IT’S A PRETTY SAFE bet that many folks who visit the Columbus Communications web site will be perplexed by the music the site has running as you peruse.
Why in the world does a company serving the Caribbean, Latin America and South America feature bagpipe-driven Celtic music as an audio feature (think a meandering Great Big Sea instrumental solo)?
Long-time Cartt.ca readers will recall, however, that its investors and executives are Eastern Canadians. Columbus chairman and CEO Brendan Paddick and president John Reid are Newfoundlanders and majority owner John Risley of Clearwater Seafoods is a Nova Scotian.
We’ve dropped in a couple of times in the past six years on Columbus and the Canadians who run it (along with Paddick and Reid, who used to run the former Persona Communications, other past Canadian cable and broadcast executives working for Columbus include Michelle English, Carol McLean, Darren Richer, Paul Scott and Jan Pisko, among others).
John Reid was recently promoted to president and after six years running the company’s retail cable operations from Port of Spain, Trinidad, has relocated to Miami to oversee the ongoing growth of the company whose one-of-a-kind undersea fibre network rings the entire Caribbean and lands in 21 countries. It also provides cable, high speed Internet and phone in Trinidad, Jamaica, Curacao and Grenada under the Flow brand.
What follows is an edited transcript of a recent interview with Reid (pictured).
Greg O’Brien: How many customers do you have now?
John Reid: We call it Revenue Generating Units (RGUs) and we’re closing in on 400,000.
In all of the regions together, and the smallest would be Grenada?
JR: No, Curacao because it’s a greenfield.
GOB: And the biggest is…
JR: Trinidad. Half of the RGUs are in Trinidad.
GOB: Take me through your time in Trinidad. The system you bought back in ’05 that I saw when I was there was in pretty rough shape. What is it like now, what did it take to get there and how is the company perceived now?
JR: Trinidad is certainly a good reference point because that’s where I spent most of my time, even though my responsibilities were for a couple of other islands. Trinidad, when we arrived in 2005, was an analog system only of 70 channels. It was an antiquated system with an old controller in the head end that we still have, actually, for about 25% of our customers.
But certainly, the challenges in the early years included regularizing the channel lineups. So when we got there in 2005, half the content that was offered as part of the programming line up – we had no contracts for, or we weren’t allowed to carry it. So that whole regularization, legal work consumed a lot of my time in the first two years. I would think about 30% of my efforts were expended towards legal issues: Either copyright or other local or related legal issues. The other challenge, obviously, is building your employee base. We started with 200 employees in Trinidad. We have direct employment of about 700 employees there now.
I learned through several years, with our great management team in Trinidad, how to adapt and push our employees to reach levels that they weren’t accustomed to reaching. So as we move ahead to 2011, and we’ve had probably 30 to 40% growth of cable television subscriber platform, we’re about 20 months away from completely having a 100% digital system. We have a very robust network architecture that is a very passive fibre, deep fibre network that has no amplifiers or line extenders. So very robust.
GOB: You offer a triple play?
JR: Yes, we do a triple play. The first thing we did was make the necessary internal changes, the network changes to an investment required to offer digital cable television. That was followed by broadband service in 2007, followed by digital telephone service in 2008. And in Trinidad up to this point – at the end of 2011, we will have invested about $200 million U.S. in Trinidad alone. And, if you look at Columbus as a whole, looking ahead at this fiscal year and what we plan to do by the end of 2011, we will have invested approximately $900 million in the Caribbean Latin American region.
GOB: John Risley still the main shareholder.
JR: John owns in excess of 50%, followed by, obviously, Brendan Paddick, Michael Lee-Chin (AIC) through some of his assets. And management as well.
GOB: Tell me a little about serving the business community and then pull that into what Columbus does with its undersea cable unit, too.
JR: I can tell you that when you’re an island operation, the model only works when you own the access off the island. It’s no different than if we lived in Newfoundland. To provide the robust service that you want to, and to control your cost base, you have to own the terrestrial fibre asset. For us, we’re fully on a system with Jamaica, Curacao, Trinidad as a part of the broader subsea asset. It allows us to certainly to offer a service, really a broadband service that is similar to what you would experience in Hamilton (Ontario).
GOB: Now when you talk about your undersea fibre ring, you also sell that to your competitors.
JR: We do. I’m a customer of our sister company, Columbus Networks. I buy bandwidth off them for business and residential needs. And at the same time, competitors in many of our countries buy capacity from us as well.
