Cogent Banks on T1 Replacement

Cogent Communications Inc. http://www.cogentco.com has rolled the dice: It just gambled over $400 million to roll out a single service--100-Mbit/s dedicated Internet access for $1,000 a month.

Cogent says its service will provide an alternative to $1,500-per-month T1 circuits for companies that require dedicated Internet connections. It also aims to attract business customers who are frustrated with the bandwidth limitations of dedicated xDSL. Cogent plans to roll out the service first in New York, then Washington, Philadelphia, and Chicago by year's end -- with more cities to follow.

Cogent's strategy is straightforward: Keep costs down, and speeds high, by owning facilities, multiplexing single strands of fiber, and simplifying administration and provisioning by offering just one product.

At least one industry source applauds Cogent's moxey: "The economics associated with this service are disruptive enough to quickly put Cogent on the map, and make other carriers evaluate their own metro access architectures," says Scott Clavenna, principal analyst with Pioneer Consulting LLC http://www.pioneerconsulting.com.

But saving customers money is costing Cogent big: its tab broke $400 million this week when the startup signed a five-year, $25 million contract with Chromatis Networks Inc. (http://www.chromatis.com to purchase that vendor's Metropolis 2000 multiservice provisioning platform (MSPP) for installation in multi-tenant buildings nationwide.

Cogent's spending spree began March 1, when it announced the leasing of $100 million worth of local dark fiber rings from Metromedia Fiber Network Inc. (http://www.mmfn.com in key U.S. cities. On March 6, Cogent announced a three-year, $280 million deal to buy the ONS 15454, ONS 15800, and 12016 Gigabit Switch Router (GSR) from Cisco Systems Inc. http://www.cisco.com to stock its backbone. This week, the deal with Chromatis was unveiled, bringing the tab to $405 million.

Cogent plans to build an OC-192 and OC-48 backbone using Cisco gear, supplemented in metro areas by DWDM and ATM capabilities of the Chromatis switches housed in the basements of multi-tenant buildings. Cogent says the bandwidth flexibility of the Chromatis switches will enable the service to more efficiently manage capacity among users. Instead of having to pull new rings to accommodate a surplus of users, for example, Cogent will be able to split up wavelengths to handle the overflow. And keeping it simple keeps it cheap.

Cogent's outlay is not bad for a pre-trial startup with a mere $26 million of funding (from Jerusalem Venture Partners, Worldview Technology Partners, Oak Investment Partners, Boulder Ventures and C.Blair Asset Management). Still, it's high stakes. Cogent faces competition from the likes of Yipes Inc.(see http://www.yipes.com and Yipes Bets Big on Gig), another fast-track startup with 100-Mbit/s service. Unlike Cogent, Yipes offers LAN-to-LAN or Internet connectivity at rates to 1 Gbit/s, in increments from 1 Mbit/s to 1 Gbit/s. But Cogent's IP-over-Sonet and its ATM capabilities stand in contrast to the Yipes' infrastructure, which does not support ATM or Sonet.

by Mary Jander, senior editor, Light Reading http://www.lightreading.com