What changed in this filing

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Item 1. Business

2022-02-25 compared with 2021-02-26 · 116 added, 122 removed, 222 unchanged (52% of the section changed)

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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.

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 net-centric customers include 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.

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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.

We continue to support but do not actively sell these non-core services.

Competitive Advantages

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Low Cost of Operation:

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.

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 fiber optic Wavelength Division Multiplexing (“WDM”) equipment and optically interfaced routers.

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

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

Over the last five fiscal years, our cost of goods sold per bit delivered for our customers has declined at a compounded annual rate of 23.3.%.

Important components of our low cost operating strategy 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.

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”)

Selecting one operating protocol has also had positive effects 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.

● Wide Spread Access to Fiber on a Cost Effective, Long-Term Basis .

We have acquired a large portfolio of dark fiber leases from around the world sourced from the excess inventory of existing networks.

The choice to lease rather than build reduces our capital intensity and the operating costs of our intercity and metro networks.

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 terms.

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

We have relationships with 295 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 large 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 that the relative size of our salesforce training, support and overhead is lower than comparable telecom providers which tend to offer a broader, “one-stop shop” 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 standards and configurations.

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

Greater Control and Superior Delivery.

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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.

In our carrier neutral data centers (“CNDCs”) we are collocated with our customers.

As a result, only a cross-connection within the data center is required to provide our services to our customers.

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.

The vast majority of our on-net services can be installed in less than two weeks which is materially faster than the installation times for some of our incumbent competitors.

High-Quality, Reliable Service.

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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.

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.

We have also begun to evaluate the sustainability of new locations by evaluating the LEED Green Rating of Buildings, the potential to source renewable energy at potential locations and the potential impact of climate change on a location including access to water and the risk of flooding.

Our network is connected to 3,035 total buildings located in 216 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 include 1,817 large MTOBs (totaling 986.9 million square feet of office space) in major North American cities where we offer our services to a diverse set of high-quality corporate customers within close physical proximity of each other.

These buildings also include 1,359 CNDCs located in 1,164 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 also operate 54 of our own data centers across the United States and in Europe which comprise over 600,000 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.

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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.

We currently serve 7,569 access networks as well as numerous large and small content providers and 45,423 corporate customer connections.

As a result of these growing bases of customers who distribute (content providers) and receive (access networks) content on our network, the majority of all the traffic on our network remains “on-net’ by both originating and terminating on our network.

This control of traffic is an important differentiator as it increases our service reliability and speed of traffic delivery.

The increasing share of traffic delivered from content providers to access networks also enhances our margins as we are compensated by both the originator and terminating customers.

The breadth of our network, extensive size of our customer base,

and the volume of our network traffic enables us to be one of a handful of Tier 1 networks that are interconnected on a settlement-free basis.

This Tier 1 interconnection status broadens our geographic delivery capability and materially reduces our network costs.

Proven and Experienced Management Team.

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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.

Our on-net corporate customers are typically small to medium-sized businesses connected to our network through 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.

We typically sell dedicated internet access at the same price per connection as our competitors, but our customers 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.

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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 are currently one of the leading providers of high-speed internet access to a variety of content providers and 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 over-the-top (“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;

● Geographic breadth – We have the broadest carrier neutral data center footprint in the industry and currently offer network services in 50 countries – as net-centric customers seek a more international audience this footprint is a significant advantage;

● High capacity and reliability – We offer 100 Mbps to 400 Gbps ports in all of the carrier neutral data centers and 400Gbps in selected locations 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 207 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.

● Competitive pricing – We aggressively price and offer discounts for our services to customers in order to attract new customers and drive volume.

Develop a Worldwide Peering Platform.

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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.

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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.

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.

Continue to Improve our Sales Efforts and Productivity.

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

We seek to maintain a consistent level of sales 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 our sales efforts including introducing strategies and tools to optimize and improve our sales productivity.

Expand our Off-Net Corporate Internet Access Business.

We have agreements with national carriers providing us last mile network access to over 4.0 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.

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

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.

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.

We believe these agreements broaden our addressable market for corporate dedicated internet access and enhances our competitive position through the ability to provide enterprise-wide connectivity for corporate customers.

