Alternative ISP is growing quickly on demand for its super-fast and affordable services.
Beanfield Sows Fibre:
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If it’s super-fast and inexpensive internet service you’re after in the United States, it’s clear what you have to do: move to a city where Google Fiber is being rolled out. But what’s one to do in Canada, where there is no Google Fiber?
Simple: buy a condo in a big city.
Condominium dwellers in major urban centres are indeed the lucky ones in at least this respect, with newer fibre broadband providers emerging as alternatives to traditional phone and cable companies.
Beanfield Metroconnect is making a name for itself as that third option to Toronto condo owners. The company, started as an IT support operation in the 1990s by high school student Dan Armstrong, has in recent years been moving into providing residential broadband.
Its services range from 100-megabit-per-second connections – download and upload – for $45 a month, to 500 Mbps for $100. And that’s with no usage limits. It’s enough to make the detached home dweller, who typically gets much slower speeds at considerably higher prices with a low usage cap, weep.
The company has grown to servicing 500 buildings in the Greater Toronto Area, with just under 100 employees. It has also beaten out the likes of Bell and Allstream for major corporate contracts, including Waterfront Toronto and the upcoming Pan Am Games.
I sat down with Chris Amendola, Beanfield’s president and chief strategy officer, to discuss the company’s growth, the upcoming games, and whether he ever plans to expand the company’s affordable super-fast broadband beyond just the Toronto condo market. Here’s an edited version of that conversation.
How did Beanfield get to where it is now?
The company is 25 years old now. I’ve been here 20. My partner Dan had started it five years prior to him and I meeting. It was a different company, primarily IT support. He had a few large clients, Fabricland, Royal LePage, and he just ran to their offices and fixed their computers.
I joined because a lot of requests were coming in for new wiring. I started doing all the infrastructure installs. It wasn’t until a couple years into me being there that Dan wanted to start a little ISP, not because he wanted to be an ISP, but because he wanted to be able to remotely manage our customers’ networks. Driving out to Markham to fix something for an hour just wasn’t worth it.
The turning point was the dot-com crash. Around 2000, we had a lot of people banging on our door saying, ‘My internet provider just went out of business.’ There were a ton of people selling internet back then, a lot of them were just reselling over Bell, Rogers and Allstream. They stopped paying their bills and were shut off, so people were asking if we could help them.
I was used to running cabling so I ran cables to these other offices in the building and we started selling them internet. That’s where the whole concept came from.
Then we looked into getting service to other buildings in the area, but we found that was just too expensive, we didn’t have the money and we couldn’t go through all the legal work with the city.
But we did find a bunch of abandoned tunnels in [the] Liberty Village [area] that I used, that we probably shouldn’t have. I took a fibre-optic splicing course and we ran some cables connecting some of the buildings in the area and we were selling internet to all the tenants.
I went to the city and I didn’t even know what I was asking for at the time. I was in my early 20s and I went to them and asked for the agreement that Bell and Rogers had…
They kind of responded the same way [laughs]. We asked to run cables through the streets and do construction and they laughed. I don’t blame them. I was probably in flip flops and a T-shirt and torn-up jeans. But I kept going back every day and said, ‘I’ll keep showing up until you give it to me.’
You went back in a suit?
No, no, still flip-flops. I stayed true to my roots.
They slapped this monster agreement on the table and I went through it. We couldn’t afford a lawyer at the time, but I figured, ‘This is the city and they’re not going to budge on anything. They have to be fair to everyone so my risk in signing this probably isn’t that great.’ So I signed it and had to go to the hydro utility next because a lot of the infrastructure is on their poles. I got the same response: ‘That’s funny, that’s cute.’
I’ll never forget this, though. One of the guys there said, ‘Listen, nobody here wants to help because they think you’re going to fail. I want to help you because I appreciate the entrepreneurial spirit and you seem like a nice guy. But if you mess up once, you’ll be out of there.’
He took me under his wing and showed me the permit process. We had a great relationship with hydro and we followed the rules.
We still had this IT support company where we would make enough money to build the cable to another building. We just kept doing that one at a time up until 2008, then we really started expanding.
