Cogent's Schaeffer: Our interconnections with AT&T, Verizon are nearly congestion free

Cogent is seeing its efforts to alleviate traffic congestion with AT&T (NYSE: T) and Verizon (NYSE: VZ) finally paying off with these networks becoming nearly free of any issues.

Speaking to investors during the Deutsche Bank 23rd Annual Leveraged Finance Conference, Dave Schaeffer, CEO of Cogent, said that the FCC's adoption of net neutrality rules that include Title II regulation, and passage of similar rules in the European Union, have led to ports on other networks becoming unclogged.

"The adoption of the Open Internet order and Title II jurisdictional authority were mirrored in the EU and on June 30 the European Commission adopted a set of regulations that were passed by the parliament and the council," Schaeffer said. "As a result of that we have seen significant port augmentations."

In particular, the service provider has seen its connections to Comcast become uncongested, while it continues to add capacity to AT&T and Verizon where it has signed agreements.

Cogent signed new interconnection agreements with AT&T and Verizon just as the FCC's new net neutrality went into effect. Like the pact Level 3 made with Verizon, the two companies can add capacity and establish new interconnection locations between their networks.

Schaeffer said AT&T and Verizon "are nearly congestion free and will be completely congestion free sometime in the fourth quarter."

Additionally, Cogent is conducting negotiations with Time Warner Cable, CenturyLink and a host of international providers such as Orange, Telefonica, and Deutsche Telekom.

"We are in active negotiations with Time Warner Cable and CenturyLink and we believe we will get deals done based on the threat of litigation under the current regulatory rules," Schaeffer said. "We have seen progress with Telefonica, Orange and even are in negotiations with DT so we hope that issues will subside."

Besides completing negotiations for peering arrangements, Cogent is also making new investments into its network centric sales force like it did on the business services side.

When it completes that process, the company expects its net centric growth rate to reaccelerate from 3 percent in the second quarter back to about 10 percent.

The company suffered a small set back when Ernie Ortega, chief revenue officer and VP of global sales, announced late last month he would leave the company due to a disagreement with Schaeffer over strategy and sales force compensation.

Schaeffer said that while Ortega helped scale the sales organization, his vision for the net centric side was not in line with where the company wanted to go.  

"Two and a half years ago, we brought Ernie in as a new sales leader and he helped us scale the organization and implemented a number of very successful initiatives that have resulted in lower turnover and better productivity out of those sales people," Schaeffer said. "As we began to make those changes on the net centric side, Ernie and the company had a different point of view on the cost of what those reps would be and ultimately we concluded we needed to bring someone else in to help us on that side."

Schaeffer added that "it is not an indication of any issues and we absolutely will be back in the double digit growth in 2015 versus 2014."

For more:
- listen to the webcast (reg req.)

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