Cogent sees a nearly 5K wavelength services customer site opportunity funnel

Enhancing wavelength activation

As Cogent ramps its wavelength service capabilities, it is focusing on shortening activation times for its customers to 30 days.

Cogent’s wavelength customer base is diverse, with three-fourths of them being existing customers and 25% being new to Cogent.  

In terms of its wavelength install cadence, while Cogent installed and began billing 147 wavelengths in the quarter, it actually installed several hundred more wavelengths than it has begun to bill for.

While its ability to offer a shortened provisioning time certainly will make its wavelength services appealing, activation is often delayed because customers still must prepare their sites. Typically, a customer will order its cross-connects, pluggable optics and accept wavelengths in a three to four-month window

“As we had mentioned in previous calls, we have been installing services faster than customers have expected,” Schaeffer said. “They then usually need to order a cross-connect, sometimes pluggable optics on their side to be able to accept these wavelengths, and they've been accustomed to having protracted delays from other vendors.”

He added that we “are beginning to build credibility with those customers, and we are accelerating our ability to install.”

In one large customer case, Cogent was able to provision almost 100 wavelengths in seven days. However, the customer could not take them.

Schaeffer said that while “I understand investors' frustrations that they want to see an installed number, we only report installations based on billing revenue.”

Despite the near-term activation challenges, Schaeffer said Cogent has the capabilities to ramp up to 500 wavelengths per month. “Over the next several quarters, our customer base is going to become accustomed to our rapid provisioning, which is different than what the industry has traditionally experienced,” he said. “And because of that, we think the number of wavelengths that we install, but do not bill, will shrink.”

Off-net declines cut into revenues

While Cogent continues to make progress with selling its on-net services, including wavelengths, the service provider continues to see a drag from off-net services.

Cogent breaks out its revenue types into three main elements: NetCentric, corporate and enterprise.

Its corporate business represented 44.3% of our revenues this quarter, down 8.8% year-over-year and 1.5% sequentially.

Thaddeus Weed, CFO of Cogent, said, “These decreases in our corporate revenue are primarily due to the continued growth of loss net of low-margin off-net customer connections and the elimination of non-core products that we acquired.”

Alternatively, Cogent’s NetCentric business, which continues to benefit from the growth in video traffic activity related to artificial intelligence, streaming and wavelength sales, saw an uptick in revenues. The NetCentric business represented 39.5% of our revenues this quarter, rose 6.8% year-over-year, and sequentially by 5.1%.

Due to the reduction in the non-core and low-margin off-net enterprise revenues that Cogent acquired in the Sprint acquisition, the provider’s enterprise business represented 16.2% of its revenues this quarter. That was a decrease of 19.9% year-over-year and sequentially by 8.8%, primarily.

On-Net revenue was $132.3 million for the quarter, while off-net revenue was $102.2 million for the quarter, down 8.3% year-over-year and 4.8% sequentially. Cogent serves 26,239 off-net customers and 19,073 off-net buildings.

“Our off-net revenue results are impacted by the migration of certain off-net customers to on-net and the continued grooming and termination of low-margin off-net contracts, mostly acquired from Sprint, T-Mobile,” Weed said.

Cogent’s total revenue for the quarter was $246.2 million, down $800,000 sequentially.

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