IT WAS ALMOST 18 MONTHS ago when we first profiled Columbus Communications, the growing cable and telecom company owned and run by Canadians.
Originally launched by Newfoundlander Phil Keeping and currently run by CEO and Newfoundlander Brendan Paddick, the company owns an undersea fibre loop that lands on 17 Caribbean countries as well as cable operations in The Bahamas, Jamaica and Trinidad. Backed by billionaire Michael Lee-Chin (AIC Investments) and the founder of the Clearwater Seafoods conglomerate, John Risley, Columbus is run by former Persona Communications executives.
According to John Reid, president and COO of cable operator Flow Trinidad and another native Newf, all portions of the company are growing right now, from the mature triple play offering in The Bahamas to the ongoing rebuild and re-start in Jamaica to the all-digital conversion under way in Trinidad to providing raw bandwidth to and from North America via the undersea fibre.
The company is looking to acquire to grow, too, with opportunities on several islands which are currently under serious discussions.
Last week, Cartt.ca editor and publisher Greg O’Brien caught up with Reid at The Cable Show in Las Vegas. What follows is an edited transcript of the conversation.
John Reid: Two years goes fast. When did we sit down for the first one?.
Greg O’Brien: It was just before Christmas ’05.
JR: So, 17 months ago.
GOB: Yup.
JR: I’ve been in Trinidad for almost two-and-a-half years.
GOB: Fried yet?
JR: No, not fried, but it’s been an interesting couple of years. Columbus itself has continued to grow. Obviously the investment in New World Networks which is now Columbus Networks is paying off and we just keep upgrading that asset and basically selling the bandwidth.
GOB: That’s the loop around the Caribbean?
JR: Yeah, that’s the loop. It’s growing substantially. As we can see – or as you certainly know just as well as anyone – the demand for bandwidth for video data, even telephony and the mobile net is increasing all the time.
So that aspect is really an excellent one for us. It hits 17 countries presently and we’re now probably six months away from having the connection completed to Trinidad, which is important for our business model. I mean the Trinidad model is a good model, but to be honest with you the driver’s going to be broadband, and with broadband you need accessible bandwidth.
GOB: And, that’ll cut your cost quite a bit too.
JR: Significantly. So, Columbus is doing fine and expanding. Flow in Jamaica is growing. In terms of the entire business model, you set an aggressive sort of time how you see things progress and you get into these markets and like the first thing you realize is that every market is different… In the regulatory environment, the political environment, the consumer environment. Jamaica really is very much in start up mode, but they are a triple-play operator now… and they’re growing organically but also through acquisitions in Jamaica.
And (Cable) Bahamas of course, just keeps humming along. We’ve got a partnership with a wireless provider there that’s also a bandwidth provider…
GOB: But Bahamas is different than your other markets because its sort of fully penetrated.
JR: But it keeps growing. They’re up close to 75,000 cable subs. They’re pushing 40,000 Internet subs and of course the international private line business, local loop and telecom services continue to grow. And that basically is part of the play. And don’t forget, Cable Bahamas was analog… they just went to digital probably about 18 months ago.
Now they’re getting up close to about 20% penetration in digital. At some point, I’m sure down the road there will be a discussion and decision to migrate to a 100% digital like we’re doing (in Trinidad).
It is amazing. It’s a small island, but a robust economy, we own the market pretty well on broadband. And it hasn’t seemed to be slowing down at all, which is great. Then when you add in new services like voice and digital cable, you can certainly see the curve continuing for the foreseeable future.
GOB: When I was there, your headend was still concrete dust and they were still jack hammering things
JR: In two years we’ve grown the video customer base about 30%. So we are pushing 125,000 customers now… and of those, about 15,000 of them now are digital, and we’re converting about 500-700 customers a week onto the digital platform.
GOB: Now that’s with the low cost box right?
JR: Yeah, it’s the DCT 700. Of course we have plans to roll out the PVR and HD boxes as well in the second quarter of this year.
GOB: And you’ve rebranded to Flow Trinidad.
JR: Yes. And we’ve launched broadband, but we really haven’t launched broadband is what I can say – and what I mean is we’ve launched it and we have 1,000 customers who are accessing bandwidth through the local telephone company. We’re basically buying IP transit just to serve those customers. It’s not true broadband, its 256/512 (Kbps) right now – and that’s competitive, which is scary.
What will happen is as soon as we complete our network in the fall, bandwidth isn’t become an issue anymore, and it becomes more affordable, such that we can finally give the market a product that we’re also used to in North America.
And if you listen to the speakers at this conference we can go back several years on that broadband is the enabler of so many technologies. So… the first thing we do is quadruple the service right away for the two or three thousand customers we add on by that time.
And then I’m really expecting a herd effect. I really believe that. There’s such a demand for broadband services there. The local incumbent’s DSL service is spotty and concerning restricted in terms of geographic region. And you know people are raving about our 256/512 service. So, we kind of smile at that, but certainly the opportunity there is huge. And not only for residential, commercial applications as well.
JR: Trinidad is still a very robust economy.
GOB: Resource, or oil-based, right?
JR: Oil and gas… Trinidad provides most of the United States’ natural gas.
GOB: So the economy must be rockin’ and rollin’.
JR: The amount of activity in the country is huge, commercial activity, which helps our business.
GOB: What’s the competitive landscape like now? When we talked before, the government owned the telephone company, or at least influenced it.
JR: It’s still at arms length. They own 51% of the local telephone company, and Cable & Wireless (U.K.) has the other 49%. From our regulatory perspective, and I’ve gone through the process of receiving two licenses, or concessions, since I’ve been there – the domestic license for triple play and also an international license for telecommunication services, I can tell you our relationship with the regulator in a still-deregulating environment is very strong. I probably meet with the regulators on one issue or another every 30 days… Our business is developing in a deregulating market.
