PSINet were one of the first commercial Internet Service Providers and helped create the Commercial Internet Exchange alongside UUNet and CERFnet (led by Susan Estrada). PSINet were founded in 1989 by Martin Schoffstall and William Schrader, but collapsed in 2001 when it filed for Chapter 11 bankruptcy (possibility to reemerge after restructuring) in the United States of America. PSINet were based in Ashburn, Virginia, when it ceased trading as a going concern in 2001.
Whilst PSINet grew to be a huge company -- it reported a loss of over $3bn during its fourth quarter in 2001 -- its origins were humble, built with small personal loans from its founders: Martin Schoffstall and William Schrader. Just as with other early commercial IP networks, PSINet had a major problem: the backbone of the Internet in the late 1980s was funded, owned and operated by United States government agencies, and they enforced an "acceptable use policy" that limited the amount of traffic that commercial IP networks could send across their backbone. The solution to this problem was building a commercial backbone infrastructure that was independent of the United States government agencies backbone (NSFNet, ARPANET etc) and the first interconnection was named the Commercial Internet Exchange (CIX) Association. The Commercial Internet Exchange was cofounded in 1990 by PSINet, CERFnet and UUNet; the creation of CIX ensures PSINet rightful place as a pioneer of the commercial Internet we use today.
The creation of CIX by PSINet eventually led to NSFNET derestricting commercial access to its Internet backbone, and set in motion a series of events that would result in the Internet's backbone evolving from a U.S. federally funded one, to one that was funded and controlled by large commercial telecommunications companies. The popularity of PSINet and CIX forced 'the hands' of the National Science Foundation (NSFNET) who came to realise that their backbone could not cope with the rapid increase in traffic that commercial use brought to a backbone that previously had a simple educational research focus. By 1995, NSFNET was dissolved and PSINet began an initial public offering of its shares on the American stock exchange NASDAQ. Nasdaq is an acronym for the National Association of Securities Dealers Automated Quotations, and focuses heavily on listing information technology companies.
In 1996, PSINet was struggling to cope with increased competition for retail customers and sold its retail business to MindSpring; MindSpring was an ISP based in Atlanta, Georgia, and was another tech company that went public on NASDAQ in the mid-1990s. From 1996 onwards, PSINet's focus shifted to infrastructure and facilities, providing traffic for government agencies, large companies, and smaller 'virtual' Internet service providers. PSINet saw massive growth during this period, fueled by a series of acquisitions of Internet companies in Europe, Latin America, North America and Japan. Some of these acquisitions included: Tokyo Internet Corp. of Japan; Rimnet Corp. of Japan; Inet Inc. of Korea; Metamor Worldwide Inc. of Houston of the United States of America; and Interlog Internet Services Inc. of Canada. It has been estimated that PSINet made over seventy acquisitions in the late 1990s.
The problem PSINet had, alongside many of its rivals, was that while it was growing its revenue and assets, it was rarely producing a profit. PSINet was at the heart of a boom in investment in information technology companies -- from 1994 to 2000 -- many listed on the NASDAQ, that was subsequently referred to as the dot-com bubble. By May 2001, PSINet's shares were trading below one dollar and the company was removed from the NASDAQ. By June 2001, they had filed for Chapter 11 bankruptcy. In 2002, Cogent Communications, an ISP offering similar Internet infrastructure and facilities services to PSINet, acquired PSINet's assets. In May 2001, the BBC reported that Harry G. Hobbs, president and chief executive of PSINet, said: "Our existing capital structure did not permit us to respond to the rapid changes in our markets, the Chapter 11 filing will provide us with the flexibility and time to explore all strategic alternatives."