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Schaeffer said investors should not expect price stability, arguing that price per bit has fallen at about 23% per year, which he said has kept the total addressable market “in dollar terms flat.” He said price compression is likely to continue “perpetually” due to competition at both the end-user and backbone levels.
Cogent’s sustainable advantage, he said, is its network architecture designed to deliver the lowest cost of producing what he called an “interface-routed bit mile.” He pointed to long-term improvements in Wavelength Division Multiplexing and optically interfaced routers as key technologies that allow costs to decline. Schaeffer said Cogent captures these advances more effectively than legacy providers, enabling it to keep some benefits as profit while passing some on to customers.
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He added that Cogent typically prices at a 50% discount to the market average, which he said has contributed to it becoming the largest carrier of internet traffic globally.
Schaeffer said internet services represent more than 85% of Cogent’s revenue. In the end-user market, he said Cogent has roughly 1.1 billion square feet of multi-tenant office space on-net and offers service installed “nine times faster” than competitors, with “three times” better reliability and “30–60 times” the symmetric throughput for price parity. He said this has resulted in a 35% market share in 11% of office space in North America.
However, he characterized most of the remaining office market as not economically serviceable due to fiber extension costs, customer acquisition costs, and building size economics. Cogent maintains an off-net business relying on others for last-mile fiber, but Schaeffer said the company’s competitive advantage is lower there.
In wholesale, or its “Net-centric” business, Schaeffer said Cogent connects to 1,902 data centers in 307 markets across 57 countries over its own network. He cited a terrestrial long-haul footprint of about 93,000 route miles and about 33,000 route miles of metro fiber. He also said the competitive landscape has shrunk significantly, estimating that the number of “legitimate global carriers” has declined from about 25 a decade ago to six or seven today, and suggesting the market could ultimately stabilize with fewer than five players.
Schaeffer differentiated internet connectivity—routed across many networks—from wavelength services, which he said customers value for security, large packet transmission, and predictable latency with defined paths. He said Cogent did not enter the Wavelength Division Multiplexing business until 2023, and framed the Sprint transaction as two concurrent acquisitions: an operating customer business and a separate long-distance network asset.
He said the customer business acquired from Sprint was “burning almost $1 million a day of cash,” and Cogent negotiated with T-Mobile to buy the business while receiving a $700 million payment stream. He said Cogent removed costs, eliminated products, reduced the customer base, and turned it “marginally profitable.”
He described the primary strategic rationale as acquiring the dormant Sprint long-distance voice network for $1 and repurposing it to sell wavelengths. Cogent spent more than two years connecting that network to 1,096 data centers in North America and said it can provision a wavelength between any of those facilities in 30 days or less.
Schaeffer pegged the total addressable market for wavelengths at about $7 billion globally, including $3.5 billion in North America. He said Cogent is focused on the $2 billion “inner-city data center to data center” segment rather than the $1.5 billion local market dominated by incumbents. He said wavelengths currently represent about 4% of Cogent revenue and grew 100% year-over-year, but that the company’s market share is about 2% today.
He outlined a “five-prong value proposition” for winning share: more data centers, faster provisioning, unique routes, higher reliability, and lower price. Unlike its internet business, he said wavelengths are custom-priced by route distance.
Schaeffer said investors focus on three areas: top-line growth, margin expansion and cash flow, and balance sheet discipline. He acknowledged that following the Sprint customer acquisition, Cogent posted nine quarters of negative top-line growth, contrasting that with an 18-year pre-Sprint public-company average of 10.2% organic growth. He said Cogent has now “reverted to top line growth” and called the company a growth business again.
Looking ahead, Schaeffer said Cogent expects:
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Top-line growth of 6%–8% per year on a multi-year glide path
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EBITDA margin expansion driven by mix shift toward on-net traffic, at a minimum of 200 basis points per year
He said on-net products carry “90%+ incremental EBITDA” contribution margins, and cited fourth-quarter 2025 results in which 80% of sales were on-net. He also described waves as a potentially disproportionate contributor to on-net growth given the business’s low current penetration relative to other segments.
On capital allocation, Schaeffer said Cogent’s model is capital efficient, estimating roughly $100 million of long-term average annual capital spending plus about $40 million of principal payments on capital leases. He said the company has about $2 billion of gross debt and intends in the near term to accelerate de-levering using free cash flow and asset divestitures. Cogent previously reduced its dividend after leverage rose above its comfort zone, and Schaeffer said management has committed to returning to 4x net leverage before accelerating shareholder returns again.
He also downplayed near-term M&A, saying it is unlikely in the current environment, while highlighting ongoing geographic expansion—most notably in India after nearly a decade of licensing efforts—and saying Thailand is expected to come on-net in about 60 days. He said Cogent typically adds about 120 carrier-neutral data centers per year to its footprint and recently expanded in Japan from Greater Tokyo to Osaka.
In an update on plans to monetize parts of the acquired real estate portfolio, Schaeffer said Cogent gained 482 buildings totaling 1.9 million square feet with 230 MW of inbound power as part of the Sprint assets, along with 20,200 miles of dark fiber. After reassessing the value of inbound power, Cogent launched a one-year, $100 million retrofit program in June 2024 covering 125 buildings, and decided to divest 24 larger facilities that it believes are beyond its ability to fill. He said the retrofit project was completed at the end of June 2025.
Schaeffer described an initial two-building sale that reached a price agreement but ultimately did not close after the counterparty requested vendor financing; Cogent withdrew. He said the company subsequently signed a new, non-binding letter of intent for 10 data centers at a valuation “substantially higher” than $144 million referenced in the earlier deal, and said Cogent plans to pursue additional transactions for the remaining facilities.
Finally, Schaeffer detailed a refinancing plan for unsecured notes due in 2027. He said Cogent is restructuring assets and liabilities among subsidiaries, including moving finance leases out of the main borrowing group and committing proceeds from the initial 10-facility sale into the borrower group. He said Cogent expects to issue $750 million of secured debt—most likely with a seven-year duration—to repay $750 million of unsecured debt, extending maturities so the nearest maturity would be about six years. He said the moved capital leases would have an average remaining life of nearly 21 years.
In closing remarks, Schaeffer described Cogent as a stable business that has been public for 21 years, said it has returned to top-line growth after the Sprint-related decline, and argued the company has multiple balance sheet levers to support liquidity and potentially resume accelerated capital returns within a couple of years.
Cogent Communications (NASDAQ:CCOI) is a multinational Internet service provider specializing in high-speed Internet access and data transport services. The company operates one of the largest Tier 1 IP networks in the world, offering wholesale and enterprise customers reliable, low-latency connectivity. Cogent’s core services include dedicated Internet access, Ethernet transport, wavelength services, and MPLS-based IP Virtual Private Networks, all delivered over its privately owned, fiber-optic backbone.
In addition to network connectivity, Cogent provides data center colocation and managed services designed to support businesses with demanding bandwidth and redundancy requirements.
The article “Cogent Communications CEO: AI Could Reignite Internet Traffic as Price Compression Persists” was originally published by MarketBeat.
