Hoping to prevent customer defections to larger banks, community institutions in New England are banding together to form a no-fee automated teller machine network.

Two of the region's top trade groups, which are organizing the effort, expect to bring more than 800 ATMs into the system.

The idea is to provide an alternative to surcharges, which began in earnest nationwide in April when MasterCard and Visa lifted a ban on them. It is increasingly common for machine-owning banks to charge $1 or more to cardholders of other institutions.

Under the New England plan, banks and thrifts in the alliance would allow customers of other participants free ATM usage. The group hopes to get the system running next year, but has not settled upon a name or logo.

Industry observers say this type of alliance and the resulting new ATM network might be a first in the banking industry.

"I'm not surprised by it," said Richard T. Robida, executive vice president at Speer & Associates Inc., an Atlanta-based financial consulting firm. "We're hearing of and seeing some instances of growing discontent especially among the community bankers on the whole issue of surcharges."

The majority of the interested bankers in New England hail from Massachusetts, where 62% of the approximately 3,300 ATMs are controlled by two banks - Fleet Financial Group and Bank of Boston Corp.

So far, neither of those banks is surcharging. Fleet operates 2,000 ATMs in five New England states, New York, and New Jersey. Bank of Boston has 1,500 machines.

A Bank of Boston spokesman said it has no plans to impose surcharges on noncustomers using its ATMs.

Fleet is considering surcharges.

"Our expectations are that over time surcharges will become standard throughout the country," said James Mahoney, a Fleet Financial spokesman. "We're continuing to evaluate the pricing for our ATM network on an ongoing basis."

Officials at NYCE Corp., the regional ATM network of which Fleet Financial and Bay Banks Inc. (soon to be merged with Bank of Boston) are co-owners, said they hadn't heard about the nascent alliance. A spokesman said surcharging decisions are entirely up to individual banks and not the network of 17,900 ATMs in 26 states.

Donald S. Glass, president of the Community Bank League of New England, said the group "would invite anyone who would want to participate."

Mr. Glass' group, which represents 115 thrifts, is working closely with the Massachusetts Bankers Association to attract community banks and thrifts.

Without such a no-fee network, Wayne A. Cottle, president of $82 million-asset Dean Cooperative Bank, says his three free ATMs in suburban Boston won't be enough to maintain customers who often need to use larger banks' ATMs in downtown Boston.

"It's a lot easier to change banks than their banking habits," Mr. Cottle said.

Meanwhile, the Massachusetts Bankers Association, which represents 210 banks of all sizes, isn't looking at the issue as a matter of regionals versus community banks.

"I think our goal has been to provide banks of all sizes the opportunity to provide their customers surcharge-free machines," said James P. McDonough, president of Abington Savings Bank and member of the Massachusetts Bankers Association executive committee.

Alan Pohlman, executive vice president of Carmody & Bloom, a consulting firm in Ridgewood, N.J., said the alliance will only work if some of the larger banks sign on.

"From a consumer perspective, it's certainly a laudable effort on their part," Mr. Pohlman said. "But it is going to be a tough road."

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