Back in 2000, Cogent Communications was just one name in a crowded field of budding Internet service providers (ISPs), in a business climate that Guy Banks—the company’s vice president of real estate—recalls as a “free for all.” Once telecom melted in the wake of 9/11, many of those other companies disappeared, but Cogent remained. Banks attributes this to the strength and clarity of Cogent’s business plan.
“A lot of those companies didn’t have as strong a business plan as we did,” he says. “What set us apart was that our network was built from the ground up, with the sole purpose of carrying Internet traffic. . . . The premise we were working from was that bandwidth was a commodity and the Internet was going to be the only network that mattered, and that has come true.”
Banks says the company’s first year and a half was largely spent signing the leases needed to build its network hub sites along with entering into telecommunications license agreements (TLAs) with large, class-A multitenant office buildings to add to the network once it became operational. Between 2001 and 2004, Cogent also made a series of strategic acquisitions, buying 14 different companies. The acquisitions expanded Cogent’s network reach to Europe, peering agreements, customer base, and TLAs. It acted quickly to integrate the acquisitions, keeping what was needed and getting what wasn’t needed off the balance sheet quickly—never losing sight of its core mission to sell bandwidth. Since 2004, the company has made no acquisitions; all of its growth has been organic.
By owning and designing its network from the ground up, Cogent emerged early on as the low-cost bandwidth provider. When the company began, the price for a megabit of bandwidth for a tenant in a multitenant office building was going for $1,000. Cogent was able to sell it for $10. Companies that had been paying up to $2,000 a month for a 1.5-megabit T1 connection could get 60 times the bandwidth for half the price, which ultimately drove the price of bandwidth down to where it is today.
Yet Banks didn’t begin his career with the goal of entering real estate. After getting his undergraduate degree in marketing at Indiana University, he took a job with Mobil Oil Corp. as a marketing rep, making calls to dealer gas stations. He moved on to running company-operated stores, then was transferred to the East Coast to be a real estate representative for the company. He spent three years buying land and building gas stations. He was out several nights a week attending zoning hearings and town council meetings.
“It was a steep learning curve,” he recalls.
The company eventually moved Banks back into marketing, but by then he had become fascinated with real estate. So he took a job with Midas International in Chicago, buying land and building muffler shops, attending classes for his MBA at night. After completing his MBA at Loyola University of Chicago, Banks held positions with various affiliates of Security Capital Group Inc., including CWS Communities Trust, which developed manufactured housing communities. While serving as vice president of development for CWS, an old boss asked him to meet with Dave Schaeffer, who was starting a company called Cogent. He was hired, and found a home.
Today, Cogent carries one-fifth of the world’s Internet traffic, with a presence in more than 1,550 skyscrapers totaling 840 million square feet of office space on the network. The Cogent network reaches 193 markets in 41 countries in North America, Europe, and Asia, with 56,100 miles of long-haul fiber and more than 28,300 miles of metropolitan fiber. Cogent also connects to more than 5,700 other networks.
A Closer Look at Cogent
Cogent holds three types of assets: multitenant office building license agreements, collocation in carrier-neutral data centers, and Cogent-operated data centers. Getting into an office building requires a telecommunications licensing agreement. The agreement, which involves a licensing fee, allows Cogent to bring fiberoptics into the building and offer Internet service to the building’s tenants. It is not an exclusive service; tenants are free to get their Internet service from any provider. Guy Banks, the company’s vice president of real estate, says the company is happy to compete with other ISPs, noting that often a building owner will come to them because tenants are asking for Cogent’s service.
“In order to be considered to be in the class of building we’re in and be a choice that building owner is willing to offer their tenants, you have to add value,” he says. “The value we add isn’t the license fee we pay. It’s the size and quality of the bandwidth connection we provide.”
All buildings in the Cogent network are interconnected. In the same way that an employee in an office building might send an e-mail to the worker in an adjacent cube, Cogent On-Net buildings in New York and Los Angeles can communicate without ever touching the public Internet. The bandwidth is dedicated; anyone on the Cogent network has full use of the capability.
In searching for new agreements, Cogent is focused on high-traffic, high-demand areas. The bigger the building, the better. Across the company’s multitenant office building portfolio, the average size is 545,000 square feet, and those buildings are in high-demand urban centers.
Banks, who has been with the company since its inception, is at the nexus of all this growth. Every building and data center connected to Cogent’s network requires a real estate agreement. All those agreements are generated and managed by Banks and his team—everything from negotiating and inking the deal to approving invoices and making sure the associated bills are paid on time.
Although nothing can happen in the company without a real estate agreement, Banks says the agreements he makes would be hollow if the other parts of the business didn’t come into play.
“Real estate provides the footprint for our sales folks to sell our services,” Banks says. “If I didn’t have the most talented group of field engineering, fiber acquisition, legal, data-center operations, and finance folks to do all they do, I’d have a piece of real estate not connected to the network. It has been a tremendous 16-year journey with plenty of ups and downs, but at the end we got through it all, and we got through it together.”
NOTABLE PROJECTS IN THE UNITED STATES
FEDERAL WAY
Federal Way, Washington
As of press time, this 30,000-square-foot data center was scheduled to come online by the end of 2016. In addition to data-center operations, it will house Cogent’s Seattle-based sales team.
2947 BRADLEY
Pasadena, California
The second-largest data center in Cogent’s portfolio measures 42,757 square feet. You can also find Cogent employees at this location. Consolidated from another stand-alone office, the previous tenant had occupied the entire building. The space had a total of 110,000 square feet, which was more than Cogent needed, so the company carved out the data center and office space needed and made the deal happen.
25 BROADWAY
New York, New York
The building that serves as home to Cogent’s New York City employees is also the largest data center in the company’s portfolio at 48,278 square feet, and includes consolidated office space from another location. Work on the site began in August 2013. It was one of the few buildings in Lower Manhattan not directly affected by Superstorm Sandy.
WILLIS TOWER
Chicago, Illinois
The former Sears Tower is the largest multitenant office building on the Cogent network at 3.8 million square feet. Guy Banks personally worked on this deal with Trizec Hahn, who owned the building back in 2001, when it was connected to the Cogent network.
