September 21, 2020 | Ivan Martin
Storm Internet: Keeping Up With COVID-19’s Demand for Connectivity
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Storm Internet was founded in Ottawa, in 1996. Since its inception, Storm Internet has grown to become one of Ontario’s leading rural high-speed internet service providers. Its primary services include high-speed residential wireless, DSL and WiFi services, in addition to customized commercial networks and fibre installations. Storm’s core market and customer base encompasses rural Eastern Ontario and Quebec, covering over 8,000 square kilometers of the Ottawa Valley and beyond.
Supplying an essential service is nothing new to Storm Internet Services, and the COVID-19 crisis has the 24-year old broadband provider rising to the challenge of today’s unique demands. Jason had the opportunity to interview Birket Foster and Danny Frangione, the CEO and CFO of Storm, correspondingly. In the interview, they discussed how the company has pivoted and managed to respond to the virus, especially at a time where Eastern Ontario households are reliant on 24/7 internet connectivity as a communications lifeline, with much of the population staying home or working from home.
POLICY ACTION RECOMMENDATIONS FOR THE CONNECTIVITY SPACE
- Ensure that rural connectivity funds such as the Broadband fund are being deployed and used in a timely fashion to correspond with the construction season and to avoid delays.
- Upkeep and maintain network infrastructure to respond to the increase in internet demand as a result of COVID-19.
- Guarantee that social distancing is respected in all operational aspects of the business: from internet installation to modem pick up.
- Allow smaller internet players to take better advantage of the spectrum by lowering fees, barriers to entry, and licensing requirements.
- Increase governmental support and assistance by optimizing bureaucratic processes.
Headquarters: Ottawa, Ontario
Number of employees: 86
Government support programs/grants being used pre-COVID: None
Government support programs/grants being used post-COVID: None
Core challenges post-COVID: Responding appropriately to an increase in connectivity demands, ensure proper infrastructure maintenance in rural areas to keep up with the surge in demand, manage supply chain lead times appropriately to guarantee procurement of batteries for infrastructure keep up, pivot operational frameworks and guidelines to provide customer experiences that make sense with social distancing, managing international distributors directly
Jason: I’m here at Storm Internet Offices in Ottawa with Birkett and Danny, the CFO and CEO of Storm. Thank you guys for taking the time to do this interview.
Birket: Thanks for dropping in.
Jason: So I would love to hear a little bit about what exactly is it that your business does.
Birket: So we do internet. We do internet for both residential and commercial buildings. I’ve been invested in the company since 2003. The team has been working really hard over the last five years and as things have progressed in the way that we’ve done things, we’ve added lots of wireless customers.
We also got into the fiber game about four years ago reselling fiber. This time last year we opened a fiber project. Maybe it was not the best time because of COVID to actually penetrate into fiber but it happened anyways. A lot of our customers have wireless connectivity in the countryside although in 2003, we had a lot of wireless in the city as well. This was especially true for the city edges.
Now we provide internet in various flavors. So it’s wireless and it’s fibered. Our new project is to fiber to the home. We also resell fibers from Bell Canada and Rogers and by doing that we can provide fiber to businesses. We help spec up what needs to be done, put it in place, order it, and get it all provisioned. We also resell DSL and Rogers cable in the metro area of Ottawa. Basically our objective is to be your internet service provider and we want to be everywhere you want to be. We’re not everywhere you want to be yet because there are places where we haven’t been able to penetrate trees yet. We are looking at some experimental innovations in new frequencies to see how we can penetrate trees, but a lot of times an arborist would be your best friend.
Danny: Something to point out as well is the fact that we offer wireless connectivity for those in rural areas where there isn’t a traditional fiber or where it becomes cost-prohibitive for an incumbent to bring it to them. We are sort of the number one go-to versus the satellite option. Again, only because we’re a lot closer and the connections a lot better.
