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Item 1. Business

2021-02-26 compared with 2020-02-28 · 230 added, 87 removed, 114 unchanged (74% of the section changed)

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Our network is specifically designed and optimized to transmit packet switched data.

We deliver our services primarily to small and medium-sized businesses, communications service providers and other bandwidth-intensive organizations in North America, Europe, Asia, Latin America and Australia.

We deliver our services primarily to small and medium-sized businesses, communications service providers and other bandwidth-intensive organizations in 47 countries across North America, Europe, Asia, South America, Australia and Africa.

We are a Delaware corporation, and we are headquartered in Washington, DC.

We offer on-net Internet access services exclusively through our own facilities, which run from our network to our customers’ premises.

We are not dependent on local telephone companies or cable TV companies to serve our customers for our on-net Internet access and private network services because of our integrated network architecture.

We offer our on-net services to customers located in buildings that are physically connected to our network.

Our on-net service consists of high-speed Internet access and private network services offered at speeds ranging from 100 Megabits per second to 100 Gigabits per second.

As a result, we are not dependent on local telephone companies or cable TV companies to serve our customers for our on-net Internet access and private network service.

Our on-net service consists of high-speed Internet access and private network services offered at speeds ranging from 100 megabits per second (“Mbps”) to 100 gigabits per second (“Gbps”).

We provide our on-net Internet access and private network services to our corporate and net-centric customers.

Our corporate customers are located in multi-tenant office buildings and typically include law firms, financial services firms, advertising and marketing firms and other professional services businesses.

Our net-centric customers include bandwidth-intensive users such as other Internet access providers, telephone companies, cable television companies, web hosting companies, content delivery network companies and commercial content and application service providers.

These net-centric customers obtain our services in carrier neutral data centers and in our data centers.

Our corporate customers are located in multi-tenant office buildings and typically include law firms, financial services firms, advertising and marketing firms , as well as health care providers, educational institutions and other professional services businesses.

Our net-centric customers include bandwidth-intensive users that leverage our network to either deliver content to end users or to provide access to residential or commercial internet users.

Content delivery customers include over the top ("OTT") media service providers, content delivery networks, web hosting companies, and commercial content and application software providers.

Our access customers include over 7,330 access networks comprised of other Internet service providers (“ISPs”), telephone companies, mobile phone operators and cable television companies that collectively provide internet access to a substantial number of broadband subscribers and mobile phone subscribers across the world.

These net-centric customers generally receive our services in carrier neutral colocation facilities and in our data centers.

We operate data centers throughout North America and Europe that allow our customers to collocate their equipment and access our network.

In addition to providing our on-net services, we provide Internet access and private network services to customers that are not located in buildings directly connected to our network.

We provide this off-net service primarily to corporate customers using other carriers’ circuits to provide the “last mile” portion of the link from the customers’ premises to our network.

We provide these off-net services primarily to corporate customers using other carriers’ circuits to provide the “last mile” portion of the link from the customers’ premises to our network.

We also provide certain non-core services that resulted from acquisitions.

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We believe we address many of the data communications needs of small and medium-sized businesses, communications service providers and other bandwidth-intensive organizations by offering them high-quality, high-speed Internet access and private network services at attractive prices.

We believe that our organization has the following competitive advantages:

Low Cost of Operation.

We offer a streamlined set of products on an integrated network.

Our network design allows us to avoid many of the costs that our competitors incur associated with circuit-switched, TDM and hybrid fiber coaxial networks related to provisioning, monitoring and maintaining multiple transport protocols.

We believe that our low cost of operation also gives us greater pricing flexibility and a significant advantage in a competitive environment characterized by falling Internet access prices.

We believe our value proposition is equal or superior to our competitors’ in all of the on-net multi-tenant office buildings and carrier neutral data centers in which we operate.

Our on-net service does not rely on circuits terrestrially that must be provisioned by a third party carrier.

In on-net multi-tenant office buildings we provide our customers the entire network, including the “last mile” and the in-building wiring connecting to our customer’s suite.

In carrier neutral data centers we are collocated with our customers so only a connection, known as a cross connect, within the data center is required to provide our services.

This gives us more control over our service, quality and pricing.

We have made a series of choices around our network design, operating strategy and product offering designed to provide us with a lower cost of operation.

Our single network design allows us to avoid many of the costs that our competitors who operate, circuit-switched, TDM and hybrid fiber coaxial networks incur related to provisioning, monitoring and maintaining multiple transport protocols.

Utilizing only one network protocol enables us to benefit from the continued rapid improvement in price and performance of our key network equipment and creates scale advantages in the installation and maintenance of that equipment.

We have acquired optical fiber from the excess inventory of existing networks which reduces the capital intensity and operating costs of our intercity and metro networks.

Our streamlined set of products reduces our service delivery costs in terms of customer and product support and the investment required to train our sales representatives.

