Good morning and welcome to the Cogent Communications Holdings' Third Quarter 2016 Earnings Conference Call. As a reminder, this conference call is being recorded and it will be available for replay at www.cogentco.com. I would now like to turn the call over to Mr. Dave Schaeffer, Chairman and Chief Executive Officer of Cogent Communications Holdings.

Thank you and good morning. Welcome to our third quarter 2016 earnings conference call. I'm Dave Schaeffer, Cogent's Chief Executive Officer, and with me on this morning's call is Tad Weed, our Chief Financial Officer. We are pleased with our results for this quarter and continue to be optimistic about the strength of our business and the outlook for the remainder of 2016 and for the years beyond. For the quarter, we achieved sequential quarterly revenue growth at an accelerated constant currency rate of 3.1%. For the quarter, we achieved year-over-year traffic growth of 37% and sequential traffic growth on our network of 8%. Our EBITDA increased by 11.9% from the third quarter of 2015 and by 6.4% sequentially from the second quarter of 2016 to $37.2 million. Our EBITDA margins increased by 70 basis points from the third quarter of 2015 and increased by 110 basis points from the second quarter of 2016 to 32.9%. Our EBITDA margins as adjusted increased by 10 basis points from the third quarter of 2015, but decreased by 230 basis points to 33.5% from the second quarter of 2016 from a $3.8 million reduction in the amount of gains recognized through equipment sales. Our gains on equipment transactions were $700,000 for Q3 of 2016 as compared to $4.4 million for the second quarter of 2016 and $1.2 million for the third quarter of 2015. We do anticipate gains on equipment transactions in the fourth quarter of 2016 that will be similar to those of the third quarter of 2016. However, we anticipate our total equipment gains for the full-year 2016 will be greater than that of 2015 and will continue into 2017. Our sales force rep productivity was 5.7 units per full-time equivalent rep per month, a productivity rate that's significantly above our…

Thank you, Dave, and good morning, everyone. This earnings conference call includes forward-looking statements. These forward-looking statements are based upon our current intent, belief, and expectations. These forward-looking statements and all other statements that may be made on this call that are not historical facts are subject to a number of risks and uncertainties and actual results may differ materially. Please refer to our SEC filings for more information on the factors that could cause actual results to differ. Cogent undertakes no obligation to update or revise forward-looking statements. If we use any non-GAAP financial measures during this call, you will find these reconciled to the GAAP measurement in our earnings release, which is posted on our website at cogentco.com. Turn the call back over to Dave.

Hey. Thanks, Tad. Hopefully, you've had a chance to review our earnings press release. Our press release includes a number of historical quarterly metrics as well as our performance in the current quarter. On a constant-currency basis, our quarterly revenues increased by 3.1% from the second quarter of 2016 and by 9.7% from the third quarter of 2015. For the first nine months of 2016, we achieved year-over-year EBITDA, as adjusted, margin expansion of 170 basis points from the first nine months of 2015. We expect to continue to achieve approximately 200 basis points year-over-year EBITDA, as adjusted, margin improvement for full-year 2016 over full-year 2015. For the first nine months of 2016, on a constant-currency basis, our revenues increased by 11% from the first nine months of 2015. We continue to anticipate our full-year revenue growth for 2016 over 2015 on a constant-currency basis will be within our long-term guidance range of 10% to 20%. Our revenue and EBITDA guidance targets are intended to be long-term goals and are not intended to imply quarterly guidance. Our EBITDA, as adjusted, is impacted by the amount of equipment, sale gains that we recognize, and also was impacted by the legal fees that we have been spending related to our support of net neutrality. Now, I'd like Tad to read some additional details related to our quarter.

Thank you, Dave. And again, good morning to everyone. I'd also like to thank and congratulate the entire Cogent team for the results this quarter and their continued hard work and their efforts to another very busy and very productive quarter for the company. Some details on Corporate and NetCentric revenue. As a reminder, we analyze our revenues based upon product class, which is on-net, off-net and non-core, and we also analyze and report our revenues based upon customer type. We classify all of our customers into two types; NetCentric customers and Corporate customers. Our NetCentric customers buy large amounts of bandwidth from us in carrier-neutral data centers and our Corporate buy bandwidth from us in large multitenant office buildings. Revenue from our Corporate customers grew by 3% from the second quarter to $68.5 million and grew by 13% from the third quarter of last year. At quarter end, we had 31,199 Corporate customer connections on our network. Revenue from NetCentric customers increased from the second quarter by 2.6% to $44.5 million and increased by 5.1% from the third quarter of 2015. At the end of the quarter, we had 28,525 NetCentric customer connections on the network. Some details on revenue by product class. Our on-net revenue was $81.8 million for the quarter, which was a sequential increase of 2.9% and an increase of 9% from last year. Our on-net customer connections increased by 3.7% sequentially and increase by 17.8% from the third quarter of last year. And we ended the quarter with over 51,000 on-net customer connections on our network and our 2,334 total on-net multitenant office buildings and carrier-neutral data center buildings. Our off-net revenue was $31 million for the quarter, which was a sequential quarterly increase of 2.7% and an increase of almost 12% from the third…