There is also a play from a commercial standpoint with wireless in the city. We have a lot of commercial customers who have fiber with Bell, Rogers, or both. If the fiber cuts, they lose connectivity, so it’s a redundant wireless connection. So even within the city, there is a use for wireless connectivity. We are basically famous for wireless internet.
Jason: Awesome. What was your interest in this business? What got you into it?
Birket: Back in 1999, I was running a software business in Chesterville… the budding metropolis of Chesterville. I had 15 R&D engineers who needed the internet to do some of their research. I was trying to get the internet to come and the only available option was Bell, which was not good enough. I think it was only 256KB.
One of my mentors was Denzel Doyle from Doyle Tech. He was the original investor in Terry Matthews’ stuff, so I knew he had a good high-tech background and one of his investments was IDC, which owned a chunk of storm internet at the time. I think it was probably a hundred percent or pretty close to that. Anyways, Denzel collided me with Barry Williams who was the president of Storm. I was looking for internet and Denzel thought that maybe I should talk with him.
I then ran public meetings on the topic of how do you do internet in the countryside. I got people from various organizations to come and hang out so we ended up with Ross video talking about recruitment and retraining in the rural area. They ended up opening an R&D office in Ottawa because Bell was just too slow. We also had another organization which was a sonar company out of the Finch area. The three of us got together and talked about the challenge of hiring engineers in the countryside. At the end of the day, I managed to persuade them because I put Persona in the same room as Storm, six out of the eight times. So I think they finally got that there was a demand for internet in the zone. People around the table were saying that they wanted it and could probably use it. So we ended up getting internet buried in two hops. Down from Metcalf to Winchester. And then fed a head in fiber for Persona which was providing cable TV and wanted to offer to their clients an internet option. Persona did not really care much about the business side, it was mostly about the residents. So the first fiber in Chesterville was into our building from what used to be Persona at that time because I needed internet. Persona is now known as EastLink.
Then three years later, Barry came knocking and said “Hey, IDC is trying to do the next generation”. IDC had bought Storm because they thought that it might be a terrestrial wireless play that would help them in the future. To build that next generation and in order to hire the R&D and engineering people, they needed some money. This was during the 2000s and at that time, the marketplace had tanked. Their stock had gone from about 50 cents to three bucks and then it had collapsed back again into around 37 cents. They definitely did not want to go out and raise capital at 37 cents a share so they decided to sell off Storm.
As a result, Charles Walther and I each provided half the money to buy Storm out from IDC in 2003. Charles used to run Christian Walther which dealt fire police and ambulance encrypted radios. They were basically the biggest Motorola dealer in Eastern Ontario.
Fast forward to last fall, I had a discussion with Charles about the fact that he wanted to retire. It took until the Wednesday before Good Friday to actually have all the lawyers and accountants lined up. I ended buying out his half of the company in the middle of COVID19.
Jason: Oh my goodness
Birket: I mean, I was familiar with the team and the team was kind of familiar with me because I sat on the board. However, I wasn’t involved in the day to day operations. Even today, my job is to stay high and do strategic things. Sometimes they have to remind me. Right now, we’re working on a strategic plan for the next three years to figure out what’s the pattern going to look like and COVID19 has changed that pattern.
We had been paying more attention to our networks. We only had about five percent of the network that needed to be upgraded and we have been scheduling those upgrades on a regular basis. We have about 93 hundred services at this point. That is a lot of customers. That is part of the whole challenge, how to maintain and upgrade them constantly. It is a lot of moving parts. We actually have seven trucks that will roll out every morning to do this type of job.
Jason: That is a fantastic story Birket. A lot of history. I would love to hear a little bit about how your business had been doing pre-COVID in terms of growth or whatever information you’re willing to share compared to how things are going now.
Danny: So traditionally and I guess this is going back to 2003, the business for the most part was mainly focused on commercial. So we’ve seen a complete 180 on that one. The focus right now has been on residential as more people move out of urban centers into the rural areas needing connectivity, now more than ever. So again, a lot of our focus at least over the past three to four years has been on going to these small little hamlets and being able to connect the individuals who in order to be able to work from home need a solid internet connection, which is otherwise not available to them. Of course, there are some challenges in that. As soon as somebody gets the internet, they start streaming many different things. Especially since kids are now also at home.
