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Broadband Internet access in the Canadian Arctic - Kuhnke International News

Broadband Internet access in the Canadian Arctic

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Since 2004 the Canadian government has been engaged in a program to subsidize the cost of broadband Internet access in the Canadian Arctic, specifically the territory of Nunavut. Although it covers a land area greater than western Europe, Nunavut's population is less than 35,000 and distributed over an extremely wide area with a harsh arctic climate.

Industry Canada is the primary source of the funding.  This is distributed through the Nunavut  Broadband Development Corporation, a quasi-governmental entity which has contracted to build networks in 25 communities with the Yellowknife based VSAT ISP and technical services firm SSI Micro.  Known as QINIQ, the network was built in 2004 using C-band equipment and spectrum and TDMA technology.  The NBDC has recently completed a second phase of RFPs with its prime contractor, SSI, for additional services to meet needs not filled in the original 2004 project.


The August 16th issue of The Globe and Mail has an interesting post on other infrastructure projects in the Canadian north, including a new port for Iqaluit and housing.

In this post I will examine the reasons why this project is likely to remain government subsidized for the foreseeable future.  The primary reason is the cost of satellite bandwidth, but other factors are also involved.


Assumptions based on an extremely remote Arctic region community of 1,300 people.  These figures are only approximate and were put together in a relatively short period of time.

Although this relates to a theoretical project in northern Canada, figures are in US Dollars because the vast majority of satellite terminal equipment and network equipment comes from manufacturers and distributors in the USA.  Satellite transponder capacity (the main monthly recurring cost) is also usually quoted in US Dollars.  Adjust for the current tax rate to import equipment and Canadian dollar exchange rate as necessary.

Assume that a 6 meter size C-band satellite earth station costs $300,000.00 to construct, including equipment (WAN and LAN/MAN), freight and labor.  This is a figure including the telecommunications equipment shelter and taking into account the high cost and logistical challenges of installing a large piece of complex equipment at a highly remote arctic site.  This also includes the construction of a medium sized radio tower and central access point for a licensed spectrum NLOS point-to-multipoint MAN distribution layer based on 802.16e-2005 WiMax standard.  Installation costs for the WiMax base station assume that the entire community can be covered from a single centrally located radio tower site, or from an antenna site on the roof of the community's tallest building.  Multiple sites would increase cost.

Assume an average of 5 persons per household in a 1,300 person community = 260 houses possible to be served.  Highly optimistic 75% of households use Internet = 195 houses or business premises to be equipped with wireless/MAN CPEs.

Assume that the single earth station has a monthly recurring cost of $12,500.00 for dedicated SCPC satellite bandwidth and teleport services, on standard 12 month contracts (Loral-Telesat, Intelsat, SES, etc).  

Further assume that the community network project has one part time employee working 4 hours/day, 5 days/week paid a monthly salary of $2,000.00.  The employee's duties would include signing up new customers, billing, distributing and installing CPEs and local support issues.

Electrical costs in remote arctic locations are significantly higher than southern Canada, primarily due to the high cost of fuel and transportation of fuel.  The cost to a community for the purchase and operation of a diesel / fuel oil powered generator is also a part of the arctic region's high electrical costs.    
If the system draws a constant load of 2 kilowatts for the following:
Earth station dish de-icing apparatus, modem, router, switches, baseband up converter and LNB, voltage regulator+UPS power conditioning equipment, 1U/2U rackmount servers, management console, WiMax base station and radio antenna, etc.  
Power consumption at 2 kilowatts constant would be 48 kilowatt-hours per day.  
48 kW/h per day * 365 days = 17520 kW/h per year.
Baseline electrical cost is $0.085 per kW/h in Vancouver.
Baseline electrical cost is $0.242 per kW/h in remote arctic location.
17520 kW/h per year * $0.242 = $4239.84 per year electrical bill.
Note that electrical costs may actually be much higher than $0.242 per kilowatt-hour in some locations.

195 houses * $300.00 one time installation cost per household for wireless CPE with outdoor antenna, NLOS licensed spectrum technology = $58,500.00 NRC for CPEs.

