Telecom Decision CRTC 2021-105
References: 2019-372, 2019-372-1, and 2019-372-2
Ottawa, 19 March 2021
Public record: 1011-NOC2019-0372
Broadband Fund – Project funding approval for the Kativik Regional Government’s transport fibre project in northern Quebec
The Commission approves the Kativik Regional Government’s funding application for up to $36,256,366 to build and upgrade transport infrastructure to serve four communities in northern Quebec.
- In response to the Commission’s second call for applications for funding from the Broadband Fund set out in Telecom Notice of Consultation 2019-372, the Kativik Regional Government (KRG) filed an application, dated 28 May 2020, in which it requested approximately $36.3 million from the Broadband Fund to implement a project that will provide a significant improvement in broadband service to four communities in northern Quebec.Footnote 1 The KRG indicated that it will build approximately 870 kilometres of fibre optic transport network, providing upgraded points of presence (PoPs)Footnote 2 to serve the following communities: Akulivik, Ivujivik, Kangiqsujuaq, and Salluit.
- The project is expected to provide a capacity of between 300 and 600 gigabits per second (Gbps) to each of the transport PoPs and connect up to 29 anchor institutions.Footnote 3 This project involves extending an existing undersea fibre optic transport network. The undersea fibre will interconnect with the fibre-to-the-home infrastructure that is already present or being constructed in the communities to be served.
Commission’s analysis and determinations
- In Telecom Regulatory Policy 2018-377, the Commission established the eligibility and assessment criteria for the Broadband Fund. In Telecom Decision 2021-103, the introductory decision for the group of funding decisions issued today, the Commission provided background information and described the eligibility and assessment process and selection considerations used to assess and select projects to be funded. The introductory decision should be read in conjunction with this decision.
- The KRG’s application met each of the relevant eligibility criteria applicable to transport projects.Footnote 4 First, as a Canadian municipal entity and a Canadian carrier with more than three years’ experience deploying and operating broadband infrastructure in Canada, the KRG met each of the criteria for eligible applicants. In addition, the KRG demonstrated that it will invest more than a nominal amount in the project, and that the project would not be financially viable without funding from the Broadband Fund. Further, the KRG provided evidence that it consulted with the communities affected by the project, either directly or through community representatives. Finally, the project will serve eligible geographic areas and will meet the requirements regarding minimum capacity and wholesale and retail open access services. The Commission will continue to monitor the geographic eligibility of the project, using public or confidential information, to ensure that the geographic areas remain eligible for funding.
- On the basis of its evaluation of the project against the assessment criteria for transport projects,Footnote 5 as set out below, the Commission finds that the KRG’s project is of high quality and will assist in achieving the goals of the Broadband Fund.
- The project is technically sound, and the capacity proposed for the transport PoPs will facilitate providing broadband Internet access service to the above-mentioned region at the level of the universal service objective, which the Commission defined in Telecom Regulatory Policy 2016-496.Footnote 6 The proposed equipment is capable of delivering the proposed services, and additional capacity could be enabled in the future, making the project scalable. The project will implement widely adopted and supported technologies with good long-term sustainability. The network design includes various backups and redundancies to ensure that the network is resilient.
- The KRG committed to providing wholesale and retail open access to the transport infrastructure. In Telecom Regulatory Policy 2018-377, the Commission stated that wholesale open access to transport infrastructure could (i) enable other service providers to expand their serving territory within a funded geographic area and extend the transport infrastructure to neighbouring communities, and (ii) result in the further deployment of mobile wireless technology to underserved communities and along major transportation roads. Therefore, the Commission considered that for communities to obtain the greatest benefit from the funded transport infrastructure, wholesale open access to that transport infrastructure should be required in order for applicants to obtain funding under the Broadband Fund.
- The KRG submitted wholesale open access plans proposing dedicated service at various speeds and prices. The Commission notes, however, that the prices proposed for certain service speeds are quite high for the fibre-based services offered, even relative to services in other remote northern regions. Although the Commission concludes that the KRG’s project is of high quality based on a balanced application of all the relevant assessment criteria, the Commission encourages the KRG to review its wholesale open access plans prior to submitting its statement of work. The Commission also encourages the KRG to consider whether the prices it initially proposed could be lowered in order to improve access to the infrastructure, which could facilitate competition and further advance the telecommunications policy objectives set out in paragraph 24 below.
- The construction of transport infrastructure represents a long-term investment; a fibre transport network usually has an estimated useful life of 20 years or more. With this in mind, the Commission considered various financial indicators to assess the financial viability of the project and found it to be financially sound and the proposed costs to be reasonable. The KRG secured third-party funding.
- The KRG is not only the applicant but also the municipal and regional government representing the municipality in which the project will be built. As such, the KRG attested that consultation and information sessions were held at the community level, with additional sessions for other interested groups. The KRG stated that it received the express approval of the community to bring fibre to the region through this project.