I find it very interesting to see what the few very prominent uptakes in internet correspond to. The first one I saw was the 2014 gold medal game on the Olympics. Normally you’d see your regular spikes in values in terms of usage. After that gold medal game, it spiked and it never dropped off again. People realized that they could stream everything and they did not need to watch it on TV. So at that moment, we entered a new era. We adjusted and pivoted accordingly to add additional fibers and additional capacity. And again, as more and more people move out and the usage increases in rural areas, we have to roll out more and more equipment as well.
Then of course comes your Netflix, Disney plus, Crave…you name it. All of these streaming services want to start streaming 4k so technology has moved accordingly with them. Of course, the United States does get it before we do, but what we do get is a good roadmap in terms of the technology that is coming and what we can do about it. So we went from offering the traditional services, three down one up, to now offering 25 down five up, which realistically is three concurrent 4k streams. And who is really going to watch three concurrent forecast games? Nobody. So you are pretty well covered.
Now we find ourselves in another era. The most recent spike was actually in March and April, the beginning of COVID as obviously everyone is working from home. Ottawa is a very weird city where it is not necessarily manufacturing-based. Whereas in other places
manufacturing shutdown, nobody was working and everyone went for CERB, accepting that it was what it was…Ottawa is very government and IT-based for the most part. So you got 60 to 70 percent of employees in Ottawa who now have to work from home but are still getting fully compensated and paid their regular salary. Because of that, in Ottawa you haven’t necessarily seen the dip that you are seeing in other cities. Of course, all of these people need more connectivity, so this has created the second bump that I’ve seen since I’ve been here in terms of usage.
Everybody is experiencing an intense surge in their connectivity needs: from the mother that has to work from home to the kids that have to adapt and start doing their online schooling. You also see lots of individuals having to VPN in from home and this explosion of videoconferencing of people trying to connect with their family, friends, and workplaces. I do not think it is ever going to drop off again. As a response, we’ve upgraded accordingly in terms of our network. From doing three to four upgrades a month, now we’re doing five a week. It is what it is but it future-proofs us. Now that we know that this is a new benchmark, we’re able to go forward saying that we’re ready for it assuring the individuals that need a solid connection in the countryside because now they are carrying their day to day over there and do not know how long they will be working from home until.
Jason:: So I guess a lot of the traffic that shifted from downtown buildings over fiber is now on your network as people work from home.
Danny: We’re connecting fibers, which we purchase from the incumbents out there who have the actual infrastructure. We’re putting our own infrastructure as well. We are adding to our towers, building new towers, and connecting a record number of customers each month. Imagine this, before in a good month we would traditionally do 60 to 70 installs. Our record was a hundred eight. In April we did 140. May we did 170. In June we did 190, so we have been extremely busy.
Jason: That’s great. It’s great that you’re able to get everyone the internet that they need so that so they can work in a safe environment.
Birket: And stay informed too! One of the things that I am worried about is that too many people sometimes go too far when they are doing their exploring on the internet and you know, sometimes what you find on the internet is not always true. But for the most part, it allows people to do what they need to do at home, entertainment and edutainment, as we call it. All that kind of thing is part of the mix.
Jason: So there have been a lot of surprises with COVID and how things have shifted. What do you guys think are some of the most exciting or unexpected surprised that you guys have?
Birket: So the first one was when one of our installers went to a house that had previously filled in the safety form. The one that says “Nobody has been out of the country for two weeks, nobody is sick, etc”. So as the installer arrived, he noticed a Florida license plate in the driveway. So he asked to the people “When did you get back from Florida? Just in time eh” and the person answering the door said, “Oh, no, just three days ago”. So his sister basically knew when she had filled in the form that that was the case. Anyways, we figured out right on the spot the crafted rules for how to do touchless installs. And right now, they’re way better than they were.
