Cogent selling pre-paid transit services

Cogent Communications today began offering the market’s first prepaid data transit service, selling 10 Mb/s Internet connections for $1000 a month to small credit-strapped service providers.

The service functions just like the all-Ethernet ISP’s normal bandwidth product--which runs $3000 a month for 100 Mb/s of capacity--for service providers, except potential customers do not have to sign a year contract, do not have to pass a credit check and pay for capacity on a month-to-month basis.

“We introduced this product in response to what we were seeing in the sector--a lot of smaller content and application providers wanted to buy Tier I services from us, but they couldn’t pass the credit check,” said Cogent CEO Dave Schaeffer. “A lot of these are small start-up companies where the entrepreneur is bootstrapping the company with his credit card. Just because these companies don’t have venture capital doesn’t mean they’re ideas aren’t still good. We wanted to give them access to our network while still finding away to meet our standards.”

Cogent currently has 200 buildings in its 800-building footprint equipped as data centers or co-locations sites, all of which any potential service provider customer can use to connect to Cogent’s OC-192 fiber backbone. Many of these companies, Schaeffer said, are smaller content providers with large application or data streams come off of their servers--video streaming sites or an Internet radio station, for example.

With little in the way of resources, most must go to third-party bandwidth dealers that buy Cogent and other carriers’ capacity in bulk and resell it to small service providers at a premium. While Cogent’s pre-paid services are more expensive than its regular contract services (roughly $30 per Mb/s), the $100 per Mb/s far outstrips any price offered by a bandwidth middleman and allows smaller service providers to purchase smaller chunks of bandwidth, Schaeffer said.

“This really follows the model of prepaid cellular,” Schaeffer said. “This is meant to help small entrepreneurial businesses establish their business model and grow. Eventually, we hope they’ll move over to our more traditional post-paid services.”