COGENT COMMUNICATIONS HOLDINGS, INC.

ANNUAL REPORT ON FORM 10-K

FOR THE YEAR ENDED DECEMBER 31, 20192020

TABLE OF CONTENTS

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SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS

This reportAnnual Report on Form 10-K of Cogent Communications Holdings, Inc. (the "Company," "Cogent," "we," "our" or "us") may contain forward-looking statements within the meaning of Section 21E of the Securities Exchange Act of 1934, as amended.amended (the "Exchange Act"). Forward-looking statements are not statements of historical facts, but rather reflect our current expectations concerning future results and events. You can identify these forward-looking statements by our use of words such as “anticipates,” “believes,” “continues,” “expects,” “intends,” “likely,” “may,” “opportunity,” “plans,” “potential,” “project,” “will,” and similar expressions to identify forward-looking statements, whether in the negative or the affirmative. We cannot guarantee that we actually will achieve these plans, intentions or expectations. These forward-looking statements are subject to risks and uncertainties including those discussed in Item 1A “Risk Factors” and other factors, some of which are beyond our control, which could cause actual results to differ materially from those forecasts or anticipated in such forward-looking statements.

You should not place undue reliance on these forward-looking statements, which reflect our view only as of the date of this report. We undertake no obligation to update these statements or publicly release the result of any revisions to these statements to reflect events or circumstances after the date of this report or to reflect the occurrence of unanticipated events.

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PART I

ITEM 1. BUSINESS

We are a facilities-based provider of low-cost, high-speed Internet access, private network services, and data center colocation space. Our network is specifically designed and optimized to transmit packet switched data. We deliver our services primarily to small and medium-sized businesses, communications service providers and other bandwidth-intensive organizations in 47 countries across North America, Europe, Asia, LatinSouth America, Australia and Australia.Africa. We are a Delaware corporation, and we are headquartered in Washington, DC.

We offer on-net Internet access services exclusively through our own facilities, which run from our network to our customers’ premises. We offer our on-net services to customers located in buildings that are physically connected to our network. As a result, we are not dependent on local telephone companies or cable TV companies to serve our customers for our on-net Internet access and private network services because of our integrated network architecture. We offer our on-net services to customers located in buildings that are physically connected to our network.service. Our on-net service consists of high-speed Internet access and private network services offered at speeds ranging from 100 Megabitsmegabits per second (“Mbps”) to 100 Gigabitsgigabits per second.second (“Gbps”). We provide our on-net Internet access and private network services to our corporate and net-centric customers. Our corporate customers are located in multi-tenant office buildings and typically include law firms, financial services firms, advertising and marketing firms , as well as health care providers, educational institutions and other professional services businesses. Our net-centric customers include bandwidth-intensive users such as other Internetthat leverage our network to either deliver content to end users or to provide access to residential or commercial internet users. Content delivery customers include over the top ("OTT") media service providers, telephone companies, cable television companies, web hosting companies, content delivery networknetworks, web hosting companies, and commercial content and application software providers. Our access customers include over 7,330 access networks comprised of other Internet service providers.providers (“ISPs”), telephone companies, mobile phone operators and cable television companies that collectively provide internet access to a substantial number of broadband subscribers and mobile phone subscribers across the world. These net-centric customers obtaingenerally receive our services in carrier neutral data centerscolocation facilities and in our data centers. We operate data centers throughout North America and Europe that allow our customers to collocate their equipment and access our network.

In addition to providing our on-net services, we provide Internet access and private network services to customers that are not located in buildings directly connected to our network. We provide thisthese off-net serviceservices primarily to corporate customers using other carriers’ circuits to provide the “last mile” portion of the link from the customers’ premises to our network. We also provide certain non-core services that resulted from acquisitions. We continue to support but do not actively sell these non-core services.

Competitive Advantages

We believe we address many of the data communications needs of small and medium-sized businesses, communications service providers and other bandwidth-intensive organizations by offering them high-quality, high-speed Internet access and private network services at attractive prices. We believe that our organization has the following competitive advantages:

Low Cost of Operation. We offerhave made a streamlined setseries of products on an integrated network.choices around our network design, operating strategy and product offering designed to provide us with a lower cost of operation. Our single network design allows us to avoid many of the costs that our competitors incur associated withwho operate, circuit-switched, TDM and hybrid fiber coaxial networks incur related to provisioning, monitoring and maintaining multiple transport protocols. Utilizing only one network protocol enables us to benefit from the continued rapid improvement in price and performance of our key network equipment and creates scale advantages in the installation and maintenance of that equipment. We have acquired optical fiber from the excess inventory of existing networks which reduces the capital intensity and operating costs of our intercity and metro networks. Our streamlined set of products reduces our service delivery costs in terms of customer and product support and the investment required to train our sales representatives. We believe that our low cost of operation also gives us greater pricing flexibility and a significant advantage in a competitive environment characterized by falling Internet access prices. We believe our value proposition is equal or superior to our competitors’ in all of the on-net multi-tenant office buildings(See “Our Key Operating Advantages”)

Greater Control and carrier neutral data centers in which we operate.

Network.Superior Delivery. Our on-net service does not rely on circuits terrestrially that must be provisioned by a third partythird-party carrier. In our on-net multi-tenant office buildings (“MTOBs”) we provide our customers the entire network, including the “last mile” and the in-building wiring connecting to our customer’s suite. In our carrier neutral data centers (“CNDCs”) we are collocated with our customers so only a connection, known as a cross connect,cross-connection within the data center is required to provide our services. This givesThe structure of our on-net service provides us more control over our service, quality and pricing. It also allows us to provision services more quickly and efficiently than provisioning services on a third-party carrier network. We are typically able to activate service to our customers in one of our on-net buildings in approximately thirteen business days.

High Quality,High-Quality, Reliable Service. We are able to offer high-quality Internet service due to our metronetwork design and intercity network.composition. We believe that we deliver a high level of technical performance because our network is optimized for packet switched traffic. Its design increases the speed and throughput of our network and reduces the number of data packets dropped during transmission compared to traditional circuit-switched networks. We believe that we

networks to serve those buildings, the costs to connect buildings to our network and equipment availability. Our network is connected to 2,914 total buildings located in 202 metropolitan markets. These buildings include 1,792 large multi-tenantMTOBs (totaling 976.8 million square feet of office buildingsspace) in major North American cities and 980 carrier neutral data center buildings in North America and Europe with high levels of Internet traffic, to maximize our revenue opportunities and expand our margins. Our network is connected to our on-net multi-tenant office buildings where we offer our services to a diverse set of high-quality, low churn corporate customers within close physical proximity of each other. Our network is directly connected to 980 carrier neutral colocationThese buildings also include 1,252 CNDCs located in 1,068 buildings in North America, Europe, Asia, South America, Australia and unique data center buildingsAfrica where our net-centric customers directly interconnect with our network. We also operate our own 54 data centers across the United States and in Europe which comprise over 609,000606,000 square feet of floor space and are directly connected to our network.

Low Capital Cost to Grow Our Business. We have a history of efficient network expansion and integration execution. We believe that these network points of presence strategically position our network to attract high levels of Internet traffic and maximize our revenue opportunities and profitability.