Jason: So your install process has actually improved as part of all of this.
Danny: Exactly. Traditionally, we would enter the home and facilitate the actual connection of the router in the home. We’ve developed a new process whereby we will physically feed an ethernet cable into the home. They will pre-program a router remote in the vehicle and physically hand it to the individual. They do all the work because it’s all plug-and-play at that point. This is something that we’ve adopted and will probably do going forward, even after COVID.
Jason: It’s crazy how COVID creates these types of innovations that improve the business in the long term.
Birket: Yeah absolutely. The other thing that has changed is the way we do modem delivery. We used to have the public come and pick up their own modems. So we’ve actually been shipping modems a lot now. We did have some problems with Canada post as they were not engaging new commercial customers even though they were advertising everywhere that they would, so we decided to go with Fedex instead.
Jason: Have you been having any other types of problems regarding how your supply chain works?
Danny:A little bit. A lot of our gear electronics and gear radio equipment comes out of the states, so we have only actually had one instance where a shipment was held up at the border for whatever reason. It wasn’t because it originated from China or anything like that, it was just literally held up at the border but aside from that… it has been pretty smooth actually. The exchange rate has killed us in the past three, four months, but it is what it is.
One of the biggest things we’re seeing is that the traditional Canadian distributors we buy our stuff from have been having problems with the stock of however they get their stuff from in the States. So what we’re finding is we’re having to go directly to the States as opposed to our distributors in Canada. At the end of the day, this is fine because we still get the same gear… but it is a little more expensive. You think cutting up the middleman, it wouldn’t be pricier… but it is.
Birket: I believe we also have a longer lead time.
Danny: It is not terrible realistically. If we used to have a traditional two to three day shipping time, maybe it’s four or five now. So it’s not horrendous, you’re not waiting six and seven weeks.
Birket: I knew we did have a project that I know we waited quite some time for.
Danny: Yeah, so one of those big things that we are waiting for is batteries for some reason. You can’t just say that you want to buy a UPS cell. There is a now a six to eight week lead time to get them.
Jason: So is that going to limit your ability to onboard new customers at some point?
Birket: What that will do is limit our ability to swap out UPS’s. For instance, When we build a tower and it needs to be self-sustaining, we’ll have a UPS battery bank on-site as well as a generator for failover.
When we wanted to upgrade the UPS, we traditionally did it sort of at the time we wanted the upgrade. Now we are having to preempt ourselves to say “Look, we want to do these upgrades, you need to make the orders now so we can get them in six weeks”. We’re having to order things a lot sooner, but it’s not necessarily affecting what we do because we know way in advance that we need to upgrade these towers.
Jason: So you can’t do just in time deliveries anymore, you have to maintain a bigger inventory.
Birket: I can’t imagine running a factory under these conditions. The supply chain changes. Would be crazy.
Jason: You have a lot of different inventory parts but I guess it is more manageable than someone trying to build some sort of big AC unit.
So you mentioned changes in terms of process improvement for installations. Are there any other core changes that you think you’re gonna make to the business long term? A lot of people have been talking about like work from home, technology upgrades, business financial competitive landscape, I know you mentioned CRTC at one point and some things that we’re going on there as well. How do you think it will impact things in the long term?
Birket: The biggest thing for CRTC is they have a thing called the broadband fund and this fund has been announced for the last SATs in the last four years.
They have never put a penny forward out of that fund to the best of my knowledge. And the most recent round was supposed to close in proposals from ISPs to help serve Canadians. The fund is for helping people not in urban areas. We are delayed on that front. This was supposed to happen in April and then they moved it to the end of June when they said that they hoped to make announcements by the day.
But they haven’t. So I don’t think the government understands that the people who are in charge of this, don’t fully comprehend the build season.
It’s May through September and then maybe October and November if the snow doesn’t come. But once the ground starts freezing… it’s over. So if a miracle happened today and they announced the funds they are releasing, by the time the contracts are done they have missed this build season entirely. Consequently, they won’t actually have to take a penny out of the piggy bank to help the industry, especially at a time where we need the help right now.
