Meet the 'virtual ISP'

With many smaller and medium-sized Internet service providers struggling for financial survival, a growing segment of the market is giving up on the traditional approach of buying modem pools and T-1 links from a Tier 1 provider and hoping that revenues start flowing.

Many companies-and in some cases individuals or groups-with name recognition but no technical knowledge are outsourcing almost all their operations. The result is organizations that do all the marketing and sales of Internet access but have little to do with operations.

Behind the scenes is a small group of companies that provides everything from network connections and billing services to customized CDs that "virtual ISPs" can put their names on and home pages that make those companies look like big players.

"What we're doing is making our customer look like the virtual ISP," said Richard Gannon, vice president and general manager of Community ISP, a unit of Spring Valley Communications, which provides long-distance and telecommunications management for several companies. The company also is working with NetworkTwo Communications Group to provide network management and a customizable CD that virtual ISPs then send to their new accounts.

"From our perspective, we provide customized private label Internet service to affinity groups like church groups and alumni associations," said Gannon. "Most of these companies have a marketing baseline in a way that they can contact the customer."

Community's next major project may be a group that fits the bill perfectly: a rock band that will offer Internet service as part of its next CD.

NetworkTwo's Web Surfer Kit serves as the software platform that the two companies are using to provide a customizable browser that defaults to the customer's home page. Additionally, NetworkTwo is providing branded level one technical support so users calling for help are not only greeted by a familiar name but by someone who has the technical expertise to help.

"On our ISP side, we can make the small to medium [-sized] ISP look like a big one," said John Lenahan, vice president of marketing and general manager of NetworkTwo's ISP/reseller unit.

In fact, one of NetworkTwo's customers is Community ISP, which operates an access service in the Toledo, Ohio, area.

"We'd be a classic model of what they're trying to do in providing a backbone and other service because that way we don't have to invest in the infrastructure," said Gannon.

Although the company is getting interest from ISPs, Lenahan sees greater opportunity with companies that have name recognition such as electrical utilities and cable operators.

"The advantage of large companies is that [they have] a recognized name, but when you start having to tell people how to boot Windows, that's not their core business," he said.

Farming out most of the operations also allows companies with little infrastructure to break through the economic barrier of expanding their operations, said Andy Vasher, director of marketing for NetworkTwo. Because they must match the $19 to $22 a month price range of most ISPs, companies not already in the business see little margin and consequently no growth opportunity, he said. "They're hitting the scalability issue head on."

But because they are local, those same ISPs are good at acquiring customers, added Lenahan. "They're in the perfect position to understand their customers better than we ever could," he said.

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