We believe that our low cost of operation gives us greater pricing flexibility and a significant advantage in a competitive environment characterized by falling Internet access prices.

(See “Our Key Operating Advantages”)

Greater Control and Superior Delivery.

Our on-net service does not rely on circuits that must be provisioned by a third-party carrier.

In our on-net multi-tenant office buildings (“MTOBs”) we provide our customers the entire network, including the “last mile” and the in-building wiring connecting to our customer’s suite.

In our carrier neutral data centers (“CNDCs”) we are collocated with our customers so only a cross-connection within the data center is required to provide our services.

The structure of our on-net service provides us more control over our service, quality and pricing.

It also allows us to provision services more quickly and efficiently than provisioning services on a third-party carrier network.

We are typically able to activate service to our customers in one of our on-net buildings in approximately thirteen business days.

High-Quality, Reliable Service.

We are able to offer high-quality Internet service due to our metro and intercity network.

We are able to offer high-quality Internet service due to our network design and composition.

We believe that we deliver a high level of technical performance because our network is optimized for packet switched traffic.

Its design increases the speed and throughput of our network and reduces the number of data packets dropped during transmission compared to traditional circuit-switched networks.

We believe that we

deliver a high level of technical performance because our network is optimized for packet switched traffic.

We believe that our network is more reliable and carries traffic at lower cost than networks built as overlays to traditional circuit-switched, or TDM networks.

High Traffic Network Footprint.

We have strategically chosen locations, such as 1,767 large multi-tenant office buildings in major North American cities and 980 carrier neutral data center buildings in North America and Europe with high levels of Internet traffic, to maximize our revenue opportunities and expand our margins.

Our network is connected to our on-net multi-tenant office buildings where we offer our services to a diverse set of high-quality, low churn corporate customers within close physical proximity of each other.

Our network is directly connected to 980 carrier neutral colocation and unique data center buildings where our net-centric customers directly interconnect with our network.

We also operate 54 data centers across the United States and in Europe which comprise over 609,000 square feet of floor space and are directly connected to our network.

Low Capital Cost to Grow Our Business.

We have a history of efficient network expansion and integration execution.

We believe that we have incurred relatively lower costs in growing our business than our competitors because we use Internet routers without additional legacy equipment, we offer a streamlined set of products, and we have acquired optical fiber from the excess inventory in existing networks.

Large Addressable Market.

We have systematically evaluated and chosen our network extensions to buildings, data centers and markets based upon a rigorous set of criteria to evaluate the economic opportunity of network locations.

Additional factors relevant to our pursuit of new buildings include the willingness of building owners to grant us access rights, the availability of optical fiber

networks to serve those buildings, the costs to connect buildings to our network and equipment availability.

Our network is connected to 2,914 total buildings located in 202 metropolitan markets.

These buildings include 1,792 large MTOBs (totaling 976.8 million square feet of office space) in major North American cities where we offer our services to a diverse set of high-quality, low churn corporate customers within close physical proximity of each other.

These buildings also include 1,252 CNDCs located in 1,068 buildings in North America, Europe, Asia, South America, Australia and Africa where our net-centric customers directly interconnect with our network.

We also operate our own 54 data centers across the United States and in Europe which comprise over 606,000 square feet of floor space and are directly connected to our network.

We believe that these network points of presence strategically position our network to attract high levels of Internet traffic and maximize our revenue opportunities and profitability.

Balanced, High-Traffic Network.

Since its inception, our network has grown significantly in terms of its geographic reach, customer connections, and traffic.

We currently serve over 7,330 access networks as well as numerous large and small content providers and over 47,100 corporate customer connections.

As a result of these growing bases of customers who distribute (content providers) and receive (access networks) content on our network, we believe that the majority of all the traffic on our network originates and terminates on our network.

This control of traffic increases our reliability and speed of delivery and enhances our margins.

The breadth of our network, extensive size of our customer base, and volume of our traffic enables us to be one of a handful of Tier One networks that are interconnected on a settlement free basis.

This internetworking status broadens our geographic delivery capability and materially reduces our network costs.

Proven and Experienced Management Team.

Our senior management team is composed of seasoned executives with extensive expertise in the telecommunications industry as well as knowledge of the markets in which we operate.

The members of our senior management team have an average of over 20 years of experience in the telecommunications industry and many have been working together at Cogent for several years.

Several members of the senior management team have been working together at Cogent since 2000.

Our senior management team has designed and built our network and led the integration of our network assets we acquired through 13 significant acquisitions and managed the expansion and growth of our business.

The members of our senior management team have an average of over 20 years of experience in the telecommunications industry and many have been working together at the Company for several years.

Several members of the senior management team have been working together at the Company since 2000.

