ITEM 1A. RISK FACTORS
Market Risks
Our growth and financial health are subject to a number of economic risks.
A downturn in the world economy, especially the economies of North America and Europe, would negatively impact our growth. Our net-centric business would be particularly impacted by a decline in the development of new Internet-based applications and
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businesses that make use of the Internet. Our corporate business would be particularly impacted by an increase in vacancy rates in the MTOBs that we serve. Growth in our IP-transit segment is predicated on growth in the use of the Internet to offset the declining prices of Internet service. An economic downturn could impact the Internet business more significantly than other businesses that are less dependent on new Internet-based applications and growth in the use of those applications and less susceptible to increases in office vacancy rates resulting from the retrenchment by consumers and businesses that typically occurs in an economic downturn.
Historical reductions in our prices are expected to continue in an inflationary economy even as our costs may increase.
Many of the regions in which we operate continue to experience an increase in or elevated inflation rates. Due to the nature of our product offerings and the industry in which we operate, which is deflationary, we may be unable to raise our prices. We expect that our historical pricing patterns will continue for the foreseeable future. Additionally, we may be unable to achieve the sales volume necessary to compensate for price reductions, which may adversely impact our revenue growth.
These historical pricing patterns are occurring against the backdrop of a general increase in prices due to inflation. In particular, the cost of electricity has increased in all countries where we purchase power. While, in certain cases, we have negotiated contracts that cap price increases due to inflation or that have fixed the price of electricity, we have experienced and may continue to experience increases in the costs of electricity and other services that we cannot pass on to our customers or may only be able to pass on partially to our customers. If these price increases continue, this may impact our profitability.
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 events (including those exacerbated by climate change), fire, flooding, public health crises such as the COVID-19 pandemic 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 networks, 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 exchange traffic with other carriers, the facilities through which our transoceanic traffic passes, and certain of our network hub sites. We also rely on third-party data centers and service providers in these regions whose own disaster recovery capabilities are beyond our control. We are particularly to 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 may be to extreme weather and public health .
If these or any other of our key facilities or those of our critical third-party providers were destroyed or seriously damaged, a significant amount of our network traffic could be disrupted. Because of the large volume of traffic passing through these facilities our ability (and the ability of carriers with whom we exchange traffic) to quickly restore service would be challenged. There could be parts of our networks or the networks of other carriers that could not be quickly restored or that would experience substantially reduced service for a significant time. Such disruptions may also increase our vulnerability to cybersecurity attacks, further complicating recovery efforts. 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 an effect on our business and operating results. While we maintain business continuity plans and insurance coverage, these measures may not be sufficient to fully mitigate the financial or operational impact of such events.
Risks Relating to Our Acquisition of the Cogent Fiber Business
We may not realize the anticipated benefits of the acquisition of the Cogent Fiber Business, and the integration of the Cogent Fiber Business may disrupt our business and management.
The success of our acquisition of the Cogent Fiber Business, including the realization of anticipated benefits and cost savings, depends, in part, on our ability to successfully combine the operations of Cogent Fiber Business with our business. The integration has been and may continue to be more difficult, costly or time consuming than expected. The integration process involves numerous risks, including:
inability to achieve the financial and strategic goals for the Cogent Fiber Business and the combined businesses;
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inability to achieve the projected cost savings for the Cogent Fiber Business and the combined businesses and the resulting impact on profitability;
difficulty in, and the cost of, effectively integrating the operations, technologies, products, services, and personnel of the Cogent Fiber Business;
entry into markets in which we have minimal prior experience and where competitors have stronger market positions;
disruption of our ongoing business and distraction of management and other employees from other opportunities and challenges;
inability to retain key personnel;
inability to retain key customers, vendors and other business partners or to successfully migrate customers from legacy Cogent Fiber Business services;
any non-occurrence of anticipated tax benefits or potential for adverse tax consequences;
the effects of complex accounting requirements on our reported results;
incurring acquisition-related costs or amortization or impairment costs for acquired intangible assets that could impact our operating results;
elevated delinquency or bad debt write-offs related to the acquired customers of the Cogent Fiber Business;
impairment of relationships with employees, customers, partners, distributors or third-party providers of our technologies, products or services;
failure of due diligence processes to identify significant problems, liabilities or other challenges of the Cogent Fiber Business or technology;
exposure to litigation or other claims in connection with, or inheritance of claims or litigation risk as a result of, the Transaction, such as claims from terminated employees, customers, or other third parties;
delay in customer purchasing decisions due to uncertainty about the direction of our product and service offerings;
increased accounts receivables collection times and working capital requirements associated with business model of the Cogent Fiber Business; and
incompatibility of business cultures.
If we experience difficulties during the integration process, we may not realize the benefits of the Transaction to the extent anticipated. These integration matters could have an adverse effect on our business during the transition period and on the combined company for an undetermined period after completion.
Business Risks
We need to retain profitable existing customers and continue to add new customers in order to become consistently profitable and cash flow positive.
In order to be consistently profitable and cash flow positive, we need to both retain existing profitable 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 the services we offer 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
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switching providers. Further, as some of our customers grow larger, they may decide to build their own telecommunications backbone networks or enter into direct connection agreements with telephone and cable companies that provide Internet service to consumers or to lease dark fiber in lieu of purchasing optical wavelength services. A migration of a few very large customers to their own networks, or to closed networks that may be offered by major telephone and cable providers of last mile broadband connections to consumers, or the loss or reduced purchases from several significant customers could impair our growth, cash flow and profitability.
We have customers who depend on the U.S. government’s E-rate program for funding. There can be no assurance that the E-rate program will continue or that other governmental programs that fund governments and organizations that are or might become customers will continue. Any expiration, reduction or restructuring of such programs to continue could result in a loss of customers and impair our growth, cash flow and profitability.
A substantial and long-term shift to remote work may impact our ability to add new customers and to retain existing customers.