Yeah. Hey. Thanks, Tad. Let me take a moment and talk about the scale and scope of our network. Our network continues to grow. We have over 847 million square feet of multitenant office space today on-net, another substantial increase from the previous quarter. Our network consists of over 29,300 metro fiber miles and over 56,700 intercity route miles of fiber. The Cogent network is one of the most-interconnected networks in the world and directly connects to over 5,820 networks. Approximately 30 of these networks are settlement-free peers. The remaining networks that connect to Cogent, that is 5,790, are Cogent transit customers. We are currently utilizing approximately 25% of our lit capacity. We routinely augment capacity in parts of our network to maintain low utilization rates, particularly as we've been upgrading significant portions of our network to multiple 100-gig wavelengths. We operate 51 Cogent-controlled data centers with approximately 565,000 feet of raised floor space, roughly operating at 30% utilization. So, in summary, we believe Cogent is the low-cost provider of Internet access transit services, and our value proposition remains unparalleled in the industry. Our business remains completely focused on the Internet and IP connectivity and data center colocation services. We provide a necessary utility to our customers. We expect our annualized constant-currency long-term growth rate to be consistent with our historical annualized growth rates of 10% to 20% revenue growth, and our long-term EBITDA, as adjusted, annual margin expansion rate to be approximately 200 basis points per year. We have incurred material, legal and economic analyses expenses related to supporting net neutrality. We spent over $1.3 million in the third quarter of 2016 and $3.7 million for the full year 2015. We'll continue to incur some of those fees for the remainder of this year. Our board of directors has approved yet another increase on our regular quarterly dividend, this time increasing the pace of that dividend increase to $0.02 per share, raising our dividend to $0.40 per share per quarter. Our dividend increases represent our continued optimism regarding the increased cash flow and cash flow generating capabilities of our business. We remain committed to returning capital to our shareholders and effectively utilizing our balance sheet. We will be opportunistic in the timing of purchase of our common stock. At the end of the quarter, we have $46.1 million remaining under our current buyback authorization, and that buyback program has been extended through the end of December 2017. Again, we remain committed to growing our top-line revenue, expanding our margin, and returning capital to our shareholders, both through dividends and buybacks. With that, I'd now like to open the floor for questions.

And our first question comes from Colby Synesael with Cowen and Company. Your line is open.

Great. Thank you. Two questions, if I may. Number one, on CapEx. I think including cap leases, the expectation earlier in the year had been to get CapEx for all of 2016 below that of 2015. I obviously appreciate the meaningful reduction in the third quarter. But I'm curious if that's still your expectation. And then secondly, capital return policy. Now that the restrictions have come off, I think there has been an expectation that you would start to spend more money in terms of giving capital back to investors, be it buyback or dividend. We obviously saw the dividend go up $0.02. Is that where the board's kind of come out at in terms of their thinking? Should we expect that instead of a typical $0.01 increase that we've been seeing that we should really start thinking it's now more of a $0.02 on a consistent basis? And also, post the 2Q, I think, disappoint around the results, the stock did come off quite a bit. Surprised you didn't buy more stock back, when it got depressed. I'm just curious, if you can give some more color around why that might have been. Thanks.

Yeah. Hi. Sure, Colby. So, there were a little more than two questions here. But let's try to get those answered. First of all...

Two sell-side questions.

Okay. Fair enough. With regard to CapEx and principal payments on capital leases, we do expect that number to continue to decline on a sequential basis from Q3 to Q4. And we do expect that, for full-year 2016, that combined number will be lower for 2016 than it was in 2015, as Tad indicated, it was effectively flat for the first nine months of the year at $47.7 million. But for the full year, we should be under roughly $55 million we spent last year. Now, with regard to return of capital, we are absolutely committed to returning capital at an accelerating rate to our shareholders. The board looked at our performance and our balance sheet and decided to increase the pacing of the growth in the dividend. While there is no absolute guarantee of dividend increases in the future, the 2017 quarter sequential track record that we have, I think, should give investors confidence that we are committed to regularly trying to grow the dividend. And I do think the $0.02 per quarter pacing is an appropriate way to think about the increments that are appropriate against a base quarterly dividend of $0.40 per share that we have at this time. With regard to the buybacks, we will continue to be opportunistic. We've extended our buyback program. We did buy back some stock in the quarter. We also have done some buybacks this quarter. We'll obviously disclose the magnitude of those when we report next quarter. We chose not to put a formal program in place committing the company to a certain level of buybacks in any one quarter. But we do have a track record of being opportunistic. And I think investors should expect us to continue to return capital, both through an increase on our dividend and through buybacks.