Our senior management team has designed and built our network and, during our formative years, led the integration of network assets we acquired through 13 significant acquisitions and managed the expansion and growth of our business.

We intend to become the leading provider of high-quality, high-speed Internet access and private network services and to continue to improve our profitability and cash flow.

The principal elements of our strategy include:

Focus on Providing Low-Cost, High- Speed Internet Access and Private Network Services.

We intend to further load our high-capacity network to respond to the growing demand for high-speed Internet access generated by bandwidth-intensive applications such as streaming media, online gaming, video, voice over IP (VOIP), remote data storage, distributed computing, cloud services and virtual private networks.

We intend to do so by continuing to offer our high-speed and high-capacity services at competitive prices.

Pursuing On- Net Customer Growth.

We intend to increase usage of our network and operational infrastructure by adding customers in our existing on-net buildings, as well as connecting more multi-tenant office buildings and carrier neutral data centers to our network.

We emphasize our on-net service because our on-net services generate greater profit margins and we have more control over service levels, quality, pricing and our on-net services are provisioned in considerably less time than our off-net services.

Grow our Corporate Customer Base.

Our on-net corporate customers are typically small- to medium-sized businesses connected to our network through our multi-tenant office buildings or connected to our network through one of our carrier neutral data centers.

We generally sell two types of services to our corporate customers:

dedicated internet access and private network services.

We typically sell dedicated internet access at the same price per connection as our competitors, but our clients benefit from our significantly faster speeds and rapid installation times.

These customers are increasingly integrating off-site data centers and cloud services into their IT infrastructure in order to take advantage of the safety, security and redundancy that is offered by locating company processing power, storage and software at a data center.

An important part of this new infrastructure is a high-speed, dedicated internet connection from the corporate premises to the data center and the Internet and from one corporate premises to another corporate premises.

We believe that the importance of data centers will increasingly lead tenants to reconfigure their communications infrastructure to include dedicated internet access across their locations.

Increase our Share of the Net-Centric Market.

We are currently one of the leading providers of high-speed internet access to a variety of content providers and over 7,330 access networks across the world.

We intend to further load our high-capacity network as a result of the growing demand for high-speed internet access generated by these types of bandwidth-intensive applications such as OTT media services, online gaming, video, Internet of Things (IoT), voice over IP (VOIP), remote data storage, and other services.

We expect that we will continue to grow our shares of these segments by offering our customers a series of attractive features including:

● Geographic breadth – We have the broadest carrier neutral data center footprint in the industry and currently offer network services in 47 countries;

● High capacity and reliability – We offer 1 Gbps to 100 Gbps ports in all of the carrier neutral data centers on our network, which differentiates the capacity choices we provide our net-centric clients;

● Balanced customer base – Our leading share of content providers and access networks increases the amount of traffic that originates and terminates on our network thereby reducing latency and enhancing reliability;

● Large and dedicated salesforce – Our team of 236 net-centric sales professionals is one of the largest salesforces in this industry segment and enables us to better serve this customer segment while also identifying new sales opportunities and gaining new business and customers;

● Competitive pricing – We aggressively discount our services to customers in order to attract new customers and drive volume.

Develop a Worldwide Peering Platform.

In late 2020 we introduced a new product, Global Peer Connect (“GPC”), targeted at the growing demand for certain net-centric customers to dynamically peer traffic anywhere on our global platform.

Our GPC product provides access to our Global Peer Exchange (“GPE”) which is a worldwide connectivity platform for the exchange of peering traffic destined for the Internet.

Similar product offerings in the marketplace offer a materially smaller geographic footprint configuration and require a higher fixed cost for customers.

We believe our product offering provides the following unique advantages over other private peer exchanges or public Internet exchange points:

● Ubiquity through Leading CNDC Connectivity:

We are collocated in 1,252 CNDCs in 47 countries.

We believe this portfolio provides us a significant advantage over regional peer exchanges that typically have substantially fewer CNDC collocations and countries served.

In order to take advantage of this footprint, we enable GPC customers to peer with any other member of our GPE regardless of location thereby significantly broadening the reach for potential customers.

● Attractive Economics and Terms:

Our GPC product offers economics and terms which should make it attractive for potential users to switch their service to us.

Customers only pay for direct usage and there are no fixed port charges or distance based fees.

Our contracts have no minimum terms.

These terms reduce the hurdle for new customers to join the GPE and should drive participation.

● Greater Customer Control and Selectivity:

As our GPC offering provides direct connectivity to anywhere in our network, customers will be able to have greater control and reliability over their traffic as this eliminates intermediate networks and enables customers to selectively bypass certain regions due to regulatory or censorship concerns.

Pursue On-Net Customer Growth.

Our high-capacity network provides us with the ability to add a significant number of customers to our network with minimal direct incremental costs.

