ISPCON Keynote: Dave Schaeffer, Founder and CEO of Cogent Communications

This was the rabble rousing keynote at ISPCON. Schaeffer wants to shake up the industry, and in the keynote, he discussed the changes he'd like to see.

by Alex Goldman ISP-Planet Managing Editor [October 19, 2007]

I was surprised how few of the ISPCON attendees knew Dave Schaeffer. Some didn't even know about Cogent Communications, the company he founded and runs, so as he took the stage I was trying to explain that his rivals in the business hate him because of his prices. "100 Mbps for $1,000 per month," I said.

"$10 per megabit?"

Yes. When he took to the stage promising "bold statements and contrarian views," he was just stating a fact.

Afterwards, some attendees complained that there were so many facts in the speech that it was hard to keep up with him, but I've never heard anyone complain that a speech had too many facts in it, so I think that was a kind of complement.

Schaeffer said he does not compete with ISPs, but with other networks, especially those that rely on TDM in part.

"The internet is the worst nightmare of the phone and cable networks," he said, "because the internet separates the application and network layers."

The phone and cable networks were designed to deliver only one application (voice or television) and to charge a premium for it.

The internet delivers everything, cheaply. Which is what Schaeffer meant when he said, "the internet's dollar per bit mile price is lower than any other technology."

As the network designer (among his many other jobs) Schaeffer has designed a non-blocking non-oversubscribed network. Paying for it was not easy (see, for example, Cisco, VCs Take Over as Cogent Restructures).

I challenged Schaeffer on this point two years ago and he replied, "you're right. We got rid of our debt and it wasn't pleasant. We exchanged debt for equity and bought out some creditors, but the result is that we're ready to drive down costs for our customers."

Cost savings and efficiencies
Schaeffer talked about cost savings. He said that his routers are multifunction devices that route, multiplex, and protect the network. One thing they don't do is QoS. "We use no QoS algorithms, even MPLS."

The regulators have designed the various markets of the world according to how they dealt with the problem of local area networks, which tend to be monopolies. Cogent was built, along with many other networks, partly on regulatory relief (the 1996 act) and partly through access to capital.

There are currently four access networks, after consolidation, in America, Schaeffer said. They are AT&T, Verizon, Comcast, and Time Warner Cable.

Worldwide, there are 70 global networks that count, he added, of which 21 account for 71 percent of annual telecom spending.

Currently, advocates are promoting the idea of net neutrality, he said, but to telcos and cablecos, the message is that they have to spend between $1,000 and $2,000 per customer upgrading their networks in order to cannibalize their revenue stream (which, in the case of telcos, is historically a 64 kilobit circuit delivering 1,500 minutes per month on facilities that are amortized and paid for and currently deliver huge margins).

In the U.S., Schaeffer said, "the regulators are tired of forcing competition on the incumbents and now say that competition between DSL and cable is enough. In contrast, in Europe, where there was no cable competition, the regulators forced the phone companies to unbundled their networks and to upgrade them and the result is vibrant non-facilities-based competition in France, Germany, and the UK."

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