N.W.T., Yukon gov'ts help grow Northwestel monopoly: critics
Dempster Highway, Mackenzie Valley fibre projects do nothing to increase competition
By favouring Northwestel for large contracts, the Yukon and Northwest Territories governments aren't encouraging the growth of the North's telecommunications industry, and are instead helping the company strengthen its already formidable monopoly, say critics.
That familiar refrain is getting a reprise in the wake of the Yukon government's recent selection of the Dempster Highway as the route for extending (and, theoretically, strengthening) that territory's fibre-optic network, at an estimated cost of about $30 million.
Though a deal has yet to be finalized, Northwestel is going to be "a very important player in the project," says Steve Sorochan, the director of technology and telecommunications development for the Yukon government, which is not interested in owning the future line.
The hazy details released so far beg an important question: Is Northwestel being positioned to control yet another chunk of the North's fibre map, which it already owns most of?
According to Sorochan, Northwestel has pledged $10 million toward the Dempster project — roughly one third of the line's estimated budget. In addition, the company has offered to pay the line's estimated $3-million-a-year operating and maintenance costs, for 20 years.
To further entice the government, Northwestel is offering to "accelerate" a plan to extend the Yukon's fibre network from where it currently terminates at Stewart Crossing, to Dawson City, near the start of the Dempster Highway. (Northwestel had previously proposed to do that, but then changed its mind.)
All of that makes for an "attractive" offer and "does seem like a good solution," says Sorochan, especially since the Dempster Highway — which is home to only four communities with a combined population of around 5,000 people — does not, in the government's eyes, provide much opportunity for revenue.
But it's not the solution that was recommended to the government.
A 2014 study commissioned by the government and completed by Planetworks Consulting Corporation recommended that a new, private company be established with the help of a one-time $12.8-million government grant, and that that company build an independent-from-Northwestel fibre optic link from Whitehorse to Juneau, Alaska.
Sorochan says the government opted for the Dempster scenario due to its potential for connecting to the Mackenzie Valley Fibre Link, which is currently under construction in the N.W.T. Such a system would allow the operator of the Dempster line to redirect internet traffic through the N.W.T. (and ultimately Alberta and B.C.) in the not-uncommon event of a disruption to the network in the Yukon.
The Yukon government hopes that pan-territorial benefit will spur the federal and N.W.T. governments to chip in on the Dempster project. But those talks have yet to begin in earnest, says Sorochan.
Shutting out other companies
Cameron Zubko, the chief operating officer for Northwestel rival Ice Wireless, says the Yukon government would be shortchanging customers and other companies by partnering with Northwestel.
"We'd like to see the Yukon government issue this kind of thing in RFP (request for proposal) format, rather than sole source millions of dollars to a single company," Zubko says.
Zubko says his company hasn't been approached by the Yukon government about the Dempster route.
"There are plenty of other companies prepared to help the Yukon transition its old-guard monopoly network — which is one of the last in Canada to function like this — into a modern, healthy network of competing fibre and wireless providers," he says.
"In the south, it's a patchwork of fibre providers, which is a great way of keeping one company from having undue influence on all the pricing and all the service levels. We should be aiming for that in the Yukon as well."
Ice Wireless is used to seeing work go to Northwestel, however.
Last year the company, along with a construction partner, expressed interest in the contract to build and operate the Mackenzie Valley Fibre Link in the N.W.T., but did not make the shortlist of qualified bidders. The contract ultimately went to Northwestel and its construction partner, Ledcor, which has already reported construction problems related to difficult ground conditions.
"We were prepared to come in well under the $60 million budget for that project," says Zubko. The N.W.T. government had estimated the cost of the project at $60 million to $70 million.
"As soon as Northwestel won the bid, they announced the project was going to cost $82 million," says Zubko. "At that point, I expected the GNWT to move to the runner-up bidder. But the GNWT simply accepted the increased costs and went with Northwestel."
Government lacks political will to diversify, says aspiring MLA
David Wasylciw, a candidate running for MLA in Yellowknife's Frame Lake constituency and a director for the Smart Communities Society, which has advocated for community-owned fibre, says the N.W.T. government is too "risk-adverse" to take a chance on companies other than Northwestel.
That has the compounding effect of making Northwestel even harder to compete against.
"Without expanding the market, we lack competition," says Wasylciw. "And that competitive environment would both drive down costs and just provide different ways of implementing telecommunications in the North.
"If we're going to try to build up industries and build up jobs in the North — and telecommunication jobs are high-paying jobs, similar to jobs in government or resource-based economies — it's worth taking a bit of a risk to expand that."
Wasylciw says the government should take a page from some of the N.W.T.'s diamond mines, which set aside 10 per cent of larger contracts for smaller companies setting out to prove themselves.
"If they perform well, they'll get more of the work next time. That's the kind of environment we can be trying out."
One $5-million contract, put out by the N.W.T. government in 2012, illustrated the government's seeming compulsion to tailor-make contracts for Northwestel.
It was a wasted opportunity to create a competitive industry for fibre in the North.- Cameron Zubko, Ice Wireless, on the Mackenzie Valley Fibre Link
The contract called on a company to connect government-owned buildings in all 33 N.W.T. communities.
"That was too big, frankly, for anyone other than Northwestel to bid on," says Wasylciw.
Groups such as the Smart Communities Society successfully pushed the government to change the contract so that companies could bid on a community-by-community basis, which suggests the government has given diversification some thought, says Wasylciw.
"But in the end, after all the bids were in, all of the work ended up with Northwestel [through its one-third-owned, BIP-registered subsidiary, Ardicom]. And frankly it cost them a little more than breaking it up."
Wasylciw understands the government's point of view — to a certain extent. A smaller company could screw up a contract, but he says "we're in such a small environment that if we had gone to a smaller company and it hadn't worked out, we could have easily gone back to the incumbent monopoly provider."
Granted, he was on the losing end of what was ultimately a competitive bidding process, but Zubko of Ice Wireless sees the Mackenzie Valley link as little more than a project to help Northwestel fill a gap in its N.W.T. fibre network from Fort Simpson to Inuvik.
"It was a wasted opportunity to create a competitive industry for fibre in the North, but the GNWT obviously felt that having one company control their all their telecommunications was a benefit somehow," he says.
Northwestel declined to comment for this story, while the N.W.T. government stands by its procurement process for the Mackenzie Valley project.
The next test
What happens after the Mackenzie fibre line is built presents the N.W.T. government with another opportunity to think outside the box.
Unlike the Dempster line, the Mackenzie line will likely remain government-owned. Northwestel will be the operator and, much more curiously, provide the government input on what it should charge internet service providers, including Northwestel, for access to the line.
Wasylciw looks to what the Alberta government did with its Alberta Supernet network. That government-owned network is operated by an independent company, but service providers that want to jump on the line have to agree to provide high-speed internet access for rural residents and small businesses.
But Wasylciw says the N.W.T. government hasn't talked about the Mackenzie line beyond its initial construction.
"The way it will shape out, the pricing, the model of access…none of the internet providers in the North have been engaged in those conversations."
Translation: Northwestel might be the only company positioned to offer new and improved internet service in communities along the Mackenzie line.
"It's not like [competition] is bad for them. It keeps them sharp. It shows the marketplace is healthy and alive," says Wasylciw.
- A previous version of this story stated Ice Wireless bid on the Mackenzie Valley Fibre Link contract. In fact, while the company did participate in the bidding process, it did not make the final qualifying round for bidders.Nov 17, 2015 2:34 PM CT