We intend to increase usage of our network and operational infrastructure by adding customers in our existing on-net buildings, as well as developing additional markets and connecting more multi-tenant office buildings and carrier neutral data centers to our network.

We emphasize our on-net services because they generate greater profit margins and we have more control over service levels, quality, pricing and our on-net services are provisioned in considerably less time than our off-net services.

Our fiber network connects directly to our on-net customers’ premises and we pay no local access (“last mile”) charges to other carriers to provide our on-net services.

We are responding to this on-net revenue opportunity by increasing our sales and marketing efforts including increasing our number of sales representatives, implementing strategies to optimize sales productivity and expanding our on-net addressable market by adding service locations to our network.

Selectively Pursuing Acquisition Opportunities.

In addition to adding customers through our sales and marketing efforts, we will continue to seek out acquisition opportunities that increase our customer base, allowing us to take advantage of the unused capacity on our network and to add revenues with minimal incremental costs.

We may pursue acquisition opportunities that we believe expand our footprint, and generate positive cash flow.

These acquisition opportunities may include off-net as well as on-net customers and complementary businesses including those offering over the top applications such as VOIP.

We may also make opportunistic acquisitions of network assets.

Given our record of successful asset integration, we believe we can

continue to successfully integrate new businesses as they are acquired.

We are very selective in reviewing acquisition opportunities and have not completed an acquisition in over a decade.

Grow and Improve our Sales Efforts.

A critical factor in our success has been our growing investment and focus on our sales and marketing efforts.

Over the past five years, we have increased the size of our quota bearing salesforce by 34% from 378 to 569 employees.

We seek to pair this growth in the size of our salesforce with a consistent level of productivity as measured by the number of connections sold per salesperson per month, taking into account adjustments to the changing mix of products sold and installed.

In order to gain market share in our targeted businesses, we expect to continue to increase our sales efforts, including increasing the number of sales representatives and introducing strategies and tools to optimize sales productivity.

Expand our Off-Net Corporate Business.

We have agreements with national carriers providing us “last mile” network access to over 4 million commercial buildings across North America that are lit by fiber optic cable and that are not currently served by our network.

We have developed an automated process to enable our salesforce to identify opportunities in the off-net market and to quickly offer pricing proposals to potential customers.

We believe these agreements broaden our addressable market for corporate dedicated internet access and enable us to better leverage the skills and capacity of our direct salesforce.

Our carrier agreements also provide for discounts related to volume purchases thereby enabling us to reduce our cost of service if we are able to increase our pool of off-net customers.

Our Key Operational Advantages

We believe that the wireline telecom industry is undergoing, and will continue to face, significant price deflation for its applications and services.

This price deflation is a result of a variety of factors including increased competition, enhanced substitutability of certain products and services and the continued impact of Moore’s Law, which has driven down the cost of technology, particularly for customer premise, fiber optics and networking equipment.

Faced with the backdrop of continued price deflation in our industry, we have made a number of discreet choices around our network design and operating structures that are consistent with our objective of becoming the low cost operator in our industry.

Since our initiation of operations, this strategy has resulted in a rapid decline in our cost to transmit bits, which has increased margins and decreased capital intensity as measured by capital expenditures per total revenues.

Over the last five years, our cost of goods sold per bit delivered for our customers has declined at a compounded annual rate of 22.5%.

Important components of our key operating advantages include:

One Network Protocol.

Upon our founding, we selected to operate our network solely using Ethernet protocol.

We made this selection in order to take advantage of the significantly greater installed base and lower cost of Ethernet network equipment versus other protocols, the substantially lower costs associated with operating and maintaining one network protocol and the continued benefits of the rapid price performance ratio improvements of Ethernet-related equipment.

Selecting one operating protocol has also had positive affects in terms of our operating overhead and the simplicity of our organization.

We believe the vast majority of our competition currently operates their networks with multiple protocols and we believe that attempts to upgrade their networks to one protocol would be operationally challenging and costly.

Broad Access to Fiber on a Cost Effective, Long Term Basis.

We currently maintain a large portfolio of dark fiber leases around the world that supports our network operation.

The nature of this portfolio and the individual leases provides us long-term access to dark fiber at attractive rates and the opportunity in many cases to extend these leases for multiple renewal terms.

On average, a modest number of our dark fiber leases come up for renewal each year.

We have relationships with 269 dark fiber vendors across the globe enabling us to lease dark fiber on a long-term, cost-effective basis to virtually any geographic route or facility we require.

Narrow and Focused Product Set.

Since our founding, we have strategically focused on delivering a very narrow product set to our customers.

The vast majority of our revenue is driven or related to our high-capacity, bi-directional, symmetric internet access services which can be accessed on-net in multi-tenant office buildings and carrier neutral data centers or off-net through other carriers’ “last mile” connections to customer facilities.

There are significant cost advantages as a result of this narrow product set.