GOB: How much would it cost to duplicate what Columbus has done, do you think?
JR: Well, the subsea asset alone, which we bought in 2005, the quoted cost to build a similar asset was about a billion dollars, and it doesn’t include the retail assets as well. I think in total, we certainly look at approaching a couple of billion dollars (to build) the entire operation.
GOB: What’s the competitive landscape like in the markets you operate? Who do you compete against? I know there’s Cable and Wireless, called Lime, and then there’s government owned as well…
JR: Interesting for us – and that was another adjustment that I had to make when I moved to Trinidad, and Michelle English in Jamaica and in our other countries that we operate – is we have multiple competitors. We have the telephone company in the markets. We have regional cable television operators. We have satellite companies, wireless service providers. We also have in some particular markets those who operate without a license. So they’re basically unauthorized service providers. So it’s about as competitive as you can possibly find anywhere, I think.
GOB: So, when you go into those markets or you go to this person who is getting service, cheaply, from the guy without a license, what’s the sell? How do you convince them to come to Flow?
JR: For those who don’t have an authorized license, they also have a fairly rudimentary product out there. Our investment translates into 300 to 400 channels on video, 100 meg broadband service, digital telephone, and obviously, all the ancillary services that are supported on the network. And at the same time, we’ve worked with the government and the regulatory agencies to try to squeeze those guys out, so it’s a value proposition on the consumer side, and it’s a regulatory legal issue on the government side.
GOB: So does it relate at all to the Canadian experience, or is the Canadian experience far more orderly?
JR: It’s definitely much more orderly (in Canada), and… that’s what you struggle to adapt to when you go into a developing country. And we’re there because it’s developing. You accept some of the unique attributes of a particular country, but at the same time, you work to try to change those to level the playing field.
I think our experience in Canada in terms of operating in remote areas, trying to run our systems efficiently, having to really work on the value proposition as much as we can in areas where it was difficult in small town Canada, that helped prepare us for being on the peripheral of the big industry footprint. So we had to do things differently. So our adaptation here, I think, was made a little bit easier by our experience.
GOB: What are your consumers like, though? Are they heavy users of the Internet? Do they all have smart phones? Do they have iPads? Are they really taxing your networks? Are they searching for and consuming as much video online and elsewhere that you see and read about and experience now in North America?
JR: They are. If you take the cable products, for instance, they’re watching pretty much the same content that you may be watching. You’re watching TMN in Canada, they’re watching HBO Caribbean. They’re watching… all the main series and dramas and sitcoms on regular broadcast television, but the rights are usually bought by local broadcasters.
On the internet side, they are absolutely heavy users. I would think between 60 to 70% of our subscribers are also using BitTorrent and other network taxing features that would certainly put a bit of pressure on our network. But the good thing is that our network that we constructed is really robust. The capacity will certainly be enough to support the growth, and any changes that we make are really through extra line cards in our headend or hubs, or through perhaps some wavelength technologies to allow us to maximize the capacity.
So as our customer base has grown, we’ve made continual investment. But the network itself is certainly robust enough to handle the traffic in certainly in the foreseeable future.
GOB: Now in Curacao, that’s a brand new build.
JR: Yeah.
GOB: How are you going to do that differently than some of the other places you’ve gone into where you purchased?
JR: That is actually a very interesting asset because we’re an overbuilder. The telephone company is also the cable television company, which is owned by the government. So we have our licenses to offer broadband and cable, and we’re waiting for our telephone license. It’s no different in terms of network design – we came to the market with a broadband service that was 100 meg, similar to Trinidad and Jamaica. So it’s really a case there of really trying to shake up the market and provide consumers with a better experience.
I will say that the difference there from an existing asset to this point is that every box we deploy is a high definition box. So there are no standard definition digital boxes being deployed in Curacao.
GOB: But is fibre any deeper in that network than it would be in the other ones?
JR: Exact same. Our average node size would be 90 to 100 home nodes.
GOB: So 100 meg service. So what does it retail for?
JR: The 100 meg service, I believe, in Curacao, would probably retail for about $150. Keep it in mind that while we offer the 100 meg, 50 meg, 25 meg, our entry package is 5 meg. Most customers would migrate towards the 5 to 15 meg – and that’s really been our experience in any country right now.
GOB: When we talked back in ’05, the company seemed to have more plans for a more aggressive acquisitions. I’ve heard rumors here and there you’re trying to buy a system in Puerto Rico or whatever. Has that part just gone a little slower than you anticipated, or are other companies just not up for sale?
