Salter Global Consulting Incorporated SGC. Pre Feasibility Telecommunications Study High Capacity Network Options in Nunavik

Transcription

1 Salter Global Consulting Incorporated SGC Pre Feasibility Telecommunications Study High Capacity Network Options in Nunavik September, 2013

2 Table of Contents Page 1. Executive Summary provided by the Kativik Regional Government (KRG) 4 2. Introduction 9 3. Methodology Fibre Optic Network Options 10 a. Indicative Fibre only network option 11 b. Arctic Fibre Inc. Proposal 18 c. Terrestrial Fibre options Microwave Radio Options Satellite Options Summary of Operating Expenses cost estimate Environmental Assessment Considerations Fibre Optic Network Cost Comparisons Interconnection Options Overall Comparison of Satellite, Fibre Optics and Microwave Radio Technologies Comparison of Network Expansion Alternatives Cost and Operating Expenses Projected Project Implementation times Conclusions 44 Appendices Attachments Page 2 of 44

3 List of Figures 1. Indicative Fibre Optic Network Option Major Shipping Routes Extent of Nunavik Marine Region Arctic Fibre Inc Canadian Network Proposal Arctic Fibre Network NAN Fibre Optic Network Indicative Microwave Radio Design Combined Fibre with Radio Link to Schefferville Fibre Ring with Microwave Radio to Smaller Communities Combined Fibre and Satellite Network Option Map of Railway from Sept Isles to Schefferville Eeyou Communications Network Illustrative Comparison of Telecommunications Backbone Network Alternatives 40 List of Tables 1. Tide Fluctuations in Nunavik Satellite Capital Cost Estimate in Existing Remote Earth Stations Capital Cost Estimate for Ka Band Gateway Earth Station Satellite Network Cost Estimate for C and K Band Technologies Capital Cost Comparison for Fibre Optic Network Alternatives Fibre Optic Network Options Recurring Costs Network Alternatives that Meet KRG 2021 Capacity Requirements Network Alternatives that meet KRG 2016 Capacity Requirements 43 Page 3 of 44

4 1. Summary of Prefeasibility Study for a high capacity network in Nunavik (provided by Kativik Regional Government, KRG). Goal of the Study The goal of the study was to provide KRG with the feasibility, cost and timeframe for building a high capacity network in Nunavik. The capacity requirements were based primarily on two criteria. The first was to allow Tamaani Internet to meet the CRTC recommended goal of providing Internet service with a 5Mbs of actual download speed by The projected needs for 2016 (below) were established on this basis. The second criterion used was to look at historical growth of network usage on Tamaani Internet s network from 2004 to 2012 which increased 30 fold. It is reasonable to assume that as worldwide Internet requirements continue to grow Tamaani Internet s network must keep pace. A 30 fold increase is therefore expected to be necessary by The study looked at new technologies to meet these needs because current technology will not scale to meet growing demand. In order to meet the 2016 targets with current technology, the capacity of a full satellite dedicated to Nunavik, estimated to cost $25 million per year, would be required. To meet the 2021 targets using current technology, the capacity of three complete satellites, estimated at $75 million per year, would be needed. Clearly, a new approach is needed to meet the growing demand. The parameters provided by KRG are as follows: Community Current capacity Mbs (satellite) Projected Need 2016 Mbs Projected need 2021 Mbs Akulivik Aupaluk Inukjuak Ivujivik Kangirsuk Kangiqsualujjuaq Kangiqsujuaq Kuujjuaq Kuujjuarapik Puvirnituq Quaqtaq Salluit Tasiujuaq Umiujaq Total The consultant was asked to evaluate the feasibility, cost and timeframe of building a network to meet these targets. In addition, some vendor provided solutions proposed by Arctic Fibre, Telesat and icomm were also evaluated. Page 4 of 44

