Stargate Industries
| Company type | Private |
|---|---|
| Industry | Internet service provider |
| Founded | 1994 in Pittsburgh, Pennsylvania, United States |
| Founder | Michael Ruscitto |
| Fate | Filed for Chapter 11 bankruptcy in 2003; assets acquired by Expedient, AC Coy, Earthlink |
| Headquarters | Pittsburgh, Pennsylvania , United States |
Area served | Western Pennsylvania, parts of West Virginia, Maryland, Ohio |
Key people | Marcus Ruscitto (CEO), Shawn McGorry (COO) |
| Products | Dial-up internet, dedicated internet access (leased lines, DSL), data center and co-location services, web development |
Number of employees | 450 (circa 2000-2003) |
Stargate Industries, Inc.—which later operated as Stargate Industries, LLC and Stargate.Net, Inc.—was an Internet service provider established in 1994 in Pittsburgh, Pennsylvania. Beginning with dial-up services, Stargate broadened its offerings to include dedicated Internet access through leased lines and DSL, as well as data center and co-location solutions alongside web development. Through both internal expansion and strategic acquisitions, it grew into the largest locally owned ISP in western Pennsylvania, serving close to 100,000 customers and employing approximately 450 people at its height.
The collapse of the dot-com bubble and the subsequent economic downturn forced Stargate to file for Chapter 11 bankruptcy protection in 2003. Its assets were subsequently acquired by multiple entities such as Expedient, AC Coy, and Earthlink.
Founding and initial development
In November 1994, Stargate was launched by Michael Ruscitto, then only 16 years old, with leadership support from his brother Marcus, who assumed the CEO role. The company aimed to address the scarcity of dependable Internet access in the Pittsburgh region. Operating initially from their family residence, Stargate gained its first dial-up subscriber in early 1995. Within twelve months, the headquarters relocated to Belle Vernon, Pennsylvania to accommodate staff expansion and broadened service offerings including leased-line Internet access, web hosting, and server co-location.
Stargate developed both physical and virtual points of presence throughout Western Pennsylvania’s LATA 234 area. Through subsequent acquisitions, it extended its market penetration into northwestern Pennsylvania as well as sections of West Virginia, Maryland, and Ohio. By late 1995, the company obtained Autonomous System Number 6104 to facilitate multi-provider Internet transit with Border Gateway Protocol (BGP) redundancy.
In 1996, Stargate brought on Shawn McGorry—previously with Tele-Communications, Inc.—as Chief Operating Officer. That year also saw the acquisition of Netstation’s customer portfolio. The company utilized telecommunications infrastructure from Bell Atlantic (later Verizon) and Competitive Local Exchange Carrier Teleport Communications Group (later part of AT&T), co-locating equipment near downtown Pittsburgh to enhance leased-line services for commercial clients. Emphasizing round-the-clock technical support became a key competitive differentiator while nationwide dial-up access was expanded through partnerships with iPass roaming services starting in 1997.
Expansion through acquisitions
In January 1998, Stargate obtained funding from RRZ Capital Markets and acquired USA Onramp, Inc., its largest local rival at the time. By May, headquarters and operations moved to Pittsburgh’s Strip District. This acquisition doubled Stargate’s residential subscriber base to 17,500, increased its business clientele, doubled employee numbers to around fifty individuals, and extended service coverage into southwestern Pennsylvania as well as Wheeling, West Virginia.
Prior to this acquisition, Stargate invested in Sun Microsystems servers to consolidate email, web hosting, and news services efficiently. Its upgraded news server earned a position within the Freenix Top 1000 from late 1997 until early 2000, peaking at #395 in August 1998.
Toward the end of 1998, Stargate secured ownership of the domain "stargate.net" for marketing and website purposes. In October of that year, it expanded further by acquiring customers from Washington PA Online.
The year 1999 was marked by accelerated growth fueled by multiple acquisitions. Following a $15 million credit facility secured from Fleet Bank in February, Stargate purchased Pittsburgh Online in June; International Distribution and Consulting Inc. (IDCI) customers in September; regional providers ErieNet and Intrepid Technologies in October; and InetONE in November. These acquisitions broadened Stargate’s presence into northwestern Pennsylvania, northeastern Ohio, eastern West Virginia, western Maryland, and central/southern West Virginia—raising its total customer count to roughly 70,000.