In recent years, we saw corporate customers continue their remote work policies and take a cautious approach to adding new services and upgrades to existing services, as well as a reduced demand for connecting smaller satellite offices. We also witnessed a deteriorating real estate market in and around the buildings we service, with rising vacancy levels and falling lease initiations or renewals resulting in fewer sales opportunities for our salesforce. As a result, we experienced a slowdown in new sales to our corporate customers which negatively impacted our corporate revenue growth. If a significant number of our corporate customers or potential customers decide to retain remote work policies, we may experience increased customer turnover, fewer upgrades of existing customer configurations and fewer new tenant opportunities. These trends may negatively impact our revenue growth, cash flows and profitability. As the option to fully or partially work from home becomes permanently established at many companies, our corporate customers are integrating some of the new Internet-based applications that became part of the remote work environment. However, the exact timing and path of these trends remains uncertain, potentially increasing the current impact on our business for an extended period.
Lower vacancy rates as a result of diminished lease terminations and increased leasing and subleasing activity will be a key factor in driving renewed growth in our corporate business.
During the COVID-19 pandemic, we saw increasing vacancy rates in many of our buildings due to higher lease terminations and lower leasing activity. Throughout the year ended December 31, 2025, we observed a gradual reduction in vacancy rates and an upward trend in office occupancy rates in certain markets but elevated vacancy rates remain in a number of markets, predominantly in California, Washington D.C. and the Pacific Northwest. Concurrently, there were encouraging developments in our corporate business. Despite these positive indicators, the precise timing and trajectory of these trends remain uncertain. We may continue to see increased corporate customer turnover, fewer upgrades of existing corporate customer configurations and fewer new tenant opportunities, which would negatively affect our corporate revenue growth. The elimination of non-core and low margin products also has a negative impact on our corporate revenue results.
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 expansion of our IP Network, obtaining new customers through our sales efforts, the acquisition of the Cogent Fiber Business and the expansion of our Optical Wave Network. 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:
expand, develop and retain an effective sales force and qualified personnel;
maintain the quality of our operations and our service offerings;
maintain and enhance our system of internal controls to ensure timely and accurate compliance with our financial and regulatory reporting requirements;
expand our accounting and operational information systems in order to support our growth; and
successfully develop, market and support our optical wavelength services.
If we fail to implement these measures successfully, our ability to manage our growth will be impaired.
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We may be unable to retain existing enterprise customers, maintain the level of services provided to enterprise customers or attract new enterprise customers.
In connection with the acquisition of the Cogent Fiber Business, we acquired an enterprise customer base, a type of customer that we have not traditionally served. To manage this transition, we established a dedicated enterprise sales team within our sales force focused on retaining these customers and attracting new enterprise customers. Beginning in 2026, we merged our enterprise sales team into our retention team to streamline operations and maximize the preservation of this revenue base. The retention team is specifically tasked with maintaining existing customer relationships and servicing those clients to ensure long-term stability. Enterprise customers differ from our traditional corporate and net-centric customers in that they typically have larger, more geographically diverse operations that require a greater percentage of off-net services from us. In addition, enterprise customers are more likely to require customized solutions and processes and prefer a single provider to meet all of their connectivity needs. A number of our acquired enterprise customers purchased non-core services that we have eliminated, and this may cause such customers to look to other providers who offer a broader set of services. We may encounter difficulties retaining such customers, in converting such customers from their legacy services to newer technologies or in attracting new enterprise customers. Our inability to retain or attract such customers or to convert them to our services, could affect our growth, cash flow and . The elimination of non-core and low-margin products also has a impact on our enterprise revenue results.
Demand from certain employees to work remotely may reduce the attractiveness of our business as an employer versus some competitors who are allowing employees to work remotely.
In the fall of 2021, we began to implement a policy designed to return the vast majority of our employees to the office. Except for a brief return to remote work at the beginning of 2022 for a portion of our workforce, we have, largely maintained a full-time, in-office requirement. This policy led to small minority of our workforce leaving our employment. Further, we are experiencing competitive challenges as other companies offer hybrid or fully remote work options. Increasing and/or continued demands to work in a hybrid or fully remote work style may reduce our ability to attract and retain employees, in particular attracting and retaining salespeople.
We may not successfully make or integrate acquisitions or enter into strategic alliances.
As part of our growth strategy, we may pursue selected acquisitions and strategic alliances. To date, we have completed 14 significant acquisitions, including our acquisition of the Cogent Fiber Business in 2023. However, we are very selective with respect to such acquisitions and alliances and, prior to the acquisition of the Cogent Fiber Business, we had not undertaken either for more than 17 years. We compete with other companies for acquisition opportunities and we cannot assure you that we will be able to execute future acquisitions or strategic alliances on commercially reasonable terms, or at all. Even if we enter into these transactions, we may experience:
delays in realizing or a failure to realize the benefits we anticipate;
difficulties or higher-than-anticipated costs associated with integrating any acquired companies, products or services into our existing business;
attrition of key personnel from acquired businesses;
additional costs or charges associated with the repurposing or retirement of acquired assets or the elimination of acquired non-core products and services;
unexpected costs or charges;
unforeseen operating difficulties that require significant financial and managerial resources that would otherwise be available for the ongoing development or expansion of our existing operations; and
unforeseen difficulties or costs associated with the repurposing of the Sprint Network and buildings acquired with the Cogent Fiber Business.
In the past, our acquisitions have often included assets, service offerings and financial obligations that are not compatible with our core business strategy. We have expended management attention and other resources to the divestiture of assets, modification of
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products and systems as well as restructuring financial obligations of acquired operations. In most acquisitions, we have been successful in renegotiating the agreements that we have acquired. However, if we are unable to satisfactorily renegotiate such agreements in the future or with respect to future acquisitions, we may be exposed to large claims for payment for services 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, financial condition and results of operations. Because we have typically purchased financially distressed companies or their assets, and may continue to do so in the future, we have largely not had, and may not in the future 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.
Our data center expansions could involve significant risks to our business.
To sustain our growth in various existing and emerging markets, we may need to expand an existing data center, lease a new facility, or acquire suitable land, with or without existing structures. Following the acquisition of the Cogent Fiber Business, we embarked on the conversion of Sprint facilities into data centers suitable for either wholesale lease or sale – of which 52 are wholesale facilities and 87 are edge data center facilities. Undertaking such projects exposes us to numerous risks, including increased capital spending, that could adversely impact our financial condition and operational results. The prevailing global supply chain challenges and inflation have further heightened these risks, introducing additional uncertainties into our business.
