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Item 1. Business

2024-02-29 compared with 2023-02-24 · 180 added, 119 removed, 225 unchanged (57% of the section changed)

We are a facilities-based provider of low-cost, high-speed Internet access, private network services, and data center colocation space.

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 51 countries across North America, Europe, Asia, South America, Oceania and Africa.

We are a facilities-based provider of low-cost, high-speed Internet access, private network services, and data center colocation space and power.

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

We deliver our services on our network to businesses, large and small, communications service providers and other bandwidth-intensive organizations in 54 countries across North America, Europe, Asia, South America, Oceania and Africa.

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

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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 400 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 (“MTOBs”) 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.

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

Our corporate customers are located in multi-tenant office buildings (“MTOBs”), which 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 either to 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.

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

We expanded selling our services to enterprise customers in connection with our acquisition of the Sprint Business (as defined below).

We define “enterprise” customers as large corporations (typically, Fortune 500 companies or companies with greater than $5 billion in annual revenue) running Wide Area Networks (“WANs”) with several dozen to several hundred sites.

Our enterprise customers generally purchase our services on a price per location basis.

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

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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 as a result of certain acquisitions.

Wavelength and Optical Transport Services

In connection with our acquisition of the Sprint Business (as defined below), we expanded our offerings to include optical wavelength services and optical transport services over our fiber network.

We are selling these wavelength services to our existing customers, customers of the Sprint Business and to new customers who require dedicated optical transport connectivity without the capital and ongoing expenses associated with owning and operating network infrastructure.

We are increasing the number of locations where we can sell wavelength services to meet customer demand.

We also provide certain non-core services because of certain acquisitions, including our acquisition of the Sprint Business.

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

We expect revenue from non-core services to continue to decline or to remain flat.

Acquisition of Sprint Communications

On September 6, 2022, Cogent Infrastructure, Inc., a Delaware corporation (the “Buyer”) and a wholly owned subsidiary of the Company, entered into a Membership Interest Purchase Agreement (the “Purchase Agreement”) with Sprint Communications LLC, a Kansas limited liability company (“Sprint Communications”) and an indirect wholly owned subsidiary of T-Mobile US, Inc., a Delaware corporation (“T-Mobile”), and Sprint LLC, a Delaware limited liability company and a direct wholly owned subsidiary of T-Mobile (the “Seller”), pursuant to which the Company will acquire the U.S.

We expect that our revenues from non-core services will decline.

Acquisition of the Sprint Business

On May 1, 2023 (the “Closing Date”), Cogent Infrastructure, Inc., a Delaware corporation and our direct wholly owned subsidiary (“Cogent Infrastructure”), closed on its acquisition of the U.S.

long-haul fiber network (including the non-U.S.

extensions thereof) of Sprint Communications and its subsidiaries (the “Wireline Business”).

The Purchase Agreement provides that, upon the terms and conditions set forth therein, the Company will purchase from the Seller all of the issued and outstanding membership interests of a Delaware limited liability company that holds Sprint Communications’ assets and liabilities relating to the Wireline Business (such transactions contemplated by the Purchase Agreement, collectively, the “Transaction”).

In connection with our pending acquisition of the Wireline Business, we will begin to provide optical wavelength services over our fiber network.

We will sell these wavelength services to our existing customers, customers of Sprint Communications and to new customers who require dedicated optical transport connectivity without the capital and ongoing expenses associated with owning and operating network infrastructure.

extensions thereof) of Sprint Communications and its Subsidiaries (the “Sprint Business”) in accordance with the terms and conditions of the Membership Interest Purchase Agreement (the “Purchase Agreement”), dated September 6, 2022, by and among us, Sprint Communications LLC, a Kansas limited liability company (“Sprint Communications”) and an indirect wholly owned subsidiary of T-Mobile US, Inc., a Delaware corporation (“T-Mobile”), and Sprint LLC, a Delaware limited liability company and an indirect wholly owned subsidiary of T-Mobile (the “Seller”).