Balanced, High-Traffic Network. Since its inception, our network has grown significantly in terms of its geographic reach, customer connections, and traffic. We currently serve over 7,330 access networks as well as numerous large and small content providers and over 47,100 corporate customer connections. As a result of these growing bases of customers who distribute (content providers) and receive (access networks) content on our network, we have incurred relatively lower costs in growingbelieve that the majority of all the traffic on our business thannetwork originates and terminates on our competitors because we use Internet routers without additional legacy equipment, we offernetwork. This control of traffic increases our reliability and speed of delivery and enhances our margins. The breadth of our network, extensive size of our customer base, and volume of our traffic enables us to be one of a streamlined sethandful of products,Tier One networks that are interconnected on a settlement free basis. This internetworking status broadens our geographic delivery capability and we have acquired optical fiber from the excess inventory in existing networks.materially reduces our network costs.

Proven and Experienced Management Team. Our senior management team is composed of seasoned executives with extensive expertise in the telecommunications industry as well as knowledge of the markets in which we operate. The members of our senior management team have an average of over 20 years of experience in the telecommunications industry and many have been working together at Cogentthe Company for several years. Several members of the senior management team have been working together at Cogentthe Company since 2000. Our senior management team has designed and built our network and, during our formative years, led the integration of our network assets we acquired through 13 significant acquisitions and managed the expansion and growth of our business.

Our Strategy

We intend to become the leading provider of high-quality, high-speed Internet access and private network services and to continue to improve our profitability and cash flow. The principal elements of our strategy include:

Focus on Providing Low-Cost, High-Grow our Corporate Customer Base.Speed Our on-net corporate customers are typically small- to medium-sized businesses connected to our network through our multi-tenant office buildings or connected to our network through one of our carrier neutral data centers. We generally sell two types of services to our corporate customers: dedicated internet access and private network services. We typically sell dedicated internet access at the same price per connection as our competitors, but our clients benefit from our significantly faster speeds and rapid installation times. These customers are increasingly integrating off-site data centers and cloud services into their IT infrastructure in order to take advantage of the safety, security and redundancy that is offered by locating company processing power, storage and software at a data center. An important part of this new infrastructure is a high-speed, dedicated internet connection from the corporate premises to the data center and the Internet Access and Private Network Services. from one corporate premises to another corporate premises. We believe that the importance of data centers will increasingly lead tenants to reconfigure their communications infrastructure to include dedicated internet access across their locations.

Increase our Share of the Net-Centric Market. We are currently one of the leading providers of high-speed internet access to a variety of content providers and over 7,330 access networks across the world. We intend to further load our high-capacity network to respond toas a result of the growing demand for high-speed Internetinternet access generated by these types of bandwidth-intensive applications such as streamingOTT media services, online gaming, video, Internet of Things (IoT), voice over IP (VOIP), remote data storage, distributed computing, cloud services and virtualother services. We expect that we will continue to grow our shares of these segments by offering our customers a series of attractive features including:

Develop a Worldwide Peering Platform. In late 2020 we introduced a new product, Global Peer Connect (“GPC”), targeted at the growing demand for certain net-centric customers to dynamically peer traffic anywhere on our global platform. Our GPC product provides access to our Global Peer Exchange (“GPE”) which is a worldwide connectivity platform for the exchange of peering traffic destined for the Internet. Similar product offerings in the marketplace offer a materially smaller geographic footprint configuration and require a higher fixed cost for customers. We believe our product offering provides the following unique advantages over other private networks. We intend to do so by continuing to offer our high-speed and high-capacity services at competitive prices.peer exchanges or public Internet exchange points:

Pursuing On-NetPursue On-Net Customer Growth. Our high-capacity network provides us with the ability to add a significant number of customers to our network with minimal direct incremental costs. We intend to increase usage of our network and operational infrastructure by adding customers in our existing on-net buildings, as well as developing additional markets and connecting more multi-tenant office buildings and carrier neutral data centers to our network. We emphasize our on-net serviceservices because our on-net servicesthey generate greater profit margins and we have more control over service levels, quality, pricing and our on-net services are provisioned in considerably less time than our off-net services. Our fiber network connects directly to our on-net customers’ premises and we pay no local access (“last mile”) charges to other carriers to provide our on-net services. We are responding to this on-net revenue opportunity by increasing

Grow and Improve our Sales Efforts. A critical factor in our success has been our growing investment and focus on our sales and marketing efforts. Over the past five years, we have increased the size of our quota bearing salesforce by 34% from 378 to 569 employees. We seek to pair this growth in the size of our salesforce with a consistent level of productivity as measured by the number of connections sold per salesperson per month, taking into account adjustments to the changing mix of products sold and installed. In order to gain market share in our targeted businesses, we expect to continue to increase our sales efforts, including increasing ourthe number of sales representatives implementingand introducing strategies and tools to optimize sales productivityproductivity.

Expand our Off-Net Corporate Business. We have agreements with national carriers providing us “last mile” network access to over 4 million commercial buildings across North America that are lit by fiber optic cable and expandingthat are not currently served by our on-netnetwork. We have developed an automated process to enable our salesforce to identify opportunities in the off-net market and to quickly offer pricing proposals to potential customers. We believe these agreements broaden our addressable market by addingfor corporate dedicated internet access and enable us to better leverage the skills and capacity of our direct salesforce. Our carrier agreements also provide for discounts related to volume purchases thereby enabling us to reduce our cost of service locationsif we are able to increase our network.pool of off-net customers.

Selectively Pursuing Acquisition Opportunities. In addition to adding customers through our salesOur Key Operational Advantages

We believe that the wireline telecom industry is undergoing, and marketing efforts, we will continue to seek out acquisition opportunitiesface, significant price deflation for its applications and services. This price deflation is a result of a variety of factors including increased competition, enhanced substitutability of certain products and services and the continued impact of Moore’s Law, which has driven down the cost of technology, particularly for customer premise, fiber optics and networking equipment. Faced with the backdrop of continued price deflation in our industry, we have made a number of discreet choices around our network design and operating structures that increaseare consistent with our customer base, allowing usobjective of becoming the low cost operator in our industry. Since our initiation of operations, this strategy has resulted in a rapid decline in our cost to transmit bits, which has increased margins and decreased capital intensity as measured by capital expenditures per total revenues. Over the last five years, our cost of goods sold per bit delivered for our customers has declined at a compounded annual rate of 22.5%. Important components of our key operating advantages include:

One Network Protocol. Upon our founding, we selected to operate our network solely using Ethernet protocol. We made this selection in order to take advantage of the unused capacity onsignificantly greater installed base and lower cost of Ethernet network equipment versus other protocols, the substantially lower costs associated with operating and maintaining one network protocol and the continued benefits of the rapid price performance ratio improvements of Ethernet-related equipment. Selecting one operating protocol has also had positive affects in terms of our networkoperating overhead and to add revenuesthe simplicity of our organization. We believe the vast majority of our competition currently operates their networks with minimal incremental costs. We may pursue acquisition opportunities thatmultiple protocols and we believe expand our footprint,that attempts to upgrade their networks to one protocol would be operationally challenging and generate positive cash flow. These acquisition opportunities may include off-net as well as on-net customers and complementary businesses including those offering over the top applications such as VOIP. We may also make opportunistic acquisitions of network assets. Given our record of successful asset integration, we believe we cancostly.

continueBroad Access to successfully integrate new businessesFiber on a Cost Effective, Long Term Basis. We currently maintain a large portfolio of dark fiber leases around the world that supports our network operation. The nature of this portfolio and the individual leases provides us long-term access to dark fiber at attractive rates and the opportunity in many cases to extend these leases for multiple renewal terms.

