Cogent goes European

Cogent officially became an international carrier today, announcing the acquisition of LambdaNet, a pan-European carrier operating a point-to-point layer 1 network primarily in France and Spain.

LambdaNet, formerly Firstmark Communications, offers transport and transit services in 40 markets and 30 Cogent-owned data centers in Western and Southern Europe. Along with the acquisition, however, Cogent is getting a new product set. It plans to optimize LambdaNet’s dark fiber network for Layer 3 Ethernet services and offer its standard 10 Mb/s, 100 Mb/s and one Gb/s Internet access products to European customers. But it also plans to bring LambdaNet’s point-to-point services to the U.S., using the European carrier’s back-office infrastructure to correct direct links between multinational offices as well as offer Layer 1 services to current U.S. customers, a significant shift in Cogent’s product plans, said CEO Dave Schaeffer.

When Cogent first built out its OC-192 and OC-48 fiber network, it decided to stick solely with Internet capacity, offering gobs of capacity for low prices, but refrained from offering point-to-point services because of the back office costs, Schaeffer said. But U.S. customers have been asking for service and with the LambdaNet acquisition, Cogent is able to provide them cheaply, Schaeffer said.

Cogent, however, expects that its ISP services will remain its major product. Europe is a market of little competition relative to the U.S. market, and Cogent’s bandwidth prices will severely undercut those of France Telecom and Telefonica as well as the other PTTs, Schaeffer said.

LambdaNet comes to Cogent debt free, thanks to $1 billion in equity raised between 1998 and 2000 and debt-for-equity negotiations between the company and bondholders. Cogent got a particularly good deal for the company, however, exchanging 3.5% equity in Cogent for LambdaNet and its assets. Those assets include equity ownership of subsidiary LambdaNet Germany, which offers similar services in Austria, Germany and the Czech Republic. Schaeffer said that LambdaNet Germany would not be fully merged into Cogent until it completes a restructuring similar to that undergone by its mother company.