Another Cooperative

Can the American Alliance of Service Providers succeed where so many other cooperatives have failed?

by Jim Wagner
ISP-Lists Managing Editor

ISPs in general have never warmed to the idea of internet cooperatives, but CEO Russ Ferguson of the American Alliance of Service Providers is convinced his "alliance" will succeed where so many others have failed.

e-piphany
Last year at this time, Fergusen was running his small ISP, WOWLink serving two area codes in the town of Triangle, Va. His epiphany came while talking to the local telco, trying to haggle T-1 prices to keep his business afloat.

"I can remember sitting at my desk talking to them, thinking 'I wonder if it's this hard for the other guys' (running a small ISP)," said Fergusen. "That's when I decided to get people together and compete at a higher level. We used a list server to test interest in the idea (of a co-op), and had 25 members at the end of the day."

Things took off quickly after that first day in January. First, the organization was set up. On the advice of his lawyers, he set up his alliance as a corporation, which allows the AASP more leeway when negotiating for discounted services. Brochures were mailed to ISPs and vendors to drum up support for the fledgling co-op. Next, he took his idea on the road to the ISPCON in Orlando, May 23-25.

ISPCON
"ISPCON was the turning point for the AASP," said Bob Davis, CEO of Leading Edge Communications, an ISP providing fixed wireless solutions in Norman, Okla. "A lot of ISPs were impressed with what they saw and signed up. After that, (the AASP) got more aggressive in getting more members."

Members have been signing up to the AASP at the rate of about 15 ISPs a month. They now total more than 145 ISPs with an aggregate membership of 3.4 million subscribers.

The Co-op provides
Through UUNet, AASP members have been reaping huge price discounts. Fergusen says his ISP is now saving $700 a month per T-1 because of the discount he gets through UUNet.

In addition to deals through carriers like UUNet and USBackbone, the organization has an arrangement with companies like 3NO Systems and Cirilium Corporation, who provide back office support for ISPs such as telephony and data networking. ISPs looking for low pricing on domain name registration can go to the co-op's web site and find register.com, who joined last week. The AASP is in talks with an insurance company to provide discounted health/group insurance for ISP employees and even subscribers. Telares, featured in an article last month, is in final negotiations with the co-op to bring their services to the table.

Vendors like co-ops too
National vendors are eager to sign up with cooperatives because it gives them a chance to hit an untapped resource in their marketing machine: the local ISP.

"AASP reaches a spectrum of business that we can not otherwise keep on our radar screen," said Aaron Patt, channel manager at Targitmail.com. The company maintains a database of consumers willing to receive targeted email notifications.

Selling ads
"As our aggregate subscriber base grows we will attract national advertisers," Fergusen explained. "If an advertiser wants to advertise on the Internet, they currently have two options. Call AOL and hit 22 million subscribers, or call 1500 smaller ISPs to get the same coverage."

Networking
Another reason members are jumping aboard the AASP bandwagon is the chance to network with other ISPs who've been there, done that.

Davis and his ISP in Oklahoma haven't used any of the services the co-op offers and don't have plan to use them, either. What he does like is talking to other CEOs about the business.

"I'm in it to network with other members," said Davis. "(Running an ISP is) all so new and exotic. I like being able to talk to other ISPs from around the country, instead of someone who's just trying to sell me something."

Tainted past
ISP cooperatives have failed before. "I've never seen a proven model for the coop," said Christopher M. Knight, founder of the ISP-Lists Discussion List community. "The only people you see saying anything good about co-ops are the leaders and the cheerleaders of the co-ops. It is very, very rare when a ISP member of one of the co-ops defends the co-op they belong to, which indicates to me that all of the wonderful ISP co-op ideas the last three years have been coming 99% from the leaders or executive co-op cheerleaders only and that no co-op model has survived the harsh realities of the marketplace."

The future
Since the organization is set up as a corporation, Fergusen does not have to fear being deposed down the road and can focus on long-range goals. That means ISPs won't have to worry about someone coming on board deciding it should charge membership fees or become politically involved, the death knell of previous cooperatives.

Related article
Cooperatives are controversial on the ISP-Lists.