Stream sails downstream into receivership

Toronto-based broadband supplier Stream Intelligent Networks Corp. went into receivership on March 4, following a month that saw the company run up $400,000 in losses and approximately $13 million in debt to a past investor.

General Electric Capital Corp. forced Stream into receivership with PricewaterhouseCoopers Inc. as of Feb. 25, confirmed the receiver.

Papers filed with the receiver indicate that Stream has been in financial difficulty for the last year and would need $2 million or more in order to operate over the next two months. According to reports, the directors and officers at Stream left on Feb. 21 when they were locked out of their offices. PricewaterhouseCoopers had gained access to the company’s offices earlier in the week.

Stream did not answer telephone calls or return messages.

Stream was created to meet a need for an independent provider of point-to-point, high-speed bandwidth that could be provisioned for carriers and other high-capacity users. The company was best known for its ability to install underground cable in sewers. Stream also sold bandwidth to cellular companies.

Dr. Alex Ferworn, associate professor of the School of Computer Science at Ryerson University in Toronto, said he was surprised and sad to see Stream go “in the toilet.”

“Turns out it is harder to put fibre optic into sewer grates than people thought, I guess,” he said. “I thought they had a good idea. It’s a lot better to send a robot in there than to dig things up. On the surface, it looks like a good plan.”

That’s what Eric Yapp, manager of national telecommunications at O&Y Enterprise, a division of Toronto-based building management company O&Y Properties Inc., thought as well. Stream had a partnership with O&Y Properties, owners of commercial properties like First Canadian Place in Toronto, last summer to wire that building and others with a Metropolitan Area Network (MAN).

Yapp said he was disappointed with Stream’s situation, but said he realized early on in his own business that putting his eggs in one telecommunications basket wouldn’t be wise.

“It’s disappointing that another company has come to this tech crunch, but that’s why our strategy all along has been to never do an exclusive deal and we have always done deals with other telecommunications companies. We feel we have sufficient redundancies in our buildings so that other providers can come in and pick up the slack,” Yapp said.

Yapp continued that while he like the business model at Stream, there are other ways to wire his buildings with other providers, such as Toronto Hydro Telecom. He added that Stream’s difficulties are not surprising.

“We don’t feel we are losing anything,” he said. “I suppose it is a very tough game to get into and it requires an immense amount of capital and it requires the investors to be somewhat patient as well, because it takes time to grow the business. The market has done what everyone thought it was going to do.”

A spokesperson from CDP Capital Communications, a past investor in Stream, confirmed the receivership on Wednesday but had no comment on the issue.

Stream currently has its broadband technology deployed in over 40 buildings in the Greater Toronto Area, including many of the buildings on the underground path that leads through the downtown core.

Ferworn said there is a huge demand for this sort of technology because of the relatively low disruption. “I guess their costs must have just been out of line with the revenues,” he said. “I was so sad to hear that. It sounded like a great company. This is a viable business.”

Mark Quigley, research director at the Yankee Group in Canada in Kanata, Ont., said he had “heard rumours” that Stream was having problems, but he didn’t know it had gone this far.

“My suspicion is that they were suffering under the same cloud that the start-up telecom industry in Canada has been for the last year, in that they had a business model in place and had customers, but less and less investor patience led to this,” he said.

Quigley explained that investors often get antsy with telecommunications companies because of the substantial amount of cash up-front with little short-term gain that companies require.

“The investors did the math and didn’t like what they saw in the short-term and they pulled the plug,” he said.

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