Thank you.

And our next question comes from Frank Louthan with Raymond James. Your line is open. Frank Garreth Louthan - Raymond James & Associates, Inc.: I guess the first two guys, they can never get the names right. That's okay. Talk to us a little bit about some of the transactions we've seen this week. Was there any network divestitures that might happen out of the Century-Level 3 deal that would be interested – that you might be interested in? And talk to us a little bit about the FiberNet asset that traded? Is that why was – or was that not of interest to you?

Okay. Well, I'll try to get your name correct, Frank Louthan. So, first of all, with regard to various combinations in our industry, I think, we'll continue to see that, particularly, as many of the companies that have legacy revenue streams continue to struggle to demonstrate growth organically, M&A is a technique to at least grow scale. With regard to the announced CenturyLink-Level 3 transaction, we currently have IRUs with both of those companies. We would expect those IRUs to continue as we have long-term rights associated with them. I do believe regulators may look at the increased concentration in backbone assets now under CenturyLink after Level 3 has done a number of acquisitions and CenturyLink had also acquired the Qwest backbone, really placing virtually all of the next-gen networks now with one particular carrier. We feel comfortable that we have sufficient term left and extension options in our IRUs with those companies that we see no direct impact on Cogent. And our operation and maintenance expenses are, in fact, governed by those contracts. So, we're somewhat indifferent. With regard to the FPL FiberNet assets that were acquired by Crown Castle, we again have a dark fiber IRU with FPL FiberNet. We've had that for some time and have significant term left on that. We also have dark fiber agreements with Crown Castle, both through their organic builds as well as some of their other acquisitions. We would expect to continue those relationships and expand them. We have chosen to be a purchaser of dark fiber through IRUs, being both more capital efficient and more operationally efficient than necessarily buying the whole company. And I think Cogent remains extremely focused on generating free cash and growing its business organically. And we've seen the capital intensity of some of the more construction-oriented companies continue to increase and have chosen not to be a buyer of those types of assets. Frank Garreth Louthan - Raymond James & Associates, Inc.: Okay. Great. Thank you. And then just a follow-up on your spending on net neutrality, just let us – give us some insight on what exactly you're spending on that's kind of been the law of the land for a while? And just curious what exactly you're finding that you still need to kind of spend to defend or what exactly you're doing there?

Sure, Frank. So, probably defense is maybe not the best term in a sense that we're actually taking an offensive position at this time. We have reached agreements with seven of the eight parties that had been violating the principles of net neutrality and have increased network capacity with all seven of those parties and they continue to increase that capacity. We also have an agreement in place with Deutsche Telekom that requires both parties to increase capacity at no cost. Deutsche Telekom has chosen to violate or breach its agreement. So, we offensively have chosen to litigate against them, sue them because of that breach of contract. In that breach of contract dispute, we needed to have a third party validate the magnitude of our economic claims against Deutsche Telekom. This is a contractual, not a regulatory suit, and that suit is underway. And the bulk of the spending in this most recent quarter was to help us validate the magnitude of that claim. Frank Garreth Louthan - Raymond James & Associates, Inc.: Great. Thank you.

And our next question comes from Nick Del Deo with MoffettNathanson. Your line is open.

Hey. Thanks for taking my question. First, Level 3 has had a rough couple of quarters in the marketplace. And assuming that deal closes, they'll have a long period of integration with CenturyLink. Have your recent growth benefited from their underperformance in any measurable way? And in the past, when there have been major mergers and reorganizations like this, how much success have you had in picking off revenue and talent?

Yeah. Thanks for the questions, Nick. So, a couple of points. First of all, we wish none of our competitors ill. And I think our growth has, in fact, been a result of our network, our product set, and our marketing and sales model, which are all very different than virtually any of the other companies in our space. As a reminder, Cogent remains entirely focused on IP and, in fact, a more narrow part of the IP market, the Internet. And that has allowed us to grow. There is this structural transformation that is continuing throughout telecommunications. And if you look globally at the enterprise businesses of any of the carriers, whether it'd be AT&T or Verizon, Sprint or CenturyLink, DT or BT or Telefónica, Level 3 as a competitive player, every single one of these companies has had negative revenue growth, yet Cogent in that environment continues to grow. And that is because the Internet is continuing to replace the products and services that these companies have traditionally relied on for their revenue. Now, our experience has been that whenever multiple networks are combined, there are disruptions to customers, customers looking for diversity. And that has usually been helpful to Cogent as a completely diverse and independent network. Secondly, these companies, when they combined, typically go through a series of waves of cost cutting, and in those cost-cutting efforts, it's usually head count reduction, and sometimes we are able to add to our staff effectively. In many cases, many of those people are not a good fit for Cogent. So, we tend to be a net beneficiary. But I think our ability to deliver our 10% to 20% revenue growth and 200 basis points of margin isn't really dependent on what those around us do, but really it's dependent on how well we continue to execute.