The selection of suitable sites is a critical factor in our expansion plans. It is possible that there may be a lack of available properties in our target markets with the required combination of high-power capacity and fiber connectivity, or the options may be limited. Anticipating ongoing challenges in power availability and grid constraints in various markets, coupled with shortages of associated equipment due to heightened demand and the finite nature of these resources, we may encounter difficulties in site selection, leading to construction delays, increased costs, lower interconnection revenue, reduced margins, and potential negative implications for customer retention over time.
Currently, we are dealing with escalating construction costs attributed to the rising expenses of labor and raw materials due to inflation and tariffs, logistical challenges in the supply chain, and heightened demand, in particular for network equipment, in our sector. Despite having invested in building up a reserve of materials to address supply chain issues and inflation, there exists the possibility that it may not be sufficient. Persistent delays, difficulties in finding replacement products, and continued high inflation could potentially affect our business and growth, significantly affecting our overall business standing. Any unforeseen disruptions to our supply chain or inflationary pressures, including as a result of tariffs and other trade barriers, might substantially impact the costs associated with our planned expansion projects, potentially hindering our ability to fulfill commitments to customers who have contracted for space in new data centers under construction and to provision new on - net services.
Construction projects are dependent on receiving permits from public agencies and utility companies. Any delay in receiving permits could delay our construction projects and affect our growth. While we do not currently anticipate any material long-term negative impact to our business because of construction delays, these types of delays and stoppages related to receiving permits from public agencies and utility companies could worsen and have an adverse effect on our bookings, revenue or growth.
Furthermore, construction related projects require us to carefully select and rely on the experience of one or more designers, general contractors, and associated subcontractors during the design and construction process. Should a designer, general contractor, significant subcontractor or key supplier experience financial problems or other problems during the design or construction process, we could experience significant delays, increased costs to complete the project and/or other negative impacts to our expected returns.
Our ability to maintain or grow revenue from leasing IPv4 addresses is subject to factors beyond our control.
We own a significant inventory of IPv4 addresses, including a large block acquired through our acquisition of the Cogent Fiber Business. These addresses are critical to the operation of our network and represent an important component of the Services we
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provide to our customers. We generate revenue by leasing IPv4 addresses to our customers and may also seek to realize additional value through the strategic sale of excess addresses.
Our ability to maintain or grow revenue from IPv4 leasing, or realize value through an asset sale, is subject to factors beyond our control, including market liquidity, price volatility and the adoption of IPv6. Although IPv4 addresses are a finite resource, the market has historically experienced fluctuations in lease and sale rates. An increase in the supply of IPv4 addresses or a decline in demand could result in lower lease and sale rates.
If lease rates for IPv4 addresses decline, our revenue and profit margins would be negatively impacted.
We may be unable to monetize our data center or IPv4 assets.
We may be unable to lease or sell the acquired Cogent Fiber Business data centers on attractive financial terms, in sufficient volume or at all. If we are unable to do so, we may not recover the costs incurred in converting these facilities to data centers, we may not be able to recoup our renovation and carry costs, and that could adversely impact our financial condition and operational results.
Similarly, if demand for purchasing or leasing IPv4 addresses materially declines or there is a reduction in market liquidity or the market price for sale rate for IPv4 addresses, we may be unable to monetize excess IPv4 addresses on favorable terms, and that could adversely impact our financial condition and operational results.
Our commitments and disclosures regarding environmental, social, and governance (“ESG”) matters expose us to potential reputational and legal risks.
The perception of our ESG profile to customers or employees may impact our brand and reputation. Our level of commitment to ESG initiatives could influence our ability to attract or retain customers and employees who may hold different views on these matters. The timing, scope, or nature of these initiatives, goals, or commitments, as well as any revisions, may lead to criticism. Scrutiny regarding the ESG initiatives and the accuracy, adequacy, or completeness of ESG disclosures may arise. Our ESG-related initiatives, goals, commitments, or mandates or perceived failure thereof could adversely affect our reputation and materially harm our business. Our commitment to ESG initiatives at any level could lead to government scrutiny or private litigation or otherwise adversely affect our reputation and materially harm our business.
The evolving views on ESG matters has prompted the adoption of competing legal and regulatory requirements. While some jurisdictions have mandated additional disclosures related to climate change others have enacted statues that restrict the use of ESG factors in business decisions. If new laws or regulations conflict with one another, we may face heightened compliance burdens, legal uncertainty and increased costs. Our selection of voluntary disclosure frameworks and standards, as well as their interpretation or application, may change and might not align with investor or stakeholder expectations. Achieving our ESG commitments is contingent on numerous external factors beyond our control, including evolving and potentially inconsistent regulatory requirements, supplier availability meeting our standards, and the recruitment, development, and retention of diverse talent.
Competitive Risks
Our connections to the Internet require us to establish and maintain relationships with other providers, which we may not 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 IP Network is one such network. In order to obtain Internet connectivity for our IP 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 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 or add additional locations 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. If we are not able to maintain or increase our settlement-free peering relationships in all of our markets on favorable terms or to upgrade the capacity of our existing settlement-free peering relationships, customers may not upgrade their
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connections with us or we may not be able to provide our customers with high performance, 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. Additionally, certain of our current customers may seek to become settlement-free peers with us.
We cannot assure you that we will be able to continue to establish and maintain relationships with other ISPs, favorably resolve disputes with such providers, or increase the capacity of our settlement-free peering interconnections with such providers.
The sector in which we operate is highly competitive, and we may not be able to compete effectively.
We face significant competition from incumbent carriers, ISPs and facilities-based network operators. Relative to us, many of these providers have significantly greater financial resources, more well-established brand names, larger customer bases, sales and marketing capabilities, 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. 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.
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 Internet business is premised on the idea that customers want simple Internet access and private networks rather than a combination of such services with other services such as voice services and complex managed services. Our competitors offer such services. Should the market come to favor such services our ability 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 potential customers.
