Thursday, June 12, 2008

Cogent Drops to $7

According to reports, Cogent has decided to drop their pants pricing to $7 per MB to better compete with Level3 and Global Crossing. L3 and GX have been selling for sub $20 per MB for a while. I guess, it finally started to affect Cogent growth and revenue.

"Cogent this morning is announcing new discounts for customers who commit to three-year contracts and for higher volume service provider customers. The new three-year price for Ethernet service is a flat $7 a megabit, a dollar less than the previous rate for contracts of two years or more. For service providers who buy Ethernet services at volumes between 100 megabits per second and a Gigabit, rates are as low as $6 per megabit for a three-year contract. Service providers who buy between one Gigabit and 10 gigabits will enjoy a three-year contract rate of $5 a meg, and those that consume a full 10 gigabit port can pay as little as $4 a meg on a three-year contract." [telephony]
"Competitively, Schaeffer said Cogent today competes mostly with Level 3 and Global Crossing and less and less with AT&T, Verizon, Sprint and other backbone network providers."

Cogent says (wholesale) Internet growth has slowed. (Ike wins his bet with Dan). But since Cogent CEO Schaeffer thinks the Internet revolves around him, it could just be that Cogent's growth is slowing. I see demand for bandwidth outside the top 25 MSA's. Unfortunately, most Internet players are not there. So while companies like KDL, Zayo and 360 Networks will be growing, maybe Cogent won't. (The same holds true for GX). Many fiber projects like LUS and MBC-VA are filling fiber strands, but does that equate into growth for L3, GX or Cogent? Maybe, as these regional networks (including Zayo) have to buy from somewhere and it is more likely it would be from AboveNet or Level3 or even GX than it would be VZB/MCI or Ma Bell. In most conversations, Qwest and Sprint don't even come up. (Most of the noise is coming from SAVVIS and InterNAP from what I am seeing). makes me wonder what Verio/NTT and will do.

Full disclosure: I am a sales rep for most of these carriers.

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