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Company Brief
Cogent Communications

by Faulkner Staff

Copyright 2020, Faulkner Information Services. All
Rights Reserved.

Docid: 00018753

Publication Date: 2003

Report Type: VENDOR

Preview

Founded in 1999 and based in Washington, DC, Cogent Communications is a
multinational, Tier 1 facilities-based Internet Services Provider
(ISPs). Cogent’s primary services are Internet access and data
transport. These services are offered over a fiber optic, IP data-only
network along with colocation at the company’s 53 Internet data centers.
This brief discusses Cogent’s history, products and latest news. 

Report Contents:

• Fast Facts
• History
• Key Executives
• Major Products
• Major Competitors
• Recent Activity

Fast Facts

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Name: Cogent Communications
Headquarters:
2450 N Street NW
Washington, DC 20037
Phone: (202) 295-4200
Fax: (202) 295-9061
E-Mail: info@cogentco.com/
Web: http://www.cogentco.com/
Type of Vendor: Optical and IP Network Services Provider
Founded: 1999
Service Areas: More than 198 markets in North America,
Europe, and Asia

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History

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Founded in 1999 and based in Washington, DC, Cogent Communications
is a multinational, Tier 1 facilities-based Internet Services Provider
(ISP). Today, the company’s primary service offering consists of Internet
access and data transport, offered over a fiber optic, IP data-only
network, along with colocation in any of the company’s 53 Internet data
centers. Cogent services two customer segments: Corporate (small
businesses to Fortune 100 companies) and “NetCentric”
(carriers, service providers, and application/content) providers whose
businesses rely primarily on Internet access.

Cogent was founded on the premise that bandwidth can be treated like a
commodity – produce mass amounts and position it for sale based on
price. Having successfully executed that strategy, Cogent now serves
more than 200 markets throughout 43 countries in North America, Europe,
and Asia.

Expansion and Acquisitions: Cogent Communications was
established in 1999 as a facilities-based ISP by founder and CEO Dave
Schaeffer. Leveraging new technologies – and certain select acquisitions –
Cogent built its own IP data network independent of the traditional
voice-based networks owned by the RBOCs (Regional Bell Operating
Companies). By doing so, Cogent believed it could reduce the cost of
high quality bandwidth to a level never before realized in the
marketplace. Cogent lit its first network and began testing traffic in
November 2000. The same year, Cogent Communications secured a $310 million
partnership with Cisco Systems to build its network.

At the start of the millennium, Cogent recognized the value of acquiring
the numerous Internet start-ups that had high-quality business models but
not enough capital to adapt to a highly-evolving IP marketplace. In 2001,
Cogent acquired NetRail out of bankruptcy. The next year, Cogent completed
the purchase of Allied Riser Communications, and it began trading on AMEX
as COI. Cogent went on to buy OnSite Access out of bankruptcy, acquire
PSINet out of bankruptcy for about $10 million, and purchase the major
assets of FiberCity Networks in 2002. After several years of rapid
expansion, Cogent was forced to restructure its financing in 2003; the
company also received funding for continued operations.

Network Rollout and Geographic Expansion: Over the
next 10 years, Cogent focused on expanding into new geographic markets. In
2004, Cogent completed acquisitions of assets from LambdaNet and Carrier1
in order to expand its footprint into European markets. In 2005, the
company rolled out fiber networks across Nordic countries in Europe.
Cogent bought its fiber network in Italy in 2006, expanding the following
year across Europe – as far north as Scotland and east as Romania. From
late 2008 through 2011, Cogent ramped up its network roll-out program and
nearly doubled its fiber footprint.¹ Cogent entered Estonia
and the Ukraine in 2008, and rolled out fiber into Mexican markets in
2009. Despite its rapid growth, Cogent has not always been profitable. A
turning point began in 2010, when the company posted its first profit in
years and pursued a stock buy-back strategy. The following year, Cogent
entered Asian markets for the first time with network connections to
Japan.

