Recession is Opportunity

btIt wasn’t that the founders and owners of Fibernetics planned to launch during the first major recession of the new millennium. But, honestly, they couldn’t have picked a better time.

John Stix, co-founder, co-owner and executive vice-president for sales and marketing of the fledgling telecom firm says that it’s because of the recession that many corporations are eager to check out the cost savings that Fibernetics has to offer.

You may not have heard about Fibernetics yet, but that’s going to change. The Kitchener-based company has joined the hallowed ranks of CLECs (competitive local exchange carriers). There are only three in Ontario and the other two are Rogers and Telus. CLEC is the highest designation a phone company can reach in Canada. That designation given by the CRTC – which also regulates CLECs – gives Fibernetics the same rights and privileges as Bell Canada, and gives Fibernetics “a fibre connection into the heart of Bell,” explains Stix. “Vonage and companies like that buy Internet backbone from companies like us so they can provide customers services and charge for them.”

It hasn’t been easy. Stix and long-time friend Jody Schnarr, who is also Fibernetics president, CEO, and co-founder, have worked in the telecom industry since they left school. Stix describes it as an “arduous journey” of close to 15 years in a very capitalintensive industry. He says they flew under the radar for a long time, until the February launch of Fibernetics’ new services.

It starts with a box-like device that they designed and manufacture. It is packed with proprietary software. Plug a DSL connection into the back of it and your phone lines are on Fibernetics dedicated Internet connection. That gives you access to the Bell fibre optics system. It’s a closed network which allows Fibernetics to ensure call quality.

Stix estimates it cost about $10 million to develop the device and software, for which businesses pay a one-time fee of $1,295 that will get them two phone lines. Each additional phone line costs $295. Businesses can keep all their phone numbers – only their provider changes – and the cost.

“Businesses accept the cost of phone lines as a natural cost like heat and hydro,” says Stix. Transferring to Fibernetics dramatically reduces the cost of phone lines for everything from mom-and-pop pizza shops to major corporations.

BT1They ran a pilot program in Kitchener, Waterloo and Cambridge this year with 40 companies and the response was big. “From small companies to a very large developer it worked beautifully,” says Stix. “The buzz is just amazing.”

Long distance calls, especially overseas, do cost, but a lot less than any other phone carrier, and in this economic climate that’s a huge plus. “It’s a fully sustainable business model,” explains Stix. Their continuing income comes from providing Internet services to clients. For $89.95 per month a business can get a DSL connection that will accommodate up to 20 phone lines. “We’re a new age telecom company,” he explains.

The $10 million investment it took to set up Fibernetics was self-generated private money. Stix and Schnarr already had steady revenue from a residential phone internet service company they had called Worldline. Actually the network for Fibernetics is paid for by that residential service – a network that has unlimited bandwidth available. They haven’t even fully rolled out their marketing campaign and they’re swamped with orders and inquiries – a major player in the financial industry that has 500 phones in 48 offices across Canada wanted to meet with Stix pronto. He believes that getting that meeting would have been a lot tougher before the economic downturn. Over the next year to year and a half, Stix fully expects they’ll be hiring 100 to 150 people. The future looks so bright they’re thinking of hiring a consulting firm to help them manage growth.

“We’re the first one-stop shop in the history of Canada for phone systems,” crows Stix. “We manufacture the phone system, we are the phone system provider, we are the telecom company that provides the phone lines, and we are the Internet service provider. We believe we’re on our way to being the next Bell.”

Currently Fibernetics has about 120 employees world-wide, about 25 are at their head office in Kitchener. They have Fibernetics offices in Toronto and in London, Ontario. They also have a call centre in the Dominican Republic and a software development firm in Sofia, Bulgaria. But it’s here that they need to hire, starting with developing a larger HR department to hire the computer science grads, customer service people, installers, sales people etc. they will need in the coming months.

Stix is determined to preserve their youth-oriented, open corporate culture through all this expansion. He really doesn’t want to lose the advantage of size that the company has now, so they’re keeping infrastructure costs down. “We can turn on a dime and we want to retain that in our company culture. We’re the Google of telecom.”