Schaeffer, 50, launched Cogent Communications, an Internet service provider in Washington, in 1999. Since then the company has gone public, grown to 325 employees and posted revenue of $135.2 million in 2005. Moreover, it has become the world’s second largest carrier of Internet traffic. Schaeffer truly fits the mold of a serial entrepreneur. He grew his family’s taxi cab business to the largest in D.C. and one of the biggest in the country, bought numerous local buildings that he still owns, and launched and sold Pathnet, a developer of telecommunications networks. He also developed specialized mobile radio systems that were eventually sold to Nextel. The Washington native has a degree in physics from the University of Maryland.

Tania Anderson, for Bisnow on Business: What exactly does Cogent do?
We provide Internet access to two major customer bases - end-user corporate customers and to other service providers. We deliver that service over our own network. We operate the largest IP network. It physically extends from Seattle to Vienna, Austria, and from Stockholm, Sweden to Miami. We have distribution networks in about 40 markets in the Untied States and Western Europe. Today we provide service to about 10,000 customers.

What gave you the idea to start this company?
I had sold my previous company, Pathnet. I had taken it public and sold my position and looked at key trends in the market. First, growth in bandwidth demand was coming entirely from the Internet. Secondly, there became the ability to build an Internet service provider differently than any previous ISP. Most ISPs sit on top of the telephone network. What we did is acquire facilities from the ground up and built a network whose only purpose was to deliver Internet, therefore not requiring any of the architecture that existed in a telephone network. In doing so we were able to offer services at substantially lower prices, actually 1 percent of what the market price was at the time. It was that radical disruption in the pricing model that was attractive to us.

How did you survive the tech bust?
We were able to adapt and take advantage of the distress of others. We had acquired 13 companies, six of which were public. Those public companies had market caps of over $30 billion. All 13 companies raised over $14 billion in hard cash in either debt or equity. We were able to integrate those into a single seamless business. Secondly, it was the strength of our core business model, which has remained unchanged. It’s really the same business that we set out to execute on in late 1999.

What are your challenges today?
It remains a very competitive space. It’s one in which unit volume of traffic is still growing at 100 percent per year. However, prices continue to fall at about 50 percent per year. For the same amount of revenue spent in the industry, you’ve got to deliver twice as much service. Also, many of our competitors have emerged from bankruptcy and have been able to restructure their balance sheet. It remains a very competitive space. But we are single-minded in our focus on Internet access as opposed to other communication services. It’s been that very clear focus that’s allowed us to grow at a pace faster than the Internet.

How were you able to launch Cogent?
As a bit of a serial entrepreneur, I was able to get a lot of attention from institutional investors and venture capitalists. After selling Pathnet, I hired two 24-year-olds to help me do the due diligence and refine the business plan. One was a third year analyst from Morgan Stanley who was our underwriter. The other came from Andersen Consulting. We put together a Power Point and raised over $300 million in capital in debt and equity from venture capitalists and industrial investors. It was a very different time and we were able to do it off a Power Point.

You’ve been involved in so many other types of businesses. How did you get from all that to the Internet business?
I went to the University of Maryland. I was finishing up my Ph.D. when my dad had a small taxi cab company that was in a bit of financial trouble. I went into that business along with my two brothers and within a couple years was able to take a roughly 50-car company and grow it to 2,000 taxi cabs. It became the second largest cab company in the country. It operated under a total of 16 different corporate names. Liberty, Checkered, District, Royal, Consolidated. From that I was looking for other expansion opportunities. We controlled about 45 percent of the D.C. cab market, which was the maximum level of control that politically we could achieve. From that I started an insurance company to first insure taxi cabs and then it grew to insure other types of commercial vehicles. I then started developing commercial real estate and have done about 58 projects over the years. From the cab business, I started to branch out first into mobile radio where I developed a number of SMR systems that were sold to what became Nextel. Having done pretty well in that business, I then looked at other communications businesses. I founded a paging carrier when the government issued a new block of licenses that allowed private carrier paging as opposed to common carrier. I sold that business and then founded Pathnet, which was a company that aggregated excess telecommunications capacity from utilities, growing that business, raising debt, selling it, and then founding Cogent.

What’s an example of a commercial real estate deal you’ve done?
I own a number of office buildings here in town. Buildings like 1627 K St., 1420 K St., 1413 K St.

What are some lessons you’ve learned along the way?
The skills in all businesses are somewhat transferable in terms of general management. But the most important skill is to know the operational and economic drivers behind your particular businesses. You have to know the technology, the market opportunity and the selling proposition. What your value proposition is and how you can differentiate yourself from the competitors.

What is it about your personality that has made you so successful?
I think more than anything else, I’m lucky. Everybody likes to attribute it to themselves. I’m probably the first to admit that it’s probably being at the right place, at the right time.

What mistakes do young entrepreneurs make these days?
Probably the biggest single mistake that any entrepreneur makes is losing focus and trying to be too many things to too many different people. It’s just very important that you remain very focused and not allow yourself to get distracted.

Did you have any other influences growing up that led you to the business world?
Not really. My dad got discharged from the service after World War II here in D.C., with five bucks in his pocket. He started driving a cab. He ended up growing a small business. It was truly a mom and pop business where he had about 50 cabs. He understood the fundamentals of delivering value to a customer and what it took to get someone to do business with you. I think I learned an awful lot through that process.

Did you ever work for your dad as a kid?
I always worked at my dad’s business in my spare time. I remember when I was a little kid he used to carry me to work on his shoulders. I couldn’t have been more than three or four years old. I had odd jobs around his office.

What lesson did he teach you that you use today?
I think it’s understanding that every person you talk to and negotiate with, you have to treat with respect and fairness. You have to understand what they’re trying to get out of the negotiation. If you can accommodate their requirements, usually you can come up with a strategy where both parties win.

What’s the most interesting thing you’ve done personally or professionally in the last year?
I work all the time. Probably doing a secondary offering for public equity in Cogent. It has been four and a half years prior to us doing that offering since any company had raised public equity in our sector. Getting an equity offering done with a major bank underwriting it in a pretty challenging sector was pretty interesting.

So what’s next for you?
We have a lot of work here to do at Cogent. Today we’re only the second largest carrier of Internet traffic in the world. The goal is to become No. 1. It’s to continue to build the profitability of the business, to increase the utilization of our network and to continue to drive down prices to our end consumers. We have our hands full. I don’t have any plans beyond continuing to grow Cogent.

[This interview conducted by Tania Anderson for Bisnow on Business.]