Conclusion and directions
- In selecting the project for funding, the Commission applied the social consideration that the project will benefit Indigenous communities. Due to the upgrading of the proposed transport PoPs, the project is consistent with the universal service objective and will have a significant positive impact on the communities to be served. In addition, the Commission concludes that supporting this project represents an efficient use of the funding available from the main component of the Broadband Fund.
- In light of all the above, the Commission approves, to the extent and subject to the terms and conditions set out below, up to a maximum of $36,256,366 from the Broadband Fund to be distributed to the KRG for the purpose of the transport project described above and as set out in the approved statement of work. This approval is subject to the conditions that the KRG
- confirm in writing, within 10 days of the date of this decision, its intent to submit a statement of work package to the Commission and to proceed with the project; and
- file for Commission approval, within 120 days of the date of this decision, a completed statement of work package in the format provided by the Commission, which includes an accompanying workbook that sets out the project budget, key project dates and schedules, and detailed project information, such as logical network diagrams, network descriptions, service designs, project sites, equipment details, maps, specific costs, and milestones.
- As established in Telecom Regulatory Policy 2018-377, project construction must not have begun prior to the date of this decision and should be completed within three years. As set out in the Application Guide, the KRG may not apply for reimbursement of its costs until its statement of work has been approved by the Commission. Any eligible costs incurred prior to Commission approval of the KRG’s statement of work but following the issuance of this decision are at the KRG’s risk and will not be reimbursed if the statement of work is not approved.
- If it receives any additional funding for the project from any source, the KRG must notify the Commission in writing as soon as possible and no later than 10 days after receiving the funding. The Commission may proportionately reduce the amount of funding it has approved.
- In order to receive funding, the KRG must obtain Commission approval for (i) any material changes to the project, as set out in the approved statement of work; and (ii) any changes to the KRG that would materially affect the legal or financial documents it provided during the application process. In order for the Central Fund Administrator to be able to distribute funding, the KRG must sign the National Contribution Fund Administration Agreement if it has not already done so.
- The Commission will hold back 10% of the claimed amounts of funding until after construction of the network is complete. Holdback funds will be released only once the Commission is satisfied that the KRG has been operating the network for one year according to the conditions of service set out below (see paragraphs 19 to 21).
- In Telecom Regulatory Policy 2018-377, the Commission determined that it would impose a series of conditions (i) that must be met before it will release funding, and (ii) that ensure that the service to be provided using the funded infrastructure meets the promised service levels. The Commission indicated that funding conditions would be set based on project timelines, reporting, auditing, and material changes. Conditions imposed under section 24 of the Telecommunications Act (the Act) would be used to set the requirements for the ongoing operation of the network, including the speeds and capacity of services to be provided, pricing, and any reporting or measurement requirements. In addition, all existing regulatory obligations will continue to apply to the provision of services using funded infrastructure.Footnote 7
- Following Commission approval of the statement of work, the Commission will direct the Central Fund Administrator to release funds to the KRG, provided that the organization is in compliance with the following conditions:
- The KRG must file a progress report, in the format provided by the Commission, outlining the progress made in the implementation of the project and any variances in the project schedule included in the statement of work. This report is to be filed every three months beginning on the date established in the statement of work and continuing until the project completion report is submitted.
- The KRG must file with the Commission every three months a Broadband Fund claim form certified by its chief financial officer, or by an equivalent authorized official of the KRG, along with supporting documentation demonstrating to the Commission’s satisfaction that all costs claimed were actually incurred and paid and are eligible costs related to the activities described in the statement of work. Each claim form must be accompanied by a progress report.
- With respect to eligible and ineligible costs, as described in Telecom Regulatory Policy 2018-377, the KRG must
- include eligible costs in a claim form submitted within 120 days of the costs being incurred, unless the costs were incurred after the date of this decision but prior to the approval of the statement of work, in which case the costs must be claimed on the first claim form submitted after the approval of the statement of work;
- ensure that all goods and services are claimed for reimbursement at amounts not greater than fair market value after deducting all trade discounts and similar items. Only the fair market value of the goods and services acquired is eligible for reimbursement; and
- measure and claim all goods and services received from related parties, as defined under International Financial Reporting Standards, at cost, with no profits or markups from the supplier.
- The KRG must not claim in excess of 25% of the approved amount for costs incurred after the date of this decision but prior to the approval of the statement of work.
- The KRG must ensure that its travel costs, such as meal per diems, comply with the National Joint Council Travel Directive.
- The KRG must publicize, including by publishing on its website, the wholesale open access service packages to be offered as a result of the project at least 90 days prior to the planned date on which wholesale open access service will be available as detailed in the statement of work. This shall include the proposed location of any PoPs, capacity available for open access, service plans, prices, and terms and conditions.
