Axia Net Media Corporation (AXX)
Interview with:
Arthur R. Price, Chairman and CEO
Business News, Financial News, Stocks, Money & Investment Ideas, CEO Interview
and Information on their
high-speed IP network services and innovative learning applications.

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Axia delivers proven customer-driven solutions in two key markets: it designs and manages high-performing IP broadband networks serving both urban and rural regions; and it creates powerful, interactive learning applications that help people and organizations improve their performance while meeting individual learning styles.

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Technology
Interactive Networks
(AXX - TSX)

Axia Net Media Corporation

 3300, 450 1st Street S.W.
Calgary, AB, Canada T2P 5H1
Phone: 403-538-4000


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Arthur R. Price
Chairman and
Chief Executive Officer

Interview conducted by:
Lynn Fosse
Senior Editor

CEOCFOinterviews.com
July 2003

BIO:
Arthur R. Price.
Chairman and Chief Executive Officer
Axia NetMedia Corporation

Art Price, born and raised in Alberta, has always brought a global outlook to the businesses in which he was involved. He joined Axia in 1995 with the vision of creating a company that would meet the full spectrum of Internet Protocol-based communications needs for businesses and consumers: from creating and maintaining the connecting networks; to developing the applications that help people to learn and to exchange knowledge.

Art, trained as an engineer, held a number of senior executive positions in the oilpatch, serving as Husky Oil's president and chief executive officer from 1984 - 1993. After leaving Husky, he spent two years as special adviser to Li Ka-Shing, Chairman of the Board of Hutchison Whampoa Ltd., focusing on international investments.

He also maintains active ties to his family's agricultural roots, sitting on the board of the Sunterra Group of Companies; as well as IPSCO Inc. (Regina); the World Wildlife Fund; Rawlco Communications; Calgary Inc., and Alta Genetics Ltd.

Company Profile:

Axia NetMedia Corporation (AXX: TSX) offers high-speed IP network services and innovative learning applications, powering individuals and organizations to new levels of performance. The company designs, installs and maintains high-speed voice, data, video and telemetry communications networks. But networks are just a way to deliver information - which is why they also develop knowledge-intensive, interactive, online courses and training that can be delivered on those networks. Together, they give people that power for change. This dual focus is what sets Axia apart in the marketplace.

Organizations and individuals working in today's Knowledge Economy share a common set of needs: Information that they can be confident is reliable, dynamic, targeted to their specific interests, a clear framework for that information and global accessibility across a variety of delivery platforms. These common needs cross national borders, time zones and business sectors. Axia meets these needs by combining the power of high-speed networks with high-end applications. They ensure reliable global access by developing state-of-the-art networks in partnership with leading technology solutions providers. The impact of networked communications and learning on individuals and organizations alike is clear: partners, peers or customers can be engaged one-on-one, wherever they are in the world, at any time: dialogue is not handcuffed by local business hours or office locations.

Axia has bundled its premises infrastructure designers and creators under a nationally recognized and respected name - Netricom. As Canada's largest vendor-neutral provider of network communications services, Netricom can offer customized and cost-effective solutions centered on cabling infrastructure, data and voice networks, or wireless and IP-enabled customer applications. Infrastructure services include consulting, design, project management, procurement, installation and maintenance. Solutions can be created for a single floor, WANs and LANs or a nationwide network.

Axia's customized training and career development programs support the need for lifelong learning. Their highly sophisticated, interactive applications provide easy access to targeted, reliable information and knowledge. For example, Axia's Aerospace group works with airlines and airport authorities to create online communities, where employees can learn about local safety issues, discuss concerns, track problems and develop solutions. Axia's programs do not replace the instructors or the flight simulators - but they raise the bar by enriching the learning experience.

CEOCFOinterviews: Mr. Price, please tell us about Axia NetMedia Corp.

Mr. Price: “When Axia NetMedia began, it was with a vision that IP broadband networks were going to transform both how the network space worked and how people used interactive networks. Our view was that the most compelling revolution would be in the transfer of knowledge using these interactive networks.

We have two arms to the company: a knowledge application development, which truly looks at knowledge from the user’s perspective as opposed to the deliverer or teller’s perspective; and another specializing in interactive networks that can move media equally in each direction.”

CEOCFOinterviews: Where are you today with those the two divisions?

Mr. Price: “We now have these two arms to the company, each with precedent-setting wins. On the interactive network side, we were the successful party for the long-term operation of a broadband network right across the province of Alberta, supplying 4,700 locations of government offices, healthcare offices and schools with a enterprise wide IP broadband network. That is under construction and expected to be completed in 2004.. Axia will operate that network for the next ten years. In the network space, we use a revolutionary business model tied to next-generation technology. It is truly a breakthrough in terms of solving the digital divide with access to the high-powered broadband networks. On the application side, we were the successful party to create The Learning Zone for the Royal College of Nursing in the U.K., which is an online learning environment application delivered through the Internet for in excess of 300,000 nurses in England, Ireland, Scotland and Wales. That is an environment where the nurses are continually kept up-to-date with the latest practices and procedures as they relate to their particular area of nursing, and also tracks their education and career orientation.”

CEOCFOinterviews: Please tell us about the awards for The Learning Zone.

Mr. Price: “The core of The Learning Zone is a simple fundamental:  that people are individual when it comes to knowledge, each with their own gaps. All of our education historically has been from one (the teacher) to many (the students), mainly in the telling mode, whether that is the newspapers, textbooks, lectures, and television or radio programs. They are all broadcast programs for instance from me to you. So I will give you my knowledge, irrespective of what you individually know. The revolution that is available is to treat that individual as a custodian of their own knowledge, to find the gaps that are meaningful to them and then to fill those gaps. The critical thing is to come up with interactive media and database applications that allow that customer to experience more of a personalized learning environment than the one that they grew up with. We have won a number of international awards for The Learning Zone. We win them because we are pushing the envelope in terms of enabling the customer or learner to be in charge of a more efficient learning environment than going to a seminar or classroom, or reading a textbook.”

CEOCFOinterviews: Please explain more about the Alberta SuperNet, and how all of the funding is going.

Mr. Price: “The challenge is that with deregulation of the telecom industry, the metropolitan centers have the carriers competing with one another. The non-metropolitan centers have effectively no competition whatsoever. With the deregulation, the smaller markets have not had any access to anything that looks remotely like broadband or high-performing IP networks. Around the modern world, that challenge has become a social challenge because if you want to participate in a job or a business that depends on having access to broadband, you have to move to the metropolitan spaces, and even there, the broadband performance leaves something to be desired. The Alberta government concluded that the Axia designed concept would allow it to provide a two-pronged solution. One prong would make broadband available in the smaller markets in Alberta and the second prong would be that the government itself could get a province-wide network for the critical social services. We came up with a concept that creates a government enterprise wide network, so it is ubiquitously connected. The government has operations in essentially all the communities in the province because of the school system and the healthcare system. Having gone into those communities, we came up with a concept that drove equal open access and competition in those smaller communities to cater to those other customers, whether residences or businesses.

With the Alberta SuperNet, we really have two revenue streams: one is the government’s enterprise wide operations; and the other is the businesses and citizens who gain access through competitive ISPs and telecom companies. It creates a competitive playing field. The fee structure for that is a charge for the use of the network, and that will be somewhere in the range of forty or fifty million dollars a year for a ten-year period. The result is a low price competitive broadband, province-wide.”

CEOCFOinterviews: Can they get broadband through you?

Mr. Price: “We are the direct provider to the government but the other customers in rural Alberta get access through points of presence, and then we price those points of presence as if it is in the metropolitan space. We actually remove ourselves from competing in local access for other customers and that creates an open playing field. So the party with the network, being Axia, is not in competition with the other parties who want to provide services to the people in those communities.”

CEOCFOinterviews: What do you need to do to maintain the network and is there still building out and costs involved there?

Mr. Price: “The network will be completed by the end of next year (2004). On the building side, we provide the high-end electronics and we provision them and turn up the network. On the operating side, we maintain the network and operate it for the ten-year period. We incur the typical maintenance cost of an optical wireless network.”

CEOCFOinterviews: Does the fact that you are the manager of this process help you in the creation of more business?

Mr. Price: “The role we play and the very market niche participation that we have, where we are not a typical telco, allows us to have this same discussion elsewhere. The same problem Alberta has is elsewhere in Canada, the United States, Western Europe and Australia. The deregulation of telecom had all the advantages of starting to drive some commercial efficiency into the telecom space. What it did was create a rural/urban split. Rather than re-regulate, this is an ideal answer to that challenge of solving the rural/urban split that has come out of this deregulation.”

CEOCFOinterviews: Is there much competition in your area of the business?

Mr. Price: “Most people are in the traditional telecom sector, and if they do un-traditional telecom, there are conflicts with the role that Axia has. We are a specialty player; but we do big enterprise networks for big customers, so they are big contracts. We do them in a special way and do not participate in the rest of the telecom market the way the carriers do. We actually do not see too many people like ourselves because most people are involved in the traditional voice and cable business.”

CEOCFOinterviews: Is Axia Ireland an outgrowth of this?

Mr. Price: “Axia Ireland is a company that Axia has in partnership with a local Irish company called IAWS (Irish Agricultural Wholesale Society), which is organized to bid on a broadband solution for the country of Ireland. The country has been looking for various ways of dealing with this challenge and there are a number of policy discussions taking place in Ireland with respect to solving the same kind of challenge Alberta had. That is what Axia Ireland is organized to do.”

CEOCFOinterviews: How do you market your products and abilities?

Mr. Price: “We need to educate the customer of the compelling economics of these solutions and class of network service that is actually available. Most customers do not know that this can actually be done. They do not know that these IP networks can actually perform at the level that they can. We provide throughput-guaranteed-service type networks instead of best-efforts networks. The second thing is they do not know how such a business model can be deployed to drive competition.  . So we end up doing high-level executive communication and discussion. It is education of what can be done and how compelling and cost-effective a performance proposition it really is. Each one of these networks has a complex and long sales cycle.”

CEOCFOinterviews: What do you need to do to keep up with technology?

Mr. Price: “The first thing a potential customer should do is to make sure they have a business model that empowers them to take advantage of technology, as opposed to protecting the status quo and historically sunk investments.  That is: a business approach that is lined up with changing technology. The second is to build their fundamentals around things they know are going to last. For example, the IP protocol is going to be a lasting protocol. The world had its years and decades of proprietary networks and IP is a global standard protocol. That means that if they stay with it, it will be inter-operable, and the customers will insist on that. So if they stay at the IP layer and they have a business model that allows them to adopt the enhancements in technology, they can optimize the use of technology, which is what we do. If, on the other hand, they have a business model that has them entrenched in history, then there are many barriers to adopting that technology. For us it is an advantage if we stay within our open network and global standards. It becomes higher performing and less costly, which is usually what a change in technology means.”

CEOCFOinterviews: What is it that you are doing there and are others doing the same thing?

Mr. Price: “In the interactive media part of the business, we take it as close as we can with technology today, and we are still at the front end of this by actually giving the controls to the customer. That means we move into the customer-control space rather than the publisher-control space. Our customers need to want to understand and want to do that. We are a long way from a Web page and we are far into that space of customer database, assessment and customer interest. We need to steer that customer to an environment that is a value-added environment for them. There are other people at the forefront that are approaching it the same way. It is typically not the old publishers and the old directors, it is much more like the one-on-one tutorial and how they would approach the subject matter as compared to a teacher, professor or lecturer. It is more in the competency space. What is going to happen with broadband networks and the media exchange will add another dimension. Somebody could learn to play the violin in rural Alberta by being online with the Calgary Philharmonic Orchestra. The technology will enable that to happen, whereas there was nobody in that person’s community in rural Alberta that even knew how to play the violin.”

CEOCFOinterviews: How has the general downturn in technology affected the company, and how has it affected your missionary work?

Mr. Price: “The downturn in the technology market has started to clear out all the noise in the system, where there were many players that did not have substance and were dealing with business models that were not sustainable. The customers were confused by all of that. It is healthy that it falls away and you are left with winners and real value propositions as opposed to marketing, advertising and promises that do not hold up. That part is probably good, of course correlatively to that is that the buyers are tougher with their money. There are several organizations that are interested but ‘on hold’ and the broader economic is slower.”

CEOCFOinterviews: I see you have a continued emphasis on controlling costs; what are you doing in that area?

Mr. Price: “Both of our businesses are getting further down the path with their reputation with customers and potential customers.. We won awards in the interactive media space and we won that business in the network space. It is quite practical now for the company to define its focus more in those areas. The company grew out of the combination of media network assets that were more traditional businesses and enabled us to have customers and revenues and cash flows in the more traditional spaces. Now we can wean off and focus truly on interactive networks and interactive media. The company is going through that process currently because it has established its credentials in the next generation space, and it can wind up its participation in the traditional last generation space.”

CEOCFOinterviews: What is the financial condition of the company?

Mr. Price: “We went through a period in the last quarter where we had large outstanding receivables but we collected half of those in the last quarter and finished collecting them this quarter. Now the company is through a liquidity pitch period that we were stuck in for the last six months because of this party not paying its bills. We are now in the position where we have nominal debt, we have maybe six or seven million dollars worth of debt, and positive cash flows and we are moving into a positive earnings environment. We are going forward into a stable balance sheet period.”

CEOCFOinterviews: Why should potential investors be interested and what should they know that perhaps is not readily apparent when they look at the company?

Mr. Price: “Potential investors should know that we have world-class customers on both sides of this business and we are true leaders in terms of relationships. We have broken the barrier and have breakthroughs on both sides of the business. I would say those are our strongest credentials. We are a strong survivor and management skills company, attached to two growing businesses. If you look at them going forward, each is a big growth business. We are properly positioned for that except for maybe bulk and size. I would deduce that if I were looking at Axia, there is a ground-floor opportunity for these two businesses in the current capital market and economic environment. If I look at our risk and reward profile, then I think Axia is a smart thing to look hard at.”


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