Okay. That's helpful. And then maybe if I can get one in on churn. I think Tad noted that on-net churn was 1.3% this quarter. And if I look back, it's been 1.0%, plus or minus 10 bps, for the last three years or so. So, it's a noticeable difference. Is there anything worth noting behind that increase or any reason to think it's going to persist?

No. I think it was just a little bit of an anomaly in the quarter. We actually, again, went through a process of cleaning up some underutilized ports and continue to migrate people to larger ports. So, just as seven or eight years ago, we went through a process to take people from gigabit, when they have multiple gigabit ports in a data center on the NetCentric side and put them on to 10 gigabit. We're continuing to do that at an accelerating rate on the NetCentric side. And I think more of our customers have realized that the cost of those 100-gig interfaces has come down and the payback that they can achieve by converting those ports is pretty material as they can save a lot on cross-connect. So, I think it's nothing more complicated than network grooming.

Okay. That's great. Thanks, Dave.

Hey. Thanks, Nick.

Our next question comes from Walter Piecyk with BTIG. Your line is open.

Dave...

Hey, Walt.

How're you doing?

Good.

Can you refresh my memory on how this NetCentric business works? Because I think the unit number was down 400. And I know, but there was – it was down last year, I guess, as well. So, what's kind of the ebb and flow of how that works? And then, similarly, you know my favorite question is to kind of ask you about these hyperscale guys, Netflix, if you can just comment on their growth rate relative to the overall growth rate of the company, that would be helpful. Thank you.

Absolutely, Walt. So, first of all, the way to think about our NetCentric business is actually by bits and price per bit. The ports that they flow through isn't how we generate the revenue. We generate it on the traffic volumes. Now, on the Corporate business, it's very different. The Corporate customer buys a fixed port. And if they use more or less of that capacity, there's no change in revenue. In fact, on the Corporate side of our business, we saw Corporate utilization continue to ratchet up from roughly 17.1% of the 100-meg average port to 18.4% in the quarter. So, pretty material step-up in utilization rate. And I think that's an indication of Corporate users using some of these hyperscale cloud-based solutions and SaaS solutions. On the NetCentric side, we did see the port count go down and it was really in response to the question that Nick just asked, which is we have continued to encourage customers to reduce the money they spend on cross-connects and carrier-neutral data centers. And increasingly, more and more of our customers are able to groom multiple 10-gig interfaces at a facility into a fewer number of 100-gig interfaces. But I think what's important to note is that in our NetCentric business, several things occurred in the quarter. One, that our traffic grew sequentially 8%, 37% year-over-year. Two, the average price of a new sale in the quarter actually materially went up. It went up 35% and it went up 3% on a year-over-year basis. I wouldn't read too much into that and get too excited about that, because last quarter the average new sale declined by 31%, and I tried to counsel investors, that was a bit of an aggressive change as a single customer hit a pricing threshold. While we…

So is that just a detailed answer of kind of the follow-through on the issues from earlier this year about these – what you were talking about as far as repricing on the volume that we're now seeing the usage growth kick through. So, that should theoretically continue into the December quarter then as well, right, until we hit that same type of, hey, we lapped over into our new annual contract next year? So, if we're already seeing this growth in the September quarter, that should – I would guess that that's got to flow through, even to a greater extent in the December quarter, yes?

The answer is, we don't want to give quarterly guidance, but we feel very good about the continued trends in growth in our NetCentric business into the fourth quarter and throughout next year. Also, just as a reminder, almost all of our contracts have a fixed term on them. But very few of the contracts, probably, only a twelfth of the contracts actually renew at the calendar year. We have no real kind of correlation between calendar year and contract year.

Got it. But I thought in the last call or maybe it was the one before, they tend to blend together, you were talking about, hey, when we start a new year, there's this fixed amount of these guys always kind of under-buy, and then they have to come back after they kind of blow through the initial cap. Am I misremembering that?

No, you're remembering absolutely correctly, Walt. But that happens every single quarter.

Right. Right. That's my point – oh, every quarter. Got it. Okay. I'm sorry. Okay. Cool. Thank you, Dave.

