Cogent: King of Ports

Is Cogent really the largest Ethernet service provider in the US?

July 15, 2005

5 Min Read
Cogent: King of Ports

Is {dirlink 5|37} really the largest Ethernet service provider in the U.S.? That's what the company claims and, when measured one way, the claim is legit (see Ovum-RHK Ranks Cogent).

Cogent does indeed have more Ethernet ports deployed in the U.S. than any other service provider, according to a June 20 research brief by Ovum-RHK Inc.. That's remarkable considering Cogent only opened its doors back in 1999.

But a little picking around found that the carrier is nowhere near the top in Ethernet revenues. Also, its lead in Ethernet ports deployed is believed to be temporary, so it may not be the largest U.S. Ethernet service provider for very long.

Cogent itself didn't want to discuss its status in-depth. While the carrier took time to publicize its ranking, company spokesman Jeff Henriksen did not return Light Reading's calls seeking comment.

"Certainly, Cogent is a major supplier of Ethernet-based Internet access," says Heavy Reading analyst Stan Hubbard (see HR: Ethernet's Taking Over). "But it can hardly be considered the largest provider of Ethernet services, which… includes a whole host of Ethernet connectivity and Ethernet-based access services in addition to Internet access."

Though it has lots of ports in service, Cogent doesn't have as far a network reach as other carriers. As of early 2005, Cogent offered on-network services in 31 metro markets in the U.S., Canada, and Europe and had about 980 on-network buildings (including 880 in North America), according to Heavy Reading. {dirlink 5|199}, in contrast, has the ability to deliver many types of Ethernet services to more than 5,000 on-network buildings in 44 metro markets.

The Ovum-RHK analyst who measured and ranked the Ethernet providers concurs that Cogent's lead is bolstered by the kind of service the carrier offers. "What Cogent is focused on is providing access to the Internet," Ovum-RHK analyst Brian Van Steen says. "It's an Ethernet service, but they're not providing, say, a transparent LAN service."

Of course, Cogent's definitely not alone in offering cheap and cheerful connectivity. As Heavy Reading's April 2005 Ethernet report notes:

Telecom and cable companies in North America now offer at least 589 Ethernet connectivity and access-based services – including at least 416 Ethernet connectivity and Internet access services. While connectivity services represent the vast majority of the major offerings, Internet access is the largest single category of Ethernet service -- primarily because it is the easiest to deploy and provides a simple way to get customers hooked on Ethernet's value.



But where does Cogent measure up in terms of Ethernet revenues?

"I can say that {dirlink 5|11} was significantly higher than Cogent in revenues and the top three players in port counts was a much tighter race," Van Steen says.

Table 1: North American service provider share rankings (by revenues)

US Service Provider

Ports In Service

Ethernet Revenues (2004)

AT&T

10

1

SBC

5

2

Cogent

1

3

Verizon

2

4

Time Warner Telecom

3

5

BellSouth

4

6

XO Communications

7

7

Comcast Commercial Services

9

8

Yipes Enterprise Services

6

9

MCI

8

10





"In terms of ports in service, Cogent was listed ahead of other Ethernet providers including AT&T, {dirlink 5|16}, {dirlink 5|108}, {dirlink 5|166}, Time Warner Telecom, {dirlink 5|205}, and {dirlink 5|214}," Cogent's press release says. But when measuring revenues from Ethernet services, Cogent was third in the U.S. and sixth overall in North America, according to Van Steen.

Cogent told Heavy Reading earlier this year that the overwhelming majority of its revenue is from Internet access, while only a small percentage comes from point-to-point Ethernet services. Hubbard says he thinks Cogent's total revenues from North American Ethernet connectivity services were less than $6 million in 2004.

It's worth noting, too, that Ovum-RHK signed non-disclosure agreements with the carriers ranked, which prevented Van Steen from providing actual numbers, as opposed to overall rankings.

He was, however, able to give a sense of Cogent's port-count leadership. "I don't expect them to stay at the top just because Verizon and SBC are pretty focused on Ethernet now," Van Steen says. "Obviously those carriers are incumbents and they have the fiber access that they can rely on and the existing customer base."

It's also interesting to note that Cogent gets its customers via acquisition, as well as by signing up new accounts (see Cogent Buys Piece of Verio , Did Cogent's Aleron Buy Boost Cisco?, and Cogent Buys UFO). And it's that same quest for business customers that led Verizon to agree to buy MCI and SBC to pony up for AT&T.

Regardless of Cogent's rankings, the carrier's momentum reiterates that the North American Ethernet market is a hot business.

Ovum-RHK says there were about 67,500 Ethernet ports in service generating just under $840 million in revenues during 2004. The researcher predicts that those figures will rise by 50 percent and 60 percent respectively, making the North American Ethernet services market worth $1.3 billion this year.

— Phil Harvey, News Editor, Light Reading



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