Subtotal equipment cost earth station and CPEs, NRC: $358,500.00
Subtotal $358k equipment divided by households served, NRC cost: $1838.461
Monthly bandwidth cost divided by households served, MRC cost: $64.102

$508,500.00 equipment and bandwidth
$24,000.00 one part-time employee
$4,239.84 electricity
$536,739.84 equipment, bandwidth, one year salary subtotal

YEARS 2, 3, 4 AND 5:
$12,500.00 bandwidth per month * 12 months * 4 years = $600,000.00
$24,000.00 employee per year * 4 years = $96,000.00
$4,239.84 electricity per year * 4 years = $16,959.36

Rough estimate 5 year purchase and operational cost: $1,249,699.20



Same population and household assumptions as above, 1,300 person community with 260 total households.  Instead of a figure of 75%, assume that 60% of these households can each afford to pay $65.00 per month for Internet access, with the CPE provided for free by the ISP.  

156 households * $65.00 per month = $10,140.00 monthly recurring income

$10,140.00 * 12 months * 5 years = $608,400.00 income over five years

Rough estimate 5 year purchase and operational cost: $1,249,699.20
Income from CPEs 5 years: $608,400.00
Funding gap: $641,299.20

These income figures are extremely high and unrealistic for a period of five years.  It is doubtful that sixty percent of the total households and businesses in a 1,300 person community will consistently subscribe to the service at the rate of $65.00 per month, even if the CPE is provided for free.  It is also highly improbable that a newly served community will see a near-instant adoption rate of residential Internet usage.  More realistic total income from the community for a five year period may be as low as $90,000.00, requiring the federal government to subsidize more than 90% of the earth station+MAN's purchase and ongoing operational expenses.



With the current costs of satellite bandwidth (transponder MHz) in C-band or Ku-band, this is never going to be an economically viable for profit enterprise, considering the overall economic situation of the average remote 1,300 person arctic community and consumers' realistic ability to pay for broadband Internet services.  If the monthly recurring satellite bandwidth cost to operate the earth station's uplink drops dramatically it may become viable without government support.  

It is highly unlikely that satellite bandwidth in the North American market will fall to less than 1/8th of its current price any time in the next 15 years, unless there is some incredible price drop in space launch vehicles and telecommunications satellites capable of reliably operating in geostationary orbits.  Putting a satellite weighing 2500 kg to 6000 kg into a geostationary transfer orbit is a highly expensive proposition requiring the services of an expensive rocket such as the Ariane 5 (ESA / Kourou) or Zenit 3SL (Boeing Sea Launch).  The primary manufacturers of geostationary telecommunications satellites (Boeing, Lockheed, Loral, Orbital Sciences, Thales-Alenia Space) have no incentive to lower prices due to high worldwide demand for directo-to-home/TVRO television and VSAT services in emerging markets.  There are at present a number of competitive space launch firms with promising products in development for launch to geostationary orbit, including SpaceX and its Falcon 5 / 9 launch vehicles, but none of the launchers which may go into service in the next 5 to 10 years offer technology that is an order of magnitude less expensive or a huge leap in performance ahead of what is currently available.

Ka-band services currently being offered in North America are focused on the bulk of the population and revenue, the continental 48 United States and the Canadian population within 300 kilometres of the border.  Ka-band spot beams are generally smaller than Ku-band spot beams and more geographically restricted.  It is unlikely that a Ka-band satellite capacity operator would choose to aim several spot beams on the Nunavut and NWT region unless they receive a significant long term commitment from the federal government or other major customer.  The most likely satellite bandwidth solution for northern areas will likely remain ITU standard C-band for the next 15 to 25 years.



802.16e-2005 = WiMax point to multipoint wireless distribution system
CPE = Customer Premises Equipment, whether wired or wireless.  One per house.
kWH = Kilowatt-hour.  One kilowatt used for sixty minutes.
MAN = Metropolitan Area Network, in this case total coverage of one town.
MRC = Monthly Recurring Cost (Satellite bandwidth, electricity, salaries, etc)
NLOS = Non Line-of-Sight, wireless equipment that can "bridge" a distance without a perfectly clear line of sight between two directional antennas.
NRC = Non Recurring Cost (Equipment purchases)
SCPC = Single Carrier Per Channel, dedicated satellite bandwidth assigned to one earth station terminal.  
WAN = Wide Area Network (Uplink to Internet via geostationary telecom satellite)

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