TO SAY 2007 HAS been a year of growth for EastLink is simply a colossal understatement.
So far, the company has acquired Amtelecom Communications, Persona Communications and RuSh Communications – meaning EastLink (or officially, its parent company, Bragg Communications) has more than doubled in size to around 500,000 customers.
No longer just a regional cable concern, Bragg/EastLink is a national force to be reckoned with, with cable and telecom services extending coast to coast.
The company is a pioneer, having launched phone service years before other North American cable companies – to much success – in Nova Scotia and Prince Edward Island and it will continue to roll out telephony in its newly acquired divisions as well. And it’s not finished with growth as more acquisitions will be investigated – and its own wireless option pursued, too.
Cartt.ca editor and publisher Greg O’Brien caught up with co-CEO Dan McKeen (pictured) at last week’s Canadian Cable Systems Alliance annual general meeting in Mont Tremblant (Lee Bragg, son of company owner John Bragg is the other co-CEO). What follows is an edited transcript.
Greg O’Brien: How are you absorbing all of what you’ve purchased this year? You doubled your size basically.
Dan McKeen: Yes, we have. Amtelecom was the first piece – and obviously we’ve got more telecom (customers) than we have with the other systems. And RuSh was September first (closing of purchase).
Amtelecom is a little different because it’s mostly a telephone company… so, we’ve been working with their management team and working with how we can get some synergy, how we can do some things together. And so those things have progressed also. We’re very pleased with the progress that we’ve made in the last three or four months.
With RuSh, we’re still into our first month. We have plans to change the billing system soon… so, two months from now, the RuSh systems will look exactly like EastLink.
They have different channel capacities in some cases… and we’re going to have the same high speed Internet services and then we’ll quickly work on rolling out telephone. So, those are the big priorities. And RuSh becomes just part of the main EastLink Nova Scotia, infrastructure that we already have.
GOB: With Amtelecom then, it will stay that brand or do you foresee changing that to EastLink as well?
DM: We’ve not determined that yet. I think the jury’s still out on what we would do there. The big thing within Amtelecom will be how we can provide some synergies with the Persona systems.
It’s the Sudbury – that whole group of systems – and there are some Persona systems in Western Ontario as well… So the question is how can we make them a cluster and provide for better services for customers?
GOB: And as far as Persona is concerned, do you plan on altering that branding as well to EastLink? Or have you decided yet?
DM: We haven’t decided that either. (Ed note: At the time of the interview, it was two days prior to the official CRTC approval of Bragg’s $600-million purchase of Persona.)
You know, so until we do some (customer research) and understand some of the brand equity – you know, what does it mean? What would the EastLink brand be like, will it be accepted in different places?
Those are decisions that have not been made yet.
GOB: From what you’ve been operating until now, this is quite a big leap. I mean Persona’s systems are spread out all over the place with a lot of different pockets of customers and headends and all the rest of it. You must have some thoughts on how you’re going to deal with that, to consolidate and connect them.
DM: Yeah, we do. We think about it in chunks. I think about it going from east to west. So, the Newfoundland systems, we have a big project line, it’s called the CDLI project, where we’re interconnecting all of Newfoundland with two redundant fibres to help us – two under sea routes… that will interconnect the vast majority of the headends and there’s the upgrades to the headends that’s going on as well. So, for those systems, it’s not that complicated how we’re going to run them.
Then in Ontario, our main base is Sudbury-Timmins – the biggest system. We’re rolling out telephone there and it has quite a rich fiber network. There’s some chunks that we need to do in order to connect our systems – we like to have redundant fiber rings.
So, we sort of know how we can do that. I mean it’s not for sure – we’re trying to do deal with and see if there are some places where we can lease fibre capacity rather than build. But we have experience doing that and there’s enough subscribers there and they’re clustered, so we will be able to get a redundant fibre ring serving those customers which will really opens the door for extension of telecom and improvements to high speed internet.
Then you have the biggest systems up in the northern Alberta piece in Grand Prairie, Cold Lake and Bonnyville. We can see how we can connect those ones with fiber and have a pretty good set of systems there where there’s growth and there’s good income and a booming economy.
We can really see how we’re going to be able to have a full offering up in that area. And in Delta (B.C.)… that’s being upgraded, so, we’re seeing that we can do some testing now. So, you can see how Delta, a 40,000 subscriber systems – it’s a big enough chunk to have some of its own infrastructure.
Going across country, there are others we skipped. So, the challenge would be, where we have numbers of small systems that are quite far away from each other and low capacity and not easy to see – how you can have a fibre network connecting them together? So, how are we going to deal with the Quebec systems is a question. And then there’s the western systems in Manitoba and Saskatchewan and the southern area of Alberta where there are very small systems, you know 100, 200, 250- subscriber systems. Not interconnected. It’s very difficult to put in any amount or have an infrastructure for systems.
