Buying an ISP or rural broadband provider in Canada

Buying a rural broadband provider differs from buying a shop. The customers are real and recurring, but what keeps them connected is a network you will have to run, repair and possibly upgrade, sometimes in places that take a technician a long time to reach. A good purchase and a poor one can show the same subscriber count and similar revenue. The difference lies in the age and ownership of the network, in how dependent the business is on its founder, and in whether you can legally and practically take over what the seller is handing you. This guide is about judging the opportunity and qualifying yourself, not about price.

What a sound provider looks like

A sound rural provider may have documented, current plant on sites and routes it controls, more than one upstream path so a single supplier’s outage does not disconnect every customer, and healthy take-up in the places the network already reaches. Churn is low and explained, complaints are logged and answered, and more than one person understands how the network works. A poor one may depend on a single tower landlord or a single backhaul supplier, run radio equipment the manufacturer no longer supports, and keep customers mostly because nothing else is available yet. That last point matters, because a base held by the absence of alternatives may last only until an alternative arrives.

Read the territory before the business

Who else serves the area is worth knowing before judging how long the subscribers will stay. List the alternatives for the households on the network: cable or fibre from another provider, fixed wireless, satellite, and any municipal or cooperative build. Ask what public funding has been announced for the area, because a competitor funded to build next to you would change the picture. Then separate homes the network passes from homes that subscribe. A high share of connected homes in a market with no alternative is not the same signal as the same share where a rival is arriving. The seller’s view of the competition is useful, and an independent check of it is better.

What the seller may not volunteer

A seller may not mention things simply because the seller is used to them. Ask directly about any competitor build the owner has heard of, about the outage and repair history site by site, about the obligations in any public funding the business received and whether they are being met, and about the real reason for selling. The last one deserves care, because a funder’s deadline or a looming equipment replacement can be the reason an owner wants out now. Ask also who actually keeps the network running day to day. If the answer is the owner, with no written procedures, you are buying a transition problem as well as a business.

What you have to qualify for yourself

Some of what stands between you and ownership concerns you rather than the business, and each item is worth settling before you spend heavily on diligence.

• Telecommunications ownership. The CRTC has published a Canadian ownership and control review policy (Telecom Regulatory Policy CRTC 2009-428). Whether it applies to a particular provider is a question for telecom counsel, and a buyer with non-Canadian owners or investors should raise it before signing.
• Foreign investment review. The Investment Canada Act allows the government to review foreign investments of any size for national security, and its stated aim includes safeguarding Canada from foreign actors who try to gain ownership or control of sensitive Canadian infrastructure or personal data for purposes that could be injurious to national security.
• Competition review. The Competition Act requires parties to certain mergers to notify the Competition Bureau before closing, depending on financial thresholds related to the size of the parties and the transaction, and subject to exceptions set out in the Act. The Bureau adds that mergers which are not notifiable can still be investigated, which matters most to a buyer already serving the same area.
• Operating capability. Someone has to run the network from the first day, so the buyer needs either its own technical team or a transition arrangement with the seller.
• Funding conditions. If the business received public funding, the funder may expect the new owner to meet the same service commitments and may want to assess the buyer before agreeing to the change.

Structure changes what you inherit

In an asset purchase the buyer takes selected assets and contracts, which can mean assigning or replacing each one. In a share purchase the company continues with its contracts in place, although change-of-control clauses can still apply. The comparison of asset sale versus share sale sets out the trade-offs. Either way, the subscriber file is personal information, and the fair information principles in PIPEDA, which include accountability, consent and safeguards, go with it.

Different buyers weigh this differently

A larger regional provider may buy for density and may be able to replace a weak network with its own design, and so may price the subscribers more than the plant. An infrastructure-focused investor may look for stable cash flow and a management team that can run the network without the founder. A first-time operator takes on the personal operating risk and may lean most on the seller’s help. Know which of these you are, because it changes which findings are fatal and which are simply expensive.