In our optical wavelength business, we compete with long - established network operators. These operators also have well - established brand name, larger customer bases and a sales and marketing capabilities experienced in the wavelength business. As these operators have a long history offering wavelength services, we may face challenges persuading customers to add us as a provider or to end a longstanding relationship with an existing provider.
Moreover, the continuous evolution of technology may empower our competitors to upgrade their existing services or introduce new, more advanced offerings that could potentially diminish our sales of VPN and colocation services. As a consequence, we may face challenges in acquiring and retaining customers.
Our Optical Wave Network footprint is connected primarily to CNDCs, which may not allow us to serve the entire addressable market.
Our Optical Wave Network is architecturally distinct from our IP Network and is currently designed to provide connectivity primarily to CNDCs, which may constrain our ability to compete for customers requiring wave services at MTOBs or other service locations. Although we believe our current Optical Wave Network connects to a majority of the addressable market for wave services in North America, our lack of connections to additional service locations may prevent us from fulfilling demand for end - to - end wave services at corporate offices, potentially forcing us to forgo certain opportunities. Some of our competitors maintain wave network footprints that directly reach MTOBs and other service locations allowing them to offer solutions that we cannot currently provide. If we are incorrect in our assumption about the service locations that make up the majority of the addressable market for wave services or there is a shift in demand for wave services from CNDCs to MTOBs, we may lose, or be unable to gain, market share to and from our competitors, which could have an adverse effect on our revenue growth and overall financial condition.
Our business 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, telephone, and fixed and mobile wireless 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
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those rules were rescinded by the FCC in December 2017. A subsequent attempt to reintroduce these rules in 2024 was overturned by the U.S. Court of Appeals for the Sixth Circuit in 2025. Furthermore, the Sixth Circuit decision appears to foreclose any future possibility of the FCC reclassifying broadband as a telecommunications service, a designation that allows the FCC to regulate ISPs under the common-carrier provisions in Title II of the Communications Act. While certain US states, including California, have either issued or are considering their own net neutrality rules, it is unclear whether these state regulations should have the same national impact as the former FCC order. Also, the European Union and other countries in which we 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.
Operational Risks
Our networks may be the target of potential cyber-attacks and other security breaches that could have significant negative consequences.
We rely on our own and third-party computer systems, hardware, software, technology infrastructure and online sites and networks for both internal and external operations that are critical to our business (collectively, “IT Systems”). We own and manage some of these IT Systems but also rely on third parties for a range of IT Systems and related products and services, including but not limited to cloud computing services.
Our business depends on our ability to limit and mitigate interruptions to or degradation of the security of our networks. We face numerous and evolving cybersecurity risks that threaten the confidentiality, integrity and availability of our IT Systems, as well as trade secrets, intellectual property, personal information or other Company confidential information (collectively “Confidential Information”). We are considered a critical infrastructure provider and therefore may be more likely to be the target of cyber-attacks. Our IT Systems are subject and vulnerable to unauthorized access, social engineering/phishing, malware (including ransomware), malfeasance by insiders, human or technological error, and as a result of bugs, misconfigurations or exploited vulnerabilities in software or hardware, computer viruses, cyber-attacks, distributed denial of service (“DDOS”), and other cybersecurity risks. Additionally, any integration of artificial intelligence in our or any third party’s operations, products or services is expected to pose new or unknown cybersecurity risks and .
We and our employees are the target of phishing attempts and compromised links, and our IT Systems are the target of attempts at unauthorized access, a small number of which have been successful in accessing non-critical areas of our IT Systems. Our customer-facing network firewall regularly suppresses cyber-attacks and our IP Network routinely manages DDOS attacks. Although none of the incidents, individually or in the aggregate, have materially impacted our operations or business, we cannot guarantee material incidents will not occur in the future. An attack on or security breach of our network could result in theft of Confidential Information, the interruption, degradation, or cessation of services, an inability to meet our service level commitments or our financial reporting obligations, and could potentially compromise customer data stored on or transmitted over our network.
Cyber-attacks are expected to accelerate on a global basis in frequency and magnitude as threat actors are becoming increasingly sophisticated in using techniques and tools – including artificial intelligence – that circumvent security controls, evade detection and remove forensic evidence. As a result, we may be unable to detect, investigate, remediate or recover from future attacks or incidents, or avoid a material adverse impact to our IT Systems, Confidential Information or business. 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 security events, network failures or interruptions that could impact our network security or availability and have a material adverse effect on our business, our ability to meet our financial reporting obligations, brand and reputation, 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 (including class action lawsuits), 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. We cannot guarantee that any costs and liabilities incurred in relation to an attack or incident will be covered by our existing insurance policies or that applicable insurance will be available to us in the future on economically reasonable terms or at all. In response to past attacks, we have implemented additional 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 . There can also be no assurance that our cybersecurity risk management program and processes, including our policies, controls or procedures, will be fully implemented, complied with or in protecting our IT Systems and Confidential Information. Any impact to the availability, or confidentiality of our IT Systems or Confidential Information can result in legal
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or proceedings (such as class actions), regulatory investigations and enforcement actions, fines and penalties, negative reputational impacts that cause us to lose existing or future customers, and/or significant incident response, system restoration or remediation and future compliance costs. Any or all of the foregoing could materially adversely affect our business, operating results, and financial condition.
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 to prepare accurate and timely financial statements all of which would affect our business and results of operations.
Our insurance coverage may be insufficient to fully protect against potential risks.
We maintain various insurance policies, including liability, property, and others, to safeguard our company against insurable risks. Our choice of insurance types, coverage limits, and deductibles is determined by our unique risk profile, the balance between insurance costs and perceived benefits, and prevailing industry norms. There is a possibility that any of the insurance limits we secure, whether for flood or other risks, might be insufficient. Such inadequacy could significantly and negatively affect our business, financial health, and operational outcomes.
Our IPv4 address space is now covered by Resource Public Key Infrastructure (“RPKI”) which may not fully protect against potential risks.