5 Feasibility The study determined that there are three feasible technologies to meet the goals: 1. Undersea optical fibre network 2. Microwave tower network 3. High capacity satellite network In all scenarios with undersea optical fibre or microwave towers we assume that we would be able to interconnect with the Eeyou Communication Network in Chisasibi and via a proposed fibre optic network that may be built from Schefferville to Sept Isle. The transport from these northern communities to the south adds a significant operating cost because of their own remoteness from urban centers. In addition to these, several scenarios were examined in which two or more of these technologies would be used together to optimise the cost, performance and stability of the network. A total of seven scenarios were analysed: 1. Undersea fibre ring to all communities with land base optical fibre from Kuujjuaq to Schefferville; 2. Arctic Fibre s proposal to connect eleven communities with undersea fibre and three with microwave towers; 3. Undersea fibre ring to all communities with microwave towers from Kuujjuaq to Schefferville; 4. Undersea fibre to nine communities (including Deception bay), microwave towers to six communities and microwave from Kuujjuaq to Schefferville; 5. Undersea fibre to eight communities (including Deception bay), high speed satellite to five communities and a high speed satellite teleport in Kuujjuaq; 6. High speed satellite to all communities with some C band satellite retained for Northern village to Northern village applications; 7. Microwave network to all communities which would only meet the 2016 objective of 2.5Gbs but not the 2021 objective of 7.4Gbs. It should be noted that these technologies are not necessarily equal. Microwave towers and high capacity satellites are susceptible to adverse effects from bad weather and radiofrequency interference, although modern satellite equipment can, in many cases, mitigate the effects of weather with little or no impact on performance. The designs for satellite and microwave were done with an availability target of 99.99%. An optical fibre network is not subject to weather effect or radiofrequency interference. High speed satellite technology has high latency and continues to be problematic for latency sensitive applications which will not function well, or at all, in a high latency environment regardless of the speed of the network. Latency is not an issue for microwave towers or optical fibre networks. The high speed satellite scenario that was studied is asymmetrical; its download capacity would meet the bandwidth target but the upload capacity is significantly lower. Asymmetry is a standard design in satellite networking and is typically adequate for most present day needs. It is difficult to predict the impact of this design consideration on network usage that will be occurring fifteen years into the future with upload intensive applications such as cloud computing becoming more common. Optical fibre and microwave tower networks are inherently symmetrical and this issue is not a concern with these technologies. Lastly, optical fibre could be easily and inexpensively upgraded to vastly Page 5 of 44

6 exceed the 2021 goal of 7.4Gbs whereas both microwave towers and high speed satellite would require significant capital expenditure to upgrade after the network is built. It should be noted however that while optical fibre is technologically capable of providing virtually unlimited bandwidth, the reality is that optical fibre network growth would be limited by the interconnection cost with northern providers. The time frame for construction of projects is estimated at two years for any solution. An environmental impact assessment would be required for an optical fibre network and is estimated to take two years. For a microwave tower network, the estimated duration of the environmental impact assessment would be one year. No environmental impact assessment is expected for a satellite network. The total timeframe to build a high capacity network is therefore estimated at two to four years. In the scenarios that were examined, an optical fibre or microwave network would rely on agreements with existing northern providers and in the case of connecting through Schefferville, relies on a network segment that has yet to be built. This introduces a significant amount of uncertainty with regards to those scenarios. The exception is the Arctic Fibre project which proposes to build a self healing network with three separate paths to the Internet. Access to Arctic Fibre s international backbone would provide an advantage in term of reliability the event of a single backbone cable break, as opposed to a network that would interconnect exclusively to northern Quebec providers. Summary of comparison Optical Fibre Microwave Towers High Speed Satellite Very low latency Low latency High latency High maximum capacity Low maximum capacity Moderate Capacity Symmetrical (upload and download capacity are equal) Symmetrical (upload and download capacity are equal) Asymmetrical (upload capacity is lower than download capacity) Very high availability Moderate availability (subject to rain fade) High availability (somewhat subject to rain fade) Lifespan years Lifespan 20 years Lifespan years Inexpensive to upgrade beyond 2021 goal High cost to upgrade beyond 2016 goal High cost to upgrade beyond 2021 goal Longer time to build (~4 years) (environmental assessment for land and water) Moderate time to build (~3 years) (environmental assessment for land) Shorter time to build (~2 years) (no environmental assessment expected) Interconnection is expensive (transport from Chisasibi/Schefferville to south) Interconnection is expensive (transport from Chisasibi/Schefferville to south) Interconnection is inexpensive (gateway is in the south) Page 6 of 44