GOB: Would there be suitors for those?
DM: Oh yeah. (But) we’re not keen to selling them – we normally try to figure things out and try to see how we can bring some value to it. Not that it’s out of the question, but that’s our initial thinking.
You know, we know how to do telephone, do internet, we’re good at the video side – so, how can we bring those same kinds of values to those systems. Technically it’s not easy to figure that out.
GOB: Now, with all this do you envision more acquisitions on the horizon? I mean there are other independent telcos around Amtelecom. There are still a lot of other independent cablecos around.
DM: It just depends. It’s on a case by case basis… we still have capacity for more. I would say we want to work on Persona for a little bit… but we’re still interested. It’s really when a synergistic opportunity comes along that makes sense. So we would still see ourselves being in the vernacular where people would say we’re consolidators.
We don’t see Persona as the end of the line for us.
GOB: There are all sorts of scenarios people have been dreaming up, you know, where you and Rogers and Shaw or whatever get together and trade systems. And I’m not going to ask you to comment on that because I don’t think you will.
DM: Well, you know that’s right. There’s lots of scenarios that are possible, but you have to have lots of people interested.
But we’d say that we’re very happy with the systems that we got with Persona, and we think they have a lot of growth potential.
GOB: Any worry about your own travel schedule?
DM: It’s a little bit challenging. But we have a lot of good people at Persona – so it’s about trying to make sure that we have good management team.
GOB: Let’s talk about your wheelhouse, the competitive landscape out east. You’re a full fledged quad-play company in Nova Scotia and the other areas out east. What has it been like competing with Aliant recently, especially given the (local phone) deregulation that has happened? What’s changed? How’s it different?
DM: I would say that there’s not been changes, but we always said through the regulatory process that the vast majority of the product lines were already deregulated – and that we didn’t think we were going to see wholesale huge changes.
And that’s been the case. It’s mostly been on the promotional side, as opposed to sort of the pricing side.
GOB: Has it been any more difficult with the win back rule going away? Has Aliant been offering customers the moon or anything like that to switch back?
DM: Not particularly. This is what we said in the regulatory process anyway – that the vast majority of the customers that we have on telephone were well beyond the (old) win back restrictions anyhow.
We’ve been at the business for five years – we didn’t get most of the customers this year because we’ve been winning customers over that time. The real challenge would be if they tried to win back customers just during the transition process, so we’re watching that very carefully.
GOB: What’s been the impact of Aliant TV in the market?
DM: There are some challenges for us. They started to gain more subscribers lately as they’ve expanded it out. We think they have a competitive service offering, (but), we’re very competitive. Our competitive situation with Aliant is probably five or six years ahead of the rest of the country.
If you do a comparison of telephone prices in the rest of Canada… you’ll see that in fact, we are significantly lower than many areas of the country for telephone services. It is already a very competitive market.
GOB: And also too in business services.
DM: Yeah and we’ve been at that for four or five years.
GOB: How has that gone, separate from the (residential) side?
DM: We’d say that we’ve had some good results so far. It’s a long sales process and takes a lot of work and we have built up our expertise, but we have a carrier grade data and phone service for business customers today (and) we’re a full fledged competitor in that marketplace.
GOB: Are you more focused small and mid-sized business?
DM: Some small and mid-sized business. Not really because that’s where we want to be focused, but because a lot of the large businesses have their head offices in Toronto – so it’s difficult for us to make a sale that covers the whole country… We do go after some very significant businesses. It’s just we can’t do it nationally.
GOB: These are exciting times for EastLink.
DM: Yeah. Big growth, and over a short period of time. We did that five or six years ago when we got the Shaw systems (in Nova Scotia). That was a big expansion for us… and we’re taking that on again.
GOB: To go with all of your service expansion too. HD, VOD, you name it.
DM: And the big product on the horizon is wireless.
GOB: Do you envision yourself as a wireless operator or are you happy with the resell (EastLink offers Rogers Wireless in a bundle in its territories)?
DM: We envision ourselves as someday having a wireless product.
GOB: Does that mean you’re going to be in on the (advanced wireless spectrum) auction?
DM: Certainly we’re interested in it. We think that it’s clear that you will need to have a wireless offering to be competitive. And certainly down the road there’ll be more integration of services. So, one way or another, whether it’s a deal with a current operator, or whether it’s building our own network, whether it’s someone like MTS Allstream who builds a whole national network and makes wholesale arrangements… we think that one way or the other we’re going to need an EastLink wireless service.