That was the whole business at the time, we were no longer doing IT support. We’ve since got some big customers that have allowed us to grow very quickly.
Like the Pan Am Games?
That was post-Waterfront Toronto contract, but they were kind of tied together. We won Waterfront Toronto in 2011. Pan Am would have been 2013.
We were bidding against all the big guys, but I guess they had a level of comfort with us that we would actually get the stuff done and be easy to deal with.
What was your advantage against these big companies?
I don’t want to bash the competition, but our industry isn’t known for customer service, and we are. We’re known for having the best service at the best price and being easy to deal with. I think that was very appealing to them.
The games, there’s chaos at the time, so the last thing they need is, say, realizing, ‘Hey we’re missing a circuit between these two points and we need this up to tomorrow.’
Can you imagine if you’re talking to one of the big companies and this comes up? It’s not going to happen. But we’re going to make sure it’s in within hours for them and they knew that.
What was your background? Did you come from IT?
No, I wanted to be an architect.
Right, and you spent a lot of time in the principal’s office?
Yeah, I got in a lot of trouble in school. I lost my parents when I was young. I was planning to go to school and be an architect, but that got derailed so I was taking some time off to figure out what I was going to do with my life.
That’s when I met Dan. He was working on the computer systems in a courier company and I was working in the warehouse. We just became friends and he asked me if I had any interest in getting into IT stuff. It never really interested me but as a kid, my mom had put me in a lot of computer courses and I knew my way around that stuff. I figured I’d give it a shot for a year.
I had no background in it and neither did Dan. He was running the business in high school. While he was finishing high school, he was changing into a suit and going into meetings with Royal LePage. Ironically, most of our staff have a much higher education level than we do.
At what point did you decide you wanted to make a career of this?
I think I really started to enjoy this and see the direction around 2000, when we made that transition away from IT support as the primary business. That interested me.
It was an opportunity to do something that only Bell and Rogers had been able to do. It was an opportunity for the little guy to compete with the big guys and I’ve always enjoyed that.
What do you consider to be your niche?
On the commercial side, we sell all the same services that a Bell or Telus or Allstream would. We’re even into broadcast services now, we’re doing all the broadcast for the Pan Am Games. Our bread and butter is on the commercial side, so it’s internet access and phone service.
We also have a carrier wholesale division where we sell to all Canadian carriers and U.S. carriers that want to access our network. And on the residential side, we have the triple-play [internet, phone and TV] fibre-to-the-home service. Our customers range from a single guy in [a small condo] right up to giant financial institutions.
You’re selling speeds up to 500 megabits per second on the residential side. Are you capable of going up to a gigabit?
Yup. We just didn’t feel the need to throw that out there right now. Most people don’t need that kind of speed. Our 100 megabit symmetrical is our most popular and it’s what most people need. The 250 megabit and 500 megabit is great, but you need to be doing some serious stuff at home to need that.
All our stuff is symmetrical, which is a big difference, and there are no usage limits, data caps. We’re not doing anything in the background to throttle people if they’re going to Netflix. We don’t care. If people want Netflix, go for it. We don’t have a video-on-demand service or renting stuff out so we don’t care about that.
Gigabit speeds are getting sexy in the United States with Google Fiber and so on. Do you see them catching on in Canada eventually?
We actually deliver a gigabit to every suite. We drop it down to whatever [customers subscribe to]. We could with a [configuration] change bring it up to a gig. We’re ready for it, we just don’t need to do it just yet.
Do you foresee ever doing individual houses?
When we run out of condo buildings, we’ll do it.
So that’ll never happen?
Yeah, I don’t foresee that happening for a long time. I live in Etobicoke in a detached house and mine is probably one of the only ones that will get it. [Laughs]
It is a lot of work and I have to credit Bell and Rogers for that because they do go in and wire every house. They did have a lot of privileges early on when setting up their infrastructure, so for someone like us to go in now, it’s a lot more difficult.
It was easy for them back in the day to go down the street and drop into every house. Now, you need a lot more co-ordination to do that and right-of-ways and permits, it’s very difficult.
