Thank you, Madam Chair.
Northwestel appreciates the opportunity to speak to you here this afternoon as part of your study on northern infrastructure projects and strategies. We are very hopeful that this will result in initiatives that continue to improve the quality of life and economic prosperity for the residents of Canada's north.
As a little about Northwestel, Northwestel is the incumbent telecommunication service provider in northern Canada, serving 120,000 Canadians in 96 communities throughout Yukon, the Northwest Territories, Nunavut and northern British Columbia. Our geographical operating area encompasses 40% of Canada's total land mass, but only 0.4% of the Canadian population. Just by way of context, 70% of the communities we serve have fewer than 500 residents.
Northwestel maintains approximately 5,000 kilometres of fibre optic cable and 8,000 kilometres of microwave radio, and we operate in some of Canada's harshest and most remote locations.
Our corporate and operational headquarters are based in Whitehorse in Yukon and Yellowknife in the Northwest Territories. We also have a regional office in Iqaluit and provide local employment in more than 15 northern communities. We are one of the largest continuous private sector employers in the north, with over 500 employees living and working here. Unlike many companies operating in northern Canada, our senior leadership team, our operational presence and most of our telecommunications equipment is resident north of 60. Approximately 12% of our workforce self-identifies as indigenous, and we have eight joint ventures with indigenous businesses and institutions.
Northwestel is a significant economic contributor in the north. Our annual direct economic impact is about $170 million a year in terms of salaries, operations and capital investment. Cumulatively we have invested more than $800 million in telecommunications infrastructure across northern Canada. Northern indigenous suppliers are often significant beneficiaries of this investment.
Northerners deserve fast, reliable, cost-comparative telecommunications, and we strive to meet those objectives in a world where standards and expectations are growing at an unparalleled speed. We are proud of our efforts to modernize telecommunications in the north and we've partnered with federal, territorial and indigenous governments on bold nation-building infrastructure investments across our region. These partnership agreements and joint ventures have occurred to meet the needs and capacity of our communities, unlike traditional P3 models, which are not always well suited to northern projects.
Yukon was the first jurisdiction in Canada to provide high-speed Internet to every community in the territory, and by the end of next year we will have successfully brought broadband Internet to our entire operating area, except for one community. The one community that doesn't have service is Bob Quinn, in British Columbia. It's a community with fewer than 10 houses.
Northerners benefit most when the private sector partners with government to access funding envelopes dedicated to northern and rural telecommunications infrastructure. This has been, and continues to be, an essential way to address the unique challenges of Canada's north, our limited access or small population base, and limited human and financial resources. It's especially true for small fly-in communities. By working in partnership with various governments, we've managed to make real progress towards providing Internet services and Internet rates across the north that are comparable to those offered in southern Canada.
One of the successes I'd point you to is our modernization plan, which is a $230-million investment between 2013 and 2018. All 60 communities that are served terrestrially, meaning either by fibre or microwave, now have 4G smart phone capabilities and broadband download speeds between 15 and 250 megabits per second. We've also provisioned 14 satellite-served communities with smart phone 4G capabilities and broadband speeds ranging from 2 to 5 megabits per second.
Most recently, with the support of ISED's Connect to Innovate program, our Tamarmik Nunaliit project will provision all 25 Nunavut communities with 15-megabit-per-second broadband and 4G LTE smart phone capabilities by the end of next year.
The Mackenzie Valley fibre link is another recent example of private-public collaboration. In 2017, the Government of the Northwest Territories, Northwestel and Ledcor provisioned 1,200 kilometres of fibre between McGill Lake and Inuvik in the Northwest Territories. This investment brought high-speed Internet at lower prices to the Mackenzie Valley and facilitated improved government programs, services and economic development opportunities.
As the Government of Canada looks north and identifies investment priorities, it should focus on projects that demonstrate public benefit and leverage investment by, and opportunities for, the private sector. When developing public policy and program funding models, please consider the precarious nature that many northern businesses face given high input costs, increased global competition and limited growth opportunities.
Public funding for initiatives that instigate direct competition with the private sector creates instability and discourages private investment. Financial support for infrastructure with broad public benefit that spurs economic growth makes doing business more affordable in the north, and so a high quality of life for all northerners should be the priority.
