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Cogent Boosts Its Buildings Presence

The equipment has been bought, the fiber is being laid, the networks are being installed -- now the next-generation service providers are preparing to go to battle over customers.

Today Cogent Communications Inc., a next-gen Internet Service Provider (ISP), signed a deal with Crescent Real Estate Equities Company (NYSE: CEI), one of the country’s largest real estate investment trusts specializing in the ownership, management, and leasing of commercial properties. The agreement gives Cogent the opportunity to sell to 1600 tenants. This more than doubles its current customer base of 1300 and helps Cogent catch up with other carriers that have already signed similar deals (see The Big Idea).

“This is exciting because of the ubiquity of coverage and the number of buildings that we will have access to,” says Dave Schaeffer, founder and CEO of Cogent. “Crescent is one of the most prominent real estate companies in the country. Others in their industry look to them as a leader, so it’s important that they’ve chosen Cogent.”

According to the contract, Cogent will install fiber optics facilities and sell its 100-Mbit/s Internet access service to tenants in Crescent’s Class A office buildings. The agreement covers 57 properties in Crescent’s office portfolio, which includes premier sites in major metropolitan markets in seven states and the District of Columbia. And it adds 25 million square feet to the Cogent network.

One third of the buildings in eight cities will be brought on to Cogent’s network within six months. Included in this initial implementation are sites in Houston, Dallas, and Washington, D.C. One Houston property, 3 Greenway Plaza, is scheduled to go live later this month. The rest of the installations will most likely be completed within 18 months, says Schaeffer.

Still, the Crescent deal is only half the battle. Cogent still needs to sell its services directly to individual tenants.

“We are focused on giving our customers the best selection of providers to choose from,” says Howard Lovett, VP of new business and technology services for Crescent. “At the end of the day, the providers still have to sell to the end users.”

And making those sales may not be so easy. Crescent has agreements with several other service providers, including Cogent’s closest competitor, Ethernet provider Yipes Communications Inc. (see Metro Optical Ethernet) along with other notable service providers like BroadBand Office Inc. (see Next Gen Carriers Cash In).

But Lovett says that Cogent stands a good chance of being successful in winning customers. The main reason is its flat fee pricing model, which offers 100 Mbit/s of bandwidth for $1000 a month, he says.

“It’s a compelling proposition. That’s a lot of bandwidth,” he says. “A T1 typically costs about $1000 month, and you only get 1.5 Mbit/s of bandwidth.”

But he points out that, more than price, customers are most interested in service quality. And that doesn’t just mean the quality of the signal but the billing and the ease of installation, in addition to ongoing customer service.

“ I think they have an attractive pricing model,” he says. “But all these service providers are pretty new, and it might come down to the extent that they develop their service organizations.”

-- Marguerite Reardon, senior editor, Light Reading, http://www.lightreading.com

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