Thanks, Walt.

And our next question comes from Barry McCarver with Stephens, Incorporated. Your line is open.

Hey. Good morning, Dave, and thanks for taking my question. You got most of them. I just wanted a little bit more color around fourth quarter margins, and if your outlook for 2017 for margins remains pretty much the same. Thanks.

Yeah. Sure, Barry. So, we expect to see continued sequential improvement in gross margins and EBITDA margins. EBITDA, as adjusted, is heavily dependent on equipment sales. And on a sequential basis, we feel they'll be similar to what they were last quarter. They will not be at that very elevated level that we saw in Q2. With regard to capital spending, as I said in the answer to Colby's question, if you look at our cash expenditures or principal payments on capital leases and CapEx, we expect that to be down. So, again, I don't want to give specific quarterly guidance, but I feel very good about the trends for the remainder of the year. And maybe, more importantly, for investors, we anticipate the 200 basis points of EBITDA, as adjusted, margin improvement to continue in the 2017, 2018 and beyond. We actually saw our contribution margins continue to improve in the quarter. They've long-term average about 44%, they're above 50% today. So, I think you'll continue to see margin expansion going forward. And that's part of what's given the board, I think, so much comfort in increasing the pacing of our dividend increases.

Thanks, Dave.

Hey. Thanks, Barry.

Our next question comes from Scott Goldman with Jefferies. Your line is open.

Great. Good morning, everybody. Dave, I wonder if you could just talk a bit about revenue growth. Now that we've lapped the USF from a year ago, you're sort of right at that 10% low end of the long-term target. Just wondering what you think the path is here to be able to accelerate revenue growth. Maybe you can discuss it in the context of Corporate, NetCentric, and then, within that answer, maybe discuss the sales force. It looks like quota-bearing head count has been pretty stable for the last few quarters. And then, I may have a follow-up after that. Thanks.

Yeah. Great question, Scott. Thanks. So, first of all, we are at the lower end of our long-term guidance range. We've averaged about 13% top-line growth as a public company over the past 12 years and we're at 9.7% today. Our Corporate business is performing quite well, growing sequentially at 3% and year-over-year, 13%. We continue to see strong demand from our Corporate customers, as they take more of their business processes and computing and do it remotely, either in a proprietary or a shared environment through some of these hyperscale cloud operators. We think that trend is going to continue. We think we will continue to moderately grow our sales force, moderately see their productivity continue to remain at elevated levels, and that Corporate growth should continue in that mid-teens range. That's what it's been doing and that's what it should continue going forward. On the NetCentric side, that's the part of our growth that tends to be more volatile. It's been impacted heavily by FX. I'm not smart enough to tell you where currencies are going, but hopefully we found some stability. And then, with regard to the underlying growth, we've seen seven of the eight networks that have been trying to block their customer's ability to access the public Internet, all change their pattern or behavior at least with regard to Cogent, entering the contacts and rapidly upgrade ports. Now, there are some of them that are still works in progress. FT and CenturyLink have been a little slower than some of the other carriers. And I think it's been due to some of their network issues. And Deutsche Telekom entered an agreement and chose to breach it. We hope that that is a bit of an aberration and it goes away. But we feel that the underlying trend of over-the-top for end users as well as businesses will continue for every application and every service, and Internet traffic growth will continue to accelerate. We remain the price leader, but our rate of price decline has been fairly consistent. Yes, there can be quarterly fluctuations as we saw last quarter, but we feel quite comfortable that that business will also continue to improve from the 5.1% year-over-year growth rate we demonstrated last quarter. And as a result of that, we feel comfortable that we'll get into the higher end or above the floor in our growth. And then, finally, with regard to capital spending. We continue to be very efficient in the operation of our network and we think that we'll continue to see our capital expenditures, both principal payments on capital leases and our straight CapEx decline. So, again, these were all inputs to our board's analysis to accelerate our return of capital.

Great. And then a follow-up, sort of one-and-a-half follow-ups, if I may. Just on the previous question on the margins. If you look at the margin performance for this year, I mean the quarters where you exhibited greater than 200 basis points in margin growth has always coincided with the gains on the equipment sales that you've done. And you've already laid out sort of what the fourth quarter is going to look like, and it looks like it will be relatively light vis-à-vis, say, the first half. So, maybe just give a little bit more detail than before in terms of what the drivers of being able to get from 170 basis points year-over-year to over 200 basis points year-over-year will be, absent some of those gains? And just very quick housekeeping, if you can just comment on whether the Olympics impacted the traffic growth in 3Q? Thanks.

