Cogent invades the ISP market

The Internet service provider (ISP) community in Toronto awoke this morning to discover a new player in the Internet data services game in the form of Washington-based Cogent Communications.

Through its acquisition of Shared Technologies of Canada (STOC) earlier this year, Cogent will use the subsidiary’s facility to deliver 100Mbps of guaranteed throughput of fibre to small- and medium-sized businesses (SMBs) in the Toronto area at a cost of $1,000 per month, the company said.

Cogent’s North American network consists of an 80Gbps-fibre backbone and multiple OC-48 fibre rings. The communications company will use pre-existing fibre from Toronto Hydro, said Washington-based Dave Schaeffer, CEO at Cogent. It has been the company’s strategy to use dark fibre providers’ networks and then construct the connection from the backbone to the SMBs and units that meet Cogent’s criteria.

As Schaeffer explained, there are certain building size requirements that need to be fulfilled by the potential customer, and if they don’t meet the specifications, the company will not provide its data services.

Currently, there are approximately 3,000 buildings or 125,000 companies across North America that have been identified as suitable for Cogent’s Internet-only services.

While Cogent has agreed to honour voice services offered to previous STOC customers, the company will not look to expand its voice offerings in Canada. Instead, the company is solely focused on supplying data.

“We are an Internet service provider focused on dedicated access,” Schaeffer said. The company has modelled its approach as one with the quality of a circuit-switched network and the flexibility of a packet-switched network, he added.

The service is only available to SMBs in Toronto for the time being, and there are no plans to extend service to the consumer market. If the 100 or so buildings identified in Toronto latch on to Cogent’s service, there is the possibility for expansion into Vancouver and Montreal.

The most identifiable rivals to Cogent are Bell Nexia, Telus Corp. and AT&T Canada – all of whom won’t likely be too concerned about their newest foe.

“They (Cogent) come to the market being a relatively small player and (will) have to work for its success,” said Mark Quigley, research director at Kanata-based Yankee Group in Canada.

Soon-to-be competitor Telus Corp. will offer several price and bandwidth choices for companies to choose from. For example, a small outfit could expect to pay around $60 to $80 per month for 3Mbps of unmanaged Internet services, said Boris Kluck, assistant vice-president, customer marketing east at Telus Corp. in Toronto. Kluck said Telus was “aware of Cogent” entering the market, but noted one subtle difference.

“We all compete in a similar space [but] they (Cogent) are only a competitor in the buildings that it has its own infrastructure in,” Kluck said.

Quigley wondered exactly which SMB would need the 100Mbps of bandwidth that Cogent is offering, explaining that few companies would be that “bandwidth thirsty,” especially since most SMBs are primarily using the Internet for e-mail and not intense multimedia-type applications.

But, he added, where Cogent has found a way to distinguish itself from other communications companies that have gone bankrupt in a blink is by concentrating on a targeted market segment, something that could benefit the company in the long term, Quigley noted.