FBI Takes Down MegaUpload, With Cogent in the Crossfire

January 20th, 2012 by · 10 Comments

Shares of Cogent Communications (NASDAQ:CCOI, news, filings) are down 15% today due to attention of a very undesirable variety. The FBI and other law enforcement agencies internationally have taken down MegaUpload, a file sharing site that is accused of empowering massive copyright infringement and related piracy.  People have been arrested, and dozens of search warrants executed.  So what does this have to do with Cogent?  Well, MegaUpload is, or should I say, was a big customer it appears.

According to reports, MegaUpload's bill at Cogent was about $1M/month, and the loss of that business would certainly put a substantial dent in the company's growth profile. MegaUpload's traffic also featured somehow in Cogent's peering dispute with France Telecom in 2011.   Additionally, the FBI supposedly took information from Cogent's computers, and one of the search warrants was served at Cogent's location in DC with employees on hand for the raid itself in some form.

So what does it all mean? At the moment I'm going with "Yuck, what a mess..."  Hopefully it will all shake out safely for everyone at Cogent and the market reaction will turn out to be beyond reality and hence a buying opportunity.

 

 

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10 Comments So Far


  • Carlk says:

    This is what happens when taxi cab drivers enter into the communications business.

    Call Enron Blowhard!

    It’s also a reason for a meeting of the minds to take place on SOPA and PIPA, i.e. rational, reasonable workout deals with both sides in agreement on a sound blueprint for operating going forward.

  • Carlk says:

    If it weren’t for the Wall Street Criminal Thugs who get behind nefarious operations like this one, I am sure that we would be hearing, Cogent makes a new 52 Week Low today!

    CALL Enron Blow Hard, and ask him!

  • Anon says:

    Will be interesting to see the facts. $1 MM per month is a huge bandwidth (especially at Cogent’s price per mbps). And Cogent’s map shows no NZ assets? We’re they hosting or caching in US? This could get very interesting. DMCA and copyright laws are heavy, federal statutes.

  • mhammett says:

    MegaUpload had servers in the US and EU according to some articles I read.

    It’s kind of interesting to see how some of the regular commentators here respond to things.

  • Guest says:

    Hi Rob,

    In their revenue loss calculations nobody seems to take into account the loss of revenue from Cogent’s “eyeball’ customers. Of that $1m/month of traffic pushed onto the Cogent network probably a significant percentage was delivered to Cogent ISP customers (who tend to pay for received traffic, as opposed to content sites that pay for send traffic), meaning that that revenue (likely at a higher per Mbps rate) will also disappear for Cogent. The total impact is bound to be higher then the stated $1m USD per month. Then again they will probably also free up some peering and transit infrastructure, so they might be able to save on future capex.

    • Rob Powell says:

      Yes, that’s an interesting angle. There are many moving parts here though. I’m not sure how much of the $1M that has been bandied about is bandwidth, and how much is those servers they were renting or the colo space, etc. We’ll know soon enough when Cogent reports Q4, they’re generally very open with their numbers.

  • Anon says:

    Will this loss of eyeballs give the other operators the excuse they’ve been looking for to de-peer Cogent?

  • Jared Geiger says:

    From the people I’ve talked with, Megaupload hosted most of their main servers with Carpathia and then used Cogent datacenter space to host servers used to cache their most requested files. So Cogent probably lost most of it in colocation space.

  • Questions says:

    Are some of parties referenced in the Indictment cooperating with The United States of America? Are civil forfeiture laws related to Moneies Earned in the mix? Have the Wall Street analysts who see no issues read the Indictment? And read the DMCA?

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