In this chapter, we outline the key conclusions and recommendations - with a brief description of the corresponding lines of evidence to show how these were developed.
In order to demonstrate that a sustainable, long-term connectivity solution for the Territories is feasible, we set out to develop the following deliverables:
t Minimum recommended service standards for user groups and bandwidth capacity requirements for communities across the Territories.
t Costing of infrastructure corresponding to minimum bandwidth requirements for specific communities as well as territorial roll up of costs;
t A sustainable financial model for enhanced connectivity;
t Economic and socio-economic benefits of enhanced bandwidth; and,
t Practical ‘way forward’ pathways for implementation and engagement of stakeholders.
1. DEVELOPMENT OF RECOMMENDED MINIMUM SERVICE STANDARDS AND BANDWIDTH CAPACITY REQUIREMENTS
Minimum recommended service standards by user category
were identified ranging from residential to health and social services. The standards were developed by applying a Dynamic Optimization Model that considered the range of current applications in use (e.g., video conferencing, emailing, etc.) and simultaneity of usage of applications in each category.
As expected, minimum speed requirements varied greatly from 2Mbps for public works user category to 11 and 16 Mbps for high priority, front-line education and health services respectively (see Figure below). Overall, we found that a minimum speed of 9 Mbps
download and 1.5 Mbps upload (referred to as the 9 Mbps bandwidth – see Table below) is required to meet current needs of users in the communities.
The minimum connectivity levels recommended in this report are significantly higher than those currently available to users in most communities and CRTC’s aspirational target of 5 Mbps.
These recommendations represent revisions and improvements to the 2011 Arctic Communications Infrastructure Assessment Report (‘ACIA Report’) titled A Matter of Survival – Arctic Communications Infrastructure in the in the 21st Century by Imaituk Inc.
for Northern Communications Information Systems Working Group, This report identified the size of various user groups in the 75 communities and corresponding broadband connectivity user needs which in turn became the recommended goals and standards.
User categories as established in the ACIA report were used in this study.
Chapter 6: Conclusions and
Recommendations
Based on national and global trends, we also concluded that bandwidth requirements for the user categories would continue to increase at a very aggressive rate throughout the study period.
Figure : Applications versus Service speed
Five key service standards for Northern Connectivity were considered and goals were
recommended for all except reliability - as described in the table below.
Table : Recommended Service Standards
Recommended Service Standards
Standard Recommendation
Minimum Bandwidth* Download: 9 Mbps (now), evolving into the future.
Upload: 1.5 Mbps.
*Overall average usage per household for the population across the Territories.
Reliability No specific standard.
Redundancy 100% of the projected bandwidth used for critical applications e.g., health, safety & security.
Service Quality Bandwidth – differentiated according to population, demand by different user categories, simultaneous usage, type of platform Jitter (Packet Delay Variation) – 0.5ms average, not to exceed 10ms
maximum jitter more than 0.1% of the time Lost or dropped packets - <0.1%
Service Availability 99.99% of the time.
Aggregate minimum bandwidth requirements were identified for each of the 75 communities in the three Territories. The community calculations were based on bandwidth calculations by user category, mapping of the network platforms, contention ratios
as well as occupational and population data sourced from the ACIA report (see Chapter 2). These aggregate bandwidth requirements by community are the prerequisite for the establishing the costing of the
three service delivery platforms: fibre, satellite and microwave – and in turn, the least cost infrastructure solution for each of the 75 northern communities.
For reference purposes, an average minimum bandwidth speed per community was calculated for each of the Territories. We concluded minimum bandwidth requirements needed to be adjusted upwards significantly – from 147% for Nunavut to 463% for Yukon (see Table below).
‘Contention ratio’ is the potential maximum number of users that use the network bandwidth concurrently. The higher the
contention ratio, the greater the number of users that may be trying to use the actual bandwidth at any one time and, therefore,
the lower the effective bandwidth offered, especially at peak times. A 10% contention ratio was used in this study. Contention
ratios are adjusted downwards as the cumulative number of users on the network increases from the community to the
territorial level.
Table : Average of estimated backbone traffic – This Report versus ACIA Report
Territory
ACIA Estimated Backbone Needs (Average Mbps per
community)
Revised Estimated Backbone Needs (Average Mbps per
community)
Increase in Estimated Backbone Needs (Average increase over
all communities)
Yukon 106 948 463%
Nunavut 54 115 147%
Northwest Territories 120 550 405%
Reliability
No specific standard for reliability is set in this study, as this service standard is more properly set in light of operational experience – post-engineering and post- build/implementation of improved connectivity. Reliability is also a function of the technologies utilized in the network, which in the case of the three Territories means that the reliability of one part of the network or community may vary a great deal. As such, no single standard would be appropriate to set, nor could it be measured in this study.
