I'm Ana Goshko from Bank of America, and welcome to Bank of America 2021 Leveraged Finance Virtual Conference, still virtual. I'm thrilled to have Cogent with us and Dave Schaeffer, the company's CEO, founder, and many other illustrious titles as well. Apologies for a little bit of a late start here, but you know, we're just getting ourselves organized. Without further ado, I'm gonna turn it over to Dave. Thank you again so much for joining us this year. Any kind of opening comments before we kind of, you know, dive into our Q&A this morning?
Yeah. First of all, thank you for hosting us, and apologize for technical difficulties for the investors. We'll try to get all of Ana's questions answered. Just like to thank Bank of America for a great venue and all the investors for their time as they've taken time out of their busy day to hear a little bit about Cogent. With that, let's maybe just jump into your questions, Ana.
Okay. Well, great. Thank you so much. I think that your current environment, the pandemic and the back to office environment has really been impacting your business, and I think that's really sort of top of mind for everyone. Let's jump into that topic to begin with. You've cited pandemic-related headwinds to corporate demand that did result in negative growth. Likewise, I think we have all seen slow back to office momentum, you know, certainly in some of the bigger metropolitan markets. On both of these factors, have both of these resulted in lower new sales and/or higher churn for you?
The answer is actually yes to both. You know, the pandemic has caused our corporate business to have six consecutive quarters of negative growth. To remind investors, over the past 16.5 years as a public company, our corporate business has grown at an average of just under 11% year-over-year. We had two negative quarters of growth at the end of 2008 and beginning of 2009 with the financial crisis. The pandemic has been longer and deeper than that crisis. Many of our corporate customers have employees either working remotely or in a hybrid model and are still planning their return to office. If we look at office occupancy, we've seen roughly a tripling of vacancies in the buildings that we serve, going from about 4%- 12% of the square footage.
We have just under 1 billion sq ft multi-tenant office space in the U.S. and Canada. Our corporate business is only in the U.S. and Canada. In that footprint, we've seen average number of employees entering the buildings range from anywhere from in the low 30% range in some cities, such as New York and San Francisco, to the mid-60s in cities such as Houston, Dallas, and Miami. We are seeing most of our customers begin to have a clear vision of what their new work environment is gonna look like. They are planning for employees to return to the office either on a full-time or hybrid basis. Many of those companies had initially hoped to get people back into the office in Labor Day. With the Delta variant, they pushed those plans out.
I think with additional variants, those plans still remain uncertain, but we are seeing an increased level of activity from corporate customers planning their new office environment. In our corporate market segment, we sell two basic products to our customers: dedicated Internet access, which actually accounts for about 81% of revenues, and virtual private network services. Most of our customers actually increase the size of their Internet connection at their primary location. What they have done, though, is pare some secondary locations that may not reopen. The office-to-office connectivity or VPN services have really been the portion of our business that has been most negatively impacted. As companies plan for their new work environment, we are seeing an increased volume of quotes and installs now beginning on VPNs.
Our corporate growth rate has troughed at about -2.5% sequentially, and it has been improving each of the past three quarters, and we expect that trend to continue. We're probably still a couple of quarters away from positive corporate growth.
Okay. That's all very helpful. So, you know, if we do evolve into a new normal with a distributed workforce working from home rather than in main and branch offices, what does that mean for network architectures and ultimately your corporate demand? Is there more kind of headwind on a prolonged basis potentially to come, or is there a silver lining as, you know, upside for you as companies design the potentially new network architectures?
Yeah. As companies decide how many days a week employees are gonna be in the office, I think three things are happening with their office layouts. One, they're generally shrinking those floor plates. That is actually a positive for us. We serve slightly over 1,800 skyscrapers in North America. In those buildings, there's approximately 550,000 sq ft. At pre-pandemic, there were 51 tenants. If each tenant shrinks its floor plate, we would see the total number of tenants actually go up. That is a positive for Cogent. We sell our services to corporate customers on a flat, unmetered basis, so more tenants would actually improve our addressable market. Secondly, we have seen our corporate customers take advantage of lower rental rates, more tenant concessions, and actually begin to extend leases.
