NorthwesTel scales back planned upgrades

NorthwesTel has received some bad news from the Canadian Radio-television Telecommunications Commission. Late last week the telecom regulator scuttled a $3.4 billion deal for Bell Canada.

NorthwesTel has received some bad news from the Canadian Radio-television Telecommunications Commission.

Late last week, the telecom regulator scuttled a $3.4-billion deal for Bell Canada Enterprises – NorthwesTel’s parent company – to buy specialty TV and radio company Astral Media.

As part of the deal, Bell proposed giving NorthwesTel $40 million it had paid into the public benefits fund.

NorthwesTel planned to use that money to fund some of its five-year, $273-million modernization plan. That plan would have seen every one of the 96 communities it serves hooked up to high-speed Internet and 3G cell service.

Under the commission’s rules, any company purchasing a Canadian broadcaster has to set aside roughly 10 per cent of the purchase price for a “public benefits” fund.

That fund is supposed to go to projects that “yield measurable improvements to the communities served by the broadcasting undertaking and to the Canadian broadcasting system.”

NorthwesTel’s competitors argued that using money from that fund to expand Internet and wireless services was inappropriate. The commission agreed.

It was one of several reasons it cited in its decision to kill the Astral deal.

Without that money, the modernization plan is going to have to be scaled back, said Paul Flaherty, president of NorthwesTel.

“The reality is that if you don’t have that $40 million you can’t do it all, and I think that the thing that will fall by the wayside is the smaller communities, the ones that are uneconomic to service in the first place,” he said.

The company is still committed to the plan, which was required by the CRTC after the regulator slammed NorthwesTel for the age and quality of its network infrastructure in a decision late last year.

Just which communities will be left behind, Flaherty couldn’t say.

The company is still working on a revised modernization plan, which it then has to resubmit to the CRTC.

“I can tell you right now the plan, in my view, will include more wireless and advanced wireless and Internet and probably a little less in the voice area of our network because fewer and fewer people are having landlines these days,” said Flaherty.

That has raised the ire of some of NorthwesTel’s competitors.

As an “incumbent local exchange carrier,” NorthwesTel is required to provide landline telephone service and dial-up Internet to its customers. To help it meet that requirement, the company gets a $20 million annual subsidy from the CRTC.

Under the original modernization plan, NorthwesTel was going to use that money to help upgrade its equipment. Some of this gear supports landline services, but a large part of the plan would upgrade wireless and high-speed Internet services.

In effect, that amounts to using the subsidy to lock out competition, said Cameron Zubko, vice-president of Ice Wireless in a previous interview.

But while the CRTC hasn’t yet included wireless or high-speed Internet as mandatory services, it just makes sense to focus more resources on that area, said Flaherty.

“I know many young people these days don’t even have local telephone service, they only have wireless service,” he said. “Really, you’re seeing a shift over time and more and more people are going to wireless services only, or wireless on a fixed broadband service.

“The home phone is becoming a bit of a way of the past.”

The CRTC was set to hold hearings specifically on the communication needs of the North, but it put those plans on hold while it considered the Astral sale, said Dean Proctor, the chief development officer for SSi Micro, a Yellowknife-based Internet provider.

“The NorthwesTel modernization plan was a bit of a sideshow, and it ended up derailing the real work to be done,” he said.

No date has been set for those hearings yet, but Proctor is optimistic that the commission will move on it soon.

“What really has to be looked at is: What are the services that are essential for people in the North?” said Proctor.

With broadband Internet and cellular telephones eclipsing landlines, it no longer makes sense to give NorthwesTel $20.5 million a year to maintain its copper-line voice service, he said.

The high cost of NorthwesTel’s fibre-optic network is the other big issue for the North.

Right now NorthwesTel is charging wholesale customers like SSi Micro 5.6 times as much for Internet as it does for retail customers, which is the main reason that SSi has no presence in the Yukon.

“We will blow our brains out if we try to go in with those prices,” said Proctor. “We can’t move into the Yukon with pricing the way it is right now.

“We can’t compete with them.”

If enough people speak out to the commission when it holds hearings on the North, Proctor is hopeful that things will change for the better.

“We believe there needs to be a system in place – and you see this in the States, you see this in the U.K., you see this in Finland, you see this in Australia – there needs to be a sustainable system to allow broadband to be affordable for consumers but in a competitive and neutral fashion so there’s not just one player that gets all the cookies.”

Contact Josh Kerr at

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