A telecom equipment maker with strong roots in Saskatoon has set up shop in Ottawa and secured $18 million in second-round financing.

Critical Telecom Corp., founded 16 years ago in Saskatoon as Critical Control, has developed a next-generation DSL technology called Full Rate Extended DSL, or FRED for short.

FRED is meant to allow telecom service providers to better compete with high-speed cable Internet services from firms such as Rogers and Shaw. The technology allows for high-speed data services to be delivered over normal telephone lines to customers up to 25 kilometres from their service provider's central office, much further than existing technology.

Mark Schnarr, executive VP of investor Telus Ventures, touted FRED as a superior product that allows service providers to improve their DSL service affordably without any big investment in new infrastructure.

Oliver Cruder, president and CEO, said the company is already generating sufficient revenues that it could scale itself to be profitable right now. Instead, Critical Telecom is sinking cash into its sales efforts south of the border to attract top U.S. telcos as customers.

Cruder said Monday's financing should be sufficient to achieve that goal and drive a profit by the end of calendar 2004.

Critical Telecom established its Ottawa presence last June and relocated its head office to the nation's capital. There are currently about 50 staff split between Saskatoon and Ottawa, as well as a small sales office in Calgary to service business with Telus Corp. The company also has a couple of staff in the U.S.

Cruder said the decision to set up shop in the nation's capital was twofold.

"As we're growing we need more capable people and the pool of talent here in Ottawa is excellent," he said.

The other factor was the proximity of Ottawa to Bell Canada, which is headquartered in Montreal and is the dominant service provider in Eastern Canada. Cruder added that it is also easier to stay in touch with the U.S. customers Critical Telecom is pursuing since many of the big telcos south of the border are located on the east coast.

Cruder wouldn't comment on what kind of traction his company has achieved with Bell, but said "I look forward to good things."

Critical Telecom began as Critical Control in 1987. For 14 years the company provided contract electronics engineering and product development. The company began its transformation into a maker of telecommunications products when Cruder took the helm in 1995. In 2000 the company rebranded as Critical Telecom and refocused exclusively on telecom equipment with $2.5 million in financing to fund product development.

Monday's round of financing was led by VenGrowth Capital Partners Inc. Other investors include Telus Ventures, Business Development Bank of Canada, and Crown Ventures Fund Inc.