On average, a modest number of our dark fiber leases come up for renewal each year. We have relationships with 269 dark fiber vendors across the globe enabling us to lease dark fiber on a long-term, cost-effective basis to virtually any geographic route or facility we require.

Narrow and Focused Product Set. Since our founding, we have strategically focused on delivering a very narrow product set to our customers. The vast majority of our revenue is driven or related to our high-capacity, bi-directional, symmetric internet access services which can be accessed on-net in multi-tenant office buildings and carrier neutral data centers or off-net through other carriers’ “last mile” connections to customer facilities. There are significant cost advantages as theya result of this narrow product set. We believe the relative size of our salesforce training, support and overhead is lower than comparable telecom providers which tend to offer a broader product set to their client base.

Scalable Network Equipment and Hub Configurations. Due to our single network protocol and narrow product set, our transmission and network operations rely mainly on two sets of equipment for operation. In order to further scale our operating leverage, we have systematically reused older equipment in less dense portions of our network. Due to interoperability between the generations of products, we are acquired.able to transfer older equipment from our core, high-traffic areas to newer, less congested routes. The result of this dynamic grooming process is that we are able to utilize our equipment for materially longer time frames than the expected life of this equipment thereby reducing our capital investment in our network. We are very selectivedesign and build all of our network hubs to the same standard and configuration. This replication strategy provides us scale benefits in reviewing acquisition opportunitiesequipment purchases, training, and have not completed an acquisition in over a decade.maintenance.

Our Network

Our network is comprised of in-building riser facilities, metropolitan optical networks, metropolitan traffic aggregation points and inter-city transport facilities. We believe that we deliver a high level of technical performance because our network is optimized for packet switched traffic. We believe that our network is more reliable and carries packet switched traffic at lower cost than networks built as overlays to traditional circuit-switched telephone networks.

Our network serves over 200is comprised of 2,914 buildings which are on net and we serve 202 metropolitan markets in North America, Europe, Asia, LatinSouth America, and Australia and encompasses:Africa. Important strategic components of our Network include:

We have created our network by acquiring optical fiber from carriers with large amounts of unused fiber and directly connecting Internet routers to our existing optical fiber national backbone. We have expanded our network through key acquisitions of financially distressed companies or their assets at a significant discount to their original cost. Due to our network design and acquisition strategy, we believe we are positioned to grow our revenue and increase our profitability with limited incremental capital expenditures.

Inter-city NetworksNetworks.

Our inter-city network consists of optical fiber, including transoceanic fiber circuits for undersea portions, connecting major cities in North America, Europe, Asia, LatinSouth America, Australia and Australia. The North American, European, Asian, Latin American and Australian portions of our network are connected by transoceanic circuits.Africa. Our network was built by acquiring from various owners of fiber optic networks the right to use typically two strands of optical fiber out of the multiple fibers owned by the cable operator. We install the optical and electronic equipment necessary to amplify, regenerate, and route the optical signals along these networks. We have the right to use the optical fiber under long termlong-term agreements. We pay these providers our annual pro rata fees for the operation and maintenance of the optical fiber and we provide our own equipment maintenance.

Intra-city NetworksNetworks.

In each metropolitan area in which we provide our high-speed on-net Internet access services, our backbone network is connected to one or more routers that are connected to one or more of our metropolitan optical networks. We created our intra-city networks by obtaining the right to use optical fiber from carriers with optical fiber networks in those cities. These metropolitan networks consist of optical fiber that runs from the central router in a market into routers located in our on-net buildings. In most cases theOur metropolitan fiber runs in a ring architecture, which provides redundancy so that if the fiber is cut, data can still be transmitted to the central router by directing traffic in the opposite direction around the ring. The router in the building provides the connection to each of our on-net customers.

Within the cities where we offer our off-net Internet access services, we lease circuits from telecommunications carriers, primarily local telephone companies and cable TV companies, to provide the last mile“last mile” connection to our customer’s premises. Typically, these circuits are aggregated at various locations in those cities onto higher-capacity leased circuits that ultimately connect the local aggregation router to our network.

Network Management and Customer Care

Care. Our primary network operations centers are located in Washington, D.C. and Madrid, Spain. These facilities provide continuous operational support for our network. Our network operations centers are designed to immediately respond to any problems in our network. Our customer care call centers are located in Washington D.C., Herndon Virginia, Madrid Spain, Paris France, and Frankfurt Germany. To ensure the quick replacement of faulty equipment in the intra-city and long-haul networks, we have deployed field engineers across North America and Europe. In addition, we have maintenance contracts with third-party vendors that specialize in maintaining optical and routed networks.

Our ServicesCustomers

We offer our high-speed Internet access and IP connectivity services to two sets of customers: corporates customers, which primarily toinclude small and medium-sized businesses communicationslocated in North America, and net-centric customers, which include, content providers, applications service providers and other bandwidth-intensive organizationsaccess networks, comprised of ISPs, cable operators, mobile operators and phone companies located in North America, Europe, Asia, LatinSouth America, Australia and Australia.Africa.

We offerOur corporate customers primarily purchase direct internet access from us on-net services in over 200 metropolitan markets. We serve 2,801 on-net buildings. Our most popular on-net service in North America is Internet access at 100 megabits per second. We typically offer this service to small and medium-sized business customers. We also offer Internet access at higher speeds of up to 100 gigabits per second. These services are generally used by bandwidth intensive customers that have

Diversity and these services generate gross profit margins that are greater thanInclusion. We strive to maintain a diverse and inclusive workforce everywhere we operate. We recruit the best people for the job without regard to gender, race, ethnicity or other protected traits, and it is our off-net services.

We offer our off-net servicespolicy to customers that are not located in our on-net buildings. These services are primarily providedcomply fully with all domestic, foreign and local laws relating to discrimination in the metropolitan marketsworkplace. In 2020, at the direction of our Board of Directors, we mandated training for all of our employees on topics of diversity and inclusion. All employees were required to complete online training in North Americaunconscious bias, and Europemanagers were further required to complete additional training in inclusion. We intend to continually reinforce our commitment to global inclusion and diversity.

Employee Retention. We compete in an industry that is highly competitive for talent. Attracting, developing and retaining skilled people in sales, technical and other positions is crucial to executing our strategy and our ability to compete effectively. While we monitor overall employee retention, we focus in particular on sales representative retention, as our new sales and revenue growth are driven almost entirely by the sales generated by our direct sales force. As a complement to our sales representative retention metric, we also closely track the pace of hiring new sales representatives.

Our sales representatives comprise 53% of our employees. For the year ending December 31, 2020, we averaged 4.9% monthly churn within our sales representatives. This churn was caused primarily by an individual’s failure to meet sales performance goals. During 2020, we hired 357 new sales representatives and ended the year with 569 sales representatives, a net increase of 21 sales representatives, or 3.8% from our total sales representatives at the beginning of 2020. Our ability to recruit and retain all of our employees depends on a number of factors, including professional development, compensation and benefits, and employee engagement.

Professional Development. We recognize the importance of retaining our sales personnel, and we continually strive to improve the performance of our sales personnel to reduce turnover. To that end, we have invested heavily in professional development as a means for improving performance.

As part of our commitment to professional development, we established a sales training and enablement department that provides both online and in-person training. Our 14 regional learning managers and management development trainers are located around the world and are available for intensive, in-person group training as well as individual training with sales representatives who may need extra assistance. In 2020, our average ratio of sales representatives with less than 12 months of tenure to regional learning managers was 23 to 1.

