Cogent's Schaeffer: OTT video will drive current, future volume wholesale service growth

Dave Schaeffer, Cogent Communications
Dave Schaeffer, CEO and founder of Cogent Communications

Cogent sees the main source of growth for its wholesale NetCentric business will continue to be over the top video solutions providers.

The service provider sees the OTT market evolving beyond its current form to include more traditional and more esoteric content.

Dave Schaeffer, CEO and founder of Cogent, told FierceTelecom in an interview that OTT providers require two key elements from their wholesale providers: a desire for high amounts of bandwidth and a focus on containing costs.

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“Part of the reason why we get a view of over the top video is it tends to be the most bandwidth intensive application at least today and people that do over the top tend to be the most cost-conscious because they are using the most megabits,” Schaeffer said.

RELATED: Cogent says its Ethernet VPLS service offers better pricing, experience than SD-WAN

By offering low-cost Ethernet access services, Cogent has adopted a thesis that OTT video solutions will be the main driver of ongoing future traffic growth.

Evolving viewer, supplier behaviors

Two trends make Cogent confident that its NetCentric business can maintain growth in serving the OTT video market.

On the internet today, nearly 90% of the global bits carried are video and over 90% of the incremental bits are video.

At the same time, people watch a total of about 305 minutes a day, but only about 30 minutes is delivered over the top, meaning 90% of the minutes are still available to be captured by over the top players like Hulu, Netflix and others.

“I think over the top wins for a couple of reasons: it’s cheaper, it is affordable, it is time shiftable and it allows you a much greater choice in content,” Schaeffer said. “It’s the ultimate and long tail content and Netflix has grabbed the leader spot today and we provide bandwidth to them and we provide bandwidth to a number of other OTT players.”

However, it’s clear that the OTT video market is still evolving. This evolution is being driven by more content owners making their content available on OTT platforms and greater user acceptance.

“On the supply side, I think we’re seeing a lot more content owners willing to make their content available over the top,” Schaeffer said. “Then, on the demand side, I think we shifted from an early adopter to now it is mainstream and grandma and grandpa are OK with over the top as opposed to where it was a specialty service.”

Maintaining quality, reach

What Cogent has learned in serving OTT video providers is that you have to have three attributes: quality connections, price, and broad global connectivity.

Schaeffer said that having quality connections is a table stakes requirement to be taken seriously by OTT video providers.

“First and foremost you have to have quality, meaning you need to have adequate connectivity in your backbone and adequate connectivity to connect to other networks,” Schaeffer said. “That’s a necessary condition to win the business and if you don’t have that everything else does not matter.”

No less important is the ability to provide customers with access to a large amount of global sites.

Today, Cogent provides connectivity to over 900 carrier-neutral data centers. The service provider estimates that it has been adding about 90 new data centers to its network every year.

“This allows a lot of OTT content producers to connect to us in multiple markets,” Schaeffer said. “If you want to connect in Germany, the U.K. and come over to the U.S. or Canada and we provide that global reach.”

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