Cogent Communications Holdings, Inc. Goldman Sachs Communacopia + Technology Conference 2026

Hey, Mike. Thanks for hosting me. I'd like to thank Goldman Sachs for a great venue, and I'd like to thank all the investors for taking time late in their busy day to hear what we have to say.

Yeah, sure. First of all, 84% of Cogent's revenues come from selling internet access or internet-based services. For 25 years, we were purely an internet service provider. Recently, we've expanded our business to include optical transport or wavelength services. Let's start with the backdrop for internet traffic growth. I'm going to bifurcate our market into two segments. I'm going to look at the market by end users. Today, about 2% of Cogent's traffic, but nearly half of its internet-based revenues come from selling to end users. Most of those end users are in large multi-tenant office buildings located in the central business districts of major cities. That business had historically grown at about 11% a year organically. When the pandemic hit, that growth rate declined to negative 9%. Today, it's back to being a 3% growing business.

We today have about 35% market share in 1,870 multi-tenant office buildings, where there is about 1.1 billion square feet of office space. We also sell internet services to customers in buildings that are too small or too far from our network to justify us deploying capital. Most of those off-net customers actually came to Cogent through the acquisition of the Sprint Global Markets business from T-Mobile. We acquired a business that was declining and burning cash. T-Mobile paid us $700 million over a 54-month period. We still have just under two years of those payments left coming to us. Our transit business, where we sell bulk internet connectivity in carrier-neutral data centers. The footprint is 94,000 route miles of inner-city fiber connected to 33,000 route miles of metro fiber, serving 1,950 data centers in 58 countries around the world.

Approximately 7,500 access networks from companies as large as China Telecom or Jio buy their upstream from us, as well as all of the major content producers. That business is a volatile business that is based on unit volume growth and price declines. Our transit business today is growing at about 8% in revenue. It is growing at about 15% in unit volume. We are the largest carrier of internet traffic in the world, carrying about a quarter of all internet traffic. Roughly 77% of our traffic stays on net, meaning it goes from one paying customer to another. In 23% of the cases, we only get paid on one side, and the other side is a peer with whom we exchange traffic. This segment of our business has seen an acceleration as a result of AI for two discrete reasons.

One, the traffic that is being collected is the raw material to build large language models and now is increasingly valuable to companies to transmit and collect for that model construction. Secondly, as we are transitioning to an inference phase, we have seen a significant acceleration in traffic growth due to agent-based or agentic AI driving traffic growth across the internet. We expect these trends to continue for multiple years. The internet has gone through a series of discrete waves of growth. It had previously seen a major acceleration in traffic growth due to the acceleration in streaming at the beginning of the pandemic. That has since matured. We saw growth slow and then re-accelerate now based on AI inference. We have a couple of small bolt-on businesses. We lease IP address space out. We are the third largest owner of IP addresses.

When you use the internet, you need an address just like you do to get mail delivered to your house. There are two competing technologies. The more desirable is IPv4. We have 38 million of those addresses. We lease out about 15 million of those addresses and generate about $70 million a year in that address leasing business. We also have our own data center footprint. We operate about 170 data centers, about 1.4 million square feet, and about 150 megawatts of power. We recently divested of 10 unoccupied data centers for $225 million, selling those facilities to I Squared Capital, and we currently have 14 more facilities up for sale. Finally, the most controversial part of Cogent's business is its wavelength business. This is selling point-to-point optical transport. It is a new business for Cogent. It was a business that did not exist inside of Sprint.

We took the former Sprint long-distance voice network that was built at a capital cost of $20.5 billion between 1982 and 1989. We purchased that asset from T-Mobile for a dollar and then spent two years repurposing that to sell optical transport. Our transport business today is about a $60 million business. Last quarter, it grew 9.2% sequentially, about 62% on a year-over-year basis. A major strategic initiative for Cogent is to grow any of our on-net services. The easiest of those is wavelength. When we add a dollar of on-net revenues, they carry 90% contribution margins. It is why over a 26-year history, we have averaged about 200 basis points a year of margin expansion. Our margin expansion took a material step back with the acquisition of the Sprint customer base, and as we have purged those less desirable revenues, we have resumed our margin expansion.

It's all of the above, Mike. First of all, the cheapest, easiest way to move bits is over the public internet. There is this thesis that the world converges to a single network. That, in fact, has happened. It's called the internet. It has cannibalized every other telecom service, and it has disadvantaged many legacy service providers. A wavelength, which is in fact a private line service, it is a point-to-point fixed connection, has three characteristics that cannot be replicated on the internet. The first and most important is defined latency. You know exactly how long it takes to get from point A to point B. The internet is a non-deterministic network, and by its very architecture, is dynamically routing traffic over different paths to provide maximum resiliency. The wavelength market or private line market has been around since the 1940s.

It was initially delivered over fixed microwave by AT&T. MCI entered that market. In the late 1990s, the market pivoted to using optical transport. The term wavelength came into use. In fact, the first private lines that were sold on optical were dedicated wavelengths. What is sold today is a subset of a wavelength. We do not actually sell a full wavelength to any customer. We sell them a private line at either 10 gig, 100 gig, or 400 gig interfaces delivered over a wavelength, but it is a subset of the spectral capacity of that wavelength. Initially, the market was dominated by government and large corporate users. The market really exploded with the advent of switch-based long-distance resellers. That market then collapsed. It was then replaced by an ISP market, which also collapsed.

For the past 20 years, the market has had three primary use cases: international carrier network extension, regional carrier network aggregation, and content delivery. In the past three years, there is a fourth and significant new use case, AI training. AI training requires wavelengths because approximately 60% of the capital cost of a training facility is in the GPUs. You want those GPUs running at 24/7 and not requiring buffering. The internet would slow down that GPU utilization, so companies generally pay about 2.5 times as much per bit mile for optical transport as they do for internet services. It is also an unprotected product, which means that any physical point on the path can result in a failure if that point fails. That almost always requires customers to buy wavelength services in pairs. One as primary, one as backup.

That market had become dominated by two major players, Lumen and Zayo Group. We had the opportunity in the Sprint acquisition to get paid to fix a broken enterprise business and to then be able to buy that $20 billion asset for a dollar. An asset that doesn't produce revenues is not an asset. It's a liability. The carry cost on that fiber was about $140 million a year. We continue to reduce that cost by selling off certain facilities, by optimizing the network, and the way in which we generate profit is by repurposing that fiber. By taking that 19,000 route miles of inner-city fiber, connecting it to an additional 12,000 route miles that we've secured across North America, and then connecting it to about 22,000 route miles of North American metro fiber. We then interconnect that fiber to 1,137 data centers.