GOB: Are there any other cable competitors?
JR: There are only four or five independent cable operators that we are in fact probably overbuilding in some respects as well, and then there’s DirecTV Latin America.
My estimate on – because nothing’s published – market share would be we’ve got 125,000 video customers. There’s probably another 20,000 (to build out to). But again, we’ve certainly have had significant growth in a short period of time and what we’re seeing is as we launch digital, we’re getting a lot of organic growth in those old analog systems because you’re cleaning some of the issues or just because you’re offering a superior service.
We’ve had a good couple of years. Waiting for the bandwidth has been the toughest. I believe we would have been significantly further ahead if we were able to secure a lot of bandwidth. AT&T has access and then there’s Sprint, all the large carriers, so we will have an interim solution over the next 30 to 45 days through AT&T to access some bandwidth off the island until ours is built.
GOB: So how much work do you have to do on penetration in relation to homes passed? Because there’s what a million-five people…
JR: About 1.2, 1.4 million.
GOB: So, your penetration per homes passed is pretty low, right?
JR: Very low. I can’t tell you exactly what number of homes, Greg, because as we rebuild, we’re getting true house counts. And actually, (penetration) is even lower than we thought – which is good news and bad. We’re finding that there are more homes in areas since the data was captured the last time the network was updated.
So, we’re going in and we’re finding anywhere between 10% and 15% more households. So, we won’t even know what a true house passing is until we finish the rebuild.
GOB: And when will that be done?
JR: Probably in about three, three-and-a-half years. I think we can do it by the end of 2010… the entire network rebuild.
GOB: So, what do most people in Trinidad get for TV then? Is there a lot of over-the-air stuff? Is there a lot of—
JR: There are three national broadcasters, so they’re must-carries, but they don’t reach all of our geographic areas. So for the most part, you know, cable has been like it has been in most of North America, the vehicle whereby the local broadcasters can provide their service.
The standard package we had is one package on analog. If you recall, we had a system that had no optional tiers and no IPG. It had one package of services, 65 channels, and one basic price that has not changed now in five years. When you go to digital, that’s when consumers have access to five our six theme packs, a-la-carte services, digital audio, and pay per view launches this month.
Video on demand is probably coming in the third quarter of next year and an IPG which is really something you take for granted, I guess, in North America. So, there’s a real difference when someone goes from an analog network to a digital network, from 65 channels to probably about 220 now.
GOB: Are there piracy problems?
JR: Oh absolutely.
GOB: I’d imagine people there are like anywhere else – they want a lot of video channels. They’re not content with the two or three off the air, so if DirecTV Latin America has low penetration, and your penetration is just building, there has to be a lot of something…
JR: But don’t forget there’s probably about 20% of the island that doesn’t have any sort of service at all… But… by the end of 2010, we could (pass) 90% of the homes in Trinidad… What we’re seeing is continuous growth… I think the fact that we’re growing steadily organically, even though it’s not a promotional period, leads me to believe that we’re also effectively dealing with the piracy issue as we convert customers over.
You can’t access the system with those old analog boxes anymore. And we thought we’d get a 3 to 5% lift when we rebuilt these systems and we’re probably not too far off that.
GOB: What some of the major challenges that you’re still trying to overcome?
JR: Accessing copyrighted content that’s cleared for carriage in these areas. We’re constantly looking for legitimate content to offer to the customers and I think the first year I dealt probably 30% of my time on regulatory content issues, either through the legal teams, direct through the content providers, or through the regulatory agents, or presentations to politicians, cabinet ministers.
The other big adjustment as a service provider which was unique for me, is I didn’t realize how passionate people were about their service. I’m not sure about other Caribbean countries, — I don’t think the Bahamas is the same, but if we have a technical problem, it’s like a national story. If it’s not resolved in a timely fashion, if you’ve had some customer service hiccups, you are the topic. And I think that’s forced me to really spend that much more time on the service delivery part of the company’s operations.
And that’s a team effort, I can tell you, but, it really forces us to raise the bar because the consumer expectations in North America pale in terms of here… I won’t say we’re complacent but that we’re more accepting when things don’t go exactly right in Canada.
You just can’t provide the technology, you have to ensure that the service delivery chain works and I think in terms of challenges and continue whether that’s from an employee perspective, a cultural perspective, we continue to learn.
(Of the company’s service calls) 90% are completed within 48 hours. Eighty percent of our installations are complete within 72 hours. Those stats rank up there with anyone in North America. And I think it has just forced us to really invest a lot more time into that. And on that, when I went there in 2005, we had about 200 employees. We have 360 now. So, we’ve hired 160 people in the last 20-24 months almost. Projections in 2009 are that we’ll probably reach 450-500 employees.
GOB: So, now you’ve been there for two-and-a-half years, what’s it like personally?
JR: A great experience. And I wouldn’t say that just because I expect my boss to read this article, but we’re enjoying it. I’m not counting my days as to how long I’m going to be there. We’re enjoying every minute. My daughter’s going to school and she’s had the opportunity to now be in our third country in three years and she hasn’t skipped a beat, and my wife has adapted well.
We travel a little bit in the islands and get a little bit of exposure and there a lot of differences in the islands as you travel. It’s like anything. If you love your job, and I do, you surround yourself with people that you like to work with and people that are competent… It’s what you make of it.
GOB: What has been your company owners response to the progress being made in each division?
JR: We’ve got an ownership group that is in for the long haul and continues to actually make investments at Columbus at the parent level. That obviously has impact on the operating entity…. The company is not just to restrict itself to these entities that we operate right now. We’re actively looking for acquisitions, so don’t be surprised if you see this company grow substantially, and not just organically, but through acquisitions over the next couple of years.
