End the monopoly

On behalf of all Yukoners who use the Internet for work and play; on behalf of all Yukon businesses, charities and community groups who see their telecom expenses rising every year; on behalf of the Yukon jobs and businesses that don’t exist...

On behalf of all Yukoners who use the Internet for work and play; on behalf of all Yukon businesses, charities and community groups who see their telecom expenses rising every year; on behalf of the Yukon jobs and businesses that don’t exist yet because of expensive and unreliable internet access here, I say it is time to end NorthwesTel’s monopoly.

I don’t say this with anger or vindictiveness. NorthwesTel has often done a good job in difficult circumstances. I used to work there. I had a good experience, learned a lot about northern business and met lots of people whom I continue to respect (especially the people who climb the towers in 40 below so you can have uninterrupted access to hockey scores while in the drive-thru at Starbucks).

I say it because the old model’s time is up. An Outside-owned monopoly shouldn’t be allowed to make unknown monopoly profits, and hold back the economic development of the Yukon, in return for hiring some local people and actively sponsoring hockey rinks and hospital fundraisers.

Think back, way back, to Whitehorse in 1940. The city was in a love-hate relationship with the monopoly of the day, the White Pass railroad.

On the one hand, the city wouldn’t have existed without the railroad. Other options to get here included hiking the Chilkoot Trail carrying your gear, or travelling around 5,000 kilometres by sea from Vancouver and up the Yukon River from the Bering Strait. There were no highways and air service was still in its infancy.

Whitehorse’s population would not have mushroomed to 745 by 1941 if it hadn’t been for rail infrastructure.

On the other hand, White Pass had a monopoly grip on the Upper Yukon. They owned the train, almost all of the sternwheelers on the river, and a wide range of other businesses.

Locals complained bitterly about high ticket prices and freight tariffs. Old-timers say the railroad was not shy about throwing its weight around if Yukon businesspeople wanted to compete too aggressively with parts of its business empire.

If PowerPoint had existed in 1940, White Pass executives would have been showing the commissioner slides trying to talk the government out of investing in highways or airports. They would have pointed to how many local jobs they created, how much money they invested keeping the trains going through the passes all winter, and how much money they donated to charity.

Which is exactly what NorthwesTel executives are doing now, as they put on a full frontal charm offensive ahead of upcoming hearings by the CRTC, the federal regulator.

The question for us is whether we want to break NorthwesTel’s monopoly, as White Pass’s was shattered by the Alaska Highway and the jetliner.

Our well-meaning protectors at the CRTC and Yukon government have failed to protect us from NorthwesTel’s monopoly. They were allowed to buy the cable company a few years ago, with hardly a peep from our MLAs, giving them a local Internet monopoly. They own the only fibre cable to the Outside. Many of their prices are no longer regulated and, unlike fellow monopolist Yukon Electrical, they don’t have to publish how much money they are making here.

The CRTC did criticize NorthwesTel, remarkably harshly for a federal regulator, for under-investing in its infrastructure here. They also said that the regulatory regime “had failed to produce the expected benefits (e.g., choice, reliability, and innovation) for northern customers” and “NorthwesTel’s shareholders have benefited from the price cap regulatory framework to a far greater extent than its customers.”

High monthly fees and shocking overage charges are bad for our economy, now that Internet access is critical to doing business. Even worse, in the long run, is the fact we are on a spur fibre line. Stefan Voswinkel’s study on knowledge workers in the Yukon indicated that Internet service is a major pain point for many of them. One backhoe in Fort Nelson can cut Yukon businesses off from the world. This risk means we don’t have the chance of doing things like they did in Lulea in northern Sweden, where Facebook built a billion-dollar data centre to save on server heating costs.

Back in 1940, the solution wasn’t to have a regulator make White Pass lower its freight charges or improve connections with the steamers going south from Skagway. Or to hope for the small Yukon private sector would someday build a competing route. Instead, government built airfields and the Alaska Highway and opened them up for the private sector to use.

One specific question is whether we should commission a second fibre cable to Outside, to be run by someone other than the incumbent monopoly. This would solve the Fort Nelson backhoe problem and create a competitive option for heavy telecom users as well as future local Internet and cellular providers.

The monopoly will have lots of arguments against this idea. It would be expensive. It interferes with the private sector. It threatens local jobs. Let’s look at those in turn.

It would be expensive. I’ve heard one-time investment numbers between $20-30 million bandied about by telecom engineers for a link between Whitehorse and Juneau. While this seems like a lot of money, it is actually chump change for the Yukon government. It’s half what they spend on a new jail or school. Especially when you think of it as an asset that will last decades.

The territory spent millions studying a railroad to Fairbanks. Every year, they spend around $10 million a year supporting the tourism industry. That’s a $100 million investment over a decade.

The budget of the Department of Economic Development is around $15 million a year. If the Yukon government actually wanted to fix this problem, money is not the obstacle.

As an economist, I am normally leery of interfering with the private sector without a good reason. However, in the North, there is a good rationale for investing in infrastructure. The government runs the airports, the highways and generates most of the electricity. It then lets the private sector use these assets. No one seems to complain much about the government doing $10 million a year worth of interfering in the tourism industry.

As for local jobs, this is a difficult issue. NorthwesTel lobbyists can point to specific people and include their photos in glossy brochures. But we can’t see all the jobs that don’t exist because of expensive and unreliable Internet service. The White Pass analogy is suggestive. Would your job even exist if Air North or the Alaska Highway hadn’t come into being? We need to take the long-term perspective on this.

The CRTC is having hearings in Whitehorse June 19 and 20. But I wouldn’t get your hopes up about that. We are a small and distant district in the CRTC empire, and the CRTC does not move at Internet speed. This is a big part of the reason we are where we are.

If we want to open up our economy to the 21st century, we will have to do it ourselves. We don’t need to regulate White Pass better, we need to figure out what this century’s equivalent of the Alaska Highway is and build it.

Keith Halliday is a Yukon economist and author of the MacBride Museum’s Aurore of the Yukon series of historical children’s adventure novels.

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