R Brad Kummer, CTO

Telecoms at the EdgeJanuary 15,2003

Disrupting the Second Mile?Scalable Fiber Networks

Who is Cogent

Third largest provider of U.S. Internet route capacity, ranked by Telegeography

First Extended Ethernet Optical Network (XEON) to use Layer 3 protection resembling a nationwide switched LAN

Capital efficient with thin facilities-based network secured through IRUs (12,500 route mile two-fiber inter-city network and 6,000 route mile intra-city network)

Primary product offering is LAN-to-Internet 100 Mbps Ethernet access for $1,000 per month serving SMEs in multi-tenant buildings in CBDs in 21 major metropolitan areas

Founded in 1999 and publicly traded company (AMEX:COI)

Acquired PSINet’s U.S. assets and customer base out of bankruptcy

Milestones

National Footprint

Competitive Positioning

AT&T, Genuity, Qwest, Sprint, UUNetBACKBONE PROVIDERS

Sigma Networks, Sphera, Telseon, Urban Media

METRO PROVIDERSBankrupt / Acquired

Allied Riser, Broadband Office, eziaz, OnSite Access

IN-BUILDING PROVIDERSBankrupt / Acquired

Cog

ent

Cogent had executed on a unique business plan and constructed a facilities-based, all-optical, nationwide network consisting of:

a dedicated nationwide multiple OC-192 DWDM fiber backbone (80 Gb/s)multiple metropolitan DWDM/CWDM fiber rings (2 – 5 Gb/s to each building)in-building infrastructure operating in 564 buildings, as of Dec 31, 2002

OTHER BANKRUPTCIES: 360 Networks, Advanced Radio Telecom, Northpoint, PSINet, Teligent, Winstar Communications

Sell T-1 Internet connectivity to approximately 18,000 (180,000+ tenants) office buildings within a 10 mile radius of a Cogent POPMaintain PSINet’s customers and migrate those in CQBs to Cogent serviceSell collocation at the data centers to help broaden Cogent’s product setIdentify a managed hosting partner to offer complete hosting at Cogent’s data centersIncrease Cogent’s geographic reach in the SME market to improve national account footprint

A New Addressable Revenue Stream

Increase Network EfficienciesExpand peering with other major providers through the combined Cogent/PSINet connections; second only to UUNet in the U.S.Increase network utilization on the combined networkUtilize common (Cogent) management tools and NOC to decrease overhead per $ of revenue

PSINet Strategy

News

Cogent has been named as one of the few companies destined to survive the Telecom downturn

“Probe's [Lynda] Starr predicts the following survivors: Allegiance, Alltel, AT&T Wireless Services, Citizens, Cogent, Focal, GoAmerica, GRIC, Hickory, Infonet, Leap, Motient, Nextel, Primus, SBC, TWTC, Verizon, Vodafone, Weblink.”

Survivor: TelecomWho Will Outdo the Competition? Experts Pick Their Favorites

Lynda B. Starr, Vice President of U.S. Carrier Research, Probe Research Inc.

Cogent only targets buildings with validated demand and buildings that can be economically served

As of Dec 31, 2002, Cogent had 1,715 signed real estate agreements totaling approximately 700 million rentable square feet

REIT deals with: Crescent, Carlyle, Jameson Properties, Rudin, Tishman Speyer, Fibernet, Sunbelt, Shorenstein

Other trophy buildings include: One Liberty Place (Phila), Georgia-Pacific Bldg (Atlanta), Bank Once Center (Dallas), Wells Fargo Tower (LA), Transamerica Pyramid (SF), US Bank Bldg (Denver)

Real Estate

Sample of Cogent Target Buildings:

The Sears TowerChicago

The Chrysler BldgNew York

The Chevron TowerHouston

Washington MutualSeattle

Dial up17%

ISDN2%

DSL40%Cable

3%

Frac T9%

Full T127%

T32%

Addressable Market

Cogent Retail Building Profile

Cogent Communications Proprietary and Confidential

T1 +

Frac T1

DSL / Cable

Dial-Up

29%

9%

43%

19%

81%= Cogent

MarketAverage Tenants = 50

Addressable market within Cogent target buildings is substantial. (Nearly 40 percent have some type of T-1 product. 81% of tenants have at least DSL. )

Approximately 35% of users felt they could be more productive with more bandwidth.

Market Growth

Traffic GrowthInternet traffic growth is significant, even though it has been inflated and, in some cases, incorrectly reported in recent years (e.g., Worldcom’s claims of 1000% growth)Best estimates for growth suggest traffic is growing approximately 85% to 100% per year (source: RHK, AT&T Research Labs)Meanwhile, the number of US corporations is growing at just 2% per year, thus the growth is in actual usage, not just connections

Corporate Usage GrowthResearch shows that when customers get more bandwidth, they use it. For example, when customers switch from a T1 to a T3, their utilization increases by more than 28x (i.e., more than the capacity increase) (Source: RHK)Corporations expect to increase data usage by 11% in the next year (Source: Morgan Stanley).

YE 2000

YE 2001

YE 2002

-

500

1,000

1,500

2,000

2,500

Peta

byte

s

Internet Traffic GrowthOffered Load

Source: RHK

Cogent’s addressable market is solid and growing.

Internet usage continues to expand.