Our training group includes two additional trainers dedicated exclusively to training sales management. Our trainers also conduct training at our annual sales meeting, during which our entire sales force gathers to learn new skills and reinforce existing skills.

All sales personnel receive four weeks of live, inter-active training during their first month, which training is on developing both general and Cogent-specific sales skills. New sales personnel are also encouraged to, and rewarded for, completing a self-paced, online curriculum led by their manager during their first six months. Both recent and tenured sales personnel have access to online, on-demand training modules and the opportunity to obtain certification in specialized services.

Compensation and Benefits. We are committed to rewarding, supporting, and developing our employees. To that end, we offer on-net services. These servicesa comprehensive compensation program that includes market-competitive pay, stock options or restricted stock grants to all employees, healthcare benefits, retirement savings plans, and paid time off and family leave.

Employee Engagement. To foster and reinforce a company culture where employee concerns are generally providedheard, our Chief Executive Officer conducts biweekly town hall meetings to smallrespond to employee questions, which may be submitted anonymously. On alternate weeks, we conduct online town hall chats during which a rotating member of the executive team is available to answer questions from employees. We believe these open and medium-sized corporate customersunfiltered channels of communication lead to honest feedback from our employees to our management team.

Health and Safety. The health and safety of our employees is of utmost important to us. We safeguard our people by striving for zero employee injuries and illnesses. While nearly all of our employees work solely in over 6,870 off-net buildings.office environments, for our field personnel, we provide safety gear as appropriate given employee job duties.

During the COVID-19 pandemic, we invested heavily to help ensure the health of our employees. Beginning in March 2020, we closed all of our offices worldwide, requiring our entire workforce to work remotely whenever possible. We procured additional computer equipment to permit all employees to work remotely. While our offices have largely remained closed, we believe that it is important to our company culture and employee productivity to return to an in-office environment when it is safe to do so. To this end, a cross-functional team within Cogent has established safety procedures for a return to office, including training and additional safety and sanitation supplies.

Sales and Marketing

Direct Sales. We employ a direct sales and marketing approach. As of February 1,December 31, 2020, our sales force included 686712 full-time employees. Our quota bearing sales force includes 548569 employees with 364333 employees focused primarily on the corporate market and 184236 employees focused primarily on the net-centric market. Our sales personnel work through direct contact with potential customers in, or intending to locate in, our on-net buildings. Through agreements with building owners, we are able to initiate and maintain

personal contact with our customers by staging various promotional and social events in our multi-tenant office buildings and carrier neutral data centers. Sales personnel are compensated with a base salary plus quota-based commissions and incentives. We use a customer relationship management system to efficiently track sales activity levels and sales productivity.

Indirect Sales. We also have an indirect sales program. Our indirect sales program includes several master agents with whom we have a direct relationship. Through our agreements with our master agents we are able to sell through thousands of sub agents. All agents have access to selling to potential corporate customers and may sell all of our products. We have hired an indirect channel team who manages these indirect relationships. The indirect channel team is compensated with a base salary plus quota-based commissions and incentives. We use our customer relationship management system to efficiently track indirect sales activity levels and the sales productivity of our agents under our indirect sales program.

Marketing. Because of our historical focus on a direct sales force that utilizes direct contact, we have not spent funds on television, radio or print advertising. We use a limited amount of web basedweb-based advertising. Our marketing efforts are designed to drive awareness of our products and services, to identify qualified leads through various direct marketing campaigns and to provide our sales force with product brochures, collateral materials, in building marketing events and relevant sales tools to improve the overall effectiveness of our sales organization. In addition, we conduct building events and public relations efforts focused on cultivating industry analyst and media relationships with the goal of securing media coverage and public recognition of our Internet access and private network services.

Competition

We face competition from incumbent telephone and cable companies, and facilities-based network operators, many of whom are much larger than us, have significantly greater financial resources, better-established brand names and large, existing installed customer bases in the markets in which we compete. We also face competition from new entrants to the communications services market. Many of these companies offer products and services that are similar to our products and services.

Unlike some of our competitors, we generally do not have title to most of the dark fiber that makes up our network. Our interests in that dark fiber are in the form of long-term leases under indefeasible rights of use, or IRUs, with providers, some of which also compete with us. We rely on the owner of the fiber to maintain the

reports filed or furnished pursuant to Section 13(a) or 15(d) of the Exchange Act. The reports are made available through a link to the SEC’s Internet website at www.sec.gov. You can find these reports and request a copy of our Code of Conduct on our website at www.cogentco.com under the “About Cogent” tab at the “Investor Relations” link.

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connectivity forapplications and growth in the use of those applications because of the retrenchment by consumers and businesses that typically occurs in an economic downturn.

Events beyond our control may impact our ability to provide our services to our customers or increase the costs or reduce the profitability of providing our services

Catastrophic events, such as major natural disasters, extreme weather, fire, flooding or similar events as well as the continued threat of terrorist activity and other acts of war or hostility have had, and may continue to have, an adverse effect on our headquarters, other offices, our network, infrastructure or equipment or our customers and prospective customers, which could adversely affect our business. These events may also have an adverse impact on business, financial and general economic conditions around the world. We have certain locations through which a large amount of our Internet traffic passes. Examples are facilities in which we must establish and maintain relationshipsexchange traffic with other Internet access providerscarriers, the facilities through which our transoceanic traffic passes, and certain of our larger customers. These providers may be customers (who connect their network hub sites. We are particularly vulnerable to ours by buying Internet access from us)acts of terrorism because our largest customer concentration is located in New York, our headquarters is located in Washington, D.C., and we have significant operations in Paris, Madrid and London, cities that have historically been targets for terrorist attacks and vulnerable to pandemics.

If these or may beany other large Internet access providers to whom we connect on a settlement-free peering basis as described below. Both customers and settlement-free peers may be competitors of ours.

By entering into what are known as settlement-free peering arrangements, providers agree to exchange traffic between their respective networks without charging each other. Our ability to avoid the higher costs of acquiring paid dedicated network capacity (transit or paid peering) and to maintain high network performance is dependent upon our ability to establish and maintain settlement-free peering relationships and to increase the capacity of the interconnections provided by these relationships. The terms and conditions of our settlement-free peering relationships may also be subject to adverse changes, which we may not be able to control. For example, several network operators with large numbers of individual users are arguing that they should be able to chargekey facilities were destroyed or charge more to network operators and businesses that deliver the large volumes of traffic requested by their users. If we are not able to maintain or increase our settlement-free peering relationships in allseriously damaged, a significant amount of our markets on favorable terms or to upgrade the capacitynetwork traffic could be disrupted. Because of our existing settlement-free peering relationships, we may not be able to provide our customers with high performance or affordable or reliable services, which could cause us to lose existing and potential customers, damage our reputation and have a material adverse effect on our business. We have in the past had peering disputes with other network providers that resulted in a temporary disruption of the exchange of traffic between our network and the network of the other carrier. We have resolved the majority of such disputes through negotiations. In 2013 the major incumbent telephone and cable companies in the United States began to refuse to upgrade our peering connections. This refusal caused congestion at our existing peering connections with these networks as our connections were unable to handle the large volume of traffic requested bypassing through these facilities our ability (and the customersability of these incumbent telephone and cable companies. This congestion impactedcarriers with whom we exchange traffic) to quickly restore service would be challenged. There could be parts of our network and our services to ouror the networks of other customers. Following issuance by the FCC of its Open Internet Order we were able to enter into agreements with most of these carriers that have alleviated the congestion we were experiencing. We cannot assure youcould not be quickly restored or that the upgrade commitmentswould experience substantially reduced service for a significant time. If such a disruption occurs, our reputation could be negatively impacted which may cause us to lose customers and adversely affect our ability to attract new customers, resulting in those agreements will be sufficient to accommodate the growth of Internet traffican adverse effect on our network. In December 2017 the FCC rescinded the protections of the Open Internet Order. This may impact the willingness of telephonebusiness and cable companies to continue our current agreements or to enter into agreements to augment interconnections as traffic grows and to continue current agreements.

We have experienced the same congestion problem in Europe with incumbent telephone companies. As the use of streaming video increases this problem is exacerbated. Recently, several European incumbent telephone companies have increased the capacity of our interconnections. We do not know if they will continue to do so. The major carrier in Germany, Deutsche Telekom, continues to limit our interconnection capacity.operating results.

We cannot assure you that we will be able to continue to establish and maintain relationships with other Internet access providers, favorably resolve disputes with such providers, or increase the capacity of our interconnections with such providers.Business Risks

We need to retain existing customers and continue to add new customers in order to become consistently profitable and cash flow positive.

In order to become consistently profitable and consistently cash flow positive, we need to both retain existing customers and continue to add a large number of new customers. The precise number of additional customers required is dependent on a number of factors, including the turnover of existing customers, the pricing of our product offerings and the revenue mix among our customers. We may not succeed in adding customers if our sales and marketing efforts are unsuccessful. In addition, many of our targeted customers are businesses that are already purchasing Internet access services from one or more providers, often under a contractual commitment. It has been our experience that such targeted customers are often reluctant to switch providers due to costs and effort associated with switching providers. Further, as some of our customers grow larger they may decide to build their own Internet backbone networks or enter into direct connection agreements with telephone and cable companies that provide Internet service to consumers. A migration of a few very large Internet users to their own networks, or to special networks that may be offered by major telephone and cable providers of last

Our business and operations are growing rapidly and we may not be able to efficiently manage our growth.

We have grown our company rapidly through network expansion, and by obtaining new customers through our sales efforts.efforts and through increasing the number of our sales personnel. Our expansion places significant strains on our management, operational and financial infrastructure. Our ability to manage our growth will be particularly dependent upon our ability to:

If we fail to implement these measures successfully, our ability to manage our growth will be impaired.

WeCompetitive Risks

Our connections to the Internet require us to establish and maintain relationships with other providers, which we may experience difficulties operating in countries outsidenot be able to maintain.

The Internet is composed of various network providers who operate their own networks that interconnect at public and private interconnection points. Our network is one such network. In order to obtain Internet connectivity for our network, we must establish and maintain relationships with other ISPs and certain of our larger customers. These providers may be customers (who connect their network to ours by buying Internet access from us) or may be other large ISPs to whom we connect on a settlement-free peering basis as described below. Both customers and settlement-free peers may be competitors of ours.

By entering into what are known as settlement-free peering arrangements, providers agree to exchange traffic between their respective networks without charging each other. Our ability to avoid the higher costs of acquiring paid dedicated network capacity (transit or paid peering) and to maintain high network performance is dependent upon our ability to establish and maintain settlement-free peering relationships and to increase the capacity of the United States, Canadainterconnections provided by these relationships. The terms and Western Europe.

We have expandedconditions of our network into Eastern Europe, Mexico and on a limited basissettlement-free peering relationships may also be subject to Tokyo, Hong Kong, Singapore, Latin America and Australia. We have experienced difficulties, ranging from lack of dark fiberadverse changes, which we may not be able to regulatory issues to slower revenue growth rates in operating in these markets.control. If we are not successfulable to maintain or increase our settlement-free peering relationships in developingall of our market presence in these regionsmarkets on favorable terms or to upgrade the capacity of our operating resultsexisting settlement-free peering relationships, we may not be able to provide our customers with high performance, affordable or reliable services, which could cause us to lose existing and revenue growth could be adversely impacted.potential customers, damage our reputation and have a material adverse effect on our business.

We may experience delayscannot assure you that we will be able to continue to establish and additional costs in expanding our on-net buildings.

We plan on continuing tomaintain relationships with other ISPs, favorably resolve disputes with such providers, or increase the numbercapacity of carrier-neutral data centers and multi-tenant office buildings that are connected to our network. We may be unsuccessful at identifying appropriate buildings or negotiating favorable terms for acquiring access tointerconnections with such buildings,providers.

The sector in which we operate is highly competitive, and we may not be unableable to procure dark fibercompete effectively.

We face significant competition from incumbent carriers, Internet service providers and facilities-based network operators. Relative to connectus, many of these providers have significantly greater financial resources, more well established brand names, larger customer bases, and more diverse strategic plans and service offerings. A number of these providers also have large bases of consumers, which makes their networks particularly attractive to content providers as they can provide a direct connection to their customers.

Intense competition from these traditional and new communications companies has led to declining prices and margins for many communications services, and we expect this trend to continue as competition intensifies in the future. Decreasing prices for high-speed Internet services have somewhat diminished the competitive advantage that we have enjoyed as a result of our service pricing.

Our business is premised on the idea that customers want simple Internet access and private networks rather than a combination of such buildingsservices with other services such as VOIP and complex enterprise services. Our competitors offer such services. Should the market come to favor such services our networkability to acquire and keep customers would be impaired. Our competitors may also upgrade their existing services or introduce new technologies or services, such as satellite-based Internet or 5G services that could make our services less attractive to procure such fiber on favorable terms. Consequently, we may experience difficulty in adding customers to our network and fully using our network’s available capacity.potential customers.

WeOur business could suffer because telephone companies and cable companies may be required to censorprovide better delivery of certain Internet content, including content originating on their own networks, than content on the public Internet.

Broadband connections provided by cable TV and telephone companies have become the predominant means by which consumers connect to the Internet. The providers of these broadband connections may treat Internet which we may find difficultcontent or other broadband content delivered from different sources differently. The possibility of this has been characterized as an issue of "net neutrality." As many of our customers operate websites and services that deliver content to do and which may impactconsumers our ability to providesell our services in some countrieswould be negatively impacted if Internet content delivered by us was less easily received by consumers than Internet content delivered by others. The FCC had promulgated rules that would have banned practices such as well as impact the growthblocking and throttling of Internet usage, upontraffic, but those rules were rescinded by the FCC in December 2017. Some US states have either issued or are trying to issue their own net neutrality rules. Also, the European Union and other countries in which we depend.operate, have issued similar net neutrality rules. We also do not know the extent to which the providers of broadband Internet access to consumers may favor certain content or providers in ways that may disadvantage us.

Some governments attemptOperational Risks

Our network may be the target of potential cyber-attacks and other security breaches that could have significant negative consequences.

Our business depends on our ability to limit accessand mitigate interruptions to certain content onor degradation of the Internet. It is impossible for us (and other providers as far as we know) to filter all content that flows across the Internet connections we provide. For example, some content is encrypted when a secure web site is accessed. It is difficult to limit access to web sites by blocking a fixed set of Internet addresses when the website operators engage in practices that make it difficult to block them. Should any government require us to perform these types of blocking procedures we could experience difficulties ranging from incurring additional expenses to ceasing to provide service in that country. We could also be subject to penalties if we fail to implement the censorship.

We may not successfully make or integrate acquisitions or enter into strategic alliances.

As partsecurity of our growth strategy, wenetwork. We are considered a critical infrastructure provider and therefore may pursue selected acquisitionsbe more likely to be the target of cyber-attacks. Our network, systems, applications, and strategic alliances. To date, werouters may be vulnerable to unauthorized access, computer viruses, cyber-attacks, distributed denial of service (DDOS), and other security breaches. We experience such cyber-attacks and other security incidents of varying degrees from time to time, though none which individually or in the aggregate has led to costs or consequences which have completed 13 significant acquisitions. However, we are very selective with respectmaterially impacted our operations or business. An attack on or security breach of our network could result in theft of trade secrets, intellectual property, or other company confidential information, the interruption, degradation, or cessation of services, an inability to such acquisitionsmeet our service level commitments or our financial reporting obligations, and alliances and we have not undertaken either for more than 15 years. We compete with other companies for acquisition opportunities and we cannot assure you that we will be able to execute future acquisitionspotentially compromise customer data stored on or strategic alliances on commercially reasonable terms, or at all. Even if we enter into these transactions, we may experience:

In the past,transmitted over our acquisitions have often included assets, service offerings and financial obligations that are not compatible with our core business strategy.network. We have expended management attentionexperienced cyber-attacks of increasing sophistication which suggest an increase in cyber-attacks that may be state-sponsored or conducted by other well-financed organizations. Moreover, as cyber warfare becomes a tool in asymmetric conflicts between the United States and other resources to the divestiture of assets, modification of products and systemsnations, we, as well as restructuring financial obligations of acquired operations. In most acquisitions, we have been successful in renegotiating the agreements that we have acquired. If we are unable to satisfactorily renegotiate such agreements in the future or with respect to future acquisitions, wea US provider, may be exposed to large claims for payment for servicestargeted with increasing frequency. We cannot guarantee that our security measures will not be circumvented, thereby resulting in security events, network failures or interruptions that could impact our network security or availability and facilities we do not need.

Consummating these transactions could also result in the incurrence of additional debt and related interest expense, as well as unforeseen contingent liabilities, all of which could have a material adverse effect on our business, our ability to meet our financial reporting obligations, financial condition and operational results. We may be required to expend significant resources to protect against such threats, and may experience a reduction in revenues, litigation, and a diminution in goodwill, caused by a compromise of our cybersecurity. Although our customer contracts limit our liability, affected customers and third parties may seek to recover damages from us under various legal theories. In response to past attacks, we have implemented further controls and taken and planned for other preventative actions to further strengthen our systems against future attacks. However, we cannot assure you that such measures will provide absolute security, that we will be able to react in a timely manner, or that our remediation efforts following any past or future attacks will be successful.

If the information systems that we depend on to support our customers, network operations, sales, billing and financial reporting do not perform as expected, our operations and our financial results may be adversely affected.

We rely on complex information systems to operate our network and support our other business functions. Our ability to track sales leads, close sales opportunities, provision services, bill our customers for our services and prepare our financial statements depends upon the effective integration of our various information systems. In 2020, we developed and deployed our own customer relationship management software for our sales force. We may have difficulty maintaining this software and adding features that our sales representatives require. If our information systems, individually or collectively, fail or do not perform as expected, our ability to make sales, to process and provision orders, to make timely payments to vendors, to ensure that we collect amounts owed to us and prepare and file our financial statements would be adversely affected. Such failures or delays could result in increased capital expenditures, customer and vendor dissatisfaction, loss of business or the inability to add new customers or additional services, and the inability to prepare accurate and timely financial statements all of which would adversely affect our business and results of operations. Because

Network Augmentation and Maintenance Risks

Our network is comprised of a number of separate pieces, and we have purchased financially distressed companies or their assets, and may continue to do so in the future, we have not had, and may not have, the opportunity to perform extensive due diligence or obtain contractual protections and indemnifications that are customarily provided in acquisitions. As a result, we may face unexpected contingent liabilities arising from these acquisitions. We may also issue additional equity in connection with these transactions, which would dilute our existing shareholders.

Following an acquisition, we have experienced a decline in revenue attributable to acquired customers as these customers’ contracts have expired and they have entered into our standard customer contracts at generally lower rates or have chosen not to renew service with us. We anticipate that we would experience similar revenue declines with respect to customers we may acquire in the future.

We depend upon our key employees and may be unable to attractobtain or retain sufficient qualified personnel.maintain the agreements necessary to augment or maintain our network.

Our future performance depends uponnetwork is primarily composed of (i) leased capacity on transoceanic optical fiber; (ii) terrestrial inter-city optical fiber; (iii) intra-city optical fiber; and (iv) the continued contributionbuildings that we serve and the associated optical fiber connecting those buildings. We lease our optical fiber and obtain access to the buildings on our network, both carrier neutral data centers and multi-tenant office buildings, from a number of vendors. A number of our executive management teamleases, both for fiber and other key employees,building access, are up for renewal in particular, our Chairman and Chief Executive Officer, Dave Schaeffer. As founder of our company, Mr. Schaeffer’s knowledge of our business and our industry combined with his deep involvement inany given year. A deterioration

every aspectin our existing relationship with these operators could impact our network, harm our sales and marketing efforts and could substantially reduce our potential customer base. In addition, portions of our long-haul optical fiber and metro optical fiber are nearing the end of their original projected useful life. While we believe that this fiber will remain usable beyond the projected end date, we face the risk that portions of our network may need to be replaced in the future.

We expect to enter additional agreements with carriers and operators to obtain additional facilities, whether optical fiber or buildings, for our network in order to add capacity to our network and to expand our addressable market. However, we cannot assure you that we will be able to enter into such agreements in the future, be able to do so on economically attractive terms or find an adequate substitute if we are unable to reach an agreement. Failure to acquire new facilities to augment our network could keep us from adding new markets, capacity or buildings to our network and negatively impact our growth opportunities.

Our business could suffer delays and problems due to the actions of "last mile" providers on whom we are partially dependent.

Our off-net customers are connected to our network by means of communications lines that are provided as services by local telephone and cable companies and others. We may experience problems with the installation, maintenance and pricing of these lines which could adversely affect our results of operations and planning make him particularly well-suitedour plans to leadadd additional customers to our companynetwork using such services. We have historically experienced installation and difficultmaintenance delays when the network provider is devoting resources to replace. In addition, our senior management team has beenother services, such as traditional telephony, cable TV services and private network services. We have also experienced pricing problems when a lack of alternatives allows a provider to charge high prices for services in place fora particular area. We attempt to reduce this problem by using many years and has deep experience with our operations and abilities that would make them difficult to replace.

We will need to renew the long-term leases of the optical fiber that composes our network.

Our network is composed of optical fiberdifferent providers so that we have leasedalternatives for linking a customer to our network. Competition among the providers tends to improve installation intervals, maintenance and pricing. Additionally, these providers are often competing with us for the same customers, and have marketed their own service to our customers when our initial contract with our customer nears the end of its term.

Our business could suffer from many carriers. Mostan interruption of service from our fiber providers.

