Personal Internet consumption doubles every eight months. Online video is consumed at a rate of 23 minutes a day per user, which is up almost 25% in just 3 years. Ninety-five percent of US home phones are now digital.
Courtesy of technology advances, the requirements for seamless, buffer-less Internet access, be it video, games, television or communications, all require a fibre optic network. Advances in viewing and simple access need speeds well in excess of those delivered by the current ISP behemoths; content with charging way too much for upload and download speeds in the range of 10-25 mbps on antiquated networks.
Are We Done With Traditional ISP’s?
“With the advent of cable cord-cutters, the rise of services such as Netflix and more and complex games, current internet speeds are completely inadequate,” states John Farlinger, CEO of Vancouver-based Urban Communications ($UBN:CA). “Through our wholly owned fibre optic network, Urban delivers speeds 100 times that of the incumbent services to residential and business customers at a price point roughly 60% of the going rate. That includes both standard Internet access as well as offering an unparalleled television product.”
Urban Communications Inc., through its operating subsidiaries, is a telecommunications company providing a full suite of Internet, voice, video and broadband application products over its state-of-the-art carrier grade fibre optic network to commercial, residential and public sector customers in metro Vancouver and Victoria.
UBN finds itself in the midst of a ‘Perfect Storm,’ of rapidly growing customer needs and having the best on-board facilities, which will allow it to deliver consistent shareholder value as it builds out. Currently offering services in Greater Vancouver and Victoria, but with national aspirations, UBN owns a fully paid-for state of the art, 200-kilometre fibre optic network. With a replacement cost of nearly $60 million, that alone provides shareholders with an excellent asset. For comparison, Google is installing a 1GB fibre service of similar size in the state of Kansas at a cost of roughly $100 million. UBN’s fibre network gives it a significant leg up against competitors, both regional and national.
There is a Better Way
Cable cutters and price weary television consumers could well find a home at UBN. Urban TV has over 90 channels of crystal clear sports, entertainment and news programming (including HD) with video on demand (VOD) coming soon. Rewind is available for any channel for up to three days; a feature not currently offered by the incumbents.
UBN TV has an additional 60+ Chinese channels, 10+ Vietnamese channels and multiple television channels from Korea, Japan and the Philippines: Domestic and international television content that is as individualized as the customer. Browse, shop, Skype, and access Netflix, Amazon, YouTube, all on your big screen TV.
At prices well below the traditional providers, UBN is positioning itself as a one stop for both business and residential. In addition to great speed and attractive pricing, the Company offers business a suite of benefits including automatic cloud backup, Data solutions, Session Initiation Protocol (SIP), a signaling communications protocol, widely used for controlling multimedia communication sessions such as voice and video calls over Internet Protocol (IP) networks: All over gigabit fibre. These features are of course in addition to professional email, shared calendars, videoconference and more, courtesy of Google Apps.
“Our goal is to deliver the absolute best broadband experience to all of our customers,” states UBN President Mike Schmidt. “We will continue to offer unmatched speed and throughput capabilities over our 200+ km fibre optic network, as well as high quality entertainment choices and business applications.”
Rapidly Positioning into An Industry Leader
The summer of 2014 has seen an ongoing reorganization of UBN with new management and a more aggressive business plan to ramp up subscribers significantly over the next six months and beyond. On August 14th, the Company announced the commencement of a $2 million non-brokered Convertible Debenture financing. The proceeds will be used to discharge indebtedness with the majority allocated to the creation of recurring revenue by financing building entry from Urban’s fibre optic trunk network, installation of inside wiring, electronic equipment and marketing.
As well, the Company intends to facilitate Internet, telephone and video services (“triple play”) to multi-dwelling residential buildings, for the establishment of a co-location and data centre facility and for working capital and general corporate purposes.
Given that the fibre optic network is an asset to the Company, funding needs are modest and can be put directly into building the subscriber base, both business and residential. This situation will undoubtedly advance the timetable to both profitability and growing shareholder value. With the shares trading at roughly $0.06 and an extremely low and attractive market cap of just under 2 million, investors could well conclude that the actions of management are firmly focused on continued growth.
UBN is currently wired into 13 buildings in the lower mainland and has the ability to reach into 26 other buildings touching over 5,000 users.
CEO John Farlinger brings 20 years experience in telecom, operations, technology and finance. Past positions have included CEO of Titan Communications and CEO of venture backed Adzilla Inc. As Chief Operating Officer he oversaw the growth and expansion of Seattle-based Quanta Investments and held the position of CFO of Lavalife, managing its financial affairs through its period of high growth. Mr. Farlinger is a graduate of Queen’s University business school and a member of the Chartered Professional Accountants Association of Ontario.
President Mike Schmidt was formerly VP Business Development for TeliPhone Corp. responsible for M&A activity. Prior, he was CEO of Uniserve, a TSX listed telecommunications provider. His 20 years experience also include being a founder of Parasun Technologies, where he built a sales and marketing team-driving Parasun into both an industry leader and pioneer in Internet delivery over cable.
The Bottom Line
For investors, UBN represents a simple, yet very compelling opportunity. The problem with the Canadian telecom oligopoly (you know who you are…) is that there is little incentive to change, reduce costs or indeed innovate.
That fact represents a huge opportunity for savvy businesses, such as Urban to fill that void and offer superior broadband services at significantly reduced prices. Unfortunately for consumers, Canada still occupies one of the most expensive telecom pricing in the known universe.
From Yahoo Finance, May 2014:
“The Organization for Economic Co-operation and Development’s (OECD) 2013 Communications Outlook says Canadian broadband costs rank among the world’s top ten most expensive, which largely explains why Netflix Chief Content Officer Ted Sarandos called Canadian Internet access “almost Third World,” and added, “It’s almost a human rights violation what they’re charging for Internet access in Canada.”
Awesome. So investing in companies such as UBN not only provides a compelling opportunity, but almost a hedge against the predatory pricing of the oligopoly.
Innovation certainly benefits businesses, but it can also advantage your portfolio when you acquire quality investments at an early stage: Small risk, potentially massive reward.
Bob Beaty for The Bottom Line Report.
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