Interconnection bandwidth will grow to 8,200-plus Terabits per second (Tbps) of capacity by 2021 — 10 times the projected capacity of internet traffic — according to Equinix’s Global Interconnection Index market study.

The second annual report projects interconnection traffic — direct, private connections that bypass the public Internet — will see a five-year compound annual growth rate (CAGR) of 48 percent. This is almost double the expected 26 percent CAGR of global IP traffic, and it’s an increase over the previous year’s projections.

“It’s actually growing faster than we thought,” said Steve Madden, senior director of global vertical market development, adding it’s about a 3 percent difference in CAGR. “We put that down to software-defined networking and network functions virtualization being an accelerator. It’s speeding up people’s ability to consume interconnection bandwidth.”

Report authors analyzed colocation participants in carrier-neutral facilities across every region and major metropolitan area. While the Index’s methodology section doesn’t include the sample size, it says the sample was stratified across industries and company size segments.

The United States is responsible for the largest volume but will grow more slowly than the other three regions analyzed. The U.S. will contribute more than 40 percent of interconnection bandwidth and will see compound growth of 45 percent per year by 2021. Europe will contribute 23 percent of interconnection bandwidth but grow 48 percent annually. Asia-Pacific, meanwhile, will grow 51 percent per year, contributing about 27 percent of interconnection bandwidth. And Latin America is the fastest growing region, expected to grow 59 percent per year, but only contributing about 9 percent of interconnection bandwidth.

In terms of industry growth, the telecommunications sector is forecast to have the most installed capacity (1,756 Tb/s) by 2021, growing at a 36 percent CAGR. Cloud and IT services comes in at No. 2, with 1,382 Tb/s installed by 2021, representing a 37 percent CAGR. And banking and insurance comes in third, with 1,046 Tb/s installed by 2021 with a whopping 65 percent CAGR.

Madden said a few key trends are driving interconnection growth. Digital transformation is a big one as companies need to support real-time interactions between people, devices, locations, clouds, and data. Security risk is another as businesses shift to private data traffic exchange to bypass the public internet and help avoid data breaches.

“Digital business transformation, added to the fact that it’s happening on a more global scale,” Madden said. “And tying that with the complexities around security and data. All of those things are needed in order to operate as part of a digital business ecosystem.”

When asked what 5G networks will mean for interconnections, Madden said 5G is an “amplifier.” The internet is becoming an access network, he added: “How do you get from devices to your interconnection bandwidth or industrial internet?” 5G won’t replace interconnection bandwidth but rather will accelerate access to services by companies using interconnection bandwidth, Madden said.

This year’s Index also identifies four interconnection uses cases. They are:

Network optimization to shorten the distance between users and services applications. Data center to data center and data center to cloud connections are expensive. “If you connect to the cloud from your data center it can cost $28,000 for a 1G connection,” Madden said. “But a cross-connect from one cabinet to another [in a colocation facility] is in the hundreds of dollars.” Interconnection provides “almost 10x the bandwidth at a fraction of the cost at much lower latency.”

Hybrid multi-cloud to connect and segment traffic between multiple clouds and private infrastructure. This use case is closely related to network optimization, Madden said: “Let’s do cost avoidance by connecting in the hub and not doing more and more connections to clouds.”

Distributed security to deploy and interconnect security controls at points of digital engagement. “That’s when companies start placing more security services in those hubs, things like VPN termination, identity and access management, firewalls,” Madden said.

Distributed data to deploy and interconnect data analytics in proximity to users. This use case addresses data sovereignty and other compliance regulations, and it also allows companies to put the data close to the people who need to access it, Madden said. “You can place the data in the hub or address a sovereignty or compliance regulation by provisioning a hub.”