ONE OF CANADA’S LARGEST independent telecom companies was born as the result of a vulnerability assessment. “I was working at Bell Canada in the late 1980s, when the CRTC changed the rules with regard to retail sharing,” recalls Distributel founder and chairperson Mel Cohen.
He was assigned to a task force then to explore ramifications of the rule change that could threaten Bell’s position in the market. Instead of coming away from that project worried for his employer, he came away inspired to go out on his own. “I remember knocking on doors of small businesses in Mississauga, asking, why are you paying $200 for that Toronto line when you could pay $100 with us…they would ask me, ‘is that legal?’ because at the time, there was so little competition.” (Pictured are Distributel founder and chairperson Mel Cohen, left, and current CEO Matt Stein.)
The Distributel story was only beginning, however. Launching the company wasn’t easy. “I had to mortgage my house to get startup funds for the company, and I went for about two years without any money coming back,” he recalls. “During that time, Bell went to the CRTC with an application to shut [us] down. I’d also run out of money; I had to string along my suppliers — and my biggest supplier was Bell Canada.”
Organic growth
Over the next two decades, the company expanded across Ontario and Quebec, adding residential services to its initial business package and weathering the successive storms of evolving regulations and evolving service offers from competitors. “We’ve never been an incumbent anywhere,” says current CEO Matt Stein. “There was no dead zone [where we initially had a monopoly] that we could use as a runway. It was a grueling climb every day.”
“Bell Canada went to the CRTC to try to shut down our business, and later came up with calling plans that would have eliminated the need for the services we provide…we lost about a third of our customer base when Sprint introduced unlimited evenings and weekends for $20 [in 1998],” Cohen recalls.
“We had some business students do an analysis, and their conclusion was ‘Sell, get out while you still can!’ but we just hung in there until the bleeding stopped.” To survive the crisis, they offered a plan that was limited, but more flexible, and kept customers who needed daytime long distance. “Every single customer is a win in this [competitive] market,” says Stein, who replaced Cohen as CEO in 2014.
Early on, Cohen began thinking about expanding service outside of the Toronto area. “Our first services were local services, suburb-to-suburb calling around the GTA… I imagined doing that in the Toronto area, and then around Montreal, and then around Ottawa, and then maybe connecting them.” The company name, Distributel, was chosen because it made sense in English and French. Distributel expanded to provide internet service by buying local provider Cybersurf in 2002, and later entered the TV market, cofounding and, in 2017 fully acquiring IPTV provider Zazeen.
Today, Distributel offers business services and residential phone and internet service around Ontario, Quebec, Alberta and British Columbia, explains current CEO Matt Stein. Residential services, concentrated in Quebec and Ontario, make up about half of the company’s business; enterprise and wholesaling services comprise the rest.
Connecting the North
Currently, the company is working with the Eeyou Communications Network (ECN) to bring high-speed internet to eight communities in northern Quebec, on the traditional territory of the Cree Nation of Eeyou Istchee. “The ECN approached us and … said they knew how to build fibre but they weren’t sure how to turn it into a full service. We wanted to show we could provide cost-effective broadband internet to remote communities without taking unfair advantage of consumers,” said Stein.
The service is expected to launch later this spring and bring high-speed internet as well as reliable home phone and TV service to the communities, at prices comparable to urban areas. Long-term plans involve connecting all 14 northern Quebec Cree communities, and replicating the project in other remote First Nations communities around the country.
“This project is also an opportunity for us to get to the heart of the social issue that is the digital divide,” he adds. “This is a region that had no comparable offering at all. If you have internet up there, you’re getting it over satellite or wireless, and that’s not comparable to (wired) broadband. Being able to bring this service there is very rewarding.”
“Each time we expand into a new service, that’s a milestone to be proud of,” Cohen says.
Looking forward
Stein expects that the company will continue to expand in the years to come. “The pace of growth in our industry is accelerating organically. I look forward to offering fibre-based services outside the traditional incumbent footprint.”
Stein and Cohen, whose experience with independent telecoms stretches back longer than most, have several recommendations to make the regulatory process more independent-friendly, to.
“Independents have historically been dependent on the wholesale services that they buy from incumbents, and the prices for those services have been well above the markup that they’re supposed to be, because rates don’t get revisited for years,” Cohen says. “I’d like to see the CRTC be more vigilant about wholesale rates.”
Stein is concerned that the CRTC sometimes takes several years to approve rate changes, putting off customers with rate uncertainty. He would also like to see the regulator recognize that having more players in the market helps consumers. “Competition is a good thing, in all forms,” he adds. “Competitors help push the market forward. You can’t have too much competition. It would be great if [regulators] could recognize that.”