In 2025, we entered into a Legacy Registration Services Agreement with ARIN covering a substantial portion of our IPv4 addresses that were originally allocated prior to the creation of ARIN and the other RIRs. The Legacy Registration Services Agreement provides us access to the full range of ARIN services, including, its Resource Public Key Infrastructure (“RPKI”) and Internet Routing Registry (“IRR”).
RPKI is a framework that enables network operators to secure routing infrastructure by associating IPv4 address ranges with autonomous system numbers. By doing so, RPKI greatly reduces the possibility of route hijacking and leaks when using Border Gateway Protocol (“BGP”) on the Internet. Failures in the RPKI system, including data inaccuracies, administrative compromises, or technical vulnerabilities, could materially impact our services, resulting in service degradation and increased exposure to route hijacking.
Network Augmentation and Maintenance Risks
Our networks are comprised of a number of separate components, and we may be unable to obtain or maintain the agreements necessary to augment or maintain our networks.
Both our IP Network and Optical Wave Network are composed of some or all of the following components: (i) leased capacity on transoceanic optical fiber; (ii) terrestrial inter-city dark optical fiber; (iii) intra-city dark optical fiber; (iv) right-of-way agreements; and (v) the buildings that we serve and the associated optical fiber connecting those buildings. We both own and lease portions of our optical fiber and obtain access to the buildings on our networks, both CNDCs and MTOBs, from a number of vendors, including intra - company leases. A number of our leases, both for fiber and building access, and right-of-way agreements are up for renewal in any given year. A deterioration in our existing relationship with these counterparties could impact either 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.
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We expect to enter additional agreements with carriers and operators to obtain additional facilities, whether optical fiber, leased transoceanic capacity or buildings, for each network in order to add capacity to such 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 networks could keep us from adding new markets, capacity or buildings to our networks and negatively impact our growth opportunities.
Our off-net 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 fiber optic capacity that is 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 off-net 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 difficulties when a lack of alternatives allows a provider to charge high prices for capacity in a particular area or to a particular building. We attempt to reduce this problem by using many different providers so that we have alternatives for linking an off-net 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 off-net customers when our initial contract with our customer nears the end of its term.
Our business could suffer from an interruption of service from our fiber providers.
The optical fiber cable owners from whom we have leased 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. We also depend on third-party providers, some of which compete with us, to provide intercity and intracity fiber as well as the lateral fiber connections required to add buildings to our networks and to provide the local loop facilities for the provision of connections to our off-net customers. Consequently, they may have incentives to act in ways unfavorable to us. We may incur significant and costs in restoring service to our customers in connection with future service , and as a result we may customers.
With the Cogent Fiber Business acquisition, our reliance on agreements with landowners has increased.
Since the acquisition of the Cogent Fiber Business, our reliance on rights-of-way, license agreements, franchises, and authorizations from landowners, governmental bodies, railway companies, utilities, carriers, and other third parties have increased. These permissions allow us to place a portion of our network equipment on, over, or under their respective properties. Many of these authorizations have set expiration dates within the next five to ten years, and renewing or extending them on favorable terms is not guaranteed. The potential adverse impact on our operations looms if any of these authorizations are canceled, terminated, or allowed to lapse, or if landowners request price increases. The uncertainty lies in our ability to successfully extend these arrangements on favorable terms, or at all, upon expiration or establish new agreements necessary for executing our network expansion initiatives. Further, some of these agreements impose decommissioning obligations requiring us to remove fiber and related equipment from the rights-of-way at our expense upon the expiration or termination of the agreement. The associated cost could be significant and exceed our expectations. We cannot guarantee our in these endeavors, raising about the continuity of our operations and our ability to capitalize on network expansion .
Effects of climate change may impose risk of damage to our infrastructure and our ability to provide services.
Long-term climate change may give rise to extreme weather events, posing a direct threat to network facilities and impeding our ability to construct and maintain segments of our owned network assets. Such events could also disrupt suppliers, impacting their ability to deliver products and services essential for ensuring reliable network coverage. Any resulting disruptions have the potential to postpone our network deployment plans, interrupt customer services, escalate our operational costs, and adversely affect our overall operating results. The physical consequences of climate change, including heightened frequency and severity of storms, floods, fires, freezing conditions, and sea-level rise, could negatively impact our operations, infrastructure, and financial performance. Operational setbacks arising from these physical effects, such as damage to our network infrastructure, might lead to increased costs and revenue . To address these , we may need to invest significantly in the climate resilience of our infrastructure and
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undertaking preparations, responses, and mitigation measures for the physical impacts of climate change. Despite these considerations, accurately predicting the materiality of potential losses or costs associated with these effects remains challenging.
We are responsible for maintenance and repair of our owned fiber network.
With the acquisition of the Cogent Fiber Business, our operations now include the ownership of a substantial fiber network. With this ownership, we assume the critical responsibility for the maintenance and repair of the entire fiber infrastructure. This introduces inherent risks that could impact our operational continuity. As historically we did not own a fiber network, this new responsibility necessitates an adjustment in our operational approach and poses challenges affecting the efficiency of maintenance activities. If we are unable to maintain our owned fiber or adequately and efficiently manage disruptions to our owned fiber network, our ability to provide services in the affected markets or parts of markets would be impaired unless we have or can obtain alternative fiber routes.
Our new wavelength service is delivered as specific wavelengths on defined physical routes. Because these wave services are tied to a specific physical path, a single interruption on a route, such as a fiber cut, will affect all wavelengths on that route simultaneously. Such disruptions could result in a total loss of service for all wave customers on the affected route. In addition, we may incur unexpected and significant costs, delays or other difficulties in maintaining or repairing our fiber infrastructure, resulting in increased disruption in services to our customers. We may, as a result, lose revenue or customers.
Substantially all of our network infrastructure equipment is manufactured or provided by a limited number of network infrastructure vendors.
We purchase our network infrastructure equipment from a small number of vendors. Historically, we purchased from Cisco Systems, Inc. (“Cisco”) all of the routers and transmission equipment used in our IP Network. We have expanded our suppliers of routers, adding Arista Networks, Inc. (“Arista”) as a provider for certain types of routers but Cisco remains our primary vendor for routers. We purchase equipment for our Optical Wave Network and optical wave services from Ciena Corporation (“Ciena”).