7 Costs and Timeframe A summary of capital, operating and total costs for each is as follows: System Configuration Capital Cost Average Annual Total Cost Total Cost per year Operating Cost (not adjusted for inflation) All Fibre Option $158M $6.2M $282M $14.1M (20 years) Arctic Fibre $135M 1 Fibre plus microwave Kuujjuaq to Schefferville Arctic Fibre uses a Arctic Fibre uses a Cost per year will ($155M) 2 "Utility" business "Utility" business depend on Utility model, and ongoing model, and ongoing pricing. costs are dependent on the number of users on the system costs are dependent on the number of users on the system $139M $6.3M $265M $13.3M (20 years) Fibre plus microwave to 6 communities and Schefferville Fibre plus satellite to 5 communities $132M $7M $272M $13.6M (20 years) $130M $5M $202M $13.7M (15 years) 3 $10.2M (20 years) 3 Satellite Ka Band and C band All Microwave (Did not meet all criteria) $94M $2M $125M $8.3M (15 years) $68M $4.8M $164M $8.2M (20 years) 1 Arctic Fibre provided costs that assumed a 5% contingency 2 The study used a 20% contingency in all cost estimates and this value reflects costs provided by Arctic Fibre but calculated at 20 % contingency 3 Expected lifespan of optical fibre is 20 years. Expected lifespan of a satellite is 15 years. The amortisation is shown at both 15 and 20 years since this option uses both technologies. Page 7 of 44

8 Analysis On the basis of pure technological merit, an optical fibre network is superior to a satellite network for broadband Internet applications. However, our study shows that on the basis of pure economic merit, next generation Ka band satellite may be superior for at least fifteen more years, with one important caveat: this solution would continue to impair or deprive the region from the use of latency sensitive applications, the financial impact of which is difficult to evaluate. Both solutions are viable to meet Nunavik s network requirements. Microwave tower technology has two important limitations when compared to the other designs that were studied. Firstly, lack of road access to the towers increases the yearly operating cost largely stemming from the requirement for helicopter access to tower sites. Secondly, microwave radios capable of functioning in Nunavik s harsh weather conditions have less capacity than next generation Ka band satellite technology and quite substantially less than optical fibre. For this reason, we consider that while a microwave tower network technically is viable, Nunavik s network requirements are too high to pursue this option. Conclusion The study conclusively demonstrates that building a high capacity network for Nunavik is feasible and allows for much greater cost efficiency than is currently being achieved with the existing network. The commercial value of the C band satellite capacity currently in use by the KRG to provide Internet service in Nunavik, including capacity obtained through the National Satellite Initiative and Broadband Canada: Connecting Rural Canadians, combined with the expenses of operating the current transport network, is approximately $5.2 million per year. While the capital cost of a new network is significant, when calculated over the anticipated lifespan the average yearly cost is 50% to 150% greater than the current network. However, this new network would have up to thirty times more capacity than the existing network and solve Nunavik s major telecommunications challenge for at least fifteen to twenty years. Page 8 of 44

9 2. Introduction The Kativik Regional Government (KRG) commissioned a study with Salter Global Consulting (SGC INC) to determine the feasibility of connecting the 14 communities in Nunavik with high speed telecommunication and internet services. KRG required that the following technology options be examined: a) Undersea Fibre Optic Cable options, including the proposal that has been offered by Arctic Fibre Inc. b) Terrestrial Fibre Optic alternatives. c) Terrestrial High Capacity Microwave alternatives. d) High Speed Ka Band Satellite options, including the Telesat Ka Band payload. For each option, KRG required that the following issues be addressed: i. Technical feasibility, taking into account the climate and geography of Nunavik. ii. iii. iv. Anticipated installation timeframes. Environmental and regulatory considerations. Long term technical performance, including the projected system availability. v. System diversity and redundancy options in the event of a major system failure. vi. vii. viii. Estimated life span of each alternative. Cost Estimates, including both capital and operating costs. System Interconnection In the evaluation of technical and network alternatives, a critical parameter is the forecast demand from each community. KRG provided the following forecast: Page 9 of 44