Redundancy
Where no redundant link existed for a given community, redundancy calculations were based on the assumption that 100% of the projected bandwidth used for critical applications: health, justice / public safety and security would be included.
Service Quality
Based on the analysis above, the following suggested minimum standards for bandwidth and service quality were devised:
t Bandwidth – differentiated according to the characteristics (population, demand of user categories, simultaneous usage, platform(s), etc.) of the sector entity. The overall starting point service standard was 9 Mbps download and 1.5 Mbps upload. To be clear, this is the service package that would be subscribed to, NOT a guaranteed 24hr/day throughput guarantee. However, the physical infrastructure would generally support use of those speeds as needed;
t Latency (two-way) – As different technologies exhibit great variation in latency, no specified latency standard. While fibre optic sites will exhibit latency of <10ms, satellite sites will exhibit latencies of several hundred milliseconds;
t Jitter (Packet Delay Variation) – 0.5ms average, not to exceed 10ms maximum jitter
more than 0.1% of time; and,
t Lost or dropped packets - <0.1%.
2. BUILDING A SUSTAINABLE FINANCIAL MODEL
Our research indicated that the financial resources of stakeholders in the Territories were likely to be inadequate for the recommended network upgrades and that some outside funding of an initial capital investment would be necessary. This was expressed as the financial incentive required to attract existing operators and/or third party commercial investors to invest and operate the network.
Four scenarios were considered based on connectivity infrastructure improvements – as shown in the table below. The required financial incentive to attract the incumbent to invest in the upgrade and operate the network ranges from $547.23 million to just under $2 billion, depending on the scenario. In the scenarios without fibre builds, the required financial incentive is less than the primary network-upgrade CAPEX. In the scenarios with fibre-build options, the required financial incentive is more that the primary network upgrade CAPEX. The additional financial incentive would cover the present value of these future Free Cash Flow deficits.
In addition to the financial incentive, there would be a household subsidy requirement to offset
the higher cost of broadband. For the 2016-2023 period; this household subsidy is estimated to
be $35.39 million or $4.42 million on an annual average basis.
Table : Financial Model Summary – Rolled-Up Analysis for the 3 Territories
Primary network upgrade
CAPEX costs $622,680,444 $765,001,125 $2,178,014,035 $651,085,607 Incremental access
network CAPEX $16,077,108 $16,077,108 $16,077,108 $16,077,108 Required financial
incentive** $547,225,182 $709,376,053 $1,956,273,320 $685,746,509 Household subsidies
(2016-2023) $35,386,472
Average annual subsidy $4,423,308
Year 2023 broadband
penetration (1.5 Mbps+) 94.5%
Year 2023 ultra-broadband
penetration (9 Mbps+) 75.1%
Year 2013 broadband
ARPU $60.00
Year 2023 ARPU (before
subsidies) $97.25
Source: Nordicity estimates
* Fast roll-out scenario.
** The required financial incentive is equal to negative value of the NPV generated by the financial model.
There is compelling evidence that the financial resources of stakeholders in the Territories are unlikely to be sufficient for the investment required to meet the recommended connectivity standards. Thus, it is likely that some outside funding of an initial capital investment would be necessary. Average incomes of northern residents - with the exception of the Yukon are lower - and cost of living higher in comparison with the rest of Canada.
In the focus group and survey research, front line managers indicated that territorial governments have limited financial resources even for connectivity improvements for delivery of government services. In the run up to the June 2013 CRTC Hearing, evidence filed indicated that NorthwestTel’s modernization plan would provide incremental improvement on current connectivity levels – nowhere near the minimum levels proposed.
Statistics Canada 2006 Census, Catalogue Number 97-563-XCB2006016
Option 1 Option 2 Option 3 Option 4
Base Network Upgrade Base Network Upgrade Base Network Upgrade (no new redundancy) (critical traffic
redundancy) (full traffic redundancy)
(Option 2 plus new fibre builds)
The initial capital investment required was expressed as the financial incentive required to attract the operators and/or other commercial parties to invest and operate the network. The implantation plan in Chapter 5 illustrates the action items for the Task Force to undertake for broadband in the Territories. The financial requirements outlined in this report will be a topic for consideration by the Task Force to fund broadband implementation.