So, I'm sure there was some impact from the Olympics because we carry so many worldwide events, carrying traffic related to the election this quarter. Every quarter there's some event, there'll be World Cup Soccer. There's always something. So, I don't want people to think there is any kind of event-driven changes to our traffic growth rate. I think it's more broad than that. With regard to the margin expansion, two things. One, yes, we grew 9.7%. That's great compared to anyone else selling to businesses in the telecom ecosystem, but yes, Cogent has and will do better than that. With regard to margins, our margin expansion is really better than any other company in our comps universe as well. And our margin expansion does not come from firing people and reducing costs, but rather through growth and operating leverage. We have a high fixed cost network with very little incremental cost as we sell on-net revenues, and roughly 75% of our sales are on-net. So, that's why our contribution margins continue to improve. And while we've averaged 44% EBITDA contribution margins over a 12-year period, we're actually doing better than that now and had over 50% in this most recent quarter. So, that what gives me confidence that we'll continue to see our aggregate margins expand to that roughly 200 basis point range.

Great. Thanks for taking the questions, Dave.

Hey. Thanks, Scott.

Our next question comes from James Breen with William Blair. Your line is open. James Breen - William Blair & Co. LLC: Thanks for taking the question. Just two. One, Dave, can you tell us or remind us what percentage of revenue your largest customer was this quarter? And then, secondly, with respect to CenturyLink and Level 3, can you talk about the dynamics that you see coming to those in both in NetCentric and Corporate business? There has to be some buildings where you're competing against both of those companies, which obviously will be reduced now. And then, from the NetCentric side, sort of in the data center environment, are they both being aggressive on pricing at Level 3 more so than CenturyLink, just your thoughts there? Thanks.

Sure. So, let's talk about our largest customers, at 1.3% of revenues, they're growing about comparable to our base. Their percentages remain relatively consistent. They have, like of all of our customers, some variability in their growth rate, but we feel very comfortable that they're going to continue to give us more and more of their traffic and continue to grow with Cogent. We think that's true of all of the major OTT, video companies, either those that do it directly themselves or those that use aggregators or third-party CDNs that also buy bandwidth from Cogent. So, we feel pretty comfortable that our NetCentric growth trends are going to continue to improve. Moving to CenturyLink and Level 3, and I'm going to take both parts of our business. On the NetCentric side, quite honestly, we almost never saw CenturyLink in the market. They have pretty much walked away from the NetCentric market. Level 3 is a vigorous competitor globally. While we're in just under 900 carrier-neutral data centers around the world, I would say, Level 3 is in the vast majority of them and is our most ubiquitous competitor. I think it's really up to the managements of those two companies and then the combined company to decide whether transit will continue to be an important product for them going forward. I think, for CenturyLink, they have chosen to de-emphasize that product. Now, on the Corporate side, two very different answers. We compete with CenturyLink, but almost exclusively within the CenturyLink footprint. We do not see CenturyLink outside of CenturyLink's incumbent footprint as a competitor and don't anticipate that changing. With regard to Level 3, we occasionally see them in our Corporate space, but it's pretty rare. It's interesting that their most recent disclosure, for the first time, they kind of broke down their Corporate customers by customer size. They had never done that before. And as you can see, they're really focused on a different segment of the market than Cogent. They're really focused on building custom networks for very large companies, typically into single-tenant locations. So, we just don't see them as a significant competitor in our Corporate business. James Breen - William Blair & Co. LLC: Great. Thanks.

And our next question comes from Tim Horan with Oppenheimer. Your line is open. Timothy Horan - Oppenheimer & Co., Inc. (Broker): Thanks, guys. Just a couple of follow-ups. Dave, maybe I missed it, but volume growth was a little lighter this quarter on the NetCentric side and we were kind of expecting a little bit below last quarter. It sounds like you're confident it's going to accelerate. Maybe any color around that, and I just had a follow-up on CenturyLink.

Yeah. Sure, Tim. So, two things. First of all, our NetCentric growth on a sequential basis improved quite a bit. It was 8% sequentially, up from the 2% the previous quarter on a sequential basis. On a year-over-year basis, it was 37%. Remember, in Q3, you really have two relatively low traffic growth months and then one fairly significant growth month in September, as we move further into the cooler weather in the Northern Hemisphere. We'll see people spend more time on OTT applications and I think that will drive continued growth. Timothy Horan - Oppenheimer & Co., Inc. (Broker): Great. And then, my sense is on Qwest-CenturyLink. Historically, they've kind of kept prices a little bit high. They've not been a real price competitor. Level 3, they seemed to have changed a little bit of from that. Do you think – Level 3 sounds like they've been your primary competitor on the NetCentric side? Do you think they could maybe be a little less price aggressive? And I guess, related to that, your prices are about half of what Level 3's are, your closest, seems like, price competitor. Can that gap start to close a little bit at this point? Thanks.