10 Estimated requirements: 3. Methodology Community Current capacity Mbs (satellite) Page 10 of 44 Projected Need 2016 Mbs Projected need 2021 Mbs Akulivik Aupaluk Inukjuak Ivujivik Kangirsuk Kangiqsualujjuaq Kangiqsujuaq Kuujjuaq Kuujjuarapik Puvirnituq Quaqtaq Salluit Tasiujuaq Umiujaq Total Firstly, SGC INC evaluated the technical, cost and performance parameters of the fibre optic, microwave radio and satellite alternatives to meet the needs of the KRG demand profile, on a standalone basis. Next, SGC INC reviewed alterative network and technical configurations using a combination of technologies to meet the projected increase in demand over time. Finally, these alternatives have been summarized in terms of capital cost, operating cost, performance, installation schedule, and potential risk, and risk mitigation elements. A list of sub contractors engaged by SGC INC is shown in Attachment 1, together with a list of potential suppliers who were consulted as part of this contract. 4. Fibre Optic Network Options The network options proposed in this section are all based on a fibre "ring" architecture, with a minimum of two entry/exit interconnection points. This permits traffic to flow in both directions around the ring. In the event of a fibre break, all communities connected to the ring can maintain full traffic service by routing traffic in either direction to avoid the break. This ring type architecture is typically used in long haul marine and terrestrial fibre network architectures. This section is divided into three components:

11 a) An assessment of an indicative standalone fibre network "ring" architecture. b) A review and comparison with the proposal made by Arctic Fibre Inc. c) A review of terrestrial options for Nunavik. a) Indicative fibre only network option. Figure 1 (below) shows the proposed indicative fibre network option. In this model: An interconnection point at Chisasibi is proposed with Eeyou Communications network, providing access to southern Canada. A second interconnection point is proposed at Schefferville. Note: A fibre link to Schefferville, connecting with southern Canada network is currently proposed, using the existing railway right of way. The fibre link between Kuujjuaq and Schefferville is a terrestrial system Remaining connections are based on marine fibre links, with exception of a terrestrial link from Ungava Bay to Kuujjuaq, and a number of short terrestrial links as part of the fibre optic cable landings at selected communities (as a result of depth, tide, or potential coastal scouring issues). Figure 1 Indicative Fibre Optic Network Option Page 11 of 44

12 A detailed description of the proposed network together with costs, cable routing considerations and nautical charts of proposed landings is shown in Appendix 2. Key System Details: Fibre length 3,566 km (2,907 km marine, 659 km terrestrial, including link between Kuujjuaq and Schefferville) Capacity 12 fibre marine cable (6 fibre pairs). In this report, it is assumed that one fibre pair is equipped, initially with one 10 Gbits DWDM optical channel (DWDM Dense Wavelength Division Multiplexing). This fully meets the KRG 2021 traffic requirements with the potential to meet a very high exponential traffic growth in the future, if required. Note: Each fibre pair has a very high ultimate capacity (100Gbs per optical channel, and a total of 88 Dense Wavelength Division Multiplexing (DWDM) optical channels Technical interfaces at local communities two types of interface have been provisioned in the report: A 1 Gbps Ethernet interface (Specification IEEE 802.3, 1.25 Gbps) The option to interface at a standard Telco DS1, DS3, (ITU specification G703), and OC3 and OC12 (GR 253 CORE). These interface would most likely be applicable to industrial and/or very high usage customers System lifetime design life, 20 years minimum. Design Considerations: Ice Scouring Ice scouring represents a potentially significant risk to the integrity of the fibre optic cable, particularly at cable landing sites and areas near the shore line. In general, the backbone network is not at risks of ice scouring. The study evaluated literature regarding ice characteristics on the western shore of Hudson's Bay and in Ungava Bay. Reference documents are shown in Attachment 2. In summary, the principal risk in the area of interest is fast ice (ice that is landfast or anchored to the land mass). The movement of this ice is determined by winds, currents and salinity. A principal risk occurs from ice rafting, where one slab of ice is driven on top of a second ice sheet, with the results of a scouring action on the bottom. The estimates received on the limit of this ice scouring are approximately 2 metres (approximately 6.56 feet) below the nominal seabed floor. In the review, a nominal 3 metres (approx 9.85 feet) depth has been assumed. Icebergs occurs in the vicinity of: Page 12 of 44

