[lug] Cogent pricing...

[Rob Nagler]

jb at forethought.net writes:
> Cogent basically owns the fiber. So their operational costs on an OC-192
> are very, very, very low. Probably a few thousand, not counting engineers 
> to keep it going.

Owning fiber is not "cheap"--as many backbone operators are finding
out.  They have massive debt which is costing them $8M per quarter.
Their operating expenses are $29M per quarter, including depreciation
of the fiber links and equipment ($11M).  The Network Operations cost
is $11M, which is a very high fixed cost for $14M in revenue.  It
costs them $7M for sales, which seems to be higher than the sales
group is bringing in every quarter.

Digressing further... :-)  There's no free lunch.  To get the fiber in
the ground, they had to pay a lot of money.  Now, when somebody buys
up their assets for 10% of their cost.  Yes, the'll be cheap, but not
free.

ViaWest paid $1M for the Verado facility ($18M invested).  That's a
great deal, but it doesn't make the facility free.  There's the lease,
peering, electricity, and operations.  And, they also have to fill the
facility.  With the current overcapacity and hardware getting smaller
and more powerful, it's going to be harder and harder to do this.

Rob