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Internap May Face Lawsuit After Canceling Hundreds of Agents

By Kelly Teal
July 22, 2011 - News

Colo and cloud provider Internap reportedly is canceling between 300 and 400 subagent contracts, and compressing its 10 remaining master agents’ commissions to unfavorable levels.

According to several sources, Internap has terminated most agents and cut evergreens commissions to as low as 1 percent for partners still on the roster. Commission on renewals also is in jeopardy, although Internap appears to be changing individual terms somewhat, depending on the level of resistance it’s getting from partners.

“They’re not honoring the black-and-white agreements [from] the past … they’re rewriting the past and that’s the only issue I have," said an anonymous source.

Internap has said it will comment to Channel Partners some time today.

The impetus for the sudden change looks to be a pending sale. Internap is said to be courting a serious buyer and apparently wants to increase short-term valuations, which it would achieve by ditching monthly recurring obligations to channel partners. And those contract cancellations soon may result in a lawsuit, which would put a wrench in Internap's sale plans.

“It’s time we banded together as agents," a source said. “This is really deteriorating the whole channel. If this becomes the precedent, it’s all over – it’s really bad news for the channel."

Few details of the potential litigation were available on Friday; activity is in the works but the people involved weren’t ready to go on the record with their names.

Internap is at least the second big name in the past 18 months to sever ties with agents. In June 2010, Equinix Inc. discontinued the agent program it inherited when it bought Switch and Data Facilities Inc. earlier that year. The cuts affected 35 agents.

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