13 Foxe Straight Ungava Bay In the vicinity of Foxe Bay, the marine backbone cable is sufficiently deep that icebergs do not represent a threat. In other areas, water depth of the mainline fibre cable has been selected to be in excess of 100 metres (Attachment 3 shows indicative depths of the proposed mainline fibre cable). For cable depths between 200 metres and 100 metres, light armoured cable has been selected. For depths less than 100 metres, double armoured cable has been used. Cable landing technologies The landings represent a significant portion of the overall cost of the network. Three landing technologies are proposed: Undersea burial using a marine cable plough. "Split Pipe" construction this technique uses a heavy grade split steel to surround the cable from the foreshore until an appropriate, safe depth can be reached. Horizontal Directional Drilling this is the most expensive and typically requires significant heavy equipment on shore to execute the drilling. The study has assumed a mix of techniques based on a desk top study and literature review. This technology mix has been integrated into the desk top study cost estimates Tides Tides vary considerably around the coast of Nunavik, with the largest fluctuations occurring in Ungava Bay. Table 1 shows tide data from the Canadian Hydrological Service. Table 1 Tide Fluctuations Nunavik Page 13 of 44

14 Installation techniques have been selected to accommodate the varying tide conditions. As an example, it is proposed to use a terrestrial link from Ungava Bay to Kuujjuaq, in part, as a result of the extreme tidal range in the region. Water depth In general the deeper the cable placement, the safer the system from external threats such as shipping, fishing, ice scouring and icebergs. The depth of the mainline fibre link is shown in Attachment 3. The majority of the backbone link is at a water depth of greater than 100 m. Light armoured cable is proposed for depths below 400 m. For depths between 400 m and 100m, single armour cable is proposed and for depths less than 100m, heavy duty, double armour cable is proposed. Cable chafing Cable chafing can be a serious issue for marine cables. It is extremely important that the cable be laid directly on the seabed floor and not in a manner where there is a possibility of the cable being suspended between two seabed outcrops. In this case, the continuous motion of tidal action and currents will chafe the cable to the point of failure, sometimes in a relatively short period of time. As a result, an underwater marine survey is a critical step in the determination of the final cable placement. System availability The availability of marine fibre optic systems is very high; typically in the % range when a ring architecture is employed. The electronic and optoelectronic equipment in a modern fibre system is usually configured in a "self healing ring" configuration, to increase overall system reliability and availability. The principal vulnerabilities to a correctly surveyed and installed system are manmade. Over 90% of marine cable system failures are the result of external sources (shipping, anchor dragging, fishing etc). Figure 2 shows major shipping routes in the area. Page 14 of 44

15 Figure 2 Major Shipping Routes (Reference: Depart of Fisheries and Oceans) The challenge for an arctic marine system is the time to repair in the event that a cable failure occurs in the winter season, and the cable is therefore inaccessible. This vulnerability reinforces the need for a fibre ring architecture. Installation scheduling The study initially considered the possibility of installation of the mainline fibre cable ring in phases, however this was considered to be excessively costly and inefficient. A modern cable ship can accommodate all of the fibre cable for the Nunavik marine mainline link without the need to return to its base. When cable is layed directly on the sea floor, a modern cable ship can maintain a cable laying speed, under good "blue water" conditions, of between 4 and 7 km/hour. A typical rate of between 3 km/hour and 4 km/hour can be achieved. Cable laying speeds are significantly less when a marine plough is used to bury cable, and for installations close to shore lines. Even if bad weather, delays and other issues are considered, it is both feasible and efficient to lay the mainline link in one summer season. The additional mobilization and demobilization costs incurred by a split installation season for the mainline (backbone) project would be very high. This, however, does not mean that the landings would have to be installed at the same time. It is recommended that the initial system configuration be designed so that all of the anticipated Page 15 of 44

16 underwater branching units are identified and provisioned during the mainline installation. It is possible to return at a later date, when demand is sufficient, to connect local communities through a cable landing installation to the pre installed branching unit. It is considerably more expensive to retroactively install an underwater branching unit. Environmental Assessment and Permitting Figure 3 below shows the extent of the Nunavik Marine Region that is administered by various regulatory agencies. The map also identifies Category 1, 2 and 3 Land Areas as defined by the James Bay and Northern Quebec Agreement, and the Nunavik Inuit Land Claims Agreement ( ). Figure 3 Extent of Nunavik Marine Region with respect to Environmental Assessment The proposed fibre optic system is entirely within the boundaries of the Nunavik Marine Region. Page 16 of 44