In the past, when there had been a downturn in commercial real estate, our market segments tended to be the most immune because the landlords had the flexibility to increase tenant concessions and lower rents and maintain much higher occupancy rates. In fact, we're seeing that in this downturn as well, where the vacancy rate in our footprint is about 40% below the national average. The second thing is, I think most companies are expecting to have employees in the office at least some of the time to collaborate and ideate among themselves. I think that's gonna lead to more meeting rooms, and it's going to lead to the continuation of doored offices, but probably on a more shared basis, as opposed to dedicated to one individual all week long.
I think the third thing that is changing is the way in which VPNs for remote workers are concentrated. Most mid-size and smaller companies do that VPN concentration through their firewall. The largest organizations, such as Bank of America, would have that function located in a carrier-neutral data center. I think with a permanent hybrid work environment, we'll see a large number of our corporate customers elect to move that VPN concentration function to a more hardened environment. That actually is an incremental opportunity for Cogent to sell a service that it previously had not sold, an internet port in a data center to that corporate customer. In terms of remote offices, those offices, I think, fall into two different categories.
Those offices that are located in the same metropolitan area will typically be consolidated, and that intra-market VPN service will probably not be a major product going forward. However, for intermarket VPNs, i.e., locations in remote cities, so I'll use again, a Bank of America with headquarters maybe in New York and Charlotte, but then major work processes in L.A. and San Francisco and Texas or Miami, they would still have those remote locations and still need a interoffice VPN for that. I think long term, the impact of a hybrid work environment will be neutral or slightly positive to our business.
Okay. Thanks. Well, that's super interesting, and there's a lot that's to be seen yet, so thank you for that. Switching to NetCentric, a NetCentric demand, it really did benefit from the pandemic. But what's the outlook now? Are you seeing signs of demand growth slowing after the surge?
First of all, I wish I could say I was so smart that when I wrote the Cogent business plan 22 years ago, I was gonna have these two business segments that hedge each other in terms of the pandemic. This is just dumb luck that it ended up working out this way. Our NetCentric business has actually surged through the pandemic, and we've delivered the two best quarters in the company's history in terms of year-over-year growth in the NetCentric business over the last two quarters. There are really four things going on concurrently. One, an increase in bit volume driven by streaming. Two, a broadening of the streaming providers markets. Therefore, more of those bits are coming internationally, and they're coming from more different streaming providers instead of one or two very concentrated providers.
Three, we have benefited by being able to get paid on both sides. Because of the ubiquity of Cogent's network in over 1,350 carrier-neutral data centers in 50 countries, and a direct connectivity to over 7,600 networks around the world, we have the greatest footprint and the highest level of connectivity, allowing us to get a much larger percentage of our traffic where we're getting effectively double compensated on increasing the effective yield per bit. The fourth and final factor is prices on a nominal basis are going to continue to decline. The technology that drives price per bit reduction, that is wavelength division multiplexing, optical transport, and optically interfaced routing, are still on price decline curves similar to historic trends.
Over the next decade, we expect the average price per bit to fall at about the same rate it has historically, 23% per year. Packaging these four factors together, we've been able to deliver better growth rates. Our long term growth rate in our NetCentric business is about 9% year-over-year, not the 30% that we delivered last quarter. I think we should expect that growth rate to revert to more historical norms. Over the next year or two, go from its abnormal growth rate today to something more normalized at that 9%-10%.
Okay. Thank you for that. Switching to sales force. Sales force is one of the key engines of Cogent. You know, I think during the height of the pandemic, you did comment on kind of a lag in productivity as sales force initially had to do work from home. I wanted to see if you've gotten productivity back to where you want it. Let me set you up for the follow on questions. Two, with current labor shortages, are you having trouble attracting and retaining sales force?
I'll take them in the order in which you asked them. To protect our workforce, we quickly pivoted to remote work in March 2020. In October 2021, in the U.S., we have returned to the office. We have some limited voluntary returns in Canada, Europe. In Asia, we're still working remotely. We needed to quickly adapt all of our systems to a remote work environment. We successfully did that. Going into the pandemic, we had about a 5.7% per month churn rate in our sales percentage in our historical average going into the pandemic. Even if things remained as they were pre-pandemic, we needed to continue to hire. We had about 600 direct quota-bearing employees.
Different than most telecom companies, over 99% of our revenue come from our direct sales force and only 1% from channel or agent partners. That's very different than the industry average, which is generally between 30% and 40% of sales coming from third parties. We rely heavily on an outbound telesales model, and we needed to recruit. We quickly ramped up our training and onboarding, and we're doing a pretty good job, and we maintained headcount, but we saw productivity decline. The main issue for that decline was employees who were hired remotely were being trained adequately, not getting the mentorship and guidance that they would get in an office environment. We saw our productivity numbers decline and our sales force turnover rate increase.
As we have returned to the office, we have seen a decline in our turnover rate and an increase in our sales retention productivity numbers. We are encouraged. Now to the second part of your question in terms of labor market. We have continued to have ample supply of candidates. Our base compensation is $80,000 per year for an entry level salesperson. A typical candidate will have a college degree, soft major, and probably about a 2.7, 2.8 grade point average. Out of school in a, you know, sales environment. An $80,000 office job for someone with that profile is pretty desirable. The challenge is getting those people productive. We do know that in an office environment, have a manager and a trainer on site with those reps, their productivity is high.
We've seen our productivity bottom and improve over the last several quarters, and we expect our sales force productivity to continue to improve. We also believe that we will see a reduction in our sales force turnover. The number that is particularly startling to me is that of the salespeople that were hired remotely, so those from April of 2020 till today, 69.5% of those individuals are no longer with the company, meaning they never got to productivity levels necessary to be paid. We think by getting people back into an office at Cogent, we have 40 offices globally where there are 70 salespeople located. Each team has a manager, and typically three teams share a learning manager who's designed as a full-time trainer. This model has allowed us to develop reps and have the lowest cost of revenue acquisition.
Okay. Thank you for that. I also wanted to ask you about competition. Could you talk about what you're seeing now in the competitive environment for both corporate and NetCentric? In particular, I know that you recently talked about a dedicated team for the NetCentric business to kind of head off some churn there, which is sort of surprising because you would think that the NetCentric business is kind of so critical to your customers that there would be you know, somewhat of a natural kind of barrier to exit there.
Yeah. We've always divided our sales force between corporate and NetCentric. The usage patterns, buying practices of each customer segment are very different. In our corporate sales force, they are focused on either very small companies. The most entry-level position focuses on businesses with three or less locations. The more senior corporate position focuses on businesses that have four locations and are likely to buy VPN and data services along with an Internet connectivity product. In the NetCentric sales force, there are two groups. There are salespeople who hunt globally for either access networks or content generators. We have a smaller team that focuses on our 500 largest name accounts. Each of these segments, we have different compensation packages and different incentives.
The majority of our sales force turnover is actually on the corporate side because sales tend to be less technical, and the customers don't have as prolonged of a pattern of additional business to continue to buy. On the NetCentric side, we do have some churn. That churn is typically from businesses going out of business, being merged. You know, on the access side, our business is very stable. Once we develop a relationship, we generally maintain that relationship, and our goal is to constantly increase the percentage of business that we get from those customers. However, our NetCentric customers anticipate a 23% per year price reduction, and they also anticipate, as their volumes grow, getting additional volume threshold price discount.
We do have a team that helps those customers in those situations to reach to the next tier, perhaps shift the percentage of traffic that they send to Cogent. Cogent has consistently grown its NetCentric business faster than the market, in large part because of our pricing model. Just again to remind investors, the NetCentric business is a meter business sold on a usage basis, and Cogent undercuts its competitors by 50%. It's that aggressive pricing that has allowed us to become the second-largest player in the market. In terms of competition, on the corporate side, it's typically the phone company, and it's more suburban off-network base table is competitive. On the NetCentric side, we have seen a continued decrease in competitive pressure. As Lumen, the largest player, has continued to de-emphasize this product.
Telia, the Swedish incumbent, third-largest player in the market, has sold its business. NTT has de-emphasized the segment as well. I think part of Cogent's outperformance on the NetCentric side has been our gain in market share from our competitors.
Okay. I hate to say it Dave, but we're actually already out of time. It's always so fascinating to hear about your insights into both Cogent business and the industry. So thank you so much for being with us. I know that investors also had the chance to meet with your management team today during the one-on-one meeting. So we really appreciate that. So thank you so much for being with us. Next year, we are already committed to being back in Florida for this conference, so I'm already extending the invitation to you now, and hopefully you'll accept it and see you in Florida next year.
Absolutely. Looking forward to being back in person. Take care and stay safe, everyone.
Okay. Thank you everyone. Thank you Dave.