Amherst-based Prime Communications Systems Inc. has been acquired by a New Jersey-based company with plans to install a high-speed data center in Buffalo, the company announced Thursday.
Prime, an Internet service provider with 12,800 customers, was purchased for an undisclosed sum by BiznessOnline.com of Wall, N.J. The company is building a Northeast network of Internet providers.
"Your basic on-ramp company is an endangered species," Prime Communications owner Kirk Miller said. "Customers are demanding more and more services."
With 50,000 customers, BiznessOnline sells corporate-oriented services like high-speed Internet access, Web site hosting and electronic commerce systems. "This (acquisition) helps extend our geographic coverage," marketing vice president Lorin Beller said. BiznessOnline.com operates in Albany, Utica and Kingston, with a data communications center in Albany.
BiznessOnline's data center allows corporate "server" computers to plug into the Internet via the company's high-speed network. The PriceChopper supermarket chain and outdoor equipment maker Troybilt are among the company's corporate customers, Beller said.
A similar center is planned for downtown Buffalo, with an initial capacity of 250 servers. The center would handle connections to Internet backbone providers using Prime's communications equipment.
The center might draw corporations from Toronto as well as local businesses looking to "co-locate" their Web servers at the communications hub, Miller said.
Prime's current management and staff of 28 will continue to operate the company under the Prime name, with plans to add about 15 employees, Beller said.
The Nasdaq-traded company was attracted by Prime's positive cash flow, with $1.8 million in sales and $500,000 in before-tax profits, she said.
Prime has also introduced products such as a smart-building service in downtown Buffalo, using communications links provided by Adelphia Business Solutions Inc. Earlier this month, Prime began marketing high-speed business and residential connections with technology from independent phone company ChoiceOne Communications.
BiznessOnline's revenue will equal $28 million with the addition of Prime's sales, the company projects. It owns five upstate New York service providers, a reach that will give Prime customers the ability to dial into the network from locations throughout the state, Miller said.
The buyout exemplifies a consolidation trend among Internet service providers or ISPs, said Barbara Dooley, executive director of the Commercial Internet Exchange in Herndon, Va.
"Companies started a couple of years ago buying solid ISPs, trying to leverage their assets and create a regional (communications) backbone," she said.
Debt-fueled consolidators benefit by spreading their communications network and administrative costs over more customers while selling extra-value business services.
"There are very few ISPs today that get most of their income stream from residential dial-up," Dooley said. Profits on service-intensive residential accounts are slim and getting slimmer, as regional phone companies and cable television services offer high-speed Internet connections.
However, niche players -- offering high-end access and extra service like Web hosting and support -- continue to spring up, she said.