Devil’s in the details with new fibre line

Our territorial leaders must have been awful eager to have a flashy announcement to present to this week's gathering of business big wigs.

Our territorial leaders must have been awful eager to have a flashy announcement to present to this week’s gathering of business big wigs. How else to explain the dearth of detail to accompany the government’s plans to build a 750-km fibre-optic link up the Dempster Highway by 2017?

Heck, it took some prodding for the minister responsible, Stacey Hassard, to even provide the estimated price tag for the project. It’s about $32 million. Of that, government officials profess they don’t actually know how much they will be expected to pay. Northwestel has apparently offered to pay up to $10 million, according to a cabinet spokesman. And perhaps the Government of the Northwest Territories and Ottawa may play some role.

Who knows, really? Details like “who pays for it” are normally worked out long after a project worth tens of millions has been trumpeted, apparently.

Don’t get us wrong: construction of a second fibre-optic line out of the territory is long overdue. Currently, any rogue backhoe operator is able to snip the sole fibre cable that connects the Yukon to Outside, creating service disruptions here that affect anyone who depends on the Internet. That includes retailers with modern point-of-sale machines and many other workers who today take the Internet for granted.

Yet the Yukon government’s approach to building a second fibre line has been shrouded in secrecy from the start. And while the project initially held the promise of helping to loosen the choke hold that Northwestel holds over Internet services in the territory, the government’s chosen path now looks likely to merely reinforce the monopoly the company enjoys. Not only that, it appears it will amount to being a $22-million gift to the company, with few strings attached compared to the approach taken by our neighbours in the N.W.T.

There, the government approached its ambitious plans to string fibre up the Mackenzie Valley as you would expect a public government to handle any big infrastructure project: it put the work out to tender, and awarded the contract to the company that made the best bid.

As it turns out, Northwestel won the contract, through a consortium it created with a big construction firm. But by forcing the company to compete with two rival bids, it’s possible that the N.W.T. received a better deal than it would have if they simply sole-sourced the work, as the Yukon has done.

Another important difference between the two projects is who gets to own the line. In the N.W.T., that’s the government, although the consortium will operate and maintain the line through a 20-year agreement. One perk of government ownership appears to be that the N.W.T. will have some say over pricing.

Here, government officials say the Yukon won’t own the line, so we suppose that means Northwestel will. This, despite the fact that the company looks like it will pay just one-third of the project’s cost. And if the Yukon government will have any say about the price of using the data pipes, it hasn’t yet said so.

Perhaps Yukon officials will still push for similar terms. But it looks like they will have little leverage at this point, now that they’ve promised the public that the project will happen.

Northwestel has sweetened the deal by agreeing to build fibre from Stewart Crossing to Dawson City. But it’s worth recalling that the company had previously committed to doing this work, then backed out after the CRTC concluded the company was charging unreasonable high prices for some services and asked it to stop.

One big advantage of the Dempster route is that, by helping form a giant loop around the Yukon and N.W.T., it offers redundancy – that is to say, back-up Internet when one cable is snipped – to every community serviced by the line, since data could travel in either direction around the circuit. But it also comes with a big drawback: it does nothing to change the present arrangement of Northwestel owning every fibre cable that connects the northern territories to Outside.

Would-be competitors have complained that Northwestel puts unreasonable premiums on accessing its infrastructure. The CRTC has shared these concerns. So has the Yukon government, which, in a recent filing to the regulator, stated that “the concentration of facilities ownership (telecom, cable and wireless) with Northwestel and its affiliates represents a significant structural barrier to choice and innovation.”

That helps explain why, for a long while, the government’s preferred route was to run a new line to Skagway or Juneau, to connect up with existing undersea cables. It also probably helped that this route looked cheaper. It’s true this route wouldn’t offer redundancy to communities north of Whitehorse, but nearly all the fibre cuts to date have occurred south of the capital.

The territory first engaged in talks with a group of First Nations that it had hoped would build and operate the new line, with the territory and the First Nations splitting the $25 million capital cost. But eventually the deal fell apart when First Nations concluded the project wouldn’t yield a big enough return on their investment.

Again, it seems puzzling the Yukon government never issued a public tender for the Alaska route. Nor did it pursue other options. After all, the government could have decided to build and own the line itself, and, if need be, then hire a company to maintain it, just as the N.W.T. plans to do. But the Yukon Party got squeamish at the thought of appearing to directly compete with the private sector, and instead went along with the option that Northwestel has long championed, to run fibre up the Dempster.

Hassard says, however implausibly, that he’s confident that companies will eventually develop a fibre route to Alaska by themselves. But if the route isn’t sufficiently profitable with a government contribution of $12.5 million today, how likely is it that someone will find it’s worth investing in the scheme without government support later? Or how likely is it that the government would want to help fund this project, once the Dempster back-up line is already in place?

It’s possible that the latest government-commissioned report on a fibre-optic link would answer some of our many outstanding questions on the subject. But, unlike the raft of other reports produced in recent years on the same subject, which are all readily online, government officials say this one must not see the light of day, because it has, you know, proprietary information in it.

Here’s a hunch: maybe the report also offers some embarrassing insights into the government’s decision-making process, which, in an impressive feat, seems both drawn-out and haphazard.

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