Cogent Communications CEO Dave Schaeffer |
With seven startups under his belt, it would be an understatement to say Dave Schaeffer is a prolific entrepreneur. Schaeffer in 1999 founded and is CEO of Cogent Communications Inc., North America’s largest ISP, which has grown in part through 13 acquisitions. The following is an excerpt of a recent conversation between Schaeffer and xchange Editor in Chief Paula Bernier.
XC
: 2006 is xchange magazine’s 10th anniversary and the 10-year anniversary of the Telecom Act. What are your thoughts on how the Telecom Act of ’96 played out and the status of the telecom environment today?DS
: In looking at the goals of the Telecom Act, by any objective standard you would have to say it has been a failure. Its primary mission was to create competition in the industry, and it has not been successful. We’ve seen regulators focusing now on other issues, and it appears we’re headed back to either monopoly or duopoly reconvergence, let’s call it.XC
: On a more personal note, what were you doing 10 years ago?DS
: I had just sold my SMR businesses to what became Nextel and had just started the company I started before Cogent. Cogent is my seventh startup. The previous company was a company called Pathnet. I was just founding that company at that point.Pathnet’s mission was to aggregate excess telecommunication capacity from utilities into a nationwide network, and then sell that access to other service providers. It actually grew to a pretty large size. We ended up growing the business, signing up 63 utilities and a number of service provider customers to buy our bandwidth. We were probably a victim of the boom, in the sense that we raised over $3 billion in capital, a large portion of that being in debt.
When I left the company it was actually relatively healthy. I brought on the ex-CEO of Nynex; I became chairman for a while and then left to found Cogent. But about two years after I left, the company ultimately collapsed.
XC
: What regulatory issues are front-of-mind for Cogent?DS
: In founding Cogent, one of the things I worked very hard on as I put the business plan together was to come up with a business model that was independent of any kind of regulatory oversight. We function entirely as an Internet service provider, therefore [we are] classified by the FCC as an ESP, or enhanced service provider, and are exempt from federal or state regulation. So we kind of sit outside of the regulatory milieu that the CLEC industry is so quagmired in.XC
: You say you’re unaffected by regulations, but what about net neutrality?DS
: Net neutrality, I guess, obliquely impacts us, but not directly. We at Cogent have focused on being a pure Internet service provider. We’re actually the second-largest carrier of Internet traffic in the world today, carrying about 12 percent of world’s traffic. So I guess we’re somewhat inoculated to those concerns because of the scale and amount of traffic that we carry. So it’s very difficult for a regional Bell company to take too hard of a stance, simply because of the breadth and size of our network. But for some smaller providers, which I think are the true core of this industry, net neutrality is a big issue. But even the definition of what that means is still ambiguous.XC
: Do you expect to see new federal telecom legislation this year?DS
: Probably not this year. I think over the next couple of years. It is important to remember the RBOCs are actually the largest political contributors in 49 of the 50 states. If you look at the top contributor in each state, except Alaska, every one of them is the local phone company. With that, we’ll only see new telecom regulation when they totally figure out what they want. ...XC
: In a telecom environment that many believe is moving to a handful of megacarriers, how does Cogent fit in?DS
: ... on the core backbone, as prices continue to fall and there is continued pressure on operating margins, we’re seeing a lot of companies either abandon that space or get into significant financial trouble. Our belief is that that market, as prices continue to fall, is probably large enough to support somewhere between two and four global players. Today, there’s probably only a dozen or less true global backbones, and that’s down from 50 or 60 a few years ago. When we started Cogent, there were 13,000 facilities-based ISPs in the world. Today, there’s less than 1,000. So at the core we think the market continues to go to that dozen or so down to about three or so.For an extended version of this interview, click here.
| Links |
| Cogent Communications Inc. www.cogentco.com |