So, I mean, ultimately, the decision on their pricing strategy is theirs, not ours. So, it'd probably be inappropriate for me to speculate. You are correct in what you said about CenturyLink's strategy with the Qwest network and it's why Qwest has become relatively insignificant in the NetCentric market. For large capacity customers, there are really four choices in the market; Level 3 and Cogent, NTT and Telia. Telia and NTT tend to be a little more geographically challenged, not everywhere. But those are really the market choices. We continue to be, I think, the choice that most companies choose to use a lot of bandwidth, and it's why our traffic growth rates are substantially faster than the Internet. With regards to the rate of price declines, we are today down to only utilizing 25% of the lit capacity in our network. We feel very comfortable that we have a lot of room to be aggressive on pricing and do whatever it will take to grow our business. Timothy Horan - Oppenheimer & Co., Inc. (Broker): And then just lastly on CenturyLink-Level 3, as you pointed out, they are going to have essentially a monopoly in next-generation networks. How much of a concern do you have with that, with your business or do you think the government might have an – is there certain cures that you would like to see to protect you over the longer term? Thanks.

So, first of all, I feel we're quite well protected by contract. And we have agreements with both CenturyLink and Level 3, and both of those companies have been very honorable in honoring the contracts that were entered into a long time ago and have renewal options that we have exercised. So, I have to doubt that Cogent is in a good space. I think it's probably premature for me to talk for the regulators. If I was a betting person, I think this transaction will happen. But I think there probable are areas of concern in any type of horizontal merger such as this, that regulators are going to take a look at. And I think as we have discussions, and others do with the FCC and the DOJ, we'll kind of end up figuring out what needs to be done. Timothy Horan - Oppenheimer & Co., Inc. (Broker): Thank you.

Our next question comes from Michael Bowen with Pacific Crest. Your line is open.

Okay. Thanks for taking the question. Couple here, Dave, sorry if you already answered them. But sales force churn, I think it was 5.9% last quarter. Wanted to see if you had given that number, also customer penetration of your on-net buildings would be helpful as well. And your last comment around utilizing 25% of the capacity. I want to say, correct me if I'm wrong, that this was 30% last quarter. So, if you could let us know what changed there. Thanks.

Yeah. Sure. So, sales force churn was 5.3% in the quarter, down from...

5.8%.

...5.8% the previous quarter. So, there was an improvement there. And again, it's not perfectly linear. But we're still running below long-term historical trends, and we continue to feel that the training programs that we've put in place are doing what they're supposed to do. And our sales force productivity is good. With regard to penetration, we have seen our Corporate MTOB penetration continue to increase and it's about 16 connections per building, up from about 15.5. So, we are continuing to see good, consistent improvement in that penetration rate.

And then, on the lit capacity percentage?

So, on capacity, last quarter, we were at 28% utilization. Even though traffic grew sequentially 8% in the quarter, we saw our utilization rate fall to 25%. A large part of that is as a result of this very aggressive rollout of 100-gig replacing multiple 10-gig. So, it's multiple 100s replacing multiple 10s. And today, nearly 70% of our long-haul bits today flow over 100-gig waves versus 10s. And again, we have multiple 100s. In some cases, we'll have several terabits between different city pairs. And I think as the cost to move a bit of mile continues to fall, we try to be very efficient in staying ahead of that. And any given route, once it reaches about 40% utilization, we begin an upgrade program.

Okay. Thanks. And one last one. How far through the (1:06:57) the NetCentric sales force?

Yeah. I think on the NetCentric sales force, we're still adding people and we're still working on account segmentation as we have talked about on previous calls. It's hard to put a percentage. I think there's a lot of room to do better. And listen, we are doing better than we had done in the past. We're going to do better going forward. And I think the NetCentric sales organization has a good foundation, it has the right tools and the right number of people kind of at the core level. But we are adding people, particularly to serve some of these peripheral markets.

Our next question comes from Michael Rollins with Citigroup. Your line is open.

Hi. Good morning. Just a question on the pace of penetration in some of the buildings. I was wondering if you could break down maybe some – maybe by some cohorts of age and help us understand, in some of the buildings that you've been in for a long time, how you look at incremental penetration gains in that segment versus maybe the results you're achieving in some of the newer buildings. Thanks.

