* Verio exits low-speed Internet access business
NTT subsidiary Verio sold its T-1 Internet access business to Cogent Communications Group, an up-and-coming Washington, D.C., ISP, in a deal that will affect 2,400 U.S. small and midsize businesses. The sale was announced Dec. 3.
Cogent says it will migrate Verio’s T-1 customers in North America to Cogent’s all-optical IP network by the end of January.
These customers will see 10% to 40% cost savings from migrating to Cogent’s newer, higher capacity IP backbone when their contracts come up for renewal, Cogent officials say.
Cogent CEO Dave Schaeffer says the savings “really varies on a customer-by-customer basis because the local loop or tail circuit is such a large portion of the customer’s service…When the contracts come up, we’ll have the opportunity to re-price those tail circuits.”
Cogent anticipates some tweaking of its U.S. network backbone during the first quarter of 2005 as it consolidates what was formerly Verio’s T-1 traffic with its own traffic. However, Cogent claims its customers won’t be affected.
“Customers should see no significant change in their service,” Schaeffer says. “In each of these locations, Verio had equipment installed to aggregate circuits and bring traffic onto the Verio backbone. That equipment will be re-pointed to the Cogent backbone.”
For Cogent, the acquisition of Verio’s T-1 customer base will expand the ISP’s reach into the U.S. SMB community in 23 U.S. markets. The deal also helps Cogent improve utilization of its massive network backbone, which supports 80G bit/sec.
“Prior to this deal, our capacity utilization was running at about 4.5% of the network’s capacity,” Schaeffer says. “By picking up these additional 2,400 customers, we increase our capacity utilization to just below 7%. So it allows us to increase the utilization of an asset we already have in place.”
Cogent focuses on dedicated Internet access for SMBs. Cogent says 99% of the companies involved in the Verio deal will be new customers of its Internet access services.
“The vast majority of these customers are statically routed, not multi-homed, so they use only one service provider to connect to the Internet,” Schaeffer says. “They’re all SMBs. There are very few large enterprises and very few governmental or educational entities.”
Verio will continue to sell T-3 and above Internet access services, managed network services, Web hosting and leading-edge IPv6 services to U.S. corporations. Verio is the only ISP in the U.S. to offer commercial IPv6 service.
“We’re still selling IP to people who need it, but we made a strategic decision that the low-speed customer – T-1 and below – is not a space where we can deliver a product that is as cost effective as we would like it to be,” says Stan Barber, vice president of engineering operations at Verio.
Barber says that by selling its T-1 business, Verio will free up bandwidth and company resources to be able to offer more advanced network services, including those for IPv6.
The Cogent deal “will allow us to accelerate some of the things that we have in the hopper there,” Barber says of IPv6. “We’re certainly not going to be pulling back on any of our capabilities with IPv6.”
The financial terms of the Cogent/Verio deal are undisclosed.
