Cannect looks at new ways of doing business; challenges telcos & new entrants

A new entrant to the CLEC wars is challenging conventional telecom wisdom, saying bundling and longterm contracts mimic the old monopoly models and do little to serve small- and medium-sized business customers. Cannect Communications Inc arrived on the Canadian scene just over two years ago, and is currently making its way eastward. On May 25, the company announced that it is now providing data and voice services over high-capacity fibre networks to downtown Ottawa businesses. President/CEO George Horhota says Cannect is offering customers a new telecom services model, one that doesn't try to force small companies to accept big company solutions. In a recent interview with Network Letter, he said bundling is part of that old-school mentality. "Bundling is the end product of a very long process of establishing a relationship with a customer, and it is yet to be seen to be achieved," he maintains. "You know what the fundamental problem with telecommunications is? Everybody wants to get the Bell monopoly again. That's what bundling is. It's re-monopolizing the business." Cannect also doesn't tie its customers into long term contracts. The former CFO of ACC TelEnterprises (now part of AT&T Canada) claims such agreements are unenforceable under Canadian law. Established in March 1998, Cannect serves customers in five core groups: professional services, information technologies, financial services, resource companies and media and entertainment. It has agreements with AT&T Canada and Shaw Communications that give it fibre connections to more than 2500 buildings in Vancouver, Calgary, Toronto and Ottawa. The firm is targeting clients who typically spend less than $10,000 on local and LD calls. Cannect has about 1500 customers, some two-thirds in Vancouver and Calgary, and the rest primarily in Toronto. Service is expected to arrive in Edmonton and Victoria next year. Cannect's goal is to achieve two per cent market penetration nationally, and 10 per cent in its local serving areas. Staying with smaller clients is key to that strategy, says Horhota. "All our competitors talk about small business but they're always going for the high end," he says. "Everyone gets seduced by the big accounts. The big accounts have had personal service. The big accounts are very well served by large companies." Cannect also has a different approach to service. It assigns a service representative and a sales representative to each customer. Thus clients have an actual person to deal with, rather than searching around blindly for assistance. Cannect is headquartered in Vancouver, although Horhota is situated in Oakville ON. The president says the CLEC was quite deliberate in its decision to put its technical group on the West Coast. In the east, telcos must battle one another for skilled staff. In British Columbia, Telus has been laying off staff which gives companies like Cannect access to a talented labour pool. Cannect has drawn its sales and service staff from outside the telecom world because they have greater experience in working in a competitive market. About one-third of the firm's 139 workers are new to the telecom business. Cannect's phone specialists come from established firms, especially ACC TelEnterprises and Telus. "We all chose to build Cannect because we felt quite strongly from previous experiences that about 30 per cent of what we do in the telecommunications industry is right and 70 per cent is wrong," the president states. The financial backing behind the CLEC is impressive. Its largest shareholder is Nortel Networks Corp, with which Cannect has a contract to rollout the firm's Succession solutions. Next up is American investment firm Kohlberg, Kravis Roberts & Co and 10 Canadian investors such as pension and mutual funds. Venture capitalists and individuals also have a stake and management owns or has options on 15 per cent of fully diluted shares.

Cannect looks at new ways of doing business; challenges telcos & new entrants

News | 06/05/2000 4:00 am EDT

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