On the Closing Date, we purchased from the Seller all of the issued and outstanding membership interests (the “Purchased Interests”) of Wireline Network Holdings LLC, a Delaware limited liability company that, following an internal

restructuring and divisive merger, holds Sprint Communications’ assets and liabilities relating to the Sprint Business (such transactions contemplated by the Purchase Agreement, collectively, the “Transaction”).

Corporate Structure after the Closing Date

The Company operates through its two direct, wholly owned subsidiaries, Cogent Infrastructure and Cogent Communications Group, Inc.

(“Cogent Group”).

Cogent Infrastructure holds the Sprint Business operations.

Following the Closing Date, Cogent Infrastructure, through its subsidiaries, owned, among other things, the Sprint Network (as defined below), consisting of approximately 20,000 fiber miles of fiber optic cable in the continental United States, a portfolio of owned properties totaling approximately 1.9 million square feet.

Sprint operating subsidiaries in over 30 countries worldwide, approximately 1,300 Sprint customers, both enterprise and wholesale, vendor and supply agreements and over 9.7 million IPv4 addresses.

Cogent Group is the parent of Cogent Communications, Inc., which was our sole operating company prior to the Closing Date, and Cogent Group is the issuer of our $500.0 million of 3.50% senior secured notes due in May 2026 (“2026 Notes”) and our $450.0 million of 7.00% senior unsecured notes due in June 2027 (“2027 Notes”).

Cogent Group owns, among other things, our IRU network, Cogent data centers, Cogent operating subsidiaries in 54 countries worldwide, our corporate and net-centric customer base and over 28 million IPv4 addresses.

Cogent Group also receives payments due from T-Mobile for IP transit services in connection with the Transaction.

We have moved and may continue to move, to the extent permitted by and in compliance with the indentures governing our 2026 Notes and 2027 Notes, certain assets and obligations between the companies owned by Cogent Infrastructure and Cogent Group to better align these assets and obligations with our business and operations and for general corporate purposes.

Competitive Advantages

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.

After our acquisition of the Wireline Business we will be offering services to larger enterprise customers.

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

With our acquisition of the Sprint Business, we began offering services to larger enterprise customers.

We believe that our organization has the following competitive advantages:

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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 offerings 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 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 21.0%.

Important components of our low cost operating strategy include:

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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.

Our single network protocol allows us to avoid many of the costs that our competitors who operate circuit-switched, time-division multiplexing (“TDM”) and hybrid fiber coaxial networks incur related to provisioning, monitoring and maintaining multiple transport protocols.

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.

● Widespread 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.

This 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 provide us long-term access to dark fiber at attractive rates and the opportunity in many cases to extend these leases for multiple terms.

We have acquired a large portfolio of dark fiber leases from over 325 dark fiber vendors from around the world sourced from the excess inventory of existing networks.

The nature of this portfolio and the individual leases provide us long-term access to dark fiber at attractive rates and, in many cases, the opportunity 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 308 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.

In addition, with our acquisition of the Sprint Business, we now own a nationwide domestic fiber network (the “Sprint Network”).

Acquiring the Sprint Network allows us to capitalize on the benefits of owning network without significant upfront capital investment.

The Sprint Network is mostly complementary to our

existing leased dark fiber network, offers unique geographic routes and will allow us to reduce our reliance on leased dark fiber.

This strategic combination of owned and leased dark fiber will help to ensure a robust and reliable network and enables us to connect via dark fiber to virtually any geographic route or facility we require on a long-term, cost-effective basis.

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 MTOBs and carrier neutral data centers (“CNDCs”) or off-net through other carriers’ “last mile” connections to customer facilities.

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

The addition of optical wave and optical transport services and our decision to continue to support MPLS VPN services for our acquired customers are consistent with this strategy.

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.

We believe that the relative size of our salesforce training, support and overhead is lower than comparable telecom providers that 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.

The addition of optical waves and optical transport services to our product set has not altered this configuration.

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.

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

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

We design and build all of our network hubs, points of presence (“PoP”s), and data centers to the same standards and configurations.

