Cogent CEO Sees AI Lifting Traffic Growth Above 10% Despite 23% Price Decline
CEO Dave Schaeffer said price per bit declines of ~23% annually have plateaued the addressable market, but Cogent’s low-cost network and 50% discount pricing preserve margins. He expects AI inference adoption to lift traffic growth above ~10%, while its 4%-revenue wavelength unit grew 100% YoY in a $7B market.
1. Persistent Price Compression
Cogent’s price per bit has declined by approximately 23% annually, keeping the total addressable internet services market flat in dollar terms. CEO Dave Schaeffer emphasized that ongoing competition at both end-user and backbone levels will perpetuate this price erosion, challenging legacy providers.
2. AI as Next Growth Driver
Schaeffer highlighted that AI inference is not yet widely integrated into applications, and as adoption matures, internet traffic growth could accelerate from the current ~10% closer to its long-term 23% trend. He positions Cogent to capture this potential surge by scaling capacity on its low-cost network.
3. Network Architecture Advantages
Cogent leverages a network designed for the lowest cost ‘interface-routed bit mile,’ capturing advances in wavelength division multiplexing and optically interfaced routers more effectively than competitors. The company prices services at a 50% discount to the market average and covers 1.1 billion square feet of multi-tenant office space on-net with faster installation and higher reliability.
4. Wavelength Business Expansion
Cogent entered the wavelength market in 2023 via repurposed Sprint long-haul assets, connecting 1,096 data centers across North America. Wavelength services now account for 4% of revenue, grew 100% YoY, and target a $7 billion global market—particularly the $2 billion inner-city data center segment.