Competition critical of NorthwesTel plan

The president of NorthwesTel, Paul Flaherty, is "very excited" about his company's plan to modernize its infrastructure. Not everyone is so enthused. "They've completely missed the boat," said Dean Proctor.

The president of NorthwesTel, Paul Flaherty, is “very excited” about his company’s plan to modernize its infrastructure. Not everyone is so enthused.

“They’ve completely missed the boat,” said Dean Proctor, chief development officer for SSi Group, an Internet service provider based in Yellowknife. “They’re focusing on building local wireless infrastructure for Bell and for NorthwesTel, but they have not focused on how to make bandwidth affordable.”

Last December, the Canadian Radio-television and Telecommunications Commission took NorthwesTel to task for the age and state of its communications infrastructure.

The commission gave the telco six months to come up with a plan detailing how it was going to modernize its system.

Earlier this month, NorthwesTel released that plan.

The five-year, $273-million project will see every one of the 96 communities in NorthwesTel’s service area hooked up to high-speed Internet and 3G or 4G wireless services.

To fund part of the modernization plan, NorthwesTel and its parent company, Bell Canada Enterprises, have asked the CRTC to allocate $40 million of the “public benefits” associated with Bell’s proposed $3.38-billion purchase of Astral Media to the project.

Under the CRTC’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.”

Although the benefits fund has never been used to build Internet or wireless infrastructure, it isn’t completely without precedent, said Flaherty.

When Bell bought CTV last year, the commission approved $60 million in public benefits funding that went to providing set-top boxes and improving satellite television infrastructure.

The plan that NorthwesTel submitted also calls for $100 million of the funding to come from the next five years of the annual $20.5-million subsidy that NorthwesTel already receives from the CRTC’s contribution fund.

But this is not the kind of thing that the fund is supposed to be used for.

“The contributions subsidy system is meant to support the cost of monopoly wireline phone service, not wireless phone service in a competitive market,” said Proctor.

His company, SSi, already provides Internet and VoIP services to 56 communities across the Northwest Territories and Nunavut. The only thing that is hampering access for those people is the high cost of bandwidth.

“NorthwesTel’s wholesale rate is five times what they charge retail customers,” said Proctor.

The modernization plan is akin to giving someone a car that they can’t afford to fill up with gas, he said.

“Right now, if you want to watch a movie it’s going to cost you much more for bandwidth in a satellite-serviced community than it will cost you to buy the film,” said Proctor.

Earlier this year, the commission ordered NorthwesTel to offer more reasonable rates for its wholesale services, and prove it with a cost study.

The rates that NorthwesTel has proposed have lowered the costs in larger communities but in smaller ones they’ve gone up, said Cameron Zubko, vice president of Ice Wireless, a cellular phone company that plans to start offering service in Whitehorse this fall.

Both Zubko and Proctor agree that the subsidy system needs to change.

They’d like to see subsidies shared, rather than given to NorthwesTel exclusively.

“The worst thing we can do for the North is give a massive subsidy to the company that already controls 90 per cent of the market so it can take the rest,” said Zubko. “NorthwesTel has shown they’re not willing to give up their monopoly easily.

“This is more about restoring their monopoly and destroying competition.”

If the $40 million in public benefits isn’t approved, the modernization plan will still move forward but it will have to be cut back, said Flaherty.

“The reality is we’d likely cut back the things in the least economic areas so the people who would be most disadvantaged would be people in the small communities,” he said.

But northerners shouldn’t allow themselves to be “held hostage” by a company with such a poor track record, said Proctor.

“The $273-million price tag looks very impressive, except it’s about the same amount of money (NorthwesTel) spent over the previous five years on capital, and the commission had determined that was not money well spent,” said Proctor.

Flaherty takes issue with that assertion.

Based on the average capital spending of the last five years, it’s actually a 32 per cent increase, he said.

“I think 32 per cent is a pretty significant increase,” said Flaherty.

Ultimately, it’s the CRTC that will decide what will happen, but the public does have a chance to influence that decision.

Until Aug. 9, the commission is accepting written submissions from the public.

Both NorthwesTel and SSi have posted instructions on their websites detailing how to participate.

Contact Josh Kerr at