Oct. 2, 2002 -- Cogent Communications will offer free colocation space in three newly-acquired data centers to customers who purchase the company's connectivity, the company said yesterday.
The facilities in Los Angeles, New York City and Herndon, Va. were among the assets Cogent acquired from the bankrupt PSINet in April for $10 million.
Cogent is offering a free rack of colo space to customers who purchase 100 Mbps Internet connections at any of the three new colocation facilities. The offer is a short-term promotion, rather than a permanent policy, according to Cogent vice president of sales Bruce Wagner. But customers who accept the offer will receive a free rack for the lifetime of their bandwidth contract.
The use of free colo space as a hook to sell other services presents a challenge to companies focused on colocation, as the collision of dueling business models may place additional pressure on colo pricing.
The move continues an aggressive expansion in which Cogent has grown rapidly by acquiring the assets of distressed providers. In the past year Cogent has bought assets from NetRail, Allied Riser, OnSite Access and FiberCity Networks in addition to PSINet.
"Cogent is once again providing a value to the customer that will be nearly impossible for other providers to match," said company CEO Dave Schaeffer.
"We see these colo sites as a great opportunity to drive customers to our bandwidth," said Wagner. "We acquired these colos for a very good price versus what it cost to build them. The cost basis in these facilities is quite low."
Cost is the key ingredient in Cogent's business model, which is designed to pass those savings along to its customers. Cogent describes its pricing as "radically low" and features a 100 Mbps hookup for just $1,000 a month for end-users and $3,000 a month for resellers. By comparison, a T1 connection provides connection speed of about 1.5 Mbps.
The three new data centers provide more than 85,000 square feet of hosting space, enough to house 1,900 customer racks. Wagner said the free rack space offer is designed to attract customers who want to benefit from Cogent's pricing, but currently don't have access to the company's network.
According to colo brokerage Band-X, the average monthly cost of a rack in North America is $894 a month. While many colo providers offer lower pricing, free rack space could offer significant savings over time.
Cogent Communications is a Tier 1, facilities based, all-optical ISP focused on delivering ultra-high speed Internet access and transport services to businesses in the office market and to ISPs. The company is based in Washington, DC