We believe the relative size of our salesforce training, support and overhead is lower than comparable telecom providers which tend to offer a broader product set to their client base.

Scalable Network Equipment and Hub Configurations.

Due to our single network protocol and narrow product set, our transmission and network operations rely mainly on two sets of equipment for operation.

In order to further scale our operating leverage, we have systematically reused older equipment in less dense portions of our network.

Due to interoperability between the generations of products, we are able to transfer older equipment from our core, high-traffic areas to newer, less congested routes.

The result of this dynamic grooming process is that we are able to utilize our equipment for materially longer time frames than the expected life of this equipment thereby reducing our capital investment in our network.

We design and build all of our network hubs to the same standard and configuration.

This replication strategy provides us scale benefits in equipment purchases, training, and maintenance.

Our network is comprised of in-building riser facilities, metropolitan optical networks, metropolitan traffic aggregation points and inter-city transport facilities.

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We believe that our network is more reliable and carries packet switched traffic at lower cost than networks built as overlays to traditional circuit-switched telephone networks.

Our network serves over 200 metropolitan markets in North America, Europe, Asia, Latin America and Australia and encompasses:

Our network is comprised of 2,914 buildings which are on net and we serve 202 metropolitan markets in North America, Europe, Asia, South America, Australia and Africa.

Important strategic components of our Network include:

● 1,792 multi-tenant office buildings strategically located in commercial business districts;

● 980 carrier-neutral Internet aggregation facilities, data center buildings and single-tenant buildings;

● 1,252 carrier neutral data centers located in 1,068 buildings offering our customers the largest portfolio of CNDCs of any carrier;

● 54 Cogent Data Centers;

● 955 intra-city networks consisting of 37,567 fiber miles;

● an inter-city network of 58,285 fiber route miles;

● multiple high-capacity transoceanic circuits that connect the North American, European, Asian, Latin American and Australian portions of our network.

● multiple high-capacity transoceanic circuits that connect the North American, European, Asian, South American, Australian and African portions of our network.

We have created our network by acquiring optical fiber from carriers with large amounts of unused fiber and directly connecting Internet routers to our existing optical fiber national backbone.

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Inter-city Networks.

Our inter-city network consists of optical fiber connecting major cities in North America, Europe, Asia, Latin America and Australia.

The North American, European, Asian, Latin American and Australian portions of our network are connected by transoceanic circuits.

Our inter-city network consists of optical fiber, including transoceanic fiber circuits for undersea portions, connecting major cities in North America, Europe, Asia, South America, Australia and Africa.

Our network was built by acquiring from various owners of fiber optic networks the right to use typically two strands of optical fiber out of the multiple fibers owned by the cable operator.

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We have the right to use the optical fiber under long-term agreements.

We pay these providers our pro rata fees for the maintenance of the optical fiber and provide our own equipment maintenance.

We pay these providers our annual pro rata fees for the operation and maintenance of the optical fiber and we provide our own equipment maintenance.

Intra-city Networks.

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These metropolitan networks consist of optical fiber that runs from the central router in a market into routers located in our on-net buildings.

In most cases the metropolitan fiber runs in a ring architecture, which provides redundancy so that if the fiber is cut, data can still be transmitted to the central router by directing traffic in the opposite direction around the ring.

Our metropolitan fiber runs in a ring architecture, which provides redundancy so that if the fiber is cut, data can still be transmitted to the central router by directing traffic in the opposite direction around the ring.

The router in the building provides the connection to each of our on-net customers.

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Typically, these circuits are aggregated at various locations in those cities onto higher-capacity leased circuits that ultimately connect the local aggregation router to our network.

In-building Networks

In office buildings where we provide service to multiple tenants we connect our routers to a cable typically containing 12 to 288 optical fiber strands that run from our equipment in the basement of the building through the building riser to the customer location.

Multi-Tenant Office Buildings ("MTOBs").

We have network access to a portfolio of 1,792 MTOBs which provide us access to a highly attractive base of bandwidth intensive tenants.

In MTOBs where we provide service to multiple tenants, we connect our routers to a cable typically containing 12 to 288 optical fiber strands that run from our equipment that is generally located in the basement of the building through the building riser to the customer location.

Our service is initiated by connecting a fiber optic cable from our customer’s local area network to the infrastructure in the building riser giving our customer dedicated and secure access to our network using an Ethernet connection.

We believe that Ethernet is the lowest cost network connection technology and is almost universally used for the local area networks that businesses operate.

Carrier Neutral Data Centers ("CNDCs").

Our network is collocated in and can provide connectivity to customers in 1,252 CNDCs located in 1,068 buildings across our footprint.

CNDCs are an integral component of the Internet Infrastructure where Content Providers, Application Service Providers, Carriers and Corporates locate their server and service infrastructure.

