Ottawa: Connectivity Provides Opportunity on the Turbulent Sea 

May 12, 2020
4.5 mins | 800 words
By: Adam Dewar

Adam Dewar

Since being confined to our homes, I, along with many of you, have felt a range of emotions over the past few months. And, in my case, I know I’m lucky. But as a Millennial, I was brought up to be inherently mobile – two weeks in China? Sure, no problem! – and for now, this mobility is gone. Enter the new virtual world. 

What is not gone is our ability to connect. In specific sectors of our economy – and for Ottawa’s technology ecosystem, demand is up; people are working from home, streaming, teaming, zooming, skyping, calling, and watching countless videos on YouTube.  

This increased activity has created just a small draw on our networks. And by “small” I mean the European Union, carriers around the world, and other agencies have asked and received compliance from all of the above to lower quality so as not to overwhelm the network (Netflix and YouTube are slowing down in Europe to keep the internet from breaking, CNN).  

So, what does this mean for Ottawa and our telecom ecosystem? Amongst the turbulence, a potential opportunity emerges.  Over the past month and a half, I have had the opportunity to connect with key players in the Ottawa telecom ecosystem to gain their insights and perspectives. To be honest, after watching the stock market crash, I had expected to find a neutral to negative outlook – instead, it was cautiously positive.  

To support the growth in network traffic, our telecom players have been busy. As organizations, they too are juggling amidst this new reality, sending most of their staff home for social distancing (they are part of an essential supply chain, and some of their labs require staff to be physically present to do what needs to be done). But they are also busy working with their customers, the carriers, and data centres (Hint: Facebook, Youtube (Google), Netflix, Amazon, Microsoft, etc.) to help them stay online, troubleshoot problems, and, if this continues, to scale their capacity.  

That last piece is key. It is key because the scaling of capacity will mean monetization of this opportunity for these players. The potential opportunity and cautious positivity hinges on monetization. But given that most people reading this are working from home, heavily using their network connections – possibly having upgraded their service  you are probably wondering, “Isn’t this a slam dunk?”  

The industry is cautiously positive because the industry has worked hard to keep its customers online, largely on its existing software and systems. For many, this means extended capacity. Whether it makes a difference on their bottom line and is positive for their cash flow is an open question, to which an answer will start to present later in the year – Q3 or soBut the level of activity does have most players exhibiting a cautious optimism.  

They are cautiously positive as consumer sentiment, and the overall economic situation is still unclear. If this reality goes on for a quarter or two, and the light at the end of this tunnel shines, it will be positive. If it goes on longer, unemployment in Canada and the US reaches 20% or 30%, and telecom players shed customers who are unable to pay, this will trickle down the supply chain to the companies who develop these critical systems in the Ottawa Valley. And that needed monetization will fail to materialize. So, there is an inherent level of risk. 

There are also supply chain challenges for some players, particularly in the systems and components sectorsMany companies are dependent on optical and network components from China, and while these supply chains are slowly coming back online, they likely won’t be at pre-COVID-19 levels for a whileIn the medium term, this also presents another opportunity. Between US trade policy and the COVID-19 situation, companies are starting to look at diversifying their supply chains, so they aren’t so focused on China. For a region like Ottawa, this presents a secondary opportunity to attract more prototyping and advanced work, similar to what we already see in the region. 

The final risk to this cautious optimism centres around our pre-revenue startups, early-stage investors, and scaling companies.  Many pre-revenue startups will have a formidable challenge, especially if they are in the process of raising funds or need to raise funds in the next few quarters—also, fast-growing firms who require cash to reach their full potential. Firms needing to refinance debt or satisfy their covenants could face challenges if their revenues deteriorate or if their revenues only increase at a fraction of the rate they budgeted, pushing up their cash burn leading to a cash crunch. 

It goes without saying if this situation extends beyond a couple of quarters, the outlook will likely deteriorate. Luckily, we can all work to reduce that risk by staying home and following public health guidelines. Doing this together, we will reduce the length of the pandemic and hasten economic recovery.   

Though we can all share some cautious optimism that at least in the short term, one of the major sectors of the Ottawa ecosystem, and our regional economy, is experiencing an uptick in demand, telecoms companies are working hard to keep systems running. By keeping systems running low, many businesses from across Canada and around the world can take their work to the cloud, enabling connectivity, remote work, and social distancing.   

If you or your business has insights or challenges to share with Invest Ottawa, please do not hesitate to reach out to a member of the Invest Ottawa team or me. We are actively engaged with industry and are collecting and sharing insights back to our partners at all levels of government.   

Adam Dewar is the Invest Ottawa Market Director, Americas. A member of the Global Expansion Team, Adam leads foreign direct investment (FDI) market engagement. He is highly motivated to work with companies and entrepreneurs in the Ottawa and Americas region to expand their business interests in the Ottawa region. Adam has a passion for technology, the Ottawa region, and Canada more broadly, being a transplant from Alberta by way of Nova Scotia.

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