Capital Cost Estimates for Network Upgrade Option 2
The option of upgrade to existing infrastructure with satellite redundancy was selected as the base case for reference purposes
10and correspondingly, the aggregate capital cost estimate is $765 million (capital costs). A breakdown for each of the 3 Territories provided in the table below.
Table : Costs to Upgrade Current Network Infrastructure by Technology by Territory using baseline assumptions (Mackenzie Valley Fibre exists, and carrying only high priority traffic on redundant links.)
Microwave Costs
($000) Fibre Costs
($000) Satellite Costs ($000)
Redundant Satellite Link Costs
($000)
Yukon $15,847 $1,750 $4,225 $39,814
NWT $27,988 $1,413 $37,686 $58,033
Nunavut $- $- $533,771 $44,474
3-Territory
Totals $43,835 $3,164 $575,682 $142,321
Main Link Upgrade Costs $622,680 Redundant Link Upgrade Costs $142,321 3-Territory Grand Total $765,001
Upper Estimate (+50%) $1,147,502 Lower Estimate (-50%) $382,501
Designation of this option as base case, does not preclude selection of other scenarios as a preferred option rather it simply
reflects the fact that this scenario would meet the minimal objectives of improving connectivity and providing redundancy
while reducing the financial incentive required for the long-term sustainability.
3. ECONOMIC AND SOCIO-ECONOMIC IMPACT ASSESSMENT
Investment in enhanced broadband access is expected to generate significant economic and socio-economic impacts over the projected 2016-23 time frame as shown in Table below.
Without improved broadband connectivity in the North, the three Territories may lose potential growth and their ranking relative to other economies worldwide that are experiencing these positive impacts. As a result, the North might lose its competitive advantage in the global market, experience losses in jobs (migration of workers) and a decrease in quality of life (e.g., consumers will no longer gain utility via consumer surplus).
Economic Impacts
Our assessment of economic impacts identifies changes in GDP, employment and consumer surplus while socio-economic impacts focus the transformative effects improved connectivity has on health, education and other social services which in turn will support cultural groups, institutions and communities.
Using an economic impact model and leveraging previous studies, the impact of enhanced connectivity
10on the GDP, employment and consumer surplus
10in each of the three Territories was estimated - as shown in the table below.
These estimates are projected totals from 2016 to 2023.
Consumer surplus is a measurement that assigns a monetary value to benefits that consumers experience when using a service
or product – in this case, broadband connectivity. Consumer surplus is calculated using the consumer’s ‘willingness to pay’ for
that service – that is, they assign their own monetary value on that service or product. The market determines the actual price
the consumer pays for the service or product. The consumer surplus is thus the difference between that market price that the
consumer actually pays, and the willingness to pay price.
Table : Total Economic Impact Summary, by Territory, 2016-2023
2016-2023 Yukon
GDP $174.9 million
Employment (Min.-Max.) Fiscal Impacts Consumer Surplus
68-220
$9.86 million
$51.6 million
Northwest Territories
GDP $294.2 million
Employment (Min.-Max.) Fiscal Impacts Consumer Surplus
109 -238
$22.3 million
$55.8 million
Nunavut
GDP 133.1
Employment (Min.-Max.) Fiscal Impacts Consumer Surplus
72-178
$5.45 million
$26.4 million GDP
The 3 Territories are expected to experience a notable increase in GDP over the 2016-2023 study period with the most significant increases in the first few years of implementing the broadband plan. Once the 9 Mbps target has been reached in 2019 for Yukon, NWT and for Nunavut, in 2020, the growth in broadband penetration declines in the model to a more natural path to steady state penetration and the GDP growth becomes more modest in growth.
The economic analysis shows NWT gaining the most GDP from enhanced connectivity - a total of $294.2 million by 2023 – see Table below. On average, broadband adds $14.8 million of GDP to the Nunavut economy, annually – while Yukon broadband adds $19.4 million of GDP per year and NWT broadband adds $32.7 million of GDP per year.
Table : Total GDP impact, by Territory Cumulative total
GDP impact, 2016-2023
Total GDP impact, per year Yukon $174.9 million $19.4 million Northwest
Territories $294.2 million $32.7 million Nunavut $133.1 million $14.8 million
Source: Nordicity estimates
Employment
In total, the expansion of the broadband services in the North (in accordance with the forecast
in this analysis) is expected to create between 249 and 636 new jobs - depending on the
connectivity investment scenario - in the North between 2016 and 2023.
