With no network infrastructure, towns opting to build their own

Among the arguments from BCE Inc. and those supporting its appeal to federal cabinet of the CRTC decision mandating wholesale access to fibre-to-the-home (FTTH) networks is that the ruling will slow development of high-speed Internet infrastructure in outlying areas. But the high costs involved with getting that infrastructure into rural and more-remote communities means they already weren't high on the priority list, which leaves it up to smaller, home-grown companies and government to fill the void, said independent telecom analyst Bill St. Arnaud. "Most communities are, at best, served by one or two carriers — a cable company and a telephone company — and generally are not interested in making any significant investments in smaller or more-remote communities," St. Arnaud said in a phone interview. "The cost of back hauling everything so far and the rate of return for a large telephone or cable company is much higher than for a smaller company, they have much larger overheads and so forth." These outlying communities "feel it’s important for economic survivability to have world-class Internet and network connectivity. (Going it alone is) generally their only option," St. Arnaud said. The central Alberta town of Olds, located about an hour north of Calgary, was one such community that decided to take matters into its own hands. About eight years ago, the Olds Institute for Community and Regional Development, a volunteer-run non-profit, decided one way to get a leg up on resident and business attraction and retention was to improve its insufficient broadband services, Chris Thompson, assistant general manager of O-Net said. Those discussions at the Olds Institute led to the decision to install a FTTH network. It wasn't uncommon for companies handling large amounts of data to move it physically instead of digitally, Thompson said in a phone interview. "There's companies out there that do these three-dimensional laser scans of these oilfield well sites, that kind of thing — and we're talking about massive amounts of data — and inevitably what they're doing is driving it around and flying it around as opposed to using Internet connectivity to move it around," Thompson said. O-Net is a for-profit entity wholly owned by the Olds Institute that sells TV, Internet and phone services over the community-owned infrastructure. And, according to a recent third-party speed test, its customers are getting three-digit Mbps download speeds compared to single-digit Mbps download speed offered by the next fastest carrier, Thompson said. With a population of about 8,200, Olds now offers gigabit Internet to nearly all of the town's 3,500 residences and 400 business locations, said Thompson. "The original concept was essentially ‘we, as the community, will put the network into the ground and we want the incumbent providers to come and sell higher quality or higher level of services over top of that infrastructure," Thompson said. "The incumbents eventually backed out of that process, they weren’t interested in that, which inevitably formed the birth of O-Net as the provider of these services." He added: "I think when you just look at the size and scope of the projects, it's probably more financially viable to light up a community of 10,000 versus a million. It's an extremely capital intensive process to build the networks." Earlier this year, a Deloitte Touche Tohmatsu Ltd. report forecast that gigabit Internet would be available in three per cent of Canadian homes by the end of the year. But as part of its petition opposing the CRTC’s policy, Bell said allowing other users access to its infrastructure would be a major obstacle to its FTTH rollout plans, upon which many of these gigabit offerings depend. Even though large committed investments in places such as Toronto will "eventually proceed," Bell said that in "smaller towns and rural areas, fibre-to-the-home deployment will be delayed or not take place at all, as mandated access eliminates the business case for investment." Last week, Ottawa city council followed its Toronto counterpart in debating a motion proposing support for the CRTC decision. But unlike in Toronto, Ottawa's municipal politicians voted against formalizing their support. During the Feb. 24 debate, Ottawa Coun. Stephen Blais addressed rural access, noting that there are areas within the municipal boundary that don't currently have high-speed Internet. Upholding the CRTC ruling won't provide the necessary incentives for companies to invest in the high-speed infrastructure, Blais said. "To support this motion means supporting or being anti-rural Internet. So you’re actually disincentivizing access to the Internet for tens of thousands of rural residents in our city," Blais said. "And we can’t ask companies to invest in innovation if we’re going to let small firms bleed off of that investment without having the proper opportunity to recoup those funds and continue to innovate." According to a 2014 report commissioned by the Federation of Canadian Municipalities on rural broadband access, while it's one thing to acknowledge the country's digital divide, "moving from recognition to action is a slow process, with most investments focused on providing minimum levels of connectivity to the most remote regions." The same year, the federal government launched the Connecting Canadians program, which provided funding for service providers to expand broadband access in rural areas. Appealing to the telecom companies' bottom line is an important tool used by the Pathways to Technology Initiative in its negotiations, according to project manager Ruth Williams. "The bottom line is they have to be profitable, right?" she said. "One of the major things is we're paying the costs. They have no capital costs. And it's a captive audience of clients." Since 2008, Pathways to Technology has been working to connect British Columbia's 203 First Nations communities to high-speed Internet, some of which are very remote and require crossing some challenging terrain. When it began, only 42 per cent of the communities were connected to high-speed Internet, Williams said in an interview. Today, the $48.8 million project administered by All Nations Trust Company, with funding from the provincial and federal government, has made links to 95 per cent of the aboriginal communities. Pathways to Technology has partnered with Bell affiliate Northwestel Inc., City West Cable and Telephone Corp. and Telus Corp. to build the infrastructure needed to link these communities and then a variety of community ISPs to provide the "last mile" connection, Williams said. Once connected, some communities opt to be their own ISP, which creates an additional revenue source, Williams said. "We negotiate a better rate for them for service from Telus," she said. "Because if we're paying for the capital, we're saying 'give them a better rate for five years.' So it gives them some stability in knowing what their costs are going to be in the future." In addition to having a new way to bring money into a local band, once connected, residents have access to things like health care services and education opportunities that just weren't there before, said Williams. In Olds, any profits O-Net generates from selling its services go back into the non-profit Olds Institute and reinvested into the community, Thompson said, adding that reinvestment hasn't yet occurred since "there's still a lot of capital going into the ground." The Olds model is one that's piquing interest in other communities. "If I’m a small ISP or if I’m a huge incumbent carrier, anywhere in-between, I would simply create a point of presence in that community and pay an access fee to bill me on a per-customer basis to provide a service," Thompson said. "So it still promotes that competitive nature, but inevitably it allows the providers to cost-effectively provide a higher quality of service, which is what the driving factor is." Thompson said he fields several calls per week from other municipalities and interested parties. Central Ontario's Lakeland Holding Ltd., co-owned by five Muskoka-region municipalities, began connecting customers to its FTTH network in the spring of 2014. "We're definitely going to see more of this and it's inevitably going to evolve into the larger municipalities," Thompson said. — With reporting by Charelle Evelyn at cevelyn@thewirereport.ca and editing by Anja Karadeglija at akarad@thewirereport.ca

With no network infrastructure, towns opting to build their own

News | March 2, 2016

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With no network infrastructure, towns opting to build their own

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