Cogent Communications put together the missing pieces of its connectivity strategy and cast the future of the troubled in-building competitive carrier market this week when it acquired Allied Riser Communications.
Allied Riser was the leading in-building access provider in the U.S. By buying it, Cogent follows in the footsteps of gigabit Ethernet provider Yipes Communications, which created a hybrid in-building/metro carrier in July when it paid $5.5 million for building access rights negotiated by bankrupt BroadBand Office.
"Cogent has spent most of its time and money on building a backbone in metro markets, but has not been able to go as far as they wanted in getting these buildings on the network," said Scott Clavenna, president of PointEast Research who tracks metro markets. "The real difficulty in provisioning high-bandwidth services to business customers tends to be getting access into buildings and negotiating with landlords."
Helen Lee, Cogents chief financial officer, said Allied Risers building access contracts were the chief motivation behind the acquisition. The deal is subject to stockholder and regulatory approval and is expected to close in the fourth quarter.
"They have been serving over 310 million square feet of large multitenant and office buildings," she said "In Cogents business model, the primary target is all of the medium-size enterprises in large multitenant buildings in the commercial business districts of the top 20 markets."
Past transactions and future deals are almost certainly bad news for existing customers, though. Yipes did not acquire customers in the Broadband Office deal. Only Allied Riser customers in buildings deemed profitable will be offered Cogent services.
I-managers also shouldnt expect services other than broadband from the hybrid players. Though Allied Riser had said it planned to roll out advanced services, including IP telephony, to its business customers, those initiatives are being reconsidered. Cogent, which claims the nations largest 80-gigabit-per-second IP backbone, in the past has been clear its business plan includes no services beyond broadband.
"Cogent will continue with our existing business plan," Lee said. "We will wait for the integration process to assess" Allied Risers advanced services.