JR: Certainly, there are assets that we would still find attractive in the region. We did take a look a couple years ago in Central America, but we opted out of an opportunity to buy some assets there that would have been significant… but no, I think that the difference in our business, because we look at it holistically in terms of the subsea business and the retail assets – is we really started to look more at expanding our networks where we don’t necessarily offer cable, television service, but where we land the fibre.
So in Panama, Honduras, Guatemala, where we land the fibre to the shoreline, we’ve actually bought assets now that connect us right to the city core. So in Panama City, we’re now actually going door-to-door to commercial entities selling commercial services. So, the strategy has changed based on the opportunities that present themselves. We would still buy assets on the cable side if they fit into our plan, but the opportunities over the last couple years in particular have really been more on the commercial business side in large Spanish speaking markets.
GOB: So what’s next?
JR: I think next, for Columbus, really, is we’ve got one particular large project that the board and senior management we’re looking at that would extend our network, but… it’s been a pretty fast and intense pace for five years. We’re at a point where in year six, we’re tightening up operations. We’re putting in better business practices and really focusing on developing our management base that much more. And at the same time, keeping an eye onto opportunities to grow.
We’ve all signed on for the next five years. So we love what we do. We love the business. What’s really interesting is in 2005 when we moved to the Caribbean, we were probably a few years lagging the North American market in terms of technology changes and adoption. Now, we’re launching VOD and we’re looking at OTT at the same time, and what’s really changed in terms of our industry is that we’re butting up against those big operators who are rolling out advanced services, rolling out similar things.
As well, consumer buying patterns, consumer surfing patterns, their interest in content everywhere and anywhere is no different in Trinidad or Curacao or in Jamaica than it is in New York or Toronto.
GOB: Given the size of especially Trinidad and Jamaica, you’ve got a lot of opportunity there to improve your penetration, correct?.
JR: Well, in Trinidad, it would be less than 50%, and in Jamaica, it might be 35%.
GOB: Lots of opportunity there to grow it.
JR: Absolutely.
GOB: How many employees do you have overall at Columbus?
JR: I think we’re pushing about 1,700.
GOB: That’s pretty good.
JR: Yeah, so they would be about 500 on the sub seaside and about 1,200 on the cable side.
GOB: And now how many expats or Canadians are there?
JR: As our employee base has grown, it’s grown primarily with nationals. In Trinidad, for instance, we have seven expats and 700 employees… and we prefer to train nationals in the countries that we’re in.
GOB: That’s a bit of a bone of contention with the governments you deal with that they would rather their own people employed and working and earning a living.
JR: We’re very cognizant of the fact that we try to keep that percentage (of expats on the payroll) very low. But, when the economy goes south as it has for many countries in the last two years, then immigration and approval of work permits becomes that much more challenging because they want the job (for a local).
We’re the guest. We provide something that the country does not have. The other thing I will add is that from all of us who have ventured abroad, we can see the tangible assets that we’re leaving behind. So we’re building and – in developing countries, we’re actually making a real impact. And that’s very satisfying for all of us who have been working for Columbus.
Seeing the country go, as an example – In Curacao, before we got there two years ago, the average broadband offering was 2 megs for 300 US a month but now we’re in there offering a 5 meg for about $40.00 as our entry-level package. So we’re really contributing through our investment, and I think certainly from our perspective is that it’s very satisfying.
GOB: That’s got to wreck the business plan for the government.
JR: Yeah, the phone companies don’t like it when we come to the markets for sure. The government is usually of two minds because while in many respects, they own the competing assets, they also have social policy initiatives that aren’t being met. So we help them reach those objectives. So it’s kind of a double-edged sword certainly for those assets. In Curacao recently and Granada, in Trinidad, even in Jamaica to a certain extent, the government would certainly acknowledge that we can make a positive contribution.
GOB: Yeah. So are you going to be the first to go to Cuba if the walls ever come down?
JR: I tell you, we’d certainly love to get to Cuba.
GOB: There will be a race on there. That’s for sure if that ever happens.
JR: Trying to get a foothold into Cuba. There’s not much success at this point, but I think when that market opens up, it’ll certainly change the region for sure… Mr. Chavez (the Venezuelan president) is building a fibre up there now from Venezuela. We’ll see. Hopefully, critical changes in the coming years. We’ll see that market open up. Canadians, obviously, have been doing business in there for years. And successfully. So it’s certainly a market we’d love to get into if we have the opportunity.