CNDCs offer highly reliable, secure, cost effective and convenient space for these operators to access important services including connectivity, power, rack space and security all on a 24 hour basis in order to support their Internet activities.

We believe we are connected to more CNDCs than any other IP transit provider enabling us to offer greater coverage, more network configuration choices and increased reliability for our net-centric customers.

Cogent Data Centers.

We operate 54 data centers across the United States and in Europe.

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Larger ISPs exchange traffic and interconnect their networks by means of direct private connections referred to as private peering.

Peering agreements between ISPs are necessary in order for them to exchange traffic.

Without peering agreements, each ISP would have to buy Internet access from every other ISP in order for its customer’s traffic, such as email, to reach and be received from customers of other ISPs.

Tier 1 ISP Status.

We directly connect with over 7,330 total networks of which 24 networks are settlement-free peers.

The remaining networks are customers whom we charge for Internet access.

We believe our standing as a Tier 1 ISP provides us with a reputation for size, breadth and reliability.

These relationships also reduce our cost of operating the network versus non-Tier 1 ISP Peer Networks who must compensate other networks in order to deliver a significant portion of their traffic.

Peering agreements between ISPs enable them to exchange traffic.Without peering agreements, each ISP backbone would have to buy Internet access from every other ISP backbone in order for its customer’s traffic, such as email, to reach and be received from customers of other ISP backbones.

We are considered a Tier 1 ISP with a large customer base and, as a result, we have settlement-free peering arrangements with other providers.

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We do not treat our settlement-free peering arrangements as generating revenue or expense related to the traffic exchanged.

We do not sell or purchase paid peering.

We directly connect with over 6,920 total networks of which approximately 30 networks are settlement-free peers, the remaining networks are customers, whom we charge for Internet access.

We do not sell or purchase paid peering on our transit network.

We facilitate peering between other networks but not to our transit network, on our Global Peer Exchange.

Network Management and Customer Care.

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In addition, we have maintenance contracts with third-party vendors that specialize in maintaining optical and routed networks.

We offer our high-speed Internet access and IP connectivity services primarily to small and medium-sized businesses, communications providers and other bandwidth-intensive organizations located in North America, Europe, Asia, Latin America and Australia.

We offer on-net services in over 200 metropolitan markets.

We serve 2,801 on-net buildings.

Our most popular on-net service in North America is Internet access at 100 megabits per second.

We typically offer this service to small and medium-sized business customers.

We also offer Internet access at higher speeds of up to 100 gigabits per second.

These services are generally used by bandwidth intensive customers that have

businesses, such as web hosting, Internet access, and video delivery, predicated upon the Internet.

These services are generally delivered at our data centers and carrier neutral data centers.

We believe that, on a per-megabit basis, this service offering is one of the lowest priced in the marketplace.

We also offer colocation services in our data centers.

This service offers Internet access combined with rack space and power in our facility, allowing the customer to locate a server or other equipment at that location and connect to our Internet access service.

Our final on-net service offering is our private network service.

This service provides point-to-point and point to multi-point connectivity.

Our Customers

We offer our high-speed Internet access and IP connectivity services to two sets of customers:

corporates customers, which primarily include small and medium-sized businesses located in North America, and net-centric customers, which include, content providers, applications service providers and access networks, comprised of ISPs, cable operators, mobile operators and phone companies located in North America, Europe, Asia, South America, Australia and Africa.

Our corporate customers primarily purchase direct internet access from us on-net in multi-tenant office buildings and carrier neutral data centers or off-net through other carriers’ “last mile” connections to those customer facilities in metropolitan markets in North America.

This service enables these customers to access the Internet with a high-speed, bi-directional, symmetric circuit with a very high degree of reliability and 100% access to that contractual capacity at all times.

Depending upon the geographic breadth of our customers’ footprint and their communications requirements, we also sell these corporate customers private network services.

Private network services provide connectivity on a point to point or point to multi-point basis.

This service allows customers to connect geographically dispersed local area networks in a seamless manner.

We primarily offer these corporate customers speeds ranging from 100 Mbps per second to 1 Gbps per second and in some cases up to 10 Gbps per second.

The continued growth in demand for increased bandwidth has led to a rapid shift towards higher capacity circuits.

In 2020, our 1 Gbps product surpassed our 100 megabit product as our most popular product in terms of revenues and connections, as existing corporate customers upgraded to the faster 1 gigabit service, and new customers preferred the faster connection.

We expect that this shift will continue.

We also sell our corporate customers other products including rack and power in our data centers.

Our net-centric customers purchase IP connectivity and other services in our 1,252 carrier neutral data centers as well as our data centers.

We support these services in 202 metropolitan markets in 47 countries across the world.

These bandwidth intensive organizations typically purchase circuits ranging from 10 Gbps up to 100 Gbps, designed to provide them high-speed, bi-directional, symmetric circuits with a high degree of reliability and 100% access to the contractual capacity at all times.