Investments in telecommunications connectivity are absolutely important, but so are investments in transportation and electricity. These have tremendous impact on our cost of doing business and the cost of service provision to our customers. Transportation and travel costs are among the most significant inputs to Northwestel's operations. We service 96 communities that are spread out over 40% of Canada's land mass. In the most extreme case, Grise Fiord is 1,500 kilometres from the nearest hospital in Iqaluit and 400 kilometres to the nearest community, which is Resolute. Distances increase the cost to serve these communities.
A lack of transportation options is also a significant cost input for any company operating in the north. Forty-three of our 96 communities do not have year-round road access, and of these, 30 have no road access at all. For business, that means equipment and supplies must be barged in on a sealift, in the case of the eastern and northern Arctic. Limited commercial flights into and out of communities often means air charters are required for both routine and emergency repairs.
I can give you an example. In some communities, if we have a phone line that's broken in a residential home and we charter in an aircraft, it could be $15,000 or $20,000 just to fix a phone line.
Electricity is another significant cost input for us. Our commercial power costs in the north are significantly higher than in the rest of Canada and 15 times higher than equivalent consumption bands in Quebec. In Nunavut, commercial rates can be as high as $1.11 per kilowatt hour. Rates in Nunavut are expected to go up, with rates in Iqaluit increasing until they're equal to the rates in the other communities.
While commercial power rates in the Northwest Territories and Yukon are lower than in Nunavut, they're nearly double the national average and climbing at a higher rate than inflation. As electricity is a key input to broadband service delivery, continued rate increases place upward pressure on residential and business Internet rates.
In addition to commercial power, our network's remote locations require us to generate our own power at 81 sites where we have no commercial power access. Thirty-six of those are accessed by helicopter only, meaning we have to sling diesel fuel in on helicopters to power the sites.
Improving broadband is not as simple as just needing more fibre, increasing competition or regulating prices lower. Distance, geographical challenges, high input costs and low population density make it challenging to find a business case for telecommunications service providers to recover their investments.
This challenging business case is made significantly more adverse by structural mechanisms that drive market conditions. Examples are the requirements to provide wholesale access. Unlike most southern jurisdictions, there are simply not enough customers and not enough revenue from local services in the smallest communities to support one service provider, let alone two or more in communities that are forced into competition for facilities access that directly impacts future private sector investment.
Achieving CRTC's 50-megabit target will require significant public-private partnerships in fibre to the home, 5G, long-haul terrestrial fibre, long-haul subsea fibre—for example, between Nuuk in Greenland and Iqaluit in Nunavut—or investments in technologies such as low earth orbit satellites in the coming years.
Government programs also need to consider redundancy concerns in rural and remote regions of Canada. Businesses and consumers rely on the Internet 24-7, and any service outage can have significant health, safety and socio-economic implications.
Closing the infrastructure gap between the Arctic and the south will require hundreds of millions of dollars in infrastructure development and strong collaboration between all levels of government, indigenous organizations and the private sector. This is the only way that Canada will meet its economic and social potential in the Arctic.
As one of Canada's largest permanent private sector employers in the north, I know first-hand how the infrastructure gap impacts the cost of doing business and our ability to be competitive. To shrink this gap and support social and economic development in the north, we have four recommendations.
The first one is to allocate specific funds that address the northern infrastructure deficit and that recognize the unique characteristics of operating here and the high cost of infrastructure development in the north.
Second, when considering major infrastructure investments, consider the broad benefits of the initiative both today and into the future. Frequently, public funds are allocated based on the business case for a single project outcome—a road, a hydro dam, a line of fibre—when in fact most nation-building initiatives support multiple social and economic benefits, and if considered in their entirety with potential partners, could include efficiencies and cost savings in preparing northern Canada for tomorrow.
Third, if northern Canada is to be fully engaged in the digital economy with reliable data and Internet services comparable to the south, public broadband programs must set aside funds specifically to build infrastructure and address redundancy concerns in remote and rural locations in Canada.
Finally, the government should look to abandon any obligation for subsidy recipients in Canada's north to offer wholesale access; instead, promote affordability through retail price commitments.
Thank you, Madam Chair. I'd be happy to take any questions the committee may have.
