Logical Net: Growing by Doing Good

Regional ISP Logical Net has taken the simple idea of affinity marketing and, through careful, details-oriented implementation, executed a simple business plan that will be difficult to imitate.

by Alex Goldman ISP-Planet Managing Editor [April 16, 2004]

The original business plan as written in 1994 called for a business ISP providing T-1s and DS3s and dedicated DS0s to local business. After six months of network design and implementation, the first customer was announced on February 15, 1995. But inquiries came from individuals as well as businesses, so the people at Albany, N.Y.-based Logical Net started referring callers to any of the 20 or 30 local residential ISPs.

"One day, a good friend called me up," says Tush Nikollaj (pronounced like "Nicholai") founder and CEO of Logical Net. "He said, I'm a business customer but I called for home service and they referred me to somebody else. What exactly is it you do? Why can't I get it from you? What makes you think that if you cannot supply me with home access, I'll allow you to supply me with business access?"

So the company launched residential service. Logical added residential service reps to its call center, reconfigured the phone systems, and was ready to go.

The business plan was simple in theory, but difficult to execute. "When we first started, everyone was talking about tech this and tech that, but we all had the same tools. So when I would do my pitch and people would ask me, 'what's you competitive advantage,' I'd explain that it all comes down to service."

Service worked. "We had the reputation that if they called, we'd answer the phone," says Nikollaj. He says the company experienced double digit growth each year from 1995 to 2000, and has been stable since at about 20,000 subscribers, most of them in upstate New York. "It used to be all about tech, but after the bust, the trend became customer centric again," he says. "I like to think we were always right." During that time other public ISPs from AOL to Internet America were losing dialup customers rapidly.

"Some go to our DSL platform," he says. "Some go to cable, which we don't provide." ISPs would like to offer cable service, but are often legally prevented from doing so. ISPs that offer DSL service often face illegal obstructions to business. Overall, this makes providing business service more attractive than residential.

Nikollaj has no complaints though. "We cover nooks and crannies. There are some areas that AOL doesn't cover that we do," he says. Logical Net gets this coverage by working with local rural ILECs, a potential source of positive partnership for local and regional ISPs. The ILECs that Logical Net partners with range in size from Frontier (part of Citizens Communications) with 1.1 million access lines to Middleburg Telephone (which has 7,200 telephone lines, 2,000 cable TV customers, 3,000 Internet customers, and 1,500 long-distance customers) to much smaller ILECs serving as few as 900 customers.

Rural ILECs can be backbone providers, too. Citizens, which owns several rural ILECs, has a national fiber backbone called Electric Lightwave, and local operations like Champlain Telephone also have fiber backbones.

In its latest business venture, Logical Net is using years of local ties to reach out to the community. Nikollaj expects that dialup pricing will eventually fall below even the $9.95 per month that the discounters charge. Logical Net charges $19.95 for premium dialup with anti-spam and anti-virus from Postini, and dialup acceleration and parental controls from Artera Turbo.

Paradoxically, many potential customers would not switch for a significant discount. The company, he said, did a survey in which it asked potential customers whether they'd drop service costing $23.95 in favor of service costing $19.95. The answer, generally, was no.

"But if we offered to give back to the community, then eyebrows started to go up," says Nikollaj.

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