotiate a monthly cap on burst billing or a 30-day traffic audit period before burst charges activate.

Physical Access Rights and Remote Hands Scope

Physical access clauses define who can enter the cage, under what conditions, and how quickly. Standard contracts allow access during business hours with 24-hour notice for after-hours entry. That policy is workable for planned maintenance but creates real exposure during an incident. If your on-call engineer needs to swap a failed drive at 3 a.m., a 24-hour notice requirement means the server stays down until morning.

Remote hands services — where facility staff perform physical tasks on your behalf — are almost always billed separately, typically at $100 to $250 per hour with a one-hour minimum. The scope of what remote hands staff will and will not do varies significantly between providers. Some will reseat cables and cycle power; others will not touch anything beyond a pre-approved task list. Verbal assurances during the sales process are not enforceable.

Negotiate 24/7 unescorted access for named personnel as a contract term, not a verbal accommodation. Also confirm whether escort requirements apply to your own subcontractors, such as hardware vendors performing warranty repairs. A financial services firm learned this the hard way when a vendor technician was turned away at the cage because the contract required 48-hour advance notice for third-party access — extending a storage failure by an entire business day.

SLA Structure: What Is Actually Guaranteed and What Is Not

A 99.999 percent uptime SLA sounds ironclad until you read the exclusions. Most colocation SLAs cover facility infrastructure — power to the cabinet, HVAC, and physical security — but explicitly exclude network carrier outages, scheduled maintenance windows, and events the provider classifies as force majeure. A fiber cut caused by construction outside the building often falls into an exclusion category, even though it takes your services offline just as completely as a power failure.

The financial remedy is the other area to scrutinize. Many SLAs offer service credits equal to one day's fees for each hour of downtime beyond the threshold. On a $1,500 per month cabinet, that credit is roughly $50. If the outage costs your business $50,000 in lost transactions, the SLA credit is functionally meaningless as compensation.

Ask the provider to define "downtime" precisely — whether it means loss of power to the cabinet, loss of network connectivity, or both — and request the historical incident log for the facility. Providers confident in their reliability will share it. Those who resist often have a reason to. Negotiate for credits that scale with outage duration rather than flat per-incident amounts.

Exit Conditions, Data Removal, and Early Termination Costs

Exit clauses are the section most teams skip during contract review and regret most during a migration. Standard colocation agreements carry one- to three-year terms with early termination fees equal to the remaining contract value. On a $3,000 per month contract with 18 months remaining, that exposure is $54,000 — enough to make a provider switch financially painful even when the service is genuinely poor.

Data removal timelines are a separate risk. Some contracts give you as few as 15 days after termination to remove equipment before the provider charges storage fees or, in extreme cases, claims a lien on the hardware. If your migration timeline slips — and migrations almost always slip — those fees accumulate quickly.

The non-obvious issue is what happens to your IP address allocations and BGP configurations when you leave. If the provider owns the IP space you have been using, you may need to renumber your entire infrastructure as part of the exit. Confirm IP ownership in writing before signing, and negotiate a minimum 60-day equipment removal window with no storage fees. Build a termination checklist into the contract itself so both parties agree on the handoff sequence before the relationship begins.

Conclusion

Colocation contracts reward careful readers and punish assumptions. The five areas covered here — power density, network billing, physical access, SLA scope, and exit terms — each contain specific language that determines your actual costs and your actual risk exposure, not the headline numbers from the sales deck. Before signing, verify circuit specifications in writing, request sample invoices, confirm 24/7 access rights for named personnel, read every SLA exclusion, and document your exit timeline. The time spent on contract review before your servers ship is far cheaper than renegotiating terms after your equipment is racked and your leverage is gone.