The optical fiber cable owners from whom we have obtained our inter-city and intra-city dark fiber maintain that dark fiber. We are contractually obligated under the agreements with these carriers to pay maintenance fees, and if we are unable to continue to pay such fees we would be in default under these agreements. If these carriers fail to maintain the fiber or disrupt our fiber connections due to our default or for other reasons, such as business disputes with us, bankruptcy, and governmental takings, our ability to provide service in the affected markets or parts of markets would be impaired unless we have or can obtain alternative fiber routes. Some of the leases are long-term, i.e. 15 years with renewal rights. These leases are generally referred to as indefeasible rights of use (IRU). In coming years we will need to renew certain of these leases either pursuant to the renewal termscompanies that maintain our inter-city dark fiber and some of the lease or by negotiating an extensioncompanies that maintain our intra-city dark fiber are also competitors of ours. Consequently, they may have incentives to act in ways unfavorable to us. While we have successfully mitigated the term. In particular, the lease for a large portioneffects of our U.S. intercity network will need to be renewed in 2020. We have exercised our renewal right as providedprior service interruptions and business disputes in the lease. However, the owner of the fiber has the rightpast, we may incur significant delays and costs in restoring service to abandon the fiber rather than renew the lease. We do not expect the owner to abandon the fiber but if the owner did soour customers in connection with future service interruptions, and as a result we would experience substantial disruption and expense in replacing our U.S. backbone network with fiber from other providers. We face similar risks with respect to the other portions of our network.may lose customers.

Substantially all of our network infrastructure equipment is manufactured or provided by a single network infrastructure vendor.

We purchase from Cisco Systems, Inc. (Cisco)(“Cisco”) the routers and transmission equipment used in our network. If Cisco fails to provide equipment on a timely basis or fails to meet our performance expectations, including in the event that Cisco fails to enhance, maintain, upgrade or improve its products, hardware or software we purchase from them when and how we need them, we may be delayed or unable to provide services as and when requested by our customers. We also may be unable to upgrade our network and face greater difficulty maintaining and expanding our network.

Transitioning from Cisco to another vendor would be disruptive because of the time and expense required to learn to install, maintain and operate the new vendor’s equipment and to operate a multi-vendor network. Any such disruption could increase our costs, decrease our operating efficiencies and have an adverse effect on our business, results of operations and financial condition.

Cisco may also be subject to litigation with respect to the technology on which we depend, including litigation involving claims of patent infringement. Such claims have been growing rapidly in the communications industry. Regardless of the merit of these claims, they can result in the diversion of technical and management personnel, or require us to obtain non-infringing technology or enter into license agreements for the technology on which we depend. There can be no assurance that such non-infringing technology or licenses will be available on acceptable terms and conditions, if at all.

International Operations Risks

Our businessinternational operations expose us to numerous risks.

We have expanded our network into 47 countries worldwide on every continent other than Antarctica. We continue to explore expansion opportunities. We have experienced difficulties, ranging from lack of dark fiber, to regulatory issues, to slower revenue growth rates from our operations in these markets. If we are not successful in developing our market presence in these regions, our operating results and revenue growth could suffer because telephone companies and cable companies may provide better delivery of certain Internet content, including content originating on their own networks, than content on the public Internet.

Broadband connections provided by cable TV and telephone companies have become the predominant means by which consumers connect to the Internet. The providers of these broadband connections may treat Internet content or other broadband content delivered from different sources differently. The possibility of this has been characterized as an issue of “net neutrality.” As many of our customers operate websites and services that deliver content to consumers our ability to sell our services would be negatively impacted if Internet content delivered by us was less easily received by consumers than Internet content delivered by others. The FCC had promulgated rules that would have banned practices such as blocking and throttling of Internet traffic but those rules were rescinded by the FCC in December 2017. The European Union has issued similar net neutrality rules but they remain untested. We also do not know the extent to which the providers of broadband Internet access to consumers may favor certain content or providers in ways that may disadvantage us.adversely impacted.

Our international operations outside of the United States expose us to economic, regulatory and other risks.

The nature of our operations outside of the United States involve a number of risks, including:

As we continue to expand into other countries, our success will depend, in part, on our ability to anticipate and effectively manage these and other risks. Our failure to manage these risks and grow our operations outside the United States may have a material adverse effect on our business and results of operations.

Fluctuations in foreign exchange rates may adversely affect our financial position and results of operations.

Our operations outside the United States expose us to currency fluctuations and exchange rate risk. For example, while we record revenues and the financial results of our European operations in Euros, these results are reflected in our consolidated financial statements in US dollars. Therefore, our reported results are exposed to fluctuations in the exchange rates between the US dollar and the Euro. We may fund certain of our cash flow requirements of our operations outside of the United States in US dollars. Accordingly, in the event that the foreign currency strengthens against the US dollar to a greater extent than we anticipate, the cash flow requirements associated with these operations may be significantly greater in US dollar terms than planned.

Our business could suffer delays and problems due to the actions of “last mile” providers on whom we are partially dependent.

Our off-net customers are connected to our network by means of communications lines that are provided as services by local telephone and cable companies and others. We may experience problems with the installation, maintenance and pricing of these lines which could adversely affect our results of operations and our plans to add additional customers to our network using such services. We have historically experienced installation and maintenance delays when the network provider is devoting resources to other services, such as traditional telephony, cable TV services and private network services. We have also experienced pricing problems when a lack of alternatives allows a provider to charge high prices for services in a particular area. We attempt to reduce this problem by using many different providers so that we have alternatives for linking a customer to our network. Competition among the providers tends to improve installation intervals, maintenance and pricing. Additionally, these providers are often competing with us for the same customers, and have marketed their own service to our customers when our initial contract with our customer nears the end of its term.

Our network may be the target of potential cyber-attacks and other security breaches that could have significant negative consequences.

Our business depends on our ability to limit and mitigate interruptions or degradation to our network availability. Our network, including our routers, may be vulnerable to unauthorized access, computer viruses, cyber-attacks, distributed denial of service (DDOS), and other security breaches. An attack on or security breach of our network could result in interruption or cessation of services, our inability to meet our service level commitments, and potentially compromise customer data transmitted over our network. Cyber-attacks of increasing sophistication and breadth suggest an increase in cyber-attacks that may be state-sponsored or conducted by other well-financed organizations. Moreover, as cyber warfare becomes a tool in asymmetric conflicts between the United States and other nations, we, as a US provider, may be targeted with increasing frequency. We cannot guarantee that our security measures will not be circumvented, thereby resulting in network failures or interruptions that could impact our network availability and have a material adverse effect on our business, financial condition and operational results. We may be required to expend significant resources to

Changes in laws, rules and enforcement may also adversely affect our customers. For example, a possible repeal or curtailing of Section 230 of the Communications Decency Act in the United States could have an adverse impact on our customers and, consequently, on us. While our top 25 customers reprented less than 5.5% of our revenue for the year ended December 31, 2020, several large net-centric customers are or may be the subject of increased regulatory scrutiny, which may impact their businesses and, consequently, their use of our services in unknown ways.

We may be required to censor content on the Internet, which we may find difficult to do and which may impact our ability to provide our services in some countries as well as impact the growth of Internet usage, upon which we depend.

Some governments attempt to limit access to certain content on the Internet. It is impossible for us to filter all content that flows across the Internet connections we provide. For example, some content is encrypted when a secure website is accessed. It is difficult to limit access to websites by blocking a fixed set of Internet addresses when the website operators engage in practices that make it difficult to block them. Should any government require us to perform these types of blocking procedures we could experience difficulties ranging from incurring additional expenses to ceasing to provide service in that country. We could also be subject to penalties if we fail to implement the censorship.