17 In general, environmental assessment is a process to predict environmental effects of proposed initiatives before they are carried out. An environmental assessment: identifies potential adverse environmental effects proposes measures to mitigate adverse environmental effects predicts whether there will be significant adverse environmental effects, after mitigation measures are implemented includes a follow up program to verify the accuracy of the environmental assessment and the effectiveness of the mitigation measures. There are five major review agencies that impact the proposed Nunavik fibre optic network from an environmental review perspective i. Kativik Environmental Quality Commission (KEQC) ii. iii. iv. Nunavik Marine regional Impact Review Board (NMIRIB) Federal Environmental and Social Impact Review Board (COFEX Nord) Canadian Environmental Assessment Agency (CEAA) v. Department of Fisheries and Oceans (DFO) Navigation, protection of fisheries habitat (including freshwater habitats), and the Species at Risk Act (SARA). Attachment 4 outlines the responsibilities of the respective agencies, and the processes that will likely be needed to secure the permits for the project. In summary, the process is initiated by a Project Description Report (PDR) which outlines "potential adverse effects" and proposes mitigation techniques to minimize these adverse effects. Environmental Review agencies review both natural and social effects, and the test for inclusion in the initial stages of the applications are relatively low to give each community or potentially affected party the opportunity to participate and share views. The outcome of this stage of the process is typically some form of Preliminary Environmental Assessment, which gives the proponent an indication of the likely terms and conditions that will need to be met prior to formal applications for permitting. The next stage of the environmental review process uses a higher level of threshold that is typically defined as "significant adverse effects." Public consultations and engagement are an important element at each step of the process. Once all of the review processes are complete, the proponent is required to formally apply for the required permits to implement the project. Page 17 of 44

18 Using similar infrastructure projects as a guide, it is estimated that the length of the entire process from idea to permits could be in the range of 2 years. Capital and Ongoing estimated costs: Capital Cost = $153.9M (assuming a 20% contingency allowance). Ongoing costs = $2.3M per year (excluding interconnect connection costs). b). Arctic Fibre Inc. Proposal Arctic Fibre has proposed a Canadian mainline marine network as shown in Figure 4. Figure 4 Arctic Fibre Inc Mainline Marine Canadian Network Arctic Fibre INC has provided cost estimates for serving all 14 communities in Nunavik plus Deception Bay. Figure 5 shows the Arctic Fibre design to serve the communities in Nunavik Page 18 of 44

19 East Hudson Branching Unit Ivujivik Salluit Deception Bay Existing Fibre Link Kangiqsujuaq Akulivik Quaqtaq Proposed Arctic Fibre Link Puvirnituq Inukjuak Kangirsuk Aupaluk Tasiujaq Kangiqsualujjuaq Kuujjuaq Umiujaq Kuujjuarapik Radisson Brisay Chisasibi ExistingFibre Links Figure 5 Arctic Fibre Network In summary, the Arctic Fibre proposal is divided into two sections: i. A marine backbone section comprising a distance of approximately 1,400 km. This network connects with the proposed Arctic Fibre trans Canadian Arctic Fibre network, and provides an alternative spur route to Chisasibi broadly following the western shore of Nunavik (connecting at the Eastern Hudson's Bay Undersea Branching Unit). The capital cost estimate for the backbone network is between $55M and $65M (with a 5% contingency allowance). ii. A local network connecting individual communities to the backbone network. The total distance for these individual connections is approximately 1,400 km. The capital cost Page 19 of 44

20 estimate for the "local connecting links and landings" network is between $80M and $90M (with a 5% contingency allowance). iii. iv. Microwave radio links from Kuujjuaq to Kangiqsualujjuaq, Tasiujaq and Aupaluk. A terrestrial fibre link from Ungava Bay to Kuujjuaq. v. Arctic Fibre has indicated that the installation schedule for the Canadian portion of the route is contingent on Government of Canada approval, marine surveys and carrier support. In terms of availability, the network proposed by Arctic Fibre can be configured in a ring configuration. This means that the expected availability could be in the % region. c). Terrestrial Fibre Options The KRG Statement of Work required the study to review the technologies employed in the Northern Ontario Pickle Lake fibre optic installation for suitability to Nunavik. Attachment 5 provides a summary of the Northern Ontario Broadband Fibre Optic Network located in the Nishnawbe Aki Nation (NAN) territory. Figure 6 shows the extent of the NAN network Figure 6 NAN Fibre Optic Network, Northern Ontario The NAN network extends for approximately 2,645 km, connecting 