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

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In our on-net 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 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.

In the 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, including our newer optical wave and optical transport offerings.

The structure of our on-net service provides us with more control over our service, its 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.

The vast majority of our on-net internet and VPN 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 .

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.

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

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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.

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 3,155 total buildings located in 219 metropolitan markets.

These buildings include 1,837 large MTOBs (totaling 1.0 billion 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.

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, and 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 locations and the potential impact of climate change on a location including proximity to water and the risk of flooding.

Our network is connected to 3,277 total buildings located in 228 metropolitan markets globally.

These buildings include 1,862 large MTOBs (totaling over 1.0 billion 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 1,558 CNDCs located in 1,347 buildings in North America, Europe, Asia, South America, Oceania and Africa where our net-centric customers directly interconnect with our network.

We also operate 54 of our own 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.

Our anticipated acquisition of the Wireline Business will add approximately 45 data centers to our network.

As of December 31, 2023, we also operate 68 of our own data centers (13 of which converted from facilities acquired with the Sprint Business) across the United States and in Europe, which comprise over 1.3 million square feet of floor space, offer 125 MW of power, 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 7,792 access networks as well as numerous large and small content providers and 44,844 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 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.

We currently serve 7,988 access networks as well as numerous large and small content providers, 54,493 corporate customer connections and 20,740 enterprise customer connections.

Because 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 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 originating customer and terminating customer.

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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, excluding the pending acquisition of the Wireline Business, and managed the expansion and growth of our business.

We anticipate that our management team will successfully manage the integration of the Wireline Business into our current operations.

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.

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

We anticipate that our management team will successfully manage the integration of the Sprint Business into our current operations.

We intend to remain a 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:

Grow our Corporate Customer Base.

Our on-net corporate customers are typically small to medium-sized businesses connected to our network through MTOBs or connected to our network through one of our CNDCs.

Our on-net corporate customers are typically small to medium-sized businesses connected to our network through MTOBs or connected to our network through one of our on-net CNDCs.

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

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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.

After our acquisition of the Wireline Business we will be offering services to larger enterprise customers.

Expand our Business with Enterprise Customers .

With our acquisition of the Sprint Business, we acquired a number of larger enterprise customers.

While we are in the process of terminating certain non-core services to these customers at the end of their current term, we have continued to provide our core services to enterprise customers and elected to provide MPLS services, a new service for the Company, as well.

We have not previously focused our sales efforts on larger enterprise customers.

Since the acquisition of the Sprint Business, we have formed dedicated sales teams who are tasked with preserving existing business with and seeking new sales from enterprise customers.

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 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 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, voice over IP, 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:

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● Large and dedicated salesforce – Our team of 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;

● The customers of the Wireline Business will include a number of large enterprise customers, a type of customer that we have not traditionally served.

Develop a Worldwide Peering Platform.

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

Our Global Peer Connect product provides access to our Global Peer Exchange 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 currently serve over 400 connections via our Global Peer Exchange.

● Wave and optical transport services – We began offering wave and optical transport services to our net-centric customers who require these high bandwidth services

Pursue On-net Customer Growth.

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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 MTOBs and CNDCs to our network.

We are also upgrading our network and operational infrastructure to provide wave and optical transport services in more of our on-net buildings.

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

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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.

We also intend to leverage the skills and relationships of our sales force to sell new service offerings, in particular, optical wavelength and optical transport services.

We have developed several training programs that are directed toward increasing our sales representative tenure and increasing our sales representative productivity.

Expand our Off-net Corporate Internet Access Business.

We have agreements with over 500 national and international carriers providing us last mile network access to over 4 million commercial buildings that are lit by fiber optic cable across North America and that are not currently served by our network.

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.

In addition, we have required all of our employees to work in the office on a full-time basis, thereby providing additional opportunities for management coaching and oversight in order to increase productivity.

Expand our Off-net Corporate and Enterprise Internet Access and VPN Business.