Fiscal Impacts
The fiscal impacts analysis showed the tax revenue for all Territories that is tied to improved broadband. The analysis showed the that the NWT government will see the most tax revenue attributed the economic impact of broadband, at $22.3 million, while the Yukon and Nunavut governments see $9.86 million and $5.45 million in tax revenues, respectively for the 2016-2023 period. In total, broadband will generate $37.61 million in tax revenues for all the Territories between 2016-2023.
Consumer Surplus
Across the three Territories, the annual incremental consumer surplus is forecast to range from
$0.3 million to $11.6 million. Over the 2016-2023 period, the incremental consumer surplus is forecast to total $133.8 million in economic benefits for broadband users in the North.
Socio-economic Impacts
Socio-economic (or ‘social’) impacts were identified from our primary (focus groups, survey) as well as literature review. Consistent with benchmarking of similar projects in best practice jurisdictions, Impacts are generally expressed as indicators of improvements for society, like increased healthcare quality, better quality of education or enabling better quality of an employee’s work. However, as socio-economic impacts are generally the result of complex interactions of multiple causes, it is difficult to quantify the impact of a single cause such as enhanced connectivity on outcomes.
Government services
Healthcare, education and justice - government agencies providing frontline services – were cited in the primary research as having the highest bandwidth needs and potential benefits.
Potential benefits are summarized as follows:
t Healthcare – enhanced broadband would improve healthcare access and service quality. One critical advantage would be the ability of specialists from outside of the North to provide diagnoses in northern communities through remote access.
Correspondingly, wait times for diagnoses and treatment as well as transportation costs would be reduced.
t Education – improvements are expected due to improved distance education, access to video-conferencing and access to course materials. Also reducing the amount of time to do research and improving educational outcomes by improving access to information.
t Justice – Focus group research showed that currently, justice court circuits are
heavily back-logged and an increase in the use of videoconferencing would
contribute to reducing the load on the Justice system. Unfortunately, current
connectivity available to the courts is limited and is unreliable. Enhanced
connectivity would allow for regular video-conferencing among the parties: police, lawyers, judges as well as allowing for video-conference appearances for routine court appearances (e.g., for witness deposition, court sessions, remand, etc.). This would result in improved justice services and a reduction in travel costs.
t Government–Improved connectivity would allow administrators (both support functions such as HR and finance as well as personnel dealing with the public - to use more functions in current applications as well as new, bandwidth intensive applications. This in turn, would improve communications within government departments. There is also the potential for savings in travel costs for training and meetings.
t Public safety and first responders – enhanced connectivity and redundancy would ensure that first responders had access to real-time videos, images, and other data as well as more reliable services in the event of a natural disaster or emergency.
It would also allow better contact with rural and remote access communities that currently rely on very limited satellite connections and/or even short-wave radio.
Businesses
t Small and medium sized enterprises (‘SMEs’) generate significant employment in the Territories and enhanced connectivity would mean more competitive businesses with the rest of Canada and the world. Arts and crafts and tourism - important to the economies and employment in the Territories - were identified as two sectors that are where enhanced connectivity would provide important benefits.
Arts and crafts constitute the second largest occupation in Nunavut and is important in the Yukon and NWT. More reliable network connections and video-conferencing, etc. would enable contacts with material suppliers and buyers, collaborate design and production with artists in other communities and continuous learning. PEOPLELink – a direct video link between carvers and end-purchasers in global metropolitan markets enables artists to produce custom designed, on-demand, higher value art work, and retain a greater percentage of the profits locally and ultimately, increased sales.
In the case of outfitters and the hospitality industry in the north – much like the benefits afforded by PEOPLELink – improved connectivity entails a host of economic and social benefits. The Tourism Industry would be better equipped with the necessary tools to communicate with potential clients, tour organizers, airlines, cruise ships and others in the travel industry necessary both for seasonal planning and on-going logistics. Enhanced connectivity would enable the Tourism Industry in the north to be more agile and respond to rapid changes in technology, and tourism market trends.
t Large companies such as those in mining and other resources, transportation
(shipping, airlines) and services (hotels), etc. often have their own on-site satellite communications. These companies are potential partners in the development of communications as long term clients that can share the costs of infrastructure improvements and new builds. In cases where mine sites are located close to existing communities, some large mining companies have made broadband connectivity - used during working hours for business – available to those communities.
