Cogent's CEO encouraged by SD-WAN trials, but technology isn't ready for prime time

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Cogent's CEO says that while the company sees potential for software-defined wide area networking (SD-WAN), the overall solution isn’t hardened enough to be deployed on a large-scale basis.

Dave Schaeffer, CEO of Cogent, told investors during its third-quarter earnings call that a growing part of its customer base is interested in SD-WAN, but the service still needs work.

Dave Schaeffer, Cogent Communications
Dave Schaeffer

“We’re starting to see SD-WAN solutions emerge, but those SD-WAN solutions are still not quite ready for prime time in two respects: they don’t have complete standards uniformity yet and the overhead in running those is still relatively significant,” Schaeffer said.

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Regardless of the early challenges, Schaeffer said that Cogent is trialing SD-WAN solutions.

“We are testing multiple vendors and multiple products in our labs,” Schaeffer said. “Over the past couple of months, we have seen material improvements from various vendors on SD-WAN performance, but for customers that have a higher demand the products aren’t quite there yet.”

Many of Cogent’s customers are using a dedicated internet connection, while others are deploying virtual private line services instead of MPLS.  

Schaeffer said that SD-WAN combined with these approaches could be a way to steal MPLS share from incumbent providers.

“I firmly believe that 90% of the MPLS market is going to migrate to one of these strategies,” Schaeffer said. “For Cogent this is great news because we have no MPLS business to lose and only incremental business to win.”

Here’s a breakdown of Cogent’s key third-quarter metrics:

On-net revenues: On-net revenue was $87.9 million for the three months ended Sept. 30, 2017, up 2.7% sequentially and 7.4% year-over-year.

Off-net revenues: Off-net customers is located in buildings directly connected to Cogent's network using other carriers' facilities and services to provide the last mile portion of the link from the customers' premises to Cogent's network. Off-net revenue rose 2.6% sequentially to $34.9 million.

Financials: Cogent reported service revenue of $12 million, up 2.7% sequentially from the second-quarter of 2017.

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