We have agreements with over 620 national and international carriers providing us last mile network access to over 6 million commercial buildings that are lit by fiber optic cable in the 54 countries we serve and that are not currently served by our network.

We believe these agreements broaden our addressable market for corporate dedicated internet access and private network services 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 private network services 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.

Expand our Product Offerings to Include Wavelength and Optical Transport Services .

In connection with our pending acquisition of the Wireline Business of Sprint Communications, we will begin to provide optical wavelength and optical transport services, initially in the United States, over our fiber network.

We will sell these services to our existing customers, customers of Sprint Communications and to new customers who require dedicated optical transport connectivity without the capital and ongoing expenses associated with owning and operating network infrastructure.

In connection with our acquisition of the Sprint Business, we expanded our offerings of optical wavelength and optical transport services over our fiber network.

We are selling these services to our existing customers, customers acquired with the Sprint Business and to new customers who require dedicated optical transport connectivity without the capital and ongoing expenses associated with owning and operating network infrastructure.

We currently offer wavelength services in 401 CNDCs and intend to offer this service in approximately 800 CNDCs in the United States and Mexico by the end of 2024.

We believe our wavelength service has the advantages of unique routes, ubiquitous service locations, faster provisioning times and lower prices.

Expand our Data Center Footprint .

We currently operate 68 of our own data centers across the United States and Europe.

As part of our acquisition of the Sprint Business, we acquired multiple Sprint facilities that previously housed Sprint equipment.

We evaluated the suitability of these facilities for conversion to commercial data center space and began repurposing suitable facilities.

Repurposing these facilities included removing unused, obsolete equipment and racks, and upgrading or installing new HVAC systems, uninterruptable power supplies (“UPS”), backup generators and fire suppression systems as well as other structural changes.

By the end of 2023, we had converted 13 former Sprint facilities and are in the process of converting approximately 30 additional facilities.

If and when these facilities are all suitable for data center customers, we will have added 1.31 million square foot of floor space and approximately 113 MW of available power to our data center portfolio.

Increase our Leasing of IPv4 Address Space.

We lease IPv4 address space to our customers, both on a standalone basis and as a complement to a customer’s internet access services with us.

We provide a small number of free IPv4 addresses to our dedicated internet access customer as well.

We currently own approximately 38 million IPv4 addresses, of which 9.9 million were recently acquired at the closing of the Sprint Business acquisition.

We currently lease nearly 11.1 million of our IPv4 addresses to our customers on contracts with service terms ranging from 1 month to 5 years.

We intend to continue to lease IPv4 addresses to our customers as well as explore alternatives for monetizing our IPv4 address inventory.

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

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 packet switched traffic at lower cost than networks built as overlays to traditional circuit-switched telephone networks.

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

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

Our network is comprised of 3,277 buildings which are on-net, and we serve 228 metropolitan markets in North America, Europe, Asia, South America, Oceania and Africa.

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

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.

Due to our network design and acquisition strategy, we believe we are positioned to grow our revenue and increase our profitability with limited incremental capital expenditures.

Our network consists of owned optical fiber in the Sprint Network and leased optical fiber on a long-term basis from carriers with large amounts of unused fiber to which we directly connect our own optical equipment and Internet routers to form our optical fiber national backbone.

We have expanded our network by acquiring owned and leased fiber through key acquisitions of financially distressed companies or their assets at a significant discount to their original cost.

Due to our network design and acquisition strategy, we believe we are positioned to grow our revenue and increase our profitability with incremental capital expenditures.

Inter-city Network.

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.

We install the optical and electronic equipment necessary to amplify, regenerate, and route the optical signals along these networks.

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

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.

Our inter-city network is comprised of the approximately 19,000-mile inter-city portion of the Sprint Network and long-term, leased strands of optical fiber, typically two, out of the multiple fibers owned from various dark fiber vendors.

We install the optical and electronic equipment necessary to amplify, regenerate, and route the optical signals along this network.

