A colocation contract is a long-term commitment to space and power, not a month-to-month arrangement. Understanding what you're signing before you sign it saves you from surprises that are expensive to unwind.
The two documents you will sign
Most operators use a two-layer structure. The master services agreement sets the rules that govern the whole relationship: liability limits, dispute resolution, confidentiality, and how the contract can be terminated. The order or service order sits underneath it and specifies what you are actually taking: how many cabinets, how much power, where in the facility, and for how long. When people say "the contract," they usually mean the order. Read both.
Term
Colocation terms for AI infrastructure run long. Expect a multi-year term. That reflects the time it takes an operator to build or reserve the capacity you need and recover the cost of the infrastructure it installs for you. A shorter term is rarely available at the power densities AI hardware demands, and when it is, the conditions are usually less favorable. Going in, treat the term as a fixed cost of doing business, not a variable you can negotiate away.
Committed power and what it means in practice
The contract will name a committed power draw, measured in kilowatts, that you agree to pay for whether you use it or not. This is the number the operator uses to plan its facility. It is not a cap: many contracts allow bursting above the committed level, subject to availability and additional charges, but the committed figure is your floor.
Density matters here. A single 8-GPU H100 or H200 server draws around 10 kW. A GB300 NVL72 rack draws up to 142 kW. If you are placing 10 of those 8-GPU servers, you are committing to roughly 100 kW before you add any networking or storage. That number has to match what the operator's facility can deliver to your cabinets, and what your contract says you are paying for.
The ramp schedule
You rarely take all your power on day one. A ramp schedule is the agreed timeline for your power draw to step up from initial delivery to your full committed level. It matters for two reasons. First, it sets when your financial obligation kicks in at each level. Second, it gives the operator a signal for when to have the infrastructure ready. If your hardware delivery slips and your ramp schedule does not, you may be paying for power you cannot yet use. Negotiate the ramp milestones against your hardware timeline, not against an optimistic plan.
Service levels and credits
A service level agreement, or SLA, defines what the operator promises to deliver and what happens when it does not. For colocation, the two commitments that matter most are power availability and network uptime. The SLA will express each as a percentage of time over a measurement period, and it will specify a credit you receive if the operator falls short.
Read the credit carefully. A credit is typically a reduction in a future invoice, not a cash payment, and it is usually capped as a fraction of one month's charges. It is a remedy for inconvenience, not compensation for the full cost of downtime. The SLA also lists exclusions: planned maintenance windows, events outside the operator's control, and failures caused by your own equipment. Know what is excluded before you assume you are covered.
Cross-connects
A cross-connect is a physical cable inside the facility that links your cabinets to a network carrier, an internet exchange (a shared facility where networks hand traffic to one another), or another tenant. They are billed separately from your space and power, usually as a recurring monthly charge per connection. If your design depends on low-latency links to specific carriers, confirm those carriers are present in the facility before you sign, and ask how cross-connects are provisioned and how long provisioning takes.
Renewal
Most contracts include an auto-renewal clause: if you do not give notice by a specified deadline before the end of your term, the contract rolls over, often for another full term. That notice window is often several months before expiry. Mark it in your calendar the day you sign. Missing it is an avoidable mistake.
Questions to take into your next call with an operator
- What is the committed power level, and what does bursting above it cost?
- What does the ramp schedule look like, and what triggers each step?
- How is the SLA measured, and what is the credit cap per incident?
- Which carriers and exchanges are already connected inside the facility, and what does a cross-connect cost?
- What is the notice period for renewal, and what are the options at end of term?
- What happens to my committed obligation if my hardware delivery is delayed?
Sources
The contract structures described here reflect standard practice in the commercial colocation industry, drawn from publicly available operator agreements and infrastructure legal commentary. No specific operator agreement is quoted or cited. For background on what a colocation site provides physically, see the XIRR Advisors explainer Space and power: what a colocation site provides.
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