OpenTransit (france telecom) depeers cogent

Thu Apr 14 19:39:49 UTC 2005

NOTE: Off-list, as I'm not sure this is on-topic enough to post.

At 03:19 PM 4/14/2005, Neil J. McRae wrote:

> > They've recently slashed their prices to even more absurdly
> > low new levels, and are actively targetting their peers'
> > customers, particularly in Europe. Anyone who didn't expect
> > to see exactly this kind of fallout as a result really hasn't
> > been paying attention.
>
>Well considering the market isn't growing as much as it used to the
>only way to grow is to take business away from other people. If
>OT can't deal with that on the street then they should close up
>shop and go sell kites or something.

This is an OK analysis as far as it goes. However, if Cogent has a business 
plan (and mind you I have not read theirs) that says "we will go borrow $10 
billion, sell services at below cost until we bankrupt our competition, 
then jack up our prices" then that would not necessarily be OK.

I don't know if Cogent is selling below cost. Amazon certainly built their 
business by doing so, losing money on every order. They did a nice job 
wiping out small book stores I expect. Are we better off for that? If 
Amazon were based in Korea and were selling products below cost into the US 
market, the US Government would scream "dumping" and insist on trade sanctions.

The point of this is that competition is one thing, unfair competition by 
selling below cost (for more than a loss-leader or two) is not in the best 
interests of the economy or the future of any given industry.

>  Clearly Cogent are doing
>something that gives them a cost advantage otherwise they wouldn't
>be able to sustain this, so rather than compete with Cogent, FT
>try to fiddle with Cogent's costs. If I was an FT customer and
>I'd seen this signal I'd be phoning Cogent now for a quote.
>
>If I was Cogent I'd be getting the champers out, for FT
>to take this action they clearly feel threatened!
>
> > What remains to be seen from all of this is who blinks first,
> > if anyone else jumps in at the same time, and if any of it
> > changes anything in the marketplace.
>
>No, it won't change anything - other than for a short period of
>time customers will suffer, wouldn't it be nice if we remembered
>about the customers.