Would it be easier for another startup to do what you’re doing, at least in Toronto, because you paved the way for them?
We haven’t really paved the way. Getting into residential if you’re infrastructure-based is very difficult because of the amount of capital required. On the commercial side, we run by every condo building so for us [in residential service], it’s a matter of just teeing off into a building. For somebody to start that from scratch, I don’t think it’d be doable.
Have you always been self-funded or did you get outside investment?
We have traditional bank funding, but there’s no outside money. We’ve put profits back into the company and grown organically.
When you connect a condo, is that an exclusive deal?
No, the CRTC would go to town on a building [for that]. I can’t disclose which building it is, but I’ve got one particular property manager who said, ‘We’ve got Bell and Rogers already in here and you can’t come in,’ so I’m about to get the CRTC after them because we’ve got numerous tenants who want our service.
Exclusivity is not allowed. Rogers and Bell will pay for exclusive marketing, which is fine. I don’t really care about that.
But are there limits? Can a building cap the number of providers, say at three?
There’s no rule. It comes down to being reasonable. If there is space in the building and they’re not allowing us in, then the CRTC will force it.
What’s your feeling on third-party ISPs that use portions of big companies’ network to sell their own services? The CRTC will soon be looking at whether fibre services like yours should continue to be exempt from this mandated access.
I don’t think it’s the CRTC’s place to tell Bell or Rogers, who’ve invested all that money, to open up their networks to these guys. The [older] copper infrastructure made sense, because again, there were certain privileges and helping hands these guys had back in the day to put this infrastructure in. That infrastructure has been in there 50 to 60 years, so I get opening that up.
But now that they’re investing in fibre, my feeling is that these resellers who want access to fibre, build it yourself. I had to do it.
I was with some friends with Rogers and I said the same thing: ‘I understand your position and I back it because if someone came to me and said you have to open your fibre, I would say no. Absolutely not.’
I remember days when I didn’t know how I was going to pay the bills here and I was eating at the Esso gas station because that was the only credit card that worked. There was no one coming in and helping me at that point in time.
If we found a way to build fibre across the city, anyone who puts an effort into it and wants to invest 20 years into it, they can do the same. To be told you have to open up your investment to a bunch of people who just want to leach off of you, I don’t agree with that.
Some alternatives to incumbents like yourselves have popped up in condo markets around the country, like Novus in Vancouver, but what about people who aren’t in condos? If those third-option resellers weren’t there, those people would only have a choice between the phone and cable company. Will companies like Beanfield arise to serve those customers?
Eventually it will be done. Like any business, you’re going to go after the low-hanging fruit [first]. We only have so much capital to build and we get the most for our money if we’re building to a condo building.
For the time being, I have no idea when we’d get to detached homes. It’s too bad, I wish I could build everywhere. If the city were willing to step in and assist us with something like that, it would be a different story. We couldn’t possibly go and negotiate with every house on the street. Bell and Rogers didn’t have to do that.
What about the Google Fiber approach, where they basically ask people to organize themselves and request it?
Google has a different reason for what they’re doing. Their reason isn’t for it to be profitable, they actually don’t even want to do it. What Google wants is the end user to have lots of bandwidth and the Verizons weren’t too quick until Google to give people that.
It’s to push the incumbents to make sure there’s more bandwidth. I don’t know if Google is going to continue to do this forever, or to sell it off, but their objectives are different.
We’ve used a similar approach where people have had difficulty with the property manager. We’ll say, ‘If you want this, you’re going to have to talk to your board or property manager and get a bunch of people together to do that.’
Google also has a lot of political power so when they announce they’re going to do something in Austin, Texas, they’ve got the government and city onside. It’s a lot easier for them to get people together and rally. We don’t have the marketing money for that.
What’s next for Beanfield after the Pan Am Games?
We’re building some stuff in Mississauga and we’ve been building north into Markham. We’ve built some infrastructure in Montreal. We’re looking at some opportunities in Vancouver too. We plan to expand into other cities, it’s just a matter of time and resources.