Hey, Mike. Thanks. So, first of all, the pace at which we have been adding new corporate buildings has continued to decelerate. And today, it's about a 3% annual increase in footprint as opposed to, say, five years ago when that was nearly 10% per year. Two, we're just slightly over 16 connections per building sold to about 12 unique businesses in those buildings. So, we are continuing to see a good increase in number of businesses as well as number of connections per building. When we look at the age of the buildings, I think we continue to see even older buildings exhibiting pretty consistent rates of additional connections per building to new buildings being added. And roughly 87% of the growth on our network tells – continues to come from buildings that have been on-net for more than 18 months. So, I think it's really this change in consumer behavior that people are putting more of their computing into the public space and on cloud platforms that's driving our Corporate users to need more bandwidth. And I think, to me, an important statistic on the Corporate side is that the average Corporate utilization rate went from about 17.4% to 18.5% in one quarter. It's a big base. There's 30,000 connections out there and for them to use that much more bandwidth across the board is what's driving us to get better penetration.

Thanks very much.

Hey. Thanks, Mike.

Our next question comes from Phil Cusick with JPMorgan. Your line is open.

Hi, Dave. Thanks. I found it interesting that Level 3 is taking up CapEx for dark fiber. Has your interest in committing capital for dark fiber evolved at all?

It has not, Phil. So, after Level 3 acquired Time Warner Telecom, I think they saw their CapEx, as a percentage of revenue of obviously a much larger company, go from about 12% to nearly 18%. And I think they were spending that capital, expanding their footprint in large part to help mitigate the decline in revenue from the existing footprint due to the product substitution phenomena that is industry-wide. As we look at dark fiber, we are a buyer, not a builder of dark fiber. We buy from 215 different suppliers around the world. We did buy some more in the quarter. Our mileage has increased, 29.3 thousand metro-miles and 57.6 thousand on the long-haul side. So, we'll continue, I think, to moderately expand our footprint. But when we look at new-builds, we have concluded that the economics don't work for Cogent for Fiber to the Tower, they may for others. And then, in corporate buildings, we remain very disciplined in only going after the biggest buildings that are the tightest cluster with the right types of businesses and enough businesses in those buildings. And then finally, on the data center side, that is the one area where we've probably seen a bit of an acceleration in our footprint expansion, and that's been as a result of more data centers being built. We've seen the pace of new facilities coming on line accelerating. And Cogent's in 880 data centers around the world and expect that number to continue to increase at probably an accelerating rate for the near term. So, we'll be connecting to virtually all of them.

Got it. And you mentioned the Level 3 breaking up the different business sizes. Can you help us by breaking out your Corporate customers by size as well? Obviously, not as big as Level 3, but maybe in a few different buckets for us?

Sure. So, a couple of different points. First of all, we don't really think of the world in that respect. And quite honestly, I couldn't even tell you the revenue scale of the businesses that buy from me because I'll sell to anyone who happens to be located in one of our on-net buildings. They could have a single office in one building or they could be part of a large multinational, and we do both. Our ARPUs are relatively low. Our Corporate ARPUs are about $700. Our total on-net ARPUs are about $550. And on the off-net ARPUs, which are almost entirely Corporate, they're about $1,250. So, we report by connections. The average customer probably takes a couple of connections from Cogent. On the Corporate side, about 2.2, 2.3 connections. It's a blend of on-net and off-net. So, you're looking at probably total revenue per customer in the $2,000, $2,500 range. But the businesses could have a much bigger spend. We're only selling Internet access to them.

Thanks. And last thing, if I can. CenturyLink filed again in its fight against the BDS rules this week. Any insight you can give us into the process in DC? Thanks.

So, first of all, the BDS drama is tangential to Cogent in that we buy nothing under regulatory rates, but rather through negotiated contracts. And we've been very comfortable with the rates we've been able to negotiate. I do believe, the current regime at the FCC is committed to ensuring that the business data service market is technology agnostic, so the inclusion of cable as well as telco into that. And two, that no provider uses their monopoly position to extract non-market-based pricing from competitors. And CenturyLink does have a very rural footprint for the most part and there's generally a lack of competition. So, it doesn't surprise me that they've kind of raised their hand and tried to protest the inability to extract a monopoly price. And it's usually the RLEC areas that tend to have the worst pricing environment and, quite honestly, the worst service deliver metrics. I know when we buy off-net, the more rural the supplier and the location, and that is sometimes required by our Corporate customers, the longer the installation window is and the higher the price is. So, companies that have a big rural footprint are going to be very opposed to this type of regulation.

Thanks, Dave.

At this time, I'm showing no further questions. I would like to turn the call back over to Dave Schaeffer for closing remarks.

So, I want to thank everyone. We're very pleased with our results for the quarter and, most importantly, we're pleased with the continued improvement trends in our business. And we remain completely focused on the Internet and I think our growth is tied to the ascendancy of the Internet over other technology platforms. Thank you, everyone.

Ladies and gentlemen, thank you for your participation in today's conference. This concludes the program. You may now disconnect. Everyone, have a great day.