They actually solicited proposals from all of us all and we’ve done our part in submitting such proposals.
Dany: So one of the bigger issues again is the fact that we are working in rural areas. The fund is meant to serve those in these areas who would otherwise not be connected. Basically, we need to give them what is what they mandated, a high-speed option 5010 which from a wireless standpoint isn’t necessarily available on a cost-effective basis today.
However, there’s a lot of things that we can do if they actually push the funding through. Again, to break this point, originally they had said April, and even if they let it go today, by the time anything happens we are going to be in September, which means we lose the year. By how things are looking right now, we are going to need to push into next year, and then, who knows what’s gonna happen? Are you going to snap election? Are they gonna do something with it? They said the money is there… but is it? Is it really? Are they ever gonna release it?
I think one of the problems is that you have very few large incumbents serving the urban areas and then there’s a large amount of smaller individual ISPs who do service that gap in between major urban centers and realistically were the ones who need that fund. The area we serve is artificially expensive.
Birket: We also have to roll out a truck. If you were in an urban area and you wanted to get 200 customers, an incumbent might plug it into an apartment building and they would get 200 right away. For us to get those 200 customers, boy… it’s a long time.
Jason: Okay so having the decisions made on the release of that fund would accelerate your ability to bring rural customers online.
Danny: We have mapped out exactly the areas that we want to go to. It is based on this hexagonal map where we have areas marked in terms of underserved or unserved regions and that’s where you can make applications. It’s in our backyard, that’s where we have made the applications. We’re ready and the people are screaming for it, they want it as soon as possible.
Birket:: For most households, they don’t really need 50-10. It is nice as an objective. But right now, the way the technology is line up, for us to be able to deliver to you in a rural area at a reasonable cost, 25-5 or 25-3 would be a way better deal. If you go to 50-10 you also have to consider jitter, which has to do with how much retransmission needs to happen. Really, the spec is not 50-10, the spec if 50-10 plus jitter and other factors.
If you have a wireless frequency that is running in sixty gigahertz range, a raindrop will interrupt the signal. So if you have a storm, that will definitely interrupt the signal. Plus, you need to consider that its only two hundred meters. So every two hundred meters, you need a fiber-fed tower to be able to do this. It’s not something you can deploy in the rural areas for cheap. And that’s the whole point, which is why the incumbents haven’t done it yet.
Danny: Aside from that, one of the biggest things that the smaller individual players could use is the spectrum. One of the things we have to do because we all work in unlicensed spectrum regions is play nice with our neighbors. We could bump our offerings to a 40-10 but then you’re gonna kill out your neighbor who’s trying to broadcast using the same unlicensed spectrum. You can pump as much power through it as you want and get the desired speeds but you’re gonna get an unwanted reaction from all of them. You’re gonna destroy your neighbor and then they’re gonna do the same thing and destroy you. So you have to play nice.
So this is the cap where we operate. If there was a spectrum allocation given to the small players that we could use all day long, we could easily achieve these objectives. But because the auctions that go on are so arbitrarily expensive, we can’t play.
Birket:: Not only are the auctions arbitrarily expensive, but the borders are also gerrymandered. So what happens is that incumbents manage to persuade the CRTC, then Ottawa would go all the way down to Morrisburg. And then it’s a billion dollars for the entry fee, so how do we do this?
We belong to CANWISP, which is the Canadian Association of Wireless Internet Service providers. I think there are around 400 smaller ISPs out in Canada, and lots of them try to do this on the fringes of the cities and there are many issues involved in trying to deliver proper access in the rural areas. One of the big ones is the spectrum. If you can’t bid on the spectrum, you can’t have a licensed area and we can’t do that.
They have this program where they were going to reduce the spectrum cost from 23,000 to something like 2,600 for the annual license, which is great. We could play with that all day long, but it hasn’t come into effect yet. There are different frequencies that are going to be licensed and now we can do them from point to point, which is what we need to be able to do proper backing to all the rural areas. All of this is being delayed until next June.
