Virtual Massiveness

A new kind of marketing company with a new kind of business model is promising to create new revenue streams for local and regional ISPs with virtually no investment required.

by Jim Wagner

It's a classic Catch 22: Small, resource-constrained ISPs need new products and services to attract new customers, but without the revenue from a burgeoning subscriber base, they can't afford to implement ambitions new programs.

Telares, which bills itself at "the largest revenue-sharing consortium of local and regional ISPs" is proposing to rewrite this equation. This subsidiary of telecom aggregator Internet Global Services (iGlobal, based in Dallas) — which is in turn an offshoot of eVentures Group — has recently mounted a massive promotional campaign seeking to attract new ISP members to its opt-in value-added-service program.

An abundance of options
Want to offer broadband, but can't swing the resources? Telares has recently concluded agreements with Covad (for DSL) and Clearwire (for 2.4 GHz high-speed wireless). Want to expand your service area? Telares has a deal with Cable and Wireless to provide Virtual ISP access to that company's 350-POP network. Long distance phone and streaming video email are two more service offerings from Telares, with more to come.

Telares (pronounced tel-AIR-eeze) sells these and other services through its ISP member network; members, in turn garner a share in the revenues (10 percent for most services), with no up-front investment, membership fees, or other costs. Here's how it works.

Say you're a small-town ISP with fewer than 100 dialup customers. Until two years ago, your only realistic connectivity option would have been a T-1 from your local telco. Today, instead of paying the exorbitant rate typically charged by LECs to small customers, Telares can set you up as a virtual ISP (VISP) on its (Cable and Wireless's) massive network. If you want, Telares will even supply basic email service and tech support.

Think your customers would pay a premium for streaming media content, but can't afford to implement this? Telares' ISV Mail service, which streams video content in the context of mail messages, might expand your horizons.

Again, there's no up-front investment needed by members. Service hookups are quick and cost-free. Members agree to put up a Telares banner on their web site, and establish a co-branded Telares services page. Billing is handled by Telares and residual checks are issued monthly.

Larger than the sum of its parts?
Telares's corporate tagline, Virtual Massiveness, underscores the buying-power advantage of being part of a large organization. Now, instead of waiting years to acquire revenue to purchase equipment, members can reap the benefits of volume purchasing immediately, while offering an expanded palate of services to their customers.

Similar business models have been around for years, typically under the name of cooperative. Co-ops have garnered mixed reviews in the ISP community, however. Early attempts to bring small ISPs together have generally failed to get the intended results. Uncertainty whether the term 'cooperative' applied to business or politics often left both sides feeling cheated.

Telares hopes to change this through superior service and products, two areas David Link, president and CEO of iGlobal, thinks they excel at providing. As ISPs themselves, they know what people are looking for and what's realistically available.

Depth and breadth
"We've been an operating ISP for more than six years now" said Link, "which is a good track record in this line of business. We have a product that puts every ISP on the same level with companies like America Online and MindSpring. We have the added benefit of being able to test out new programs on our customers before offering to everyone."

There are other companies out there that provide some of the same services Telares does, Link said, but with added costs. "Telares offers true revenue-sharing," Link noted. "The other companies charge a membership fee for those services provided to members, but we don't. And I don't know of any that offer the range of services that we do."

Taking the muss-and-fuss out of value-added sourcing is bringing a lot of corporations into the fold as well as ISPs, Link said. For example, Telares is currently in talks with a major airline to offer Internet access to their employees.

Corporations see the Internet as an attractive place to brand their organization. Offering Net access (recall Kmart's bluelight.com?) provides a presence, but is also expensive to build up from scratch. Enter Telares and "virtual massiveness."

"Many large enterprises want to be able to provide Internet service to their employees as well as clients and suppliers," said Link. "Our VISP product positions them to provide that capability."

Extending market reach
A number of Telares affiliates attribute their growing subscriber bases directly or indirectly to the power of the consortium. Pat Lindsey, CEO of Texas-based ISP altinet.net, is one. Through her association with Telares, she is able to offer free streaming email service to her customers, thanks to the equipment provided by Telares. This added service brought in customers who were looking for a product Lindsey might not have been able to offer on her own.

"I'm always looking for something new to offer my customers, and Telares has a lot to offer in this respect," Lindsey commented. "After joining Telares, we noticed business coming in from other states. That never happened before we signed on with Telares."

An ISP since 1996 and Telares affiliate since '98, CEO Keith Dornbusch of Houston, Texas-based selec.net saw an increase in his corporate customers after signing up with Telares. He attributes this to the richness of value-added services Telares made possible. His mostly corporate customer base has grown from roughly 200 in 1998 to more than 2,000 today.

"It takes only a couple of hours to set up with Telares and you're up and running," Dornbusch said. Compared to cooperatives with which he's had experience, Dornbusch appreciates the simplicity of this arrangement. "It's a lot different than your cooperative, where you had to constantly keep up with reporting and the emerging technologies. Now I can just focus on the important aspects: getting subscribers."

Broadband, billing, and more
Telares has been active in addressing the current hunger for high-speed connectivity. It recently penned a deal (April 27, 2000) with Efficient Networks, Inc., to provide DSL equipment (including modems and routers) to Telares members to accelerate deployment of high-speed Internet access. The connectivity piece of the equation will be supplied by veteran DSL supplier Covad Communications (agreement announced April 7).

"Consumer demand for DSL is at a fever pitch," said Link. "We now have the ability to offer dependable and affordable DSL to ISPs that could not have deployed DSL on their own."

On March 28, Telares signed a deal in which EHPT USA, Inc. will provide with unified billing, web-based billing, and customer support (EHPT is a joint venture between Ericsson of Sweden and Hewlett-Packard and is based in Stockholm, Sweden).

Outsourcing services in this manner helps Telares keep the overhead down and provide more services to consortium members.

All of which positions small ISPs on an equal playing field with the national ISPs, turning a David and Goliath internet access scenario into a battle between evenly-matched competitors.

"Our current focus is to deploy our network and services as widely as possible," Link stated. "In the future, as our customer base continues to grow, we will strive to provide additional services from "Best of Breed" providers. When we identify market niches that aren't served by existing technology, then we will develop them. We are a small, nimble company and will always maintain that mindset even as we gain size."

About the parent
eVentures Group invests in, operates, and develops Internet communications companies. Members of this group include Jeffrey A. Marcus, former Marcus Cable CEO and Chairman, and Fred A. Vierra, former CEO of Tele-Communications International, the international arm of cable giant TCI.