Monthly Internet traffic in the U.S. is projected to grow at a 34.4% CAGR from 2005 to 2008 according to the Telecommunications Industry Association. Growth in Internet traffic is being driven by increasing broadband penetration, the proliferation of bandwidth intensive services and the maturity of online business models, among other factors. Broadband penetration increases as the price of broadband Internet access decreases and consumers experience the benefits of broadband access (e.g., faster speeds and “always-on” connectivity). Gartner projects that broadband penetration will increase from 34.3% of U.S. households in 2005 to 53.5% in 2009. Increasing broadband penetration is enabling the proliferation of bandwidth intensive services, including VoIP, online gaming, streaming video and audio and IPTV.

Growth in Internet traffic is leading to increasing demand for interconnection services, as NSPs, ISPs and other Internet dependent businesses require additional connectivity to efficiently exchange increasing amounts of network traffic. Online content providers and providers of other bandwidth intensive services, in particular, require high densities of interconnections and scalability of a service provider’s interconnection infrastructure in order to optimize their services. For these businesses, direct interconnection with each other as well as with multiple NSPs within a facility reduces transit costs, increases the performance of their services and reduces their time to market.

Growth in Internet traffic is also leading to increasing demand for colocation services. A colocation facility is typically located in close proximity to telecommunications service providers and houses networking and computing equipment such as switches, routers, fiber optic transmission gear and servers for businesses that need to connect with each other and the Internet. The highly controlled environment required for this equipment is characterized by redundant power infrastructure, reinforced floors, sophisticated security and monitoring, and reliable HVAC systems. Due to the high cost of building and maintaining colocation facilities, businesses often outsource these services to colocation service providers.

The Company’s interconnection services provide the customers with two primary options to exchange network traffic: through direct connections with each other, utilizing the Company’s cross connect services, or through peering connections with multiple customers, utilizing the Company’s Internet exchange services.

Cross connect services enable one-to-one interconnections between customers within a facility, reducing network costs and network latency. These services allow customers to connect their networks through a direct physical connection in a meet-me room. Cross connect services are offered through a variety of media including fiber optic, Ethernet or coaxial cabling, for an initial installation fee and a recurring monthly fee per connection.

Internet exchange services enable one-to-many interconnections between customers over a shared switch fabric within a facility, further reducing network costs and network latency. The Company offers these services in eight of its markets including the San Francisco Bay Area, New York City, Seattle, Dallas, Atlanta, and the Northern Virginia Area. The Company provides Internet exchange services at port capacities ranging from 100 Mbps to 10 Gbps for an initial installation fee and a recurring monthly fee, based on port capacity.

The Company’s SingleCNXT service is the resale of Internet access through ISPs who connect directly with customers in its facilities. The Company offers SingleCNXT as an accommodation to certain customers that desire a single point of contact for the colocation and Internet access services. The Company provides SingleCNXT for an initial installation fee and a recurring monthly fee based on the amount of bandwidth committed or used.

The Company’s facilities provide the customers with a reliable, secure and climate controlled environment for their networking and computing equipment. The Company’s colocation services include flexible space options, redundant power and cooling systems, physical security, other sophisticated systems for fire suppression and water leak detection and technical support.

Cost of revenues increased by $3.5 million, or 13%, to $29.4 million for the six months ended June 30, 2006 compared to the six months ended June 30, 2005.

Sales and marketing expenses increased by $1.1 million, or 21%, to $6.1 million for the six months ended June 30, 2006 compared to the six months ended June 30, 2005.

Depreciation and amortization expenses decreased by $5.5 million, or 32%, to $11.5 million for the six months ended June 30, 2006 as compared to the six months ended June 30, 2005.

Interest expense increased by $1.7 million, or 42%, to $5.8 million for the six months ended June 30, 2006 compared to the six months ended June 30, 2005.