In order to take advantage of this large set of commercial buildings we have developed an automated process to enable our salesforce to identify opportunities in the off-net market for dedicated internet access and to quickly offer pricing proposals to potential customers.

We continue to negotiate reduced pricing under our numerous carrier agreements that enable us to reduce our cost of off-net services which enhances our competitive position in the marketplace.

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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● 54 Cogent Data Centers;

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

● 1,033 intra-city networks, or rings, consisting of 39,559 fiber miles and 16,338 fiber route miles;

● an inter-city network of 60,676 fiber route miles;

● 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.

We have created our network by leasing on a long-term basis optical fiber from carriers with large amounts of unused fiber and directly connecting Internet routers to our existing optical fiber national backbone.

We have expanded our network through key acquisitions of financially distressed companies or their assets at a significant discount to their original cost.

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Inter-city Networks.

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 inter-city network consists of optical fiber, including transoceanic capacity 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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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.

Multi-Tenant Office Buildings ("MTOBs").

Multi-Tenant Office Buildings (“MTOBs”).

We have network access to a portfolio of 1,817 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.

Our service is initiated by connecting a fiber optic cable from our customer’s local area network in their suite 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").

Carrier Neutral Data Centers (“CNDCs”).

Our network is collocated in and can provide connectivity to customers in 1,359 CNDCs located in 1,164 buildings across our footprint.

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The Internet is an aggregation of interconnected networks.

We interconnect with the networks of our customers, which represent the majority of our interconnections, and with other Internet service providers, or ISPs.

The majority of our traffic travels between our customers.

We have settlement-free interconnections between our network and most major ISPs who are not our customers.

We interconnect our network to other ISP networks predominantly through private peering arrangements facilitated with direct connections with networks who are not customers of the ISP.

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

Larger Internet service providers, or ISP’s, exchange traffic and interconnect their networks by means of direct private connections referred to as private peering.

We interconnect with the networks of our customers, which represents the majority of our interconnections and network traffic, through the sale of our transit services.

We currently interconnect with 7,569 networks who pay to exchange traffic with us as customers.

We supplement our customer network interconnections with settlement-free, peering to our non-customer ISP’s.

We have settlement-free private peering interconnections between our network and 24 other major ISP’s who are not our customers.

Tier 1 ISP Status.

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

We directly connect with 7,569 total networks.

As a result of the size and breadth of our customer base and the extensive footprint and scale of our network we are a Tier 1 ISP.

We currently exchange traffic with 24 other Tier 1 ISPs on a settlement free basis.

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

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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.

Peering agreements between ISPs enable them to exchange traffic.Without settlement-free peering agreements, each ISP backbone would have to buy Internet access from every other ISP backbone in order for its customer’s traffic 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 with which we wish to peer.

We do not purchase transit services or paid peering to reach any portion of the Internet.

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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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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 have agreements with multiple national and regional 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.

As our sales of off-net services has increased, the pricing in our carrier agreements has commensurately decreased in light of our increased volume.

Our net-centric customers purchase IP connectivity and other services in our 1,359 carrier neutral data centers as well as our 54 data centers for a total of 1,413 data centers.

We support these services in 216 metropolitan markets in 50 countries across the world.

These bandwidth intensive organizations typically purchase circuits ranging from 10 Gbps up to 400 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.

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 per second basis.

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

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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

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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.

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.

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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 sales and marketing organization comprises 63% of our employees and our sales representatives comprise 49% of our employees.

For the year ending December 31, 2021, we averaged a 7.0% monthly churn rate within our sales representatives.

This churn was caused primarily by failures to meet sales performance goals as well as departures precipitated, we believe, by our decision to return to a full-time, in office work environment and a requirement to be fully vaccinated against COVID-19 in the fall of 2021.

During 2021, we hired 371 new sales representatives and ended the year with 490 sales representatives, a net decrease of 79 sales representatives from our total sales representatives at the beginning of 2021.

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.

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In 2021, our average ratio of sales representatives with less than 12 months of tenure to regional learning managers was 19 to 1.

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

Our training group includes two additional trainers dedicated exclusively to training sales management, one technical trainer and one on-line curriculum trainer.

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.

All sales personnel receive four weeks of live, inter-active training during their first month, which focuses 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.

Our CEO addresses each new hire class in an interactive training session.

