Most co-locate.
We do.
Reasoning is simple as hell - why spend millions to build a proper data center when there are soo many empty ones built already?
If a host spends a shitload of $$ on a data center then they have to pass that cost off on the client... with a profit of $0.25 per GB a host would have to sell more bandwidth then is currently consumed by the entire adult industry to make their $$ back within any reasonable timeframe
