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Ethernet services

Cogent Buys UFO

Internet access provider Cogent Communications Group Inc. (Amex: COI) made its 10th acquisition today as it bought the customer base and network of UFO Communications Inc., a carrier once backed in part by Sorrento Networks [now owned by Zhone Technologies Inc.].

UFO’s customer base comprises data service customers, and its network consists of fiber optic facilities located in San Francisco, Los Angeles, and Chicago, Cogent says. Financial terms weren't disclosed, but the company did note that most of UFO's points of presence are located in buildings where Cogent already has assets, so the network transition should go smoothly and quickly.

"Cogent has been in the process of augmenting its network to deliver Layer 2 point-to-point services," writes a Cogent spokeswoman in an email to Light Reading. "Some points on the UFO network are duplicative of Cogent's… and those redundant points will be eliminated and will reduce costs."

Clearly, increasing its customer base is one motivation for Cogent's acquisition. On average, Cogent says it serves about 4 percent of the tenants in the buildings on its network. "We believe these buildings have an average of 45 tenants," Cogent disclosed in an SEC filing earlier this year. "In addition, we currently serve less than 1 percent of the approximately 172,000 small and medium-sized businesses in the geographic regions in which we offer our off-net services."

UFO is a San Francisco-based carrier that offered dedicated Internet access and other services, such as LAN-to-LAN connectivity across its OC192, all-optical fiber network. As of December 2002, UFO had raised $22.5 million in funding, $5 million of which came from Sorrento, which supplied the company with gear for its network and a board member.

It's not clear whether Cogent CEO Dave Schaeffer or his other companies had a stake in UFO. Schaeffer has, in the past, at least indirectly benefited from transactions made by Cogent.

When Cogent acquired parts of FirstMark Communications for about $78.9 million, according to SEC filings, the company was required to buy about 90 percent of LNG Holdings, which was controlled by Schaeffer (see Cogent Buys the Boss's Network).

Past SEC filings revealed that Schaeffer was a partner at the company to which Cogent was paying $470,000 a year for its office space lease (see Cogent's Finances Revealed in Filing).

— Phil Harvey, News Editor, Light Reading

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