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.

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, a retirement savings plan, 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.

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

The health and safety of our employees is of utmost important to us, and we take all necessary precautions to safeguard our employees.

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.

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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.

A cross-functional team within Cogent has established safety procedures to transition employees for a return to office, including training and additional safety and sanitation supplies.

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In the summer of 2021, we began the process of transitioning back to an in-office environment.

As part of this process, we mandated that all employees in the United States and Canada, except those with legal exemptions, be vaccinated against the COVID-19 virus no later than October 2021.

In September 2021, all fully-vaccinated employees returned to our offices in the United States and Canada on a full-time basis.

All employees in the United States and Canada, regardless of vaccination status, returned to our offices in October 2021.

Similar to our efforts in North America, we also undertook efforts to return our employees in Europe and Asia to their offices, subject to local laws and regulations.

In November 2021, a majority of our employees outside of North America returned to the office full-time.

The spread of the Omicron variant around the world in December 2021 caused us to further modify our in-office environment.

First, we mandated that all U.S.

employees receive a COVID-19 booster vaccine no later than six weeks after first becoming eligible for such vaccine.

Second, we mandated that all US employees provide proof of vaccination to us.

Third, for offices around the world that had not been closed by government order, we shifted much of our workforce to a fully remote status at the end of 2021 in order to reduce the density of our offices.

Sales representatives with less than 12 months tenure, sales representative on performance improvement plans and their managers are currently still working in our offices on a full-time basis in the US, as we believe that the training and coaching required by new sales representatives is significantly more effective when provided in an in-office environment.

Sales and Marketing

3 unchanged sentences

Our quota bearing sales force includes 490 employees with 283 employees focused primarily on the corporate market and 207 employees focused primarily on the net-centric market.

As of December 31, 2020, our sales force included 712 full-time employees including 569 quota bearing sales force 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.

12 unchanged sentences

In addition, we conduct building events and public relations efforts focused on cultivating industry analyst and media relationships with the goal of securing media coverage and public recognition of our Internet access and private network services.

We face competition from incumbent telephone and cable companies, and facilities-based network operators, many of whom are much larger than us, have significantly greater financial resources, better-established brand names and large, existing installed customer bases in the markets in which we compete.

We face competition from incumbent telephone and cable companies, and facilities-based network operators, many of whom are much larger than us, have significantly greater financial resources, sales and marketing capabilities, better-established brand names and large, existing installed customer bases in the markets in which we compete.

We also face competition from new entrants to the communications services market.

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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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Because our fiber optic networks have been recently installed compared to those of the incumbent carriers, our state-of-the-art technology may provide us with cost, capacity, and service quality advantages over some existing incumbent carrier networks;

however, our network may not support some of the services supported by these legacy networks, such as circuit-switched voice, ATM, frame relay, wireless and shared hybrid fiber coax networks.

however, our network may not support some of the services supported by these legacy networks, such as circuit-switched voice, ATM, MPLS, frame relay, wireless and shared hybrid fiber coax networks.

While the Internet access speeds offered by traditional ISPs serving multi-tenant office buildings using DSL or cable modems typically do not match our on-net offerings in terms of throughput or quality, these slower services are usually priced lower than our offerings and thus provide competitive pressure on pricing, particularly for more price-sensitive customers.

2 unchanged sentences

Our services are subject to the regulatory authority of various agencies in the jurisdictions in which we operate.

As a provider of only Internet access and private networks to businesses regulation is generally light.

As a provider of only Internet access and private networks to businesses, regulation is generally not significant.

This benefits us in that we have flexibility in offering our services and ease of entry into new markets.

However, this light regulation generally extends to our competitors, some of whom are incumbent telephone and cable companies with whom we need to interconnect and from whom we acquire circuits for our off-net services.

However, this level of regulation generally extends to our competitors, some of whom are incumbent telephone and cable companies with whom we need to interconnect and from whom we acquire circuits for our off-net services.

The extent of regulation can change.

For example, the U.S.

Federal Communications Commission ("FCC") recently rescinded regulations applicable to mass market Internet access providers.

Federal Communications Commission (“FCC”) in 2017 rescinded regulations applicable to mass market Internet access providers.

In all jurisdictions regulations continue to evolve.

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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