If Cisco, Ciena or Arista fail to provide equipment on a timely basis or fail to meet our performance expectations, including in the event that any vendor fails to enhance, maintain, upgrade or improve the hardware or software products 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. In particular, the telecommunications industry has experienced, and may continue to experience, significant volatility in global supply chains, including shortages of routers and transmission equipment. If our primary vendors experience manufacturing or shipping delays, or geopolitical disruptions, our lead times for critical infrastructure upgrades could extend significantly. Any such delays in the receipt of equipment could us to or network expansion and projects, resulting in our to fulfill customer orders or meet installation deadlines. This could lead to a of potential revenue, the payment of contractual or service level credits to customers, and to our reputation in the marketplace. Further, if we are to procure equipment as needed, we may be to pay premium prices to secure limited supply or be required to hold higher levels of inventory at increased cost, which would impact our capital expenditures, liquidity, and overall financial performance. If our competitors are to secure equipment more quickly than we are, we may be to market share in the wave segment and face a significant competitive .
Transitioning from Cisco, Ciena, or Arista to another vendor for the types of equipment each provides 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, Ciena or Arista 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 international operations expose us to numerous risks.
We have expanded our IP Network into 57 countries worldwide on every continent, other than Antarctica, and our Optical Wave Network into Canada and Mexico. We continue to explore expansion opportunities for our IP Network. We have experienced
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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 be adversely impacted.
Our international operations involve a number of risks, including:
fluctuations in currency exchange rates, particularly those involving the Euro as we are required to fund certain of our cash flow requirements of our operations outside of the United States;
exposure to additional regulatory and legal requirements, including laws that may make it difficult or costly to enforce our contracts, import restrictions and controls, exchange controls, tariffs and other trade barriers and privacy and data protection regulations;
compliance with laws regarding privacy, trade restrictions, economic sanctions, and corruption and bribery, including the United States Foreign Corrupt Practices Act;
difficulties in staffing and managing our foreign operations;
changes in political and economic conditions; and
exposure to additional and potentially adverse tax regimes.
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.
Litigation Risks
As an Internet service provider, we may incur liabilities for the content disseminated through our network or for network failures, delays or errors in transmissions.
The law relating to the liabilities of ISPs for information carried on or disseminated through their networks is unsettled. As the law in this area develops and as we expand our international operations, the potential imposition of liabilities upon us for the behavior of our customers or the information carried on and disseminated through our networks could require us to implement measures to reduce our exposure to such liabilities, which may require the expenditure of substantial resources or the discontinuation of certain products or service offerings. Any costs that are incurred as a result of such measures or the imposition of liabilities could have a material adverse effect on our business. While we attempt to limit our liability through certain provisions contained in our customer contracts, these protections may not be sufficient to protect us in all circumstances.
Regulatory Risks
Compliance with existing and proposed privacy regulations is costly, and any failure by us or our vendors to comply may result in significant liability, negative publicity, and/or an erosion of trust that may materially impact our business.
Many countries in which we operate, including the United States, are considering adopting, or have already adopted, privacy regulations, laws, rules or industry standards that that apply generally to the handling of information about individuals. The primary impact of these rules is on businesses that collect personal information about consumer users of their services. While we do not provide services to individual consumers, we receive, store, handle, transmit, use and otherwise process business information and information related to our employees, representatives of our business customers and service providers. This collection of business information and the personal information of our employees subjects us to a number of privacy regulations, including the General Data Protection Regulation (“GDPR”) in the European Union. These regulations, among other things, require us to make certain disclosures about our privacy policies, limit our ability to process, retain and transfer such information and provide employees with certain rights in relation to the information we collect about them. We also transmit data across the Internet, which data may include personal information collected by our customers. As the applicability of privacy regulations to the types of services we provide remains unsettled, we may be required to adopt additional measures in the future.
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Privacy regulations, such as the GDPR and the California Consumer Privacy Act in California vary in scope and in the obligations, they impose on us. As new laws are implemented or existing structures are declared insufficient, we may find it difficult to comply with such regulations or find it costly to do so. Moreover, for our customers who collect personal information, increased regulation of the collection, processing and use of personal information may impact their business and their use of services in unknown ways. Any failure or perceived failure by us to comply with data privacy laws, rules, regulations, industry standards and other requirements could result in proceedings or actions against us by individuals, consumer rights groups, government agencies, or others. If any of these events were to occur, our business, results of operations, financial condition, and brand and reputation could be materially adversely affected.
In addition, in 2024, the National Security Division of the U.S. Department of Justice issued a new rule, referred to as the Data Security Program (“DSP”), to implement Executive Order 14117 aimed at preventing access to “bulk U.S. sensitive personal data” and “government-related data” by “countries of concern” (including China, Russia, Iran, North Korea, Cuba, and Venezuela) and “covered persons” (as all such terms are defined in the DSP). Effective as of April 8, 2025, and fully enforceable as of July 9, 2025, the DSP imposes stringent obligations on companies within its scope and prohibits or restricts “covered data transactions” that grant countries of concern or covered persons access to bulk U.S. sensitive personal data or any amount of government-related data. The DSP is new, complex and has yet to be enforced, and as such, there is a risk that our interpretation of its applicability, scope, and requirements is incorrect, incomplete, or misapplied. Based on our assessment of the DSP, we do not believe we engage in covered data transactions at this time, though we may discover that we do or we may begin doing so in the future. Compliance with the DSP may require us to invest heavily in data security and compliance measures, such as implementing and complying with the Cybersecurity and Infrastructure Security Agency’s guidelines and other recordkeeping, reporting, and auditing requirements. It may also require us to implement new processes, stop or restrict certain data transfers, alter the geographic scope of our operations, doing business with certain third parties or using certain tools or vendors, or change how data flows throughout our business, any of which could materially impact our business operations or our ability to grow our business. Finally, non-compliance with the DSP could result in significant civil or , which could materially affect our business, results of operations, and financial condition.