- Where a risk of adverse impact on an Aboriginal or treaty right becomes known following the approval of the statement of work and a duty to consult exists, the KRG must advise the Commission within 20 days and submit a plan detailing the form and process for fulfilment of the duty. Release of any additional funding will be contingent on demonstration that any necessary consultations were held to the Crown’s satisfaction.
- The KRG must notify the Commission in writing as soon as possible and within no more than five days of becoming insolvent.
- The KRG must file its annual financial statements with the Commission upon request. The financial statements would accompany the next progress report filed after the annual financial statements are completed and approved.
- The KRG must ensure compliance with the Government of Canada’s national security requirements to address any potential risks related to the overall integrity of network security.
- The KRG must file for Commission approval a project completion report within 90 days of completion of the final milestone in the statement of work. In the report, the KRG must confirm that project construction is complete and that broadband services are being offered. The date on which construction is complete and broadband services are being offered will be considered the project completion date. The KRG must also demonstrate in the report that the project has met the requirements set out in all related decisions. The report is to be in a format to be specified by the Commission.
- The KRG must file a project holdback report one year after the project completion date demonstrating to the Commission’s satisfaction that the KRG has been operating the network for one year in accordance with the conditions of service established in this decision and described in the approved statement of work.
Section 24 conditions
- In Telecom Regulatory Policy 2018-377, the Commission determined that it would impose, pursuant to section 24 of the Act, certain conditions regarding the offering and provision of broadband services using facilities funded through the Broadband Fund that would apply once the infrastructure is built. These conditions relate to the speeds and capacity of broadband services provided and the level of retail pricing, reporting, and associated open access service offerings. The conditions imposed on the offering and provision of broadband services will apply to the KRG and to any other Canadian carrier operating the funded infrastructure.
- The Commission may conduct periodic audits and require measurements of the project’s performance to verify compliance with the conditions of funding and the conditions imposed pursuant to section 24 of the Act on the provision of services using the funded infrastructure. To that end, as a condition of offering and providing telecommunications services using the funded infrastructure, the Commission requires, pursuant to section 24 of the Act, that the KRG, or any Canadian carrier operating the funded infrastructure, (i) retain all books, accounts, and records of the project, including administrative, financial, and claim processes and procedures, and any other information necessary to ensure compliance with the terms and conditions of this decision, for a period of eight years from the project start date; and (ii) provide the Commission with measurements of the performance of the KRG’s implemented project within five years of the project’s completion date using methodology that the Commission may determine. The Commission may request that external auditors or a Commission-approved auditor certify any related report, form, or documentation, or that a third-party professional engineer certify any required measurements.
- In addition, pursuant to section 24 of the Act, as a condition of offering and providing telecommunications services using the funded infrastructure, the KRG, or any Canadian carrier operating the funded infrastructure, must
- provide transport capacity at each eligible PoP funded by the Broadband Fund with total capacity no lower than that proposed in the application and described in the approved statement of work; and
- offer and provide, in a fair, transparent, timely, and non-discriminatory manner, wholesale and retail open access to the transport infrastructure at each eligible PoP funded by the Broadband Fund. Terms and conditions that are the same as or better than those applied to the services of subsidiaries, affiliates, or partners must be applied to other service providers requesting access to project sites. Such wholesale and retail open access services must be offered at rates no higher, and a capacity no lower, than those proposed in the application and detailed in the approved statement of work.
- The 2006 Policy DirectionFootnote 8 and the 2019 Policy DirectionFootnote 9 (collectively, the Policy Directions) state that the Commission, in exercising its powers and performing its duties under the Act, shall implement the telecommunications policy objectives set out in section 7 of the Act, in accordance with the considerations set out therein,Footnote 10 and should specify how its decisions can, as applicable, promote competition, affordability, consumer interests, and innovation.
- The Commission considers that its decision to approve funding from the Broadband Fund for the project described in detail in this decision is consistent with the Policy Directions.
- Specifically, this decision to approve funding for a project to build and upgrade transport infrastructure to serve four communities in northern Quebec will help to close the gap in connectivity in underserved areas. There would be no business case for the project without funding from the Broadband Fund. Funding the project will provide improved Internet services to the communities and thus respond to the social and economic needs of consumers. In doing so, this decision will implement the telecommunications policy objectives, including those set out in paragraphs 7(a), (b), and (h) of the Act.Footnote 11
- Broadband Fund – Second call for applications – Introductory decision regarding the second round of project funding approvals, Telecom Decision CRTC 2021-103, 19 March 2021
- Broadband Fund – Second call for applications, Telecom Notice of Consultation CRTC 2019-372, 13 November 2019; as amended by Telecom Notices of Consultation CRTC 2019-372-1, 20 March 2020; and 2019-372-2, 27 April 2020
- Development of the Commission’s Broadband Fund, Telecom Regulatory Policy CRTC 2018-377, 27 September 2018
- Modern telecommunications services – The path forward for Canada’s digital economy, Telecom Regulatory Policy CRTC 2016-496, 21 December 2016
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