Tax Risks

Governments may assert that we are liable for taxes which we have not collected from our customers and we may have to begin collecting a multitude of taxes if Internet services become subject to taxation similar to the taxation of telephone service.

In the United States Internet services are generally not subject to taxes. Consequently, in the United States we collect few taxes from our customers even though most telecommunications services are subject to numerous taxes. Various local jurisdictions have asserted or may assert that some of our operations or services should be subject to local taxes. If such jurisdictions assess taxes on prior years we may be subject to a liability for unpaid taxes that we may be unable to collect from our customers or former customers. If the taxation of Internet service is expanded we will need to collect those taxes from our customers. The process of implementing a system to properly bill and collect such taxes may require significant resources. In addition, the FCC is considering changes to its Universal Services Fund that could result in its application to Internet services. This too would require that we expend resources to collect this tax. Finally, the cumulative effect of these taxes levied on Internet services could discourage potential customers from using Internet services to replace traditional telecommunication services and negatively impact our ability to grow our business.

Our private network services, such as our VPN services, are subject to taxes and fees in various jurisdictions. We believe we collect all required taxes, however, a jurisdiction may assert we have failed to collect certain taxes. The expense of paying any unpaid taxes could be substantial and we might not be able to collect such back taxes from our customers.

The exitWe are also subject to audit of the United Kingdom from the European Unionour tax compliance in numerous jurisdictions. These may adversely affect us.

We operateresult in the EU, including the United Kingdom. The exitassessment of the United Kingdom from the EU could adversely affect our operationsamounts due that are material and sales in unknown ways.

Terrorist activity throughout the world, military action to counter terrorism and natural disasters could adversely impact our business.

The continued threat of terrorist activity and other acts of war or hostility have had, and may continue totherefore would have an adverse effect on business, financial and general economic conditions internationally. Effects from these events and any future terrorist activity, including cyber terrorism, may, in turn, increase our costs due to the need to provide enhanced security, which would adversely affect our business and resultsus.

The utilization of operations. These circumstances may also damage or destroy the Internet infrastructure and may adversely affect our ability to attract and retain customers, our ability to raise capital and the operation and maintenancecertain of our network access points. We are particularly vulnerable to actsnet operating loss carryforwards is limited and depending upon the amount of terrorism because our largest customer concentration is located in New York, our headquarters is located in Washington, D.C., and we have significant operations in Paris, Madrid and London, cities that have historically been targets for pandemics and/or terrorist attacks. We are also susceptible to other catastrophic events such as major natural disasters, extreme weather, fire or similar events that could affect our headquarters, other offices, our network, infrastructure or equipment or our customers and prospective customers, which could adversely affect our business.

the time we are obligated to do so, which could result in bankruptcy, or we may only be able to raise the necessary funds on unfavorable terms.

Our substantial level of indebtedness could adversely affect our financial condition and prevent us from fulfilling our obligations under our notes and our other indebtedness.

We have substantial indebtedness. Our substantial debt may have important consequences. For instance, it could:

Our business may not generate sufficient cash flow from operations and we may not have available to us future borrowings in an amount sufficient to enable us to pay our indebtedness or to fund our other liquidity needs. In these circumstances, we may need to refinance all or a portion of our indebtedness on or before maturity. We may not be able to refinance any of our indebtedness on commercially reasonable terms or at all.

Issuer Purchases of Operations”, the consolidated financial statements and notes included elsewhere in this report and in our SEC filings.Equity Securities

NM - not meaningful

​

2020 and the positive impact of foreign exchange. ARPU is determined by dividing revenue for the period by the average customer connections for that period. Our average price per megabit for our installed base of customers is determined by dividing the aggregate monthly recurring fixed charges for those customers by the aggregate committed data rate for the same customers. The decline in on-net ARPU is partly attributed to volume and term based pricing discounts. Additionally, on-net customers who cancel their service from our installed base of customers, in general, have an ARPU that is greater than the ARPU for our new customers due to declining prices primarily for our on-net services sold to our net-centric customers. These trends resulted in the reduction to our on-net ARPU and a 23.9% decline in our average price per megabit for our installed base of customers.

Our off-net revenues increased 2.7%decreased by 0.5% from 20182019 to 2019.2020. Our off-net revenues increaseddecreased as we increasedthe 4.7% decrease in our off-net ARPU more than offset the 2.7% increase in the number of our off-net customer connections by 6.3% atfrom December 31, 2019 fromto December 31, 2018. Our off-net customer connections increased at a greater rate than our off-net revenue primarily due to the 5.0% decrease in our off-net ARPU.2020.

Network Operations Expenses. Network operations expenses include the costs of personnel associated with service delivery, network management, and customer support, network facilities costs, fiber and equipment maintenance fees, leased circuit costs, access and facilities fees paid to building owners and excise taxes billed to our customers and recorded on a gross basis. Non-cash equity-based compensation expense is included in network operations expenses consistent with the classification of the employee's salary and other compensation. Our network operations expenses, including non-cash equity-based compensation expense, increased 0.1%decreased by 0.3% from 20182019 to 2019 as we were connected to 8.0% more customer connections and we were connected to 125 more on-net buildings as of December 31, 2019 compared to December 31, 2018.2020. The increasedecrease in network operations expense is primarily attributable to an increase in costs related to our network and facilities expansion activities, the increase in our off-net revenues and the increase in taxes recorded on a gross basis partly offset by price reductions obtained in certain of our leased circuit costs, fewer operating leases for dark fiber and fewerthe impact of a renewal of an IRU fiber lease agreement in the second quarter of 2020. We adopted Leases (“ASU 2016-02”) on January 1, 2019. When we adopted ASU 2016-02 we elected to apply certain practical expedients under ASU 2016-02 including not separating lease and nonlease components on our finance and operating leases. When we provide off-net services we also assumeAs a result of accounting for this IRU renewal under ASU 2016-02, the costpresent value of $1.8 million of quarterly maintenance and co-location fees (non-lease components) that were previously accounted for as network operations expenses prior to the second quarter of 2020, were capitalized as a finance lease liability and right-of-use leased asset totaling $34.0 million. Amortization of the associated tail circuits.right-of-use asset is recorded as depreciation and amortization expense and the payments that are made toward the finance lease liability are recorded as a reduction of the finance lease liability and interest expense.

Selling, General, and Administrative Expenses (“SG&A”).Our SG&A expenses, including non-cash equity-basedequity-based compensation expense, increased 9.8%by 7.9% from 20182019 to 2019.2020. Non-cash equity-based compensation expense is included in SG&A expenses consistent with the classification of the employee's salary and other compensation and was $22.3 million for 2020 and $17.5 million for 2019 and $16.8 million for 2018.2019. SG&A expenses increased primarily from an increase in salaries and related costs required to support our expansion and increases in our sales efforts and an increase in our headcount. Our sales force headcount increased by 10.8%3.8% from 619 at December 31, 2018 to 686 at December 31, 2019 to 712 at December 31, 2020 and our total headcount increased by 8.3%2.7% from 974 at December 31, 2018 to 1,055 at December 31, 2019.2019 to 1,083 at December 31, 2020.

Depreciation and Amortization Expenses. ExpensesOur depreciation and amortization expenses decreased 1.2% from 2018 to 2019. The decrease is primarily due to the depreciation expense associated with the increase related to