Any failure or perceived failure by us to comply with data privacy laws, rules, regulations, industry standards and other requirements could result in legal proceedings (including class actions) or actions against us by individuals, consumer rights groups, government agencies, or others. We could incur significant costs in investigating and defending such claims and, if found liable, pay significant damages or fines or be required to make changes to our business. These proceedings and any subsequent adverse outcomes may subject us to significant negative publicity and an erosion of trust. If any of these events were to occur, our business, results of operations, financial condition, and brand and reputation could be materially adversely affected.
Changes in laws, rules, and enforcement could adversely affect us.
We are not subject to substantial regulation by the FCC or the state public utilities commissions in the United States. Internet service is also subject to minimal regulation in Western Europe and in Canada. Elsewhere the regulation is greater, though not as extensive as the regulation for providers of voice services. However, governmental authorities may decide to impose additional regulation and taxes upon providers of Internet access and private network services. In addition, the acquisition of the Cogent Fiber Business has made us subject to additional or duplicate regulatory obligations, particularly in the countries where the Cogent Fiber Business has subsidiaries and related to the Cogent Fiber Business. All of these matters could inhibit our ability to remain a low-cost carrier and could have a material adverse effect on our business, financial condition and results of operations.
As with the privacy laws described above, much of the law related to the liability of ISPs for content on the network and the behavior of our customers and their end users remains unsettled. Some jurisdictions have laws, regulations, or court decisions that impose obligations upon ISPs to restrict access to certain content. Other legal issues, such as the sharing of copyrighted information, data protection, trans-border data flow, unsolicited commercial email (“spam”), universal service, and liability for software viruses could become subjects of additional legislation and legal development and changes in enforcement policies. We cannot predict the impact of these changes on us. They could have a material adverse effect on our business, financial condition and results of operations.
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 represented approximately 17% of our revenue for the year ended December 31, 2025, 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.
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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.
The imposition of tariffs may increase our costs of purchasing equipment or shipping equipment to our international subsidiaries.
In 2025, President Trump announced new and additional tariffs for most imports, including imports from Canada, Mexico and China. As a result, China later announced and implemented retaliatory tariffs on U.S. goods and expanded export controls on certain critical raw materials, including rare earth minerals. The amount import tariffs and the number of products subject to tariffs have changed numerous times based on action by the U.S. government, and certain of these tariffs have been subsequently paused or modified. Following a meeting between President Trump and President Xi in October 2025, U.S. and China announced a temporary truce, including the U.S. suspending escalation of planned reciprocal tariffs for approximately one year and China suspending its 2025 retaliatory tariffs and pausing its export controls on rare earth minerals and other materials. The Administration also refrained from implementing the previously announced additional 100% tariff on Chinese imports. However, the tariff situation remains fluid. Given the uncertainty surrounding U.S. international trade policy and the U.S.-China relationship, we cannot predict how future changes in tariffs or trade restrictions will affect us.
At least one of our primary equipment vendors manufactures and ships equipment that we purchase from China. If higher tariffs are applied to our equipment purchases, it would increase our cost of equipment and our capital expenditures. To the extent that we are unable to pass all or any such cost increases on to our customers, such cost increases could adversely affect our financial results. In addition, higher costs stemming from tariffs could lead customers to seek alternative products or services from competitors in regions not affected by such trade policies, which may further impact our financial results due to declines in our sales and operating income. As a result, our financial condition and results of operations could be adversely affected.
Further, if the United States imposes additional tariffs on other countries in which we operate, those countries may respond by imposing tariffs on imports from the United States. Any such tariffs may be applied to our equipment shipments from our US operating company to our international subsidiaries, increasing our costs and impacting our financial condition and results of operations.
Tax Risks
Governments may assert that we are liable for taxes which we have not collected from our customers or paid to our vendors, 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 and wave services, are subject to taxes and fees in various jurisdictions including the Universal Service Contribution tax in the US. We believe we collect all required taxes; however, a jurisdiction may assert that 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.
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We are subject to value-added taxes and other taxes in many jurisdictions outside of the United States. We are also subject to audit of our tax compliance in numerous jurisdictions. These may result in the assessment of amounts due that are material and therefore would have an adverse effect on us.
The utilization of certain of our net operating loss carryforwards is limited and depending upon the amount of our taxable income we may be subject to paying income taxes earlier than planned.
Section 382 of the Internal Revenue Code in the United States limits the utilization of net operating losses when ownership changes, as defined by that section, occur. We have performed an analysis of our Section 382 ownership changes and have determined that the utilization of certain of our net operating loss carryforwards in the United States is limited. Further, recent changes to the tax law in the United States and changes to tax laws in other jurisdictions in which we operate may impact our utilization of our net operating losses.
Governments may assert that we are liable for taxes on our fiber network and equipment in amounts greater than we anticipate or believe appropriate.
Our owned fiber network is located in approximately numerous taxing jurisdictions. Each of these jurisdictions may impose real or personal property taxes on us for the value of the fiber network and/or equipment located within their jurisdiction. We may, from time to time, disagree with these valuations and seek to reduce the valuations and the attendant taxes. Our ultimate success is disputing these valuations and appealing these taxes is unknown, and as a result, we may be subject to taxes in jurisdictions or of an amount that we did not anticipate, and these amounts may be material and have an adverse effect on us.
Risk Factors Related to Our Indebtedness
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.
Our total indebtedness at December 31, 2025 at par value, was $2.4 billion and includes $450.0 million of our 2027 Notes, $300.0 million of our 2027 Mirror Notes, $600 million of our 2032 Notes, $380.4 million of our IPv4 Notes and $623.4 million of finance lease obligations. The 2027 Notes are due in June 2027 and require interest payments of $31.5 million per year, the 2027 Mirror Notes are due in June 2027 and require interest payments of $21.0 million per year and the 2032 Notes are due in July 2032 and require interest payments of $39.0 million per year, each paid semi-annually. The IPv4 Notes are effectively due in May 2029 ($206.0 million) and April 2030 ($170.4 million) and require monthly interest payments of $27.6 million per year (which amount increases if $206.0 million of the IPv4 Notes is not repaid prior to May 2029 and $170.4 million is not repaid prior to May 2030). All of our noteholders have the right to be paid the principal and any applicable premium upon an event of default and upon certain designated events, such as certain changes of control. Our total indebtedness at December 31, 2025 includes $623.4 million of finance lease obligations for dark fiber primarily under 15 to 20-year IRUs. Our total indebtedness at December 31, 2025 excludes $324.3 million of operating lease liabilities, which were required to be recorded as right-to-use assets and operating lease liabilities. The amount of our IRU finance lease obligations may be impacted due to our expansion activities, the timing of payments and fluctuations in foreign currency rates.