Provide transparent, non-blocking connectivity between Prem and Hub routers

Collect as much traffic over as little fiber as possible

Provide national backbone network w/peering

Scale the network as needed, quickly, easily

Provisioning connections quickly

Reducing per-user cost: cost/bit delivered as well as provisioning

Objectives of the Network

Internet Architecture

Customer

Cogent’s NetworkCustomer

Terabit Router

Terabit Router

Terabit Router

Terabit Router

DWDM

DWDM

Gigabit Router

Cat-5 Cable in Building

Multimode fiber

Customer

Traditional Network

Router Router

RouterRouter

T-1

Dial-Up

Customer

Customer

Leased Voice Circuits

Leased Voice Circuits

Leased Voice CircuitsATM Switch

ATM Sw

itchATM

Switch

ATM Switch

CORE EDGE Customer

Customer

Network Design Philosophy

• Traditional View– Bandwidth is a highly valuable and expensive

resource which must be carefully managed to achieve an acceptable balance between customer performance and network cost

– Multi-service networks (voice has highest revenue/bit)– Elaborate network designs, QoS levels, complicated

network management and administration

Cogent ViewBandwidth is cheap, apply it liberally!Single service, data-only network (highest growth)Elegantly simple network design, all customers receive highest possible QoS (non-oversubscribed), simple network management and administration

“Pygmalion Effect” – Self-fulfilling prophecy

Why Build a Data Only Network?

Internet traffic is driving network growth, however, the 1.1 trillion dollars of network PPE is optimized for voice traffic

Aggregate voice revenue is declining and revenue per interfaced-switched bit/mile is declining for voice and data

It is becoming impossible for legacy carriers to cross-subsidize data traffic to capture the shift in revenues

Pioneer Consulting

0.0

1.0

2.0

3.0

4.0Incumbent’s Profit Gap

Bit of Voice per Mile vs.

Bit of Data per Mile

AT&T

7x

15x

1990 2000

Gbps Growth Rate

0%

20%

40%

60%

80%

100%

Voice Private Internet0%

50%

100%

Voice PrivateWAN

Internet

Cost Increase – 2.5x

Revenue Increase – 1.75x

Capacity Increase – 4x

Revenue Per Bit

Yankee Group

Other ISP

Traditional Facilities

SONET

LECCentralOffice

Customer's Premises

To Customer'sLAN

LocalLoop

Channel Bank orIntegrated Access

Device (IAD)

Channel Service Unit/

Data ServiceUnit

(CSU/DSU)

Class FiveSwitch

Class FourSwitch

SON

ET M

ultip

lexe

rSO

NET

Ter

min

alSO

NET

Tra

nspo

nder

SON

ET T

rans

pond

erSO

NET

Ter

min

alSO

NET

Mul

tiple

xer

DACS

ATMSwitch

Layer 3Router

ATMSwitch

DACS

Cogent utilizes a 1 fiber intracity network to achieve the lowest cost per bit/mile (transport) local (local fiber on average costs 10 times higher so optronics cost of bi-directional systems are justified, approximately a 20% differential)Removing hierarchical switching and switching all traffic at the packet level has lowest costProtecting the network at Layer 3 reduces fiber optronics cost by 50%Minimize the number of O-E-O conversions in the network

Utilizing the router for O-E-O conversion and 3R functionality reduces initial network cost by approximately 70% and incremental channel costs by approximately 90%Cogent utilizes a 2 fiber intercity network to achieve the lowest cost per bit/mile (transport) long haul

Network Architecture

Network Architecture

5 Gbps

Multi-Tenant Building

DWDM Metro Rings

16 ChannelDWDM

Coupler

Metro Router

Metro DWDM

AVANEX

Metro DWDM Core Router Backbone DWDM

Multiple OC-192Nationwide Backbone

80 Gbps

Cogent HUB

COGENT 15800

AUX

IN

Multimode fiber or Cat 5

Edge Router

Metro DWDM

Battery Back Up

OADM

Catalyst2948G-L3

LAYER 3S WITCH

AVANEX

Cogent Metro System Architecture Evolution

GSR

2 x GbE

MetroDWDM

SR G

BIC

BiDirDWDM

BiDirOADM

MetroDWDM

SR G

BIC

EdgeRouter

SR G

BIC

Cust 1

Cust 20

…

100 Mbps20 Customers

1-fiber ring

26 dB LossBudget

Initial DWDM Architecture

GSR

CW

DM

GB

IC

CWDMMUX

CWDMA/D

(OADM)

EdgeRouter

CW

DM

GB

IC

Cust 1

Cust 20

…

100 Mbps20 Customers

2-fiber ring

32 dB LossBudget

New CWDM Architecture

~50% Equipment SavingsCWDM GBICs CWDM GBICs

IP over WDMArchitecture Advantages

Shared GbEShared GbE 1 Gb/stotal BW

Shared GbE Ring• 1 Gb/s total bandwidth shared by all buildings on the ring

• No protection

• Statistical Multiplexing(oversubscribed)

CogentCogent16-40 Gb/stotal BW

1 - 2.5 Gb/s

1 - 2.5 Gb/s

IP over WDM• 2 - 5 Gb/s bandwidth to EACH BUILDING on the ring

• Layer 3 (IP) Protection

• Non-oversubscribed

Cogent Advantage

PriceCogent’s price is already cost-based and one of the lowest in the industry.

Capex and OpexAs prices decline, large carriers will be forced into extreme Opex and Capex reductions, potentially as high as 55% (source RHK). This will be unsustainable for many carriers.Cogent Capex and Opex are already “right-sized” for this market.

Cogent’s SG&A as a percent of total Opex is considerably lower than that of the larger carriers, primarily due to lower customer acquisition costsCogent’s BSS/OSS costs are significantly lower than traditional carriers, due to no interface with the ILEC and flat rate billing

DivergenceGiven the instability in the marketplace, customers no longer want to put all their eggs in one basketMost are looking to purchase data services unique from voice services, which again provides an advantage to Cogent

Cogent maintains several operational competitive advantages in targeting the business Internet market: