Industry Spotlight: Cogent’s Dave Schaeffer on Net Neutrality

January 31st, 2010 by · 7 Comments

When the issue of Network Neutrality gets discussed in the media, usually we hear from the same cast of characters:  ILECs and Cable MSOs on one side, and the most outspoken content providers on the other.  But there are other voices amongst the competitive service providers that don’t fit that mold.  One such voice is that of Dave Schaeffer, Founder and CEO of Cogent Communications – one of the few fiber operators out there actively supporting Network Neutrality.

TR: You have stated that Network Neutrality is good for ISPs.  Nobody likes additional regulation for its own sake, so what benefits will ISPs get from it?

ISPs and consumers will see new applications continue to be developed. These applications will drive more traffic and will enhance the importance of the Internet.

TR: Network Neutrality can’t be good for everyone, or else there would be no opposition.  Who is it not good for?

DC: It is not good for the incumbent carriers who rely on legacy products, e.g. voice and traditional video, for the majority of their revenues. Only 10% – 15% of their revenues come from Internet access, but it accounts for more than 90% of their network traffic. This traffic is cannibalizing their legacy services and they just can’t compete on price.

TR: Traditional voice and video products are the textbook examples, but are you including private line and wavelength services as well?

DC: Yes, both of these services are being replaced by the Internet. ISPs must continue to allocate sufficient bandwidth and improve the quality of their service. As smaller companies begin to feel more and more comfortable with their service they are less likely to use private lines and will build their own tunnels over public infrastructure.

TR: If Network Neutrality becomes law, what effect will it have on internet traffic growth?

DC: Traffic growth will accelerate. Net Neutrality will assist in the trend of the Internet replacing other technologies to deliver content such as audio and video. Right now the Internet is not perceived as providing carrier-class quality because the incumbents are creating that perception so they can sell other products. That perception is beginning to change, and as we continue to see Internet connected Televisions and other devices traffic will continue to grow at a high rate.

TR: Are last mile providers right to worry about the mismatch between all-you-can-eat pricing plans and growing data usage?  How much traffic can access networks economically support if over-the-top services are given free reign and consumers won’t pay more?

DC: They are right to worry if they are using antiquated technologies. The great thing about Fiber-to-the-Node is having a scalable network. You can always add more wavelengths to the fiber you have, and if there is enough infrastructure in the ground it shouldn’t have a problem handling the extra traffic on the network.

TR: What about wireless operators?  Unlike fiber networks where you can always add more, spectrum is a limited resource.  How can wireless operators cope with a proliferation of over-the-top services backed by network neutrality?

DC: Wireless is more difficult as there are limits to throughput because of spectrum scarcity and technological limits. Applications also will be separated from the network layer for wireless providers, but services will be sold with total volume pricing tiers if net neutrality is extended to wireless operators.

TR: Opponents of network neutrality often point to their need for regulatory flexibility allowing ‘reasonable network management’.  As a network operator with an access network that supports an enterprise customer base, what constitutes ‘reasonable network management’?

DC: When it comes to Network Management Cogent does not prioritize packets. These opponents want to be able to prioritize their packets to ease the loads on their networks. Cogent’s network was purpose-built to handle massive amounts of bandwidth so we don’t run into this issue.

TR: If Network Neutrality is good for the industry, why do we need the government to force it?

DC: Because 70% of the world’s telecom spend is controlled by 27 companies who all operate Local Area Networks (LANs). It should not be up to these companies to choose what packets take priority.  Local access is not an open free market. Regulators need to protect consumers from monopoly power.

TR:  Thank you, Mr. Schaeffer, for talking with Telecom Ramblings!

DC: Thank you very much for your interest in Cogent.

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Categories: Government Regulations · Industry Spotlight · Internet Traffic

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7 Comments So Far

  • carlk says:

    Hmm,,,,,,Seems like an oxymoron created vision, even one leading to a train wreck to me. imo

    We believe two of the most important trends in our industry are the continued long-term growth in Internet traffic and a decline in Internet access prices. As Internet traffic continues to grow and prices per unit of traffic continue to decline, we believe our ability to load our network and gain market share from less efficient network operators will continue to expand. However, continued erosion in Internet access prices will likely have a negative impact on the rate at which we can increase our revenues and our profitability. In June 2008, we introduced additional volume and term based discounts to certain of our customers in an effort to continue to gain market share and grow our on-net revenues.

  • carlk says:

    How will corporate net-centric customers ever earn money for Cogent, with them having already given their services away on the front end? imo

    The growth in Internet traffic has a more significant impact on our net-centric customers who represent the majority of the traffic on our network and who tend to consume the majority of their allocated bandwidth on their connections. Our corporate customers tend to utilize a small portion of their allocated bandwidth on their connections.

  • carlk says:

    I hate to sound like a JP Morgan banker on this one; however, this is not an invest-able story! As a matter of fact, it reminds me of Japanese Kamikazes. imo

  • carlk says:

    Donna Jaegars wanted to understand more about (3)’s peering dispute with Cogent this morning while querying Jack Waters who was subbing for Jim Crowe.

    Since it seemed to be old news, I wonder if it might have something to do with Cogent’s legal disclosures in their 10Q?

    In the normal course of business the Company is involved in other legal activities and claims. Because such matters are subject to many uncertainties and the outcomes are not predictable with assurance, the liability related to these legal actions and claims cannot be determined with certainty.

  • DaveRusin says:

    I think the Obama Administration should privatize the peering industry — that way everyone gets free and equal access … net neutrality is no longer and issue and with the government running things the reliability should be superb …. (humor folks) …

    • Rob Powell says:

      Heh, I think you meant ‘nationalize’ rather than ‘privatize’ there… 🙂

      • AR says:

        Nationalize and privatize, both are correct actually. In Russia Gazprom is nationalized, but privatized behind the scenes by a few individuals whom we are all familiar with.

        I think Barack again is taking his queues from Marxists, except this time it’s not Saul Alinksy, but the real genuine ones. Except, they all figured out that all those isms that are predicated on some utopia of equality will never work in practice. When will our esteemed President see the light?

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