Federal stacking restrictions a disadvantage to territorial broadband rollouts, SSi Micro says

Stacking restrictions on federal funding are constraining broadband service expansion in the territories where funding is needed for backhaul and terrestrial satellite infrastructure, Dean Proctor, chief development officer at SSi Micro Ltd., said in an interview. To comply with federal government stacking rules, service providers cannot receive funds from the federal government and request top-up funding from the territorial government for the same project, Proctor said. To get additional broadband funding, the provider would have to reach out to sources that are not funded by the federal government. The federal government sets “stacking limits” on its funding for projects, which limit the funding to a percentage of the total eligible spending on an initiative. Departments responsible for the funding take into account federal, provincial, territorial and municipal funding that goes toward the same project when calculating total Canadian government contributions. The policy affects the territories because the provinces have constitutional independence and the territories have no inherent jurisdiction from the federal government. There are projects in the provinces where the stacking rules don't apply, and in the North “the territorial government might not have the same leeway as the provincial government to contribute,” said Proctor, whose company serves more than 60 northern communities in Nunavut and the Northwest Territories. “In other words, it is a bit of a catch-22 in the territories, where if you have 'X' dollars from the federal government, the territorial government cannot come running in and then top it up,” he said. “I don't want to be too extreme on that—there has to be ways to work around it—but it is a constraint.” He said two issues facing the territories right now is a shortage of infrastructure for backhaul—the part of a network that provides intermediate links to support the network backbone—and funding to help install more wireless towers to distribute satellite broadband to homes and businesses. Progress has been made in building out terrestrial broadband infrastructure, but the cost of backhaul and getting satellite service into small communities in the territories has been a setback for broadband expansion, he said, due in part to high prices arising from Northwestel Inc.'s former monopoly in the territories. The CRTC issued a decision January to deregulate Northwestel's monopoly and allow for competition in the North. Northwestel had argued the monopoly was necessary to help subsidize costly, unprofitable services it provided in remote areas. "We have done a very good job of putting the terrestrial facilities in all communities in Northwest Territories and Nunavut,” he said. “The big issue becomes the cost of backhaul. Telesat is not out there ripping people off. There is just a reality of what the cost is to get satellite capacity into these communities.” In response to Proctor's comments, Alicia Long, a spokeswoman for Industry Canada, confirmed by email that federal assistance for broadband projects, including that provided through the Broadband Canada program, is “limited to a maximum of 50 percent of total eligible project costs with the exception of projects proposing to serve First Nations communities, where the maximum may be allowed to exceed 50 percent.” She added: “The total assistance from Canadian governments including federal, provincial and municipal, will not exceed 100 percent of eligible costs of the project.” A report released last year, called the Arctic Communications Infrastructure Assessment, said broadband expansion in the North is necessary to grow the economy and increase business opportunities. Since 1998, Northwestel has added more than 60 DSL sites—major connection points that distribute lines to neighbourhood nodes—across the Yukon, Northwest Territories and Nunavut. It has also expanded to provide cable and cellular Internet services. As part of a federal program called Broadband for Rural and Northern Development, through which Northwestel received funding, six northern communities have significant cable plants and five of the 96 communities that Northwestel covers have DSL. Joel Witten, associate director of marketing at Northwestel Inc. (a BCE Inc. subsidiary), downplayed the impact of stacking restrictions, saying the company has received government funding for projects. When asked about the restrictions, he said: "We are open to partnerships and we have participated in partnerships with the territorial government, federal government, First Nations government." Witten said broadband in Nunavut is also available through a direct-to-home satellite product from Netkaster, which operates on Telesat’s Ka-Band satellite capacity. SSi Micro launched the Qiniq network using satellite capacity in 2005. The federal government and SSi both invested $750,000 to upgrade the Nunavut Qiniq network in 2009. The same year, the territorial government and the federal government invested $18.5 million to purchase satellite bandwidth in Nunavut. Rural broadband provider Xplornet Communications Inc. has also announced the launch of satellites to support rural and remote broadband services in Canada. The Northwest Territories plans to expand broadband down the Mackenzie Valley in a project called the Mackenzie Valley Fibre Link. According to a territorial feasibility study released last year, the 1,115- kilometre fibre optic cable project is expected to face delays due to highway and pipeline construction in the Mackenzie Valley. The feasibility study estimated the fibre link could be completed by 2015 at the earliest. Witten said the Yukon has road accessibility in most communities, facilitating terrestrial networks such as fibre. Terry Hayden, assistant deputy minister of operations in the Yukon government, said in an interview that the territory is “connected by a single fibre optic link to the rest of Canada. Of course, if that link goes down, all of Yukon goes down.” The government of Nunavut funds the Nunavut Broadband Development Corporation (NBDC), which leads broadband initiatives in Nunavut. The Nunavut Department of Economic Development provides $200,000 per year to the NBDC as its core funding. Nunavut has also benefited from broadband initiatives funded solely by the government of Canada. In August 2008, the federal government awarded an investment of $21,601,175 for Nunavut's five-year broadband plan, called “Managing Bandwidth.” Most of the funding would be used for acquiring satellite bandwidth, said a Nunavut release at the time. “NBDC cannot use the federal funds to finance NBDC’s ongoing operations, and will depend on other investors to support its publicly mandated services that ensures people can obtain affordable broadband in every Nunavut community, while ensuring local economies benefit directly from broadband,” the 2008 release said. The Northwest Territories has also received funding wholly from the federal government as part of its Broadband Canada plan, which for the years 2009-2010 to 2012-2013 totals $225 million. "We have a company that has an operating area that is one-third of Canada's land mass with a population that's about one-300th of Canada's population,” Witten said, describing Northwestel's challenge of providing broadband connectivity in the North. “ a sparsely and remotely distributed population as a consumer base, plus a really harsh and difficult environment on top of that—extreme weather conditions, high costs to charter aircrafts, to maintain equipment. From a business model, it's challenging,” he said. Whitehorse and Yellowknife have significant populations of people to support broadband providers' businesses, but Nunavut is “distributed almost exclusively by charter access,” he said. “ really remote. Our challenge is to provide the same quality of service in the remote and rural locations as we provide in larger locations,” Witten said. With files from Nicholas Kyonka news@thewirereport.ca

Federal stacking restrictions a disadvantage to territorial broadband rollouts, SSi Micro says

News | February 13, 2012

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