In addition to contractual capacity, certain net-centric customers also purchase metered service that enables customers to pay for actual volume of bits delivered on a per bit basis.

We also offer a burst product that allows net-centric customers to utilize capacity when they exceed their contractual capacity.

The per bit charge for this burst capacity typically exceeds the rate for contractual services.

Overall, we believe that, on a per megabit basis, our service offering is one of the lowest priced in the marketplace.

We also offer colocation services in our data centers.

This service offers Internet access combined with rack space and power in our facilities, allowing the customer to locate a server or other equipment at that location and connect to our Internet access service.

We offer lower prices for longer term and volume commitments.

We emphasize the sale of our on-net services because we believe that we have a competitive advantage in providing these services and these services generate gross profit margins that are greater than our off-net services.

We offer our off-net services to customers that are not located in our on-net buildings.

These services are primarily provided in the metropolitan markets in North America and Europe in which we offer on-net services.

These services are generally provided to small and medium-sized corporate customers in over 6,870 off-net buildings.

We emphasize the sale of our on-net services over our off-net services, as on-net services generate higher gross margins, and we believe we can offer faster installation and greater reliability with our on-net offerings.

We have agreements with multiple national carriers providing us “last mile” network access to over 4 million buildings across North America that are not currently served by our network.

We believe these agreements broaden our addressable market for corporate dedicated internet access and VPN services and enable us to better leverage the skills and capacity of our direct salesforce.

Our carrier agreements also provide for discounts related to volume purchases thereby enabling us to reduce our cost of service if we are able to increase our pool of off-net customers.

Our People – Human Capital Management

We strive to become a leading employer in our industry by creating a workplace where employees have the tools and resources they need to hone their talents, advance in their careers and be rewarded for their hard work.

We also seek to create a diverse workplace that is respectful of all employees, as we believe this is critical to fostering an employee culture that can deliver the best service in our industry to our customers.

Our human capital objectives and initiatives are overseen by the Compensation Committee of our Board of Directors.

As of December 31, 2020, we had 1,083 employees located in 15 different countries in a variety of different roles.

Approximately 82.5% of our employees are located in the United States and Canada, 16.8% are located in Europe and 0.7% are located in Asia.

As of December 31, 2020, 53% of our employees were quota-bearing sales representatives, 13% were in sales management or sales support roles and 34% were in operational or administrative functions.

Unions represent 30 of our employees in France.

We believe that we have a satisfactory relationship with our employees.

Diversity and Inclusion .

We strive to maintain a diverse and inclusive workforce everywhere we operate.

We recruit the best people for the job without regard to gender, race, ethnicity or other protected traits, and it is our policy to comply fully with all domestic, foreign and local laws relating to discrimination in the workplace.

In 2020, at the direction of our Board of Directors, we mandated training for all of our employees on topics of diversity and inclusion.

All employees were required to complete online training in unconscious bias, and managers were further required to complete additional training in inclusion.

We intend to continually reinforce our commitment to global inclusion and diversity.

Employee Retention.

We compete in an industry that is highly competitive for talent.

Attracting, developing and retaining skilled people in sales, technical and other positions is crucial to executing our strategy and our ability to compete effectively.

While we monitor overall employee retention, we focus in particular on sales representative retention, as our new sales and revenue growth are driven almost entirely by the sales generated by our direct sales force.

As a complement to our sales representative retention metric, we also closely track the pace of hiring new sales representatives.

Our sales representatives comprise 53% of our employees.

For the year ending December 31, 2020, we averaged 4.9% monthly churn within our sales representatives.

This churn was caused primarily by an individual’s failure to meet sales performance goals.

During 2020, we hired 357 new sales representatives and ended the year with 569 sales representatives, a net increase of 21 sales representatives, or 3.8% from our total sales representatives at the beginning of 2020.

Our ability to recruit and retain all of our employees depends on a number of factors, including professional development, compensation and benefits, and employee engagement.

Professional Development .

We recognize the importance of retaining our sales personnel, and we continually strive to improve the performance of our sales personnel to reduce turnover.

To that end, we have invested heavily in professional development as a means for improving performance.

As part of our commitment to professional development, we established a sales training and enablement department that provides both online and in-person training.

Our 14 regional learning managers and management development trainers are located around the world and are available for intensive, in-person group training as well as individual training with sales representatives who may need extra assistance.

In 2020, our average ratio of sales representatives with less than 12 months of tenure to regional learning managers was 23 to 1.

Our training group includes two additional trainers dedicated exclusively to training sales management.

Our trainers also conduct training at our annual sales meeting, during which our entire sales force gathers to learn new skills and reinforce existing skills.

All sales personnel receive four weeks of live, inter-active training during their first month, which training is on developing both general and Cogent-specific sales skills.