We maintain, repair, upgrade and replace the Sprint Network and we pay our dark fiber vendors our annual pro rata fees for these same services, often called “operation and maintenance” for the leased optical fiber.

For both the owned and leased portions of our fiber network, we provide our own equipment maintenance.

Intra-city Networks.

In each metropolitan area in which we provide our high-speed on-net Internet access services, our backbone network is connected to one or more routers that are connected to one or more of our metropolitan optical networks.

We created our intra-city networks by obtaining the right to use optical fiber from carriers with optical fiber networks in those cities.

Our intra-city networks are a combination of the 1,300 miles of owned Sprint Network and our rights to use optical fiber that we obtained from carriers with optical fiber networks in those cities.

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

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.

Our metropolitan fiber runs in a ring architecture, which provides redundancy so that if the fiber is cut, data in our IP network 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.

Multi-Tenant Office Buildings (“MTOBs”).

Multi-Tenant Office Buildings.

We have network access to a portfolio of 1,862 MTOBs which provide us access to a highly attractive base of bandwidth intensive tenants.

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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.

Our network is collocated in and can provide connectivity to customers in 1,558 CNDCs located in 1,347 buildings across our footprint.

CNDCs are an integral component of the Internet infrastructure where content providers, application service providers, carriers and corporate customers 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, and after our anticipated acquisition of the Wireline Business, wavelength services.

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, and after our acquisition of the Sprint Business, wavelength services.

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.

We operate an intra-city fiber network to CNDCs optimized for IP services and optical wavelength services in the US and Mexico.

Cogent Data Centers.

We operate 68 data centers across the United States and in Europe.

These facilities comprise over 606,000 square feet of floor space and are directly connected to our network.

Each location is equipped with secure access, uninterruptable power supplies (“UPS”), and backup generators.

These facilities comprise over 1.3 million square feet of floor space with 125 MW of available power and are directly connected to our network.

Each location is equipped with secure access, UPS, and backup generators.

Our customers typically purchase bandwidth, rack space, and power within these facilities.

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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 7,769 networks who pay to exchange traffic with us as customers.

We supplement our customer network interconnections with settlement-free peering to our non-customer ISPs.

We currently interconnect with 7,988 networks that pay us to exchange traffic as our customers.

We supplement our customer network interconnections with settlement-free peering to our non-customer tier one global ISPs.

We have settlement-free private peering interconnections between our network and 23 other major ISPs who are not our customers.

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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.

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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.

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Network Management and Customer Care.

Our primary network operations centers are located in Washington, D.C.

and Madrid, Spain.

Following our acquisition of the Sprint Business, our primary network operations centers are located in Washington, D.C., Herndon, Virginia, Overland Park, Kansas and Madrid, Spain.

These facilities provide continuous operational support for our network.

Our network operations centers are designed to immediately respond to any problems in our network.

Our customer care call centers are located in Washington, D.C., Herndon, Virginia, Madrid, Spain, Paris, France, and Frankfurt, Germany.

Our customer care call centers are located in Washington, D.C., Herndon, Virginia, Atlanta, Georgia, and Madrid, Spain.

To ensure the quick replacement of faulty equipment in the intra-city and long-haul networks, we have deployed field engineers across North America and Europe.

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

In connection with our acquisition of the Wireline Business we will be adding network operations centers in Kansas City, Kansas, Atlanta, Georgia, Dallas, Texas and Orlando, Florida.

Field Services.

Our field services organization includes over 400 employees globally.

The department facilitates the deployment, maintenance, and support of products or services in our data centers, network PoPs, CNDCs and MTOBs.

This department is responsible for on-site activities, ranging from initial installations and configurations to troubleshooting, repairs, and upgrades.

Field Services is also responsible for deployment, repair and reconfiguration of the approximately 20,000 miles of fiber optic cable comprising the Sprint Network.

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, Oceania and Africa.

Our corporate customers primarily purchase direct internet access from us on-net in MTOBs and CNDCs or off-net through other carriers’ “last mile” connections to those customer facilities in metropolitan markets in North America.

