Cogent Tenders DSL-Killer
Cogent says the service, dubbed "Fiber 500," is designed to build on its existing roster of 18,000-odd customers, all of which are tenants in the approximately 600 U.S. office buildings that Cogent has lit with fiber and high-speed Internet access.
Since each of these buildings has, on average, about 50 tenants, Cogent's goal is to entice the remaining 12,000 tenants to switch services. The carrier says most of these businesses are currently using high-end business DSL services, the kind that offers all the bells and whistles for multiple users without matching the speed or reliability of fiber.
This is Cogent's first foray against DSL. Until now, Cogent has focused on services designed to replace private lines for businesses located in multi-tenant buildings. Cogent moves its own fiber point of presence into the basement, linking the building to Cogent's own redundant ring network in 20 U.S. cities plus Toronto. Cogent's present offerings include 100-Mbit/s or 1,000-Mbit/s connections, at $1,000 or $10,000 per month, respectively. Cogent also offers a 2-Mbit/s service in three cities (see Cogent Offers 2-Mbit Access).
Apparently, the carrier has been jealously eyeing the opportunities at slightly lower speeds, where business customers have sizeable DSL installations but aren't willing to drop $1,000 a month on fiber. So for $249 per month (plus $350 for installation), Cogent is offering 500-kbit/s service with guaranteed uptime and full accessibility (DSL services are often oversubscribed, Cogent claims, meaning more customers are given access than the bandwidth can accommodate at one time).
The fact that Cogent's already got a fiber POP inside the buildings it's targeting is key, because it means prospective customers won't have to shell out for a fiber installation -- a dealbreaker for many optical access services.
Cogent began offering Fiber 500 service in Washington, D.C., and Los Angeles in December, and spokesman Jeff Henriksen says there's been "strong reception," with "several customers" signed on and "twenty in the pipeline" in those cities.
Fiber 500 is being offered across all 20 U.S. cities in Cogent's network. The service also will go on sale in Toronto next week, but with slightly different pricing.
If Cogent succeeds in selling Fiber 500 in its buildings, it could conceivably realize $34 million a year in new revenues, a sizeable boost to the company's last reported net quarterly revenues of $16 million, and comparable to the $38 million the carrier reported for the nine months ended September 30, 2002.
Can Cogent do it? That remains to be seen. But the carrier has so far managed to perform better than would seem possible, given the weak market in optical access, which has resulted in a slew of high-profile setbacks and ongoing consolidation among competitors (see Yipes Reborn – Amid Accusations and OnFiber Takes Over Telseon).
Indeed, for years now, the company has represented a queer and quirky success story -- thanks in part to ongoing support from Cisco Systems Inc. (Nasdaq: CSCO), a clever reverse IPO last year, and a few interesting acquisitions that bulked up the books for a while (see Cogent Conundrum Continues and Cogent Hedges Fiber Bets).
Still, expanding the business beyond its existing customer base could prove challenging. According to analyst Amy Cravens of In-Stat/MDR, the entire U.S. market for commercial multi-tenant services was only about $74 million in 2002. And it probably won't be much more than $80 million this year, thanks in part to a lack of fiber access in key locations.
It will be interesting to see whether Cogent can prove its naysayers wrong yet again -- or at least put them off (again) for a little while.
— Mary Jander, Senior Editor, Light Reading