Stargate introduced Symmetric DSL (SDSL) services through nationwide DSL provider Northpoint Communications along with Asymmetric DSL (ADSL) via Bell Atlantic and Penn Telecom (later Consolidated Communications), deploying equipment sourced from Redback Networks and Cisco.
The company also advocated for open-access clauses within Pittsburgh’s cable franchise agreement with AT&T Cable Services (later Comcast), allowing multiple ISPs to provide Internet service over cable infrastructure. This initiative enabled Stargate to offer cable Internet throughout northwestern Pennsylvania through a partnership with Coaxial Cable TV (which later became Armstrong).
By January 2000, Stargate surpassed an 80,000-customer milestone and secured $20 million in funding from Fleet Bank and Alta Communications by May. June saw the acquisition of CIScorp—a Pittsburgh-based IT consulting firm—which was integrated as Stargate’s Professional Services Group (PSG). This acquisition increased staffing by approximately 150 employees to reach around 450 total personnel. CIScorp’s offices were consolidated into Stargate’s enlarged Strip District headquarters. That same summer marked the opening of Stargate’s inaugural data center located in Pittsburgh.
To accommodate rapid growth and escalating Internet traffic demands, Stargate expanded bandwidth capacity significantly—from a single T1 line delivering 1.5 Mb/s in 1995 to more than 330 Mb/s by 2003—utilizing multiple circuits connected to various Internet transit providers and exchange points across several facilities.
Dot-com downturn and economic slump
In 2001, Stargate encountered major obstacles as the collapse of the dot-com sector triggered an economic downturn. In January, the firm reduced its workforce by approximately 15 employees. That same month, broadband provider Northpoint Communications filed for Chapter 11 bankruptcy and was subsequently acquired by AT&T in March, which then terminated Northpoint's wholesale broadband network operations. This caused service interruptions for nearly 400 of Stargate’s residential and commercial clients, some of whom switched to alternative providers, adversely affecting Stargate’s revenue streams. By late March, the company laid off around 45 staff members (representing 10% of its employees) and began scaling back dial-up modem ports in response to customers migrating toward broadband services. By November, Stargate was serving roughly 90,000 customers and had a workforce of about 350.
Despite these difficulties, Stargate maintained growth momentum. Early in 2002, it secured $2.5 million in equity financing from Alta Communications, increasing Alta’s total investment to approximately $13 million. In May, Inc. Magazine and the Initiative for a Competitive Inner City (ICIC) ranked Stargate as the fastest-growing inner-city technology company nationwide. Additionally, that month the Pittsburgh chapter of the Society of Financial Services Professionals awarded Stargate the American Business Ethics Award for mid-sized firms.
Later in 2002, Stargate transitioned to a self-sustaining business approach, funding operations exclusively through incoming revenue due to achieving positive cash flow. The company undertook a comprehensive review of all functions to reduce expenses while preserving service quality.
Bankruptcy
Although revenue improved toward the end of 2002 and into 2003, Stargate filed for Chapter 11 bankruptcy protection in April 2003 owing to multiple factors undermining its financial health and operational model:
- The recession prompted many enterprises to reduce IT budgets, leading customers to opt for more affordable providers.
- Adoption rates of the Application Service Provider model fell short of Stargate’s projections.
- The integration of CIScorp into Stargate’s service offerings proved problematic, with recession-related cutbacks diminishing consulting contracts.
- Litigation liabilities inherited from CIScorp necessitated substantial financial reserves.
- Unfavorable agreements with communications carriers and suppliers elevated operating costs amid a challenging economic environment.
- The inability to renegotiate loans and credit facilities obtained during the 1999 dot-com expansion created financial pressure and prevented a merger with a peer provider.
- Shifting to a self-funded, cash-positive model constrained capital spending on equipment upgrades.
During bankruptcy proceedings, Stargate’s assets were divided and sold off to optimize returns for investors and secured creditors, totaling around $10 million. Residential dial-up and broadband operations were acquired by Earthlink; the Professional Services Group was sold to Pittsburgh-based AC Coy; while business and data center services retained under the Stargate name were purchased by Cleveland-based Expedient (formerly e-xpedient Holdings USA, LLC). Following this acquisition in October 2003, Stargate ceased to exist as a corporate entity.
In early 2004, founder Marc Ruscitto exited the company. Expedient temporarily continued using the Stargate brand during service migration onto its own network and relocated its headquarters to offices in Pittsburgh formerly occupied by Stargate. By mid-2004, Expedient retired the Stargate brand but continues operating with its headquarters in Pittsburgh.
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