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

corporate customers, which primarily include small and medium-sized businesses located in North America, enterprise customers, 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, Oceania and Africa.

Our corporate customers primarily purchase dedicated internet access from us on-net in MTOBs and CNDCs 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.

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

We have agreements with multiple national, international 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.

We have agreements with multiple national, international and regional carriers providing us “last mile” network access to over 6 million buildings.

We believe these agreements broaden our addressable market for corporate dedicated internet access, VPN services and/or MPLS 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.

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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 currently offer wavelength services in 401 CNDCs, and we intend to offer these services in approximately 800 CNDCs in the United States and Mexico by year-end 2024.

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We began to serve enterprise customers in connection with our acquisition of the Sprint Business.

We define “enterprise” customers as large corporations (typically, Fortune 500 companies or companies with greater than $5 billion in annual revenue) running WANs with several dozen to several hundred sites.

Enterprise customers generally purchase dedicated internet access, MPLS and other services in on-net and off-net locations.

Our enterprise customers generally purchase our services on a price per location basis.

We offer lower prices for longer term and volume commitments.

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As of December 31, 2023, we had 1,947 employees located in 25 different countries in a variety of different roles.

Approximately 82.2% of our employees are located in the United States and Canada, 16.8% are located in Europe and 0.9% are located in Asia.

Approximately 87% of our employees are located in the United States, Canada and Mexico, 11.2% are located in Europe and 1.6% are located in Asia and 0.2% in South America.

As of December 31, 2023, 34% of our employees were quota-bearing sales representatives, 10% were in sales management or sales support roles and 56% were in operational or administrative functions.

Unions represent 27 of our employees in France.

The employees of the Wireline Business that operates in Germany are governed by a works council.

Unions represent 32 of our employees in France and 3 of our employees in Sweden.

The employees of the Sprint Business that operate in Germany are governed by a works council.

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

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Diversity and Inclusion .

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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.

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

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

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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.

While we monitor overall employee retention, we focus in particular on sales representative retention with objective performance criteria, 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.

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This churn was caused primarily by failures to meet sales performance goals as well as departures precipitated, we believe, by our decision to require all employees to adhere to a full-time, in office work environment as well as a tightening labor market creating increased competition when hiring.

During 2022, we hired 401 new sales representatives and ended the year with 548 sales representatives, a net increase of 58 sales representatives from our total sales representatives at the beginning of 2022.

During the year ended December 31, 2023, we hired 478 new sales representatives and ended the year with 657 sales representatives, a net increase of 109 sales representatives from our total sales representatives at December 31, 2022.

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.

A total of 942 employees transitioned to the Company on the Closing Date in connection with the acquisition of the Sprint Business.

From the Closing Date through December 31, 2023, we terminated 94 of these employees and 90 voluntarily resigned after a material reduction in their job duties.

We paid approximately $16.2 million in severance costs, to qualifying employees, in accordance with the terms of the Purchase Agreement.

We have been fully reimbursed for these severance costs by the Seller.

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.

We recognize the importance of retaining our employees, and we continually strive to improve the performance of our 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.

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As part of our commitment to professional development of our sales personnel, 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 2022, our average ratio of sales representatives with less than 12 months of tenure to regional learning managers was 21 to 1.

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, interactive training during their first month, which focuses on developing both general and Cogent-specific sales skills.

For the year ended December 31, 2023, our ratio of sales representatives with less than 12 months of tenure to regional learning managers was 22 to 1.

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

Our trainers also conduct training in our offices to learn new skills and reinforce existing skills.

All sales personnel receive live, interactive training during their first month of employment, 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.

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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, a retirement savings plan, 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 eligible employees, healthcare benefits, life insurance, a retirement savings plan, and paid time off and family leave.

Employee Engagement .

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With respect to our decision to require all employees to work in an in-office environment, we continue to mandate that all employees in the United States and Canada, except those with legal exemptions, be vaccinated against the against the COVID-19 virus.

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Sales and Marketing

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As of December 31, 2023, our sales force included 847 full-time employees.