Northern Residents
t Quality of Life including Culture, Social Values - Enhanced connectivity has been shown to enhance quality of life in communities, allowing for access of outside resources for training and development, and enabling communities to cooperate in cultural initiatives and language preservation. One of the greatest benefits afforded by broadband connectivity to rural and remote communities is the ability to share in the experience of preserving their societal values and disseminating their culture to the rest of Canada – in other words, to those that have not had access to their culture before. Broadband connectivity can assist in creating a ‘cultural repository’, which is a goal of the elders in the northern communities but has been impossible due to bandwidth requirements.
4. IMPLEMENTATION AND STAKEHOLDER ENGAGEMENT PLAN
Enhanced connectivity is critical to improvements to quality of life and economic development in the Territories. A comprehensive strategy for implementation and stakeholder engagement is just as critical as initial funding to the success of the project. This strategy - including
recommendations on roles and responsibilities, process, deliverables and an action plan will provide the basis for sustainable development of connectivity in the Territories. The strategy is based on a joint federal and pan-territorial partnership and long term commitment to Arctic communications that would enable sustainable funding, adherence to common principals and development of innovative solutions adapted to territorial needs. The implementation of the strategy would require the formation of a Broadband Implementation Task Force with the necessary financial resources and functional expertise. The Broadband Implementation Task Force must also possess the authority and administrative capacity to administer RFIs and RFPs, as required, and then evaluate and act upon the accumulated information and proposals.
Based on best practices and accountability frameworks of the agencies cited above, four key recommendations form the core of the Implementation and Stakeholder Engagement Plan are:
Recommendation 1: Establish a high level Broadband Implementation Task Force. The
key roles of the Task Force would be to clarify joint federal and pan-
territorial funding commitments and preferences provide guidance in
the application and adaptation of strategy, direct implementation and stakeholder engagement activities around regional projects and pan- territorial concerns, provide continuity and corporate memory, financial and governance oversight and reporting back to government and other stakeholders on matters critical to the joint federal and pan-territorial mandate in order to achieve accessible, affordable, adequate and adaptable communications infrastructure in the three Territories.
Recommendation 2: For each particular regional project, the Broadband Implementation Task Force would appoint a Project Gating committee to align core stakeholders and clear financing hurdles prior to project implementation.
Recommendation 3: Once each regional project’s gating requirements have been satisfied, the Broadband Implementation Task Force would appoint an
Implementation committee to undertake the next phases of formal implementation and stakeholder engagement activities.
Recommendation 4: A) Over the near term and parallel to initiating regional projects, the Broadband Implementation Task Force would appoint an Oversight committee to seek guidance from the CRTC and any relevant federal departments with respect to prospective regulatory changes that may impact broadband services in the Arctic.
B) Over the long term and once each regional project has been implemented and gone into service, the Oversight committee would coordinate territorially- led evaluations of regional project impacts at the community, user group and territorial levels. While territorial groups would manage and conduct their respective evaluations, the Oversight committee would synthesize findings and report back to the Task Force – at large.
The process flow for the Broadband Implementation Task Force as the Oversight and Gating
Committees for selection and implementation of regional projects is shown in the figure below.
Figure : Organizational diagram of Task Force and Regional Projects
With the territorial governments as lead, the success of this project will depend on implementation and engagement strategies with key stakeholders, including businesses, governments, residents and the operator. It is assumed that the territorial government will take the lead in defining connectivity projects in order to ensure their citizen’s needs are met.
Furthermore, successful implementation depends on a financially viable model, predicated upon external financial assistance. As the committee structure and processes proposed here will be in place for multiple years, multi-year funding will be required to complete the tasks described. It is suggested that to ensure financial stability for implementation and stakeholder engagement, the federal and/or territorial governments will need to provide funding on a recurring basis.
As discussed in Chapter 3 (financial sustainability) and in Chapter 5 (implementation and stakeholder engagement), there is a critical role for the federal government and its agencies to develop connectivity in the Territories.
Without improved broadband connectivity in the North, the three Territories may lose potential growth and their ranking relative to other economies worldwide that are experiencing these positive impacts. As a result, the Territories might lose their place in the national economy, as well as a loss in competitive advantage in the global market, experience losses in jobs (migration of workers) and a decrease in quality of life (e.g., consumers would no longer gain utility via consumer surplus).
Broadband Implementation
Task Force Joint Federal-Pan-
Territorial Mandate
Regional
Project 1 Regional
Project 2 Regional Project N
Project Gating Committee
Implementation Committee
Engagement group
Selection Advisory group
Oversight Committee
