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The Mackenzie Valley Fibre Link brings NWT $1.6M annually — at a cost of $900k monthly

Last updated on May 14, 2021

Coming up on four years since the construction of the fibre project, the government of the Northwest Territories said it has about eight internet service providers as customers and generates just $1.6 million in annual revenue — all at the cost of $900,000 a month, or $10.8 million a year.

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Digestible version:

  • The nearly four-year-old Mackenzie Valley Fibre Link is generating $1.6 million a year in revenue for the Northwest Territories government, but it’s costing it $900,000 a month to operate.
  • The NWT government told the downUP about the figures after inquiring about a complaint during debates last month from a member of the legislative assembly into the cost of the operation versus how much the government was pocketing.
  • Built in 2017 by the Northern Lights General Partnership made up of Bell-owned Northwestel, Ledcor Developments and LTS Infrastructure Services, the MVFL is the hallmark broadband project of the regional government that runs a nearly 1,200+ kilometre stretch of trenched fibre cable providing bandwidth to service providers to deliver services to homes and businesses.
  • The trouble is, by February, the line only had eight customers using it.
  • The NWT government has projected that all the territories’ communities will be connected by 2023.

Key numbers:

It costs $10.8 million a year to operate the Mackenzie Valley Fibre Link for a revenue stream of just $1.6 million.

What this story contributes:

While a figure of $1.2 million was tossed around in NWT legislature debates last month, this story reports the latest figure of $1.6 million as well as the $900,000-per-month cost of operating it.

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Deeper version:

The nearly four-year old Mackenzie Valley Fibre Link, the hallmark broadband project of the Northwest Territories government, is drawing revenues of $1.6 million annually. The cost? $900,000 per month — a $9.2-million deficit.

During debates last month, a critic of the MVFL, Kevin O’Reilly of Frame Lake, was befuddled by the numbers.

“We are obviously paying a lot more than what we are getting back out of this,” O’Reilly said. “I was in the last assembly. My impression was that this was going to sort of at some point transition into maybe closer to a breakeven kind of situation.

“We are certainly nowhere near that now. Are we getting the kind of revenues that we expected or that were predicted out of the Mackenzie Valley fibre link?”

The only figures related to the link revealed during the debate was that the government was getting approximately $1.2 million from eight customers out of the project.

In response, Sandy Kalgutkar, NWT’s associate deputy minister for infrastructure, replied: “When we did the business case for the fibre, we did anticipate that, for the first part of the project, the government would be providing most of the shortfall and that, as more and more satellite facilities became operational into that area, then the project would start paying for itself. However, it was anticipated that that would happen far into the project.”

O’Reilly did not respond to multiple requests for comment. O’Reilly expressed concern during debate that there was a projected “catastrophic decline” in resource revenues.

The project is a trenched 1,154 km of fibre optic cable from McGill Lake in the south to Inuvik in the north with an extension to Tuktoyaktuk. Built in 2017 by the Northern Lights General Partnership (NLGP) — a consortium made up of Bell-owned Northwestel, Ledcor Developments, and LTS Infrastructure Services — the fibre is intended to supply service providers with backhaul capacity so they can drive the last-mile to homes and businesses. The project is valued at $84 million.

The government pays the NLGP the $900,000 a month to cover financing and operations, a spokesperson told the downUP. That is paid over a period of 23 years from design and build to operate and maintain, until it has to be handed back to the government. The NLGP has already financed the project, the spokesperson said.

According to the most recent public accounting, which preceded the debate, the MVFL as of last year still owes $75.3 million on just the principal, not including the 6.52 per cent interest. It entered into the contract with the NLGP in October 2014.

The government has already said that the project will cost $95 million in capital costs and an additional $64 million in operational costs over the 23-year contract.

When asked about the figure during an early February debate, Kalgutkar said “a big chunk of it is for the service payment that we make to Northwestel on an annual basis.

“Another portion of it, I believe about $2 million of it, is for the remediation costs that we have in our budget, to make sure that the fibre line is still working in accordance with the permits that were assigned to the Department of Finance, and we do have annual remediation obligations to make sure that that line is up to those standards.”

The spokesperson said the government “considered this project with more objectives than strictly revenue and expenses – benefits for residents and communities are also considered.

“The MVFL replaces the previously limited capacity microwave system and has enabled local service providers to enhance services and improve pricing in all MVFL communities,” the spokesperson continued. “Improvements to access, speed, and reliability are benefits to residents, communities, educational and health care facilities, as well as other government services and programs.”

Among the service providers taking advantage of the project are New North Networks, Ice Wireless, and Northwestel, which is the dominant service provider in the region.

“In the first few years of operations the MVFL has been very successful and the GNWT anticipates that success will continue and customers (revenue) will grow,” the spokesperson said. “Maintaining strong relationships both nationally and internationally sustains the opportunity to ensure the MVFL will be profitable. The GNWT is looking at the project over the entire 23 years and the financial success will depend on when new customers are obtained.”

The NWT government has projected that all the territories’ communities will be connected by 2023.

For some time, MLAs were seemingly confused about the government’s role in connecting the communities. On at least one occasion, the government has had to clarify that it isn’t a service provider, meaning it will not be the one to take the backhaul capacity from the fibre line and deliver it to homes and businesses.

The news comes during a pivotal moment in Northern Canada’s broadband future. With no end in sight for the pandemic, and as northerners continue to struggle to do basic tasks remotely due to poor broadband, the success of broadband projects like these is critical.

MLAs have complained about slow progress on broadband from the regional government and have accused the government of being complacent and even reliant on Northwestel.

The government has boasted about improved internet and prices in the next three years, thanks to an award for Northwestel to build fibre with the help of the CRTC’s $750-million Broadband Fund. It also said that satellite communities — which was the target of the CRTC’s first round of funding awards — would soon be able to access low-earth orbit satellites because of the regulator’s approval of a Northwestel project.

But in a submission to the CRTC, NWT’s committee on economic development and environment asked the regulator to put stipulations on the funding, including mandating open access to the networks to third-party competitors to broaden choice and lower prices.

According to the committee, 16.4 per cent of the region doesn’t have access to home internet.

MLAs have been urging the regional government to organize around getting properly costed submissions to the federal government for projects under its $1.75-billion Universal Broadband Fund, which opened in November.

This publication has already reported about the trials of a Nunavut broadband project that is delayed because it is second-guessing a move to connect its fibre line to the sovereign island of Greenland due to security risks and uncertainty about hammering a deal with the island’s main provider, Tele Greenland.

An announcement on what route it will take is expected in the summer or fall, a government spokesperson told the downUP. It is currently considering a connection with the Kativik Regional Government in Northern Quebec, which was awarded Friday with funds from the CRTC’s Broadband Fund.

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