Our quota bearing sales force includes 548 employees with 332 employees focused primarily on the corporate market and 216 employees focused primarily on the net-centric market.

Our quota bearing sales force includes 657 employees with 374 employees focused primarily on the corporate market271 employees focused primarily on the net-centric market and 12 employees focused primarily on the enterprise market.

As of December 31, 2022, our sales force included 698 full-time employees, including 548 quota bearing sales force employees with 332 employees focused primarily on the corporate market and 216 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 MTOBs and CNDCs.

Through agreements with building owners and CNDC operators, we are able to initiate and maintain personal contact with our customers by staging various promotional and social events in our MTOBs and CNDCs.

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

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Our marketing efforts are designed to drive awareness of our products and services, to identify qualified leads through various direct marketing campaigns and to provide our sales force with product brochures, collateral materials, in building marketing events and relevant sales tools to improve the overall effectiveness of our sales organization.

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.

In addition, we conduct building events and public relations efforts focused on cultivating

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industry analyst and media relationships with the goal of securing media coverage and public recognition of our Internet access, colocation 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, sales and marketing capabilities, better-established brand names and large, existing installed customer bases in the markets in which we compete.

With respect to our new optical wave and transport service, our competitors have offered these services for many years and have established customer bases and processes and practices.

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

Many of these companies offer products and services that are similar to our products and services.

Unlike some of our competitors, we generally do not have title to most of the dark fiber that makes up our network.

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 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.

For the portions of our network that are leased under indefeasible rights of use, or IRUs, from providers, some of which compete with us, we do not have title to the dark fiber.

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

We also depend 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, billing simplicity and brand recognition.

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, MPLS, frame relay, wireless and shared hybrid fiber coax networks.

While the Internet access speeds offered by traditional ISPs serving MTOBs 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.

These and other downward pricing pressures particularly CNDCs have diminished, and may further diminish, the competitive advantages that we have enjoyed as the result of the pricing of our services.

These and other downward pricing pressures, particularly in CNDCs, have diminished, and may further diminish, the competitive advantages that we have enjoyed as the result of the pricing of our services.

Increasingly, traditional ISPs are upgrading their services using optical fiber and cable technology so that they can match our transmission speed and quality.

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

The acquisition of the Sprint Network has provided additional competitive benefits.

While the Sprint Network was built in the 1980s (the nation’s first transcontinental fiber network), we believe it is of high quality and superior to many newer networks.

First, it has had only one owner, which ensures accurate and up-to-date records and mapping.

Second, it has been well maintained by a tenured engineering and field team, many of whom transitioned with the acquisition and remain employed with the Company.

Third, the fiber is buried deeper than newer networks with stronger sheathing, mitigating some of the damage caused by inadvertent cuts.

Lastly, it is one consistent standard of fiber – SMF28 - which is ideal for the requirements of today’s traffic, particularly wave services, with the new optronics we are adding to the network.

Our network 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 not significant.

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

In October 2023 the FCC voted to move ahead with a plan that would restore net neutrality rules and common-carrier regulation of Internet service providers.

The proposal would reclassify broadband as a telecommunications service, a designation that allows the FCC to regulate ISPs under the common-carrier provisions in Title II of the Communications Act.

In all jurisdictions regulations continue to evolve.

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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.

Our fiber network and associated facilities and equipment particularly in the United States are also subject to the regulatory authority of various agencies in which the network and facilities are located.

These regulations include environmental, health and safety reporting and compliance.

We have established a compliance team to manage this effort.

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Available Information

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 through a link on 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 also made available through a link to the SEC’s Internet website at www.sec.gov .

You can find these reports and request a copy of our Code of Conduct on our website at www.cogentco.com under the “About Cogent” tab at the “Investor Relations” link.

You can find these reports and request a copy of our Code of Conduct on our website at www.cogentco.com under the “About Cogent” tab at the “Investor Relations” link under “Reports” and under “Governance” at “Corporate Governance Documents”.

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