This substantial amount of debt may have important consequences. For instance, it could:
make it more difficult for us to satisfy our financial obligations, including those relating to our debt;
require us to dedicate a substantial portion of any cash flow from operations to the payment of interest and principal due under our debt, which will reduce funds available for other business purposes, including the growth of our operations, integration of the Cogent Fiber Business, capital expenditures, dividends, purchases of our common stock and acquisitions;
place us at a competitive disadvantage compared with some of our competitors that may have less debt and better access to capital resources; and
limit our ability to obtain additional financing required to fund working capital and capital expenditures, for strategic acquisitions and for other general corporate purposes.
Our ability to satisfy our obligations including our debt depends on our future operating performance and on economic, financial, competitive and other factors, many of which are beyond our control. Our business may not generate sufficient cash flow, and future
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financings may not be available to provide sufficient net proceeds, to meet these obligations or to successfully execute our business strategy.
Despite our leverage, we may still be able to incur more debt. This could further exacerbate the risks that we and our subsidiaries face.
We and our subsidiaries may incur additional indebtedness, including additional secured indebtedness, in the future. The terms of our debt indentures restrict, but do not completely prohibit, us from doing so. Subsidiaries not subject to our debt indentures, for example, may incur additional indebtedness. In addition, the indentures allow us to issue additional notes and other indebtedness secured by the collateral under certain circumstances. Moreover, we are not prevented from incurring other liabilities that do not constitute indebtedness as defined in the indentures, including additional operating leases obligations and finance lease obligations in the form of IRUs. These liabilities may represent claims that are effectively prior to the claims of our note holders. If new debt or other liabilities are added to our debt levels, the related risks that we and our subsidiaries now face could intensify.
The agreements governing our various debt obligations impose restrictions on our business and could adversely affect our ability to undertake certain corporate actions.
The agreements governing our various debt obligations include covenants imposing significant restrictions on our business. These restrictions may affect our ability to operate our business and may limit our ability to take advantage of potential business opportunities as they arise. These covenants place restrictions on our ability to, among other things:
incur additional debt;
create liens;
make certain investments;
enter into certain transactions with affiliates;
declare or pay dividends, redeem stock or make other distributions to stockholders; and
consolidate, merge or transfer or sell all or substantially all of our assets.
In addition, our IPv4 address securitization facility requires us to maintain a specified debt service coverage ratio. Failure to maintain the debt service coverage ratio at a specified triggered level could adversely affect our business, including full or partial amortization of the principal amount or an event of default, as applicable. Our ability to comply with these agreements may be affected by events beyond our control, including prevailing economic, financial and industry conditions. These covenants could have an adverse effect on our business by limiting our ability to take advantage of financing, merger and acquisition or other corporate opportunities. The breach of any of these covenants or restrictions could result in a default under the agreements governing our debt obligations.
To service our indebtedness, we will require a significant amount of cash. However, our ability to generate cash depends on many factors, many of which are beyond our control.
Our ability to make payments on and to refinance our indebtedness and to fund planned capital expenditures will depend on our ability to generate cash in the future, which, in turn, is subject to general economic, financial, competitive, regulatory and other factors, many of which are beyond our control.
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. Without this financing, we could be forced to sell assets or secure additional financing to make up for any shortfall in our payment obligations under unfavorable circumstances. However, we may not be able to secure additional financing on terms favorable to us or at all and, in addition, the terms of the indentures governing our notes limit our ability to sell assets and also restrict the use of proceeds from such a sale. We may not be able to sell assets quickly enough or for sufficient amounts to enable us to meet our obligations, including our obligations under our notes.
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We maintain our cash and cash equivalents at financial institutions in amounts in excess of insured limits.
We maintain the majority of our cash and cash equivalents in accounts with U.S. and multi-national financial institutions, and our deposits at certain of these institutions exceed insured limits. Market conditions can affect the viability of these institutions. In the event of failure of any of the financial institutions where we maintain our cash and cash equivalents, there can be no assurance that we would be able to access uninsured funds in a timely manner or at all. Any inability to access or delay in accessing these funds could adversely affect our business and financial position.
Our ability to access restricted cash is subject to meeting specific financial covenants, and any failure to satisfy these metrics could limit our liquidity and financial flexibility.
As of December 31, 2025, a portion of our liquidity, $56.5 million of our $205.1 million total cash and cash equivalents, was classified as restricted cash. This includes $52.5 million in restricted proceeds from our IPv4 Notes. Under the terms of the IPv4 Notes indenture, this restricted cash only becomes available to us upon the achievement of specific improvements in our monthly leverage ratio and our debt service coverage ratio, which are directly tied to the performance of IPv4 address leasing by IPv4 Issuer. While we successfully unlocked $26.9 million of restricted cash during the year ended December 31, 2025, primarily due to improvements in these ratios, there is no guarantee that our future financial performance within the IPv4 leasing market will continue to meet the required thresholds. Under the Terms of the indenture, we have until October 2026 to satisfy the performance metrics and unlock the remaining restricted funds. Any amounts remaining on deposit in the prefunding account after October 2026 will be withdrawn and applied to prepay the April 2025 IPv4 Notes on a pro rata basis based on the initial principal amount.
If our operational results deteriorate, or if we fail to meet the threshold metrics required by the IPv4 Notes Indenture, we may be unable to access the remaining restricted funds. A prolonged inability to unlock this cash could limit our ability to fund capital expenditures, service our debt obligations, or respond to competitive pressures. Furthermore, our belief that we will have continued access to public debt and equity markets is subject to broader market conditions; if we are unable to unlock our internal cash reserves and simultaneously face a tightening of the capital markets, our financial condition and results of operations could be materially and adversely affected.