Jason: So lots of government support on the spectrum side seems like a critical issue.
Birket: They could perhaps come and tour Storm, so they understood the main challenges. In our tour this morning, I think you saw some of the challenges we have and some of the areas we’d like to actually go in service.
Birket: If we had license backhaul we’d definitely be able to do more things
Danny: Another issue is that you have two bodies that sort of administer this whole thing and you can’t ever get them in the same room together, it’s almost impossible. You have ICD and CRTC.
Birket: I don’t think they actually understand how small and medium businesses own and operate. We do not have a billion dollars to go slap and install an entire network in the rural area. If we had that billion dollars, we would. It would just take a little while.
Jason: So they can either improve the licensing or they can give you a billion dollars out of their fund.
Birket: I mean… yeah. They could use it for what it was intended for, instead of just collecting money, which is what they have been doing this whole time. If you are a 10 million dollar and up company you pay into this fund. We’re not quite there yet, so we have never paid into it.
The nice part is that being a larger ISP, we do have some advantages in some economies of scale because of what we do but we are definitely not at the same level as the incumbents.
Jason: Are there any other programs, besides the spectrum, that the government can help with or any other programs that you guys have taken advantage of so far that would potentially be helpful for other small businesses?
Danny: I think that is a bit difficult question for us since the effect of COVID on our business was very different than the others due to the nature of our businesses. For instance, we did not have to furlough anybody, we have in fact hired more people and we have been busier thane ver. We have not used any of those programs because at the end of the day. It is going to come back and bite you. However, they do not tell you this. They would ask you after, “Why are you asking for this when you got this other payoff here?”. So we have asked for nothing. We would have actually qualified, but we did not feel that it was right. It is important to leave the money for its intended use. We do not need it so let’s not take it.
Birket: A lot of it was loans and you do not necessarily want to add an extra loan for a business if it does not need it. These were not grants, these were loans.
Danny: Even the ones that were potentially going to be 25% forgiven. At the end of the day, it is free money as far as I am concerned. However, it doesn’t look good, it looks terrible on us. We are not running a restaurant, fortunately.
Jason: True. If you had a time machine and you could go back in time and warn yourself a year ago that this virus was coming, what are some of the changes or things you would have done proactively to prepare?
Birket: We would have stocked up on PPE.
Danny: I would have told myself to act faster. We’ve had to bring in a lot of inventory and the prices are higher now, which is because of where we’re getting them from. If I had known full well this was going to happen, we would have loaded up as much as we could. We would have also hired some additional people to facilitate the increase in demand that we had and we would have hired them sooner because obviously hiring somebody and getting them off to speed isn’t one day turnaround. You’ve got multiple weeks of training to get them up to a point where they’re able to do the job. So we would have prepared ourselves ahead time for this influx of business and we would have started in January as opposed to starting in April so we would have been able by the end of March to go “Boom, we’re ready to hit the ground running”
Birket:: Training is a big part of this because we have occupational health and safety issues and there needs to be preparation. People don’t climb up a 300 foot tower without some training and understanding how to climb properly. There’s lots of certifications involved in this business and and it’s all really about occupational health and safety measures to make sure that everybody’s safe when they go out there.
Jason: So that’s all the questions that I had are there any questions that I should be asking that I haven’t asked?
Birket: I really think the government needs to look at the smaller and medium businesses more. I feel strongly that they don’t understand what we live through every day and therefore a lot of the programs that get rolled out have lots of flaws in them. The government operates in a very bureaucratic way. There is tons of paperwork involved in everything that they do and I’m not sure that they they know that we don’t have an extra three people to put on filling and do all of this stuff. Optimizing things, especially right now, is important.
Jason: Okay, perfect. That is really great feedback guys. Thank you so much for taking the time to have this interview with me, it was super informative for me and I am sure everyone is going to learn from it.
Birket:: Thank you Jason for stopping by!
Danny: Thanks Jason!