PSINet

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PSINet was one of the first internet service providers (ISPs), and a major player in the commercialization of the Internet until the company's bankruptcy in 2001 during the dot-com bubble and acquisition by Cogent Communications in 2002.

Mid 1990s Logo

1 History
2 References

[edit] History

[edit] Growth

PSINet was founded in 1989 by Martin L. Schoffstall and by William L. Schrader, who initially funded the company using credit cards and by selling the family car. In May 1991, the company acquired NYSERNet, the corporation that had created the first regional Internet network under Schrader's leadership, an acquisition that gave PSINet commercial access to what would come to be known as the Internet.

The company met with early success, capitalizing on the growing potential of the growing global network, an expansion in which the company played an active role. In 1991, PSINet and Alternet co-founded the Commercial Internet eXchange (CIX), a trade association of Internet Service Providers. By 1995, the company had revenues of $32.9 million.

Pressured by increasing competition in the dial-up internet market, the company restructured in 1996 to focus on its commercial Internet business, selling its retail ISP accounts to MindSpring in June of that year, and began its expansion into Europe. Co-founder Schoffstall left the company that year. As a leader in the ISP arena, PSINet was frequently mentioned in trade publications for its accomplishments and reputation. In 1997, the company raised $1 billion in bond capital and undertook a series of rapid acquisitions, making 76 acquisitions between January 1998 and December 2000. Regional ISPs were a frequent purchase, and according to Congressional testimony by CEO Shrader, the company was by 1999 the largest independent facilities-based ISP in the United States, the second largest ISP in Japan, and had more than 500 points of presence around the world.

In an attempt to generate more brand recognition, in 1999 PSINet committed $100 Million dollars for naming rights of the new stadium in Baltimore, Maryland (now M&T Bank Stadium) of the National Football League's Baltimore Ravens. The dubiousness of this marketing extravagance was that the Ravens won Super Bowl XXXV in January 2001, but PSINet, whose large neon sign hung on their home stadium, had never turned a profit.

The company's largest acquisition came in March 2000 with the purchase for more than $1.3 billion in stock of Houston-based Metamor Worldwide, a consulting services conglomerate it purchased in an effort to become a "single-source provider" for IT outsourcing services. The company also invested heavily in its fiber-optic network, anticipating strong demand, and planned in early 2000 to invest $1.4 billion over three years to build to expand its services and operations.

[edit] PSINet firsts

Internet foundation

Built first civilian backbone (NSFNET)
Founded first regional network (NYSERNET)
Co-founder of FARNET
First in Japan with dedicated ISP facilities
First foreign telecom company to operate in Korea

Industry milestones

First ISP to surpass 100 POPs
First ISP to surpass 200 POPs
Largest international web-hosting provider
First ISP to surpass 300 international POPs

Internet technology

Founders co-authored Simple Network Management Protocol (SNMP)
First ISP to offer large-scale white pages service (x.500)
First to collocate with interexchange carrier POPs
First to use T1 in network
First to use ATM/frame relay architecture
First to use ISDN
First to use cable TV systems
First ISP to design and use automatic online registration
First to offer three-continent WWW mirroring
First to use SMDS - Metropolitan Area Network (MAN) nationwide
First ISP to be ISDN-compatible system-wide
First ISP to fully integrate Windows 95
First 100% uptime guarantee for Web hosting services
First Tier 1 backbone ISP to offer free peering

Internet products

First to provide commercial Internet access to companies
First nationwide ISP to introduce T1 service
First LAN-based dial-up TCP/IP service
First individual dial-up TCP/IP service
First to offer guaranteed commercial quality of service
First to offer commercial-strength PPP individual service (PSINet Remote Access)
First ISP to offer an on-line service (Pipeline)
First managed Internet security service (SecureConnect)
First commercial ISP to offer electronic commerce services (PSINet eCommerce)
First ISP to offer private IP network service (PSI IntraNet)
First ISP to offer worldwide Internet-based faxed service (PSINet Fax)
First ISP to offer secure multi-currency e-commerce solution (PSINet Worldpay)
First commercially available hosted multimedia streaming service (PSINet Stream)
First commercially available live audio-video streaming service (TV on the Web)

Internet commercialization

Co-founder of Commercial Internet Exchange (CIX)
Co-founder of Internet Society (ISOC)
Co-founder of the Internet Operators Group (IOPS.ORG)
First to become commercial (for-profit) ISP
First ISP/on-line provider to offer flat-rate pricing
First ISP to report customer retention rates
First independent facilities-based ISP

[edit] Collapse

Despite its rapid growth and significant position in the commercial Internet services market, the company was never profitable. It was a popular stock with analysts during most of the dot-com boom because of its rapid revenue growth and aggressive expansion plans, but by 2000, PSINet was beginning to struggle. The company lost more than $5 billion in 2000 despite having close to doubled annual revenues to $995 million. Some analysts point to the Metamor acquisition as the turning point for the company, burdening it with the demands of integrating business operations while it was already struggling with significant debt from its earlier acquisitions, and facing a general slowdown in the computer services industry. However, the company had missed earnings estimates the year before, and was said to be looking to sell parts of its operation in late 1999.

A portion of it was spun out into the independent company, Inter.net (now Uniserve); and another portion, ShellTown, was sold to Saugus.net.

A wave of senior officers, including the company's president, chief operating officer, and an executive vice president departed the company in early 2001, and Schrader was himself fired from the CEO job in March. The company's stock price plunged in response to the departures and to wider-than expected losses: the stock, which had traded as high as $60.94 a share in 2000 (after a split), closed at 18 cents in late March, 2001.

In May 2001, the company was delisted from NASDAQ because the company's stock had traded below one dollar for 30 consecutive days. The company delayed filing its quarterly 10-Q filing with the U.S. Securities and Exchange Commission. Finally, overwhelmed by debts in excess of $3.7 billion and with dwindling cash reserves, the company announced on June 1, 2001, that it had filed for Chapter 11 bankruptcy protection along with 24 of its US subsidiaries, and that four of its Canadian subsidiaries had filed for protection under Canada's Companies' Creditors Arrangement Act (CCAA).

Most of the PSINet United States's assets were acquired by Cogent Communications in April 2002. PSINet Canada was acquired by TELUS Communications.