New sales personnel are also encouraged to, and rewarded for, completing a self-paced, online curriculum led by their manager during their first six months.

Both recent and tenured sales personnel have access to online, on-demand training modules and the opportunity to obtain certification in specialized services.

Compensation and Benefits .

We are committed to rewarding, supporting, and developing our employees.

To that end, we offer a comprehensive compensation program that includes market-competitive pay, stock options or restricted stock grants to all employees, healthcare benefits, retirement savings plans, and paid time off and family leave.

Employee Engagement .

To foster and reinforce a company culture where employee concerns are heard, our Chief Executive Officer conducts biweekly town hall meetings to respond to employee questions, which may be submitted anonymously.

On alternate weeks, we conduct online town hall chats during which a rotating member of the executive team is available to answer questions from employees.

We believe these open and unfiltered channels of communication lead to honest feedback from our employees to our management team.

Health and Safety .

The health and safety of our employees is of utmost important to us.

We safeguard our people by striving for zero employee injuries and illnesses.

While nearly all of our employees work solely in office environments, for our field personnel, we provide safety gear as appropriate given employee job duties.

During the COVID-19 pandemic, we invested heavily to help ensure the health of our employees.

Beginning in March 2020, we closed all of our offices worldwide, requiring our entire workforce to work remotely whenever possible.

We procured additional computer equipment to permit all employees to work remotely.

While our offices have largely remained closed, we believe that it is important to our company culture and employee productivity to return to an in-office environment when it is safe to do so.

To this end, a cross-functional team within Cogent has established safety procedures for a return to office, including training and additional safety and sanitation supplies.

Sales and Marketing

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We employ a direct sales and marketing approach.

As of February 1, 2020, our sales force included 686 full-time employees.

As of December 31, 2020, our sales force included 712 full-time employees.

Our quota bearing sales force includes 569 employees with 333 employees focused primarily on the corporate market and 236 employees focused primarily on the net-centric market.

Our sales personnel work through direct contact with potential customers in, or intending to locate in, our on-net buildings.

Through agreements with building owners, we are able to initiate and maintain personal contact with our customers by staging various promotional and social events in our multi-tenant office buildings and carrier neutral data centers.

Through agreements with building owners, we are able to initiate and maintain

personal contact with our customers by staging various promotional and social events in our multi-tenant office buildings and carrier neutral data centers.

Sales personnel are compensated with a base salary plus quota-based commissions and incentives.

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All agents have access to selling to potential corporate customers and may sell all of our products.

We have hired an indirect channel team who manages these indirect relationships.

We have an indirect channel team who manages these indirect relationships.

The indirect channel team is compensated with a base salary plus quota-based commissions and incentives.

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Our interests in that dark fiber are in the form of long-term leases under indefeasible rights of use, or IRUs, with providers, some of which also compete with us.

We rely on the owner of the fiber to maintain the

We are also dependent on third party providers, some of which compete with us, to provide both intracity fiber and the lateral fiber connections required to add buildings to our network and to provide the local loop facilities for the provision of connections to our off-net customers.

We rely on the owner of the fiber to maintain the fiber.

We are also dependent on third-party providers, some of which compete with us, to provide intercity and intracity fiber as well as the lateral fiber connections required to add buildings to our network and to provide the local loop facilities for the provision of connections to our off-net customers.

We believe that competition is based on many factors, including price, transmission speed, ease of access and use, length of time to provision service, breadth of service availability, reliability of service, customer support and brand recognition.

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We also enter into new markets with their own regulations.

The regulations with which we need to comply include licenses to provide our services, data privacy, interception of communications by law enforcement, blocking of web sites, and others.

The regulations with which we need to comply include obtaining the proper licenses to provide our services, data privacy, interception of communications by law enforcement, blocking of websites, and other regulations.

We believe that we comply with all regulations in the jurisdictions in which we operate.

The laws related to Internet telecommunications are unsettled and there may be new legislation and court decisions that may affect our services and expose us to burdensome requirements and liabilities.

As of February 1, 2020, we had 1,051 employees.

Unions represent 29 of our employees in France.

We believe that we have a satisfactory relationship with our employees.

Available Information

We were incorporated in Delaware in 1999.

We maintain an Internet website at www.cogentco.com.

We make available free of charge through our Internet website our annual report on Form 10-K, our quarterly reports on Form 10-Q, our current reports on Form 8-K, and any amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the Exchange Act.

We make available free of charge through our Internet website our annual report on Form 10-K, our quarterly reports on Form 10-Q, our current reports on Form 8-K, and any amendments to those

reports filed or furnished pursuant to Section 13(a) or 15(d) of the Exchange Act.

The reports are made available through a link to the SEC’s Internet website at www.sec.gov .

1 unchanged sentence

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 1. Business