It was meant to be a recipe for disaster. Two best friends, barely into their 20’s, wading into the world of telecommunications just as deregulation rolled out across Canada in the mid-1990s.
Everyone around them warned them off. Don’t go into business with a friend, they said. Go get a real job.
Almost 20 years later, Jody Schnarr and John Stix having navigated the changing telecommunications landscape, changing course with the current, to create the fastest-growing cellphone company by subscribers in Canada.
Needless to say, the detractors have long since gone quiet.
For Schnarr and Stix, the visionaries behind Cambridge-based Fibernetics, it all started with a telemarketing job. Schnarr, forced to work the phones due to a back injury, met Stix for their regular Thursday-night pint and started talking about what he was selling.
Bell was no longer the lone telephone carrier in Canada, he said, and Schnarr was calling people to offer a different, cheaper service. It seemed like everyone he called was saying yes.
“This company must be making huge money. We should figure this out,” Schnarr said to Stix.
That conversation in 1994 would change their lives, and help transform telecommunications across Canada then and now.
The path was far from easy. Their first foray was an investment in an alternative telco called North Phone, which went under not long afterwards. “We lost everything,” says Schnarr.
But they learned two valuable lessons: First, they would rather invest in themselves than in someone else. Second, to be successful they had to break new ground. Those two lessons would steer them through the decades to come.
They started by setting their sights on introducing flat-rate long-distance calling to southern Ontario.“With Communitech and the Accelerator Centre, you can learn so easily now. Back then, it was so hard,” Schnarr says.
They developed a PC-based switch to route calls between their hometown of Kitchener-Waterloo and Stratford, ON, a distance of less than 50 kilometres, but in the 1990s still classified as long distance.
They needed $15,000 to buy the equipment, had no idea how to write a business plan, and were out of funds of their own. So they followed advice in an article Schnarr read: Seek support outside your home community.
They went to Stratford, explained the idea, and secured a loan from TD Bank. Then the duo started knocking on doors to gauge public response.
People loved it. “Absolutely, we’d switch!” they said when told of the potential savings. “Let me know when you open up.”
Stix and Schnarr launched their business called Stratford Telecom in 1995. No one switched. They were dumbfounded.
“Early lesson,” Stix says now. “People don’t like to switch. And also, it seemed too good to be true.”
Still, they kept knocking on doors, and landed 75 customers in their first month. It wasn’t enough to cover the rent of their tiny Kitchener office. “We were going out of business,” Stix says.
Then he had an epiphany. Forget “too good be to true”. They needed “too good to resist”. They needed to make it free.
A local radio station was paying for families to call each other over the Christmas period, and people were “freaking out” about getting free long distance.
Schnarr and Stix latched onto the idea. If they could make all calls in the region free, everyone would want to use it. And then some might even be willing to pay.
But how to cover their costs at the start? Again, they took their cue from radio. They would start each phone call with a 30-second ad.
Car dealership owner Gary Stockie took the chance, and handed over the equivalent of the fledgling company’s monthly business expenses, and use of a car.
The day the newspaper article revealed that a new company was offering free calls between the two cities, Stix and Schnarr gained 4,000 customers. That Christmas, Stockie was inundated with cards of thanks.
Stix and Schnarr repeated the process in 50 more communities across Ontario.“We thought this is great. All our costs are covered and we’re acquiring massive market share – easily channeled a billion free calls – and we kind of have a decent income, but we should go back to charging these people.” Stix says.
They finally worked up the courage to switch back to a paid service, and again started with Stratford. They put a new message at the start of each call: Due to increased costs, they were introducing a modest fee. If users agreed, they could pay an additional $10 on their Bell bill and receive free calling within the region.
The day they flipped the switch was tense. Their parents had invested money into the venture too, and they had no idea if anyone would pay for the service. Stix and Schnarr sat in their office waiting for the phone to ring, and monitoring uptake of the new plan. It was silent.
Stifled by the tension, Schnarr left. By the time he came back, Stix was solemn faced. Then he broke into a broad smile. “Yes!” he shouted. “Look!”
Customers were piling up. The phone line was jammed solid. Schnarr reached over to the ghettoblaster and hit Play. “I’ve Got The Power” by Snap surged through the room.
Changing the Course of Canadian Telecom – Part Two: Enter the Internet