Net Neutrality. Cogent has sided with “net neutrality”
proponents in a battle to ensure that ISPs are not able to prioritize or
throttle content or content streams on the Internet, although the company
says any rollback would not affect its agreements. Through petitions to
the FCC and Congress, Cogent said that its business model was harmed by
providers who prioritize data streams of their own content or content
providers with whom they contract. Cogent argued that Comcast and Verizon
are also charging excessive rates for interconnection. In March 2014,
Cogent stood with Level 3 Communications in a joint plea to the FCC to
enforce net neutrality and challenge the excessive interconnection fees
charged by providers such as Comcast and Verizon.² The same
month, Cogent Communications made an unusual offer to IP service providers
to pay for the capital costs of increasing their network capacity, which
would assist them in being able to process the high amounts of data needed
for consumers’ increased use of streaming services such as Netflix.
Cogent’s proactive offer to pay for network upgrades counters the
prevailing IP service provider strategy of seeking payment to prioritize
data streams as Comcast has done with Netflix. Cogent argued that building
stronger networks to support a free Internet is the traditional model that
should be continued in an effort to support high demand for bandwidth
while supporting net neutrality.

Net neutrality was repealed by the FCC in 2018. Cogent CEO Dave Schaeffer
warned in December 2017 that overturning the 2015 net neutrality ruling
wouldn’t be a good thing. “I think this is a bad thing for the entire
Internet ecosystem,”³ he said.

Future Expansion. Cogent has completed 13 acquisitions
to date. As reported by Robert Powell of Telecom Ramblings,
Schaeffer expects the pace of future expansion will be slower and more
deliberate, citing infrastructure, regulation, and customer demand as the
principal inhibitors. “While there are probably a few additions we’ll
do, there aren’t many because many of the countries that we would wish to
extend into either don’t have infrastructure available for purchase, or
have a regulatory climate that doesn’t work with our business
model. And finally, a lot of countries just don’t have enough
aggregate demand to justify the extension of our network.”⁴ Cogent’s
corporate business primarily focuses on North America and its densely
populated business hubs.

Key Executives

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Major executives for Cogent Communications include:

Founder and CEO: Dave Schaeffer 

Chief Financial Officer: Tad Weed

Major Products

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Table 1 lists Cogent’s core products and services.

Network Description

Cogent’s network stretches over 205 markets throughout 45 countries in
North America, Europe, and Asia, with over 57,600 route miles of long-haul
fiber, and more than 35,520 miles of metropolitan fiber.

Cogent’s end-to-end optical transport network consists of IP-over-WDM
fiber links located in Cogent’s major markets throughout North America,
Europe, and Asia.

On the IP layer, Cogent’s Tier 1, IPv6, and MPLS enabled network has
direct IP connectivity to more than 6,950 AS (Autonomous System) networks
around the world with over 211 Tbps internetworking capacity.

Being a facilities-based carrier, Cogent takes advantage of full
end-to-end control over its transport and routing technology to provide
reliable and scalable service.

Major Competitors

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Cogent competes against leading IP network companies to sell bandwidth
directly to customers. Several are listed below.

• AT&T: https://www.att.com/
• CenturyLink: https://www.centurylink.com/
• Verizon Business: https://business.verizon.com/

Recent Activity

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For the fourth quarter of 2019, Cogent reported service revenue of $140.3
million, an increase of 6.2% from the previous year. Service revenue was
$546.2 million for the year ended December 31, 2019, an increase of 5%
from fiscal 2018. Basic and diluted net income per share was $0.16 for the
three months ended December 31, 2019. Total customer connections increased
by 8% from December 31, 2018 to 86,539 as of December 31, 2019. In
November 2019, the Board appointed Sheryl Kennedy and Carolyn Katz to
serve as directors of Cogent.

References

¹ Jon Brodkin. “Level 3 and Cogent Ask FCC for Protection
against ISP ‘Tolls.’ ” Ars Technica.
March 21, 2014.

² Sean Buckley. “Cogent’s Schaeffer: Net Neutrality Turnback
Won’t Impact Interconnection Agreements with AT&T, Charter, Others.” Fierce
Telecom. December 1, 2016.

³ Sean Buckley. “Cogent’s Schaeffer: Overturning Net
Neutrality Is Bad for the Internet Ecosystem.” Fierce
Telecom. December 5, 2017.

⁴ Robert Powell. “Industry Spotlight: Cogent’s Dave Schaeffer
Looks Ahead.” Telecom
Ramblings. March 11, 2011.

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