by Joseph Weisenthal

At Least One Broadband Provider Is Happy To Be A Dumb Pipe

from the heresy dept

One of the interesting subplots of this latest internet boom is the steady elimination of the bandwidth glut from the previous boom. Basically, during the last bubble, there was a lot of overinvestment in fiber, causing many early investors to lose their shirts. But, as is the case with many bubbles, the initial overinvestment and the subsequent glut of resources often lays the foundation for growth down the road. Fortune magazine has an interesting look at one company, Cogent Communications, that has made a business out of snapping up cheap, unused fiber and selling it cheaply to bandwidth-hungry firms like YouTube and eBay. Often, its prices are just a quarter of what its competitors, like AT&T, are charging. Obviously, Cogent's price advantage rankles its competitors, but the company likens itself to cheap overseas workers. While some parties are affected negatively, it's clearly a net positive for customers and the economy on the whole. What's also interesting is that the company is totally content with being a dumb pipe, a concept that freaks out incumbent operators. Still, some questions linger about Cogent's business. For one thing, the company hasn't turned a profit, nor does it expect to do so in the short term. Furthermore, the company can't have an infinite supply of cheap bandwidth. It's only a matter of time before bubble-era fiber is used up, and its infrastructure costs may come to resemble its competitors'. Thus, it's not clear how sustainable the company's current model is. Still, the incumbent operators need to pay attention. The company is growing rapidly because it's meeting the need for cheap, no-frills bandwidth, rather than trying to fight the trend towards commoditization.

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  • identicon
    ScaredOfTheMan, 26 Mar 2007 @ 9:29am

    Its the Network that matters

    Back in the day I was in charge of my company's internet access strategy, we tested out many providers but ultimately settled on UUNet as the best and fastest. Having cheap bandwidth is great, but having cheap AND Fast (i.e. no crazy over subscription) is even better!

    Good luck to Cogent, I am happy with any company that brings down the price of my internet access.

    reply to this | link to this | view in chronology ]

    • identicon
      Roy Thigpen, 29 Mar 2007 @ 7:58am

      Good observations

      The source article by Fortune was not really a true indication of Cogents business model or profitibility. As a Cogent employee, I can tell you that we own our own fiber, and we operate with the highest margins in the industry, even with our low cost bandwidth.

      By being "dumb pipe" we keep our cost and complexity down, meaning a much smaller headcount, equipment costs, and simple billing which makes income forcasting much simpler.

      Are we everything to all users? No. We lack a security product, MPLS, managed routers and servers and other products... so we're not going to win all the time, especially when someone wants to have their network managed for them. Where we shine, however, is when a company is looking for the lowest cost, most reliable internet connection they can find.

      As far as your comments about over-subscription, bear in mind that Cogent does NOT oversubscribe any of it's customers. We did have issues a couple of years ago due to poor peering, but we are now one of the biggest peers out there, so it's no longer an issue. The fact is that while our network may not have as large a footprint as ATT, MCI, Spring or L3, our current capacity of 80-120 Gbps is unmatched in the industry, and we only are operating at approximately 8% of our gross network capacity!

      reply to this | link to this | view in chronology ]

  • identicon
    Anonymous Coward, 26 Mar 2007 @ 10:01am

    The company I work for provides web hosting services and has four backbone uplink providers with cogent being one of them. The low cost shows in reliability and high latency at times. I guess this doesn't out way it's low cost though, since we automatically switch to the other providers when they have issues. Maybe if they were turning a profit or at least breaking even we would see fewer issues. We also host dedicated servers and customers use any and every port for god knows what so being a dumb pipe is what is required.

    reply to this | link to this | view in chronology ]

    • identicon
      Anonymous Coward, 26 Mar 2007 @ 11:51am


      I would suppose that not knowing what your customers are doing with that bandwidth is essential to the preservation of your sanity. You're peddling units of raw freedom. Rock on! But most freedom is squandered.

      reply to this | link to this | view in chronology ]

  • identicon
    simon, 26 Mar 2007 @ 12:17pm

    dumb pipe 1 way

    i would love for every time i get a net connection to get a free, fast and secure connection, but, due abuses (read here bot-networks/spam mail/net DOS attacks/buffer overflows/etc.) i don't see-it , yet, possible. open free net will become an overcharged, useless environment...

    still i salute and encourage this initiative, hope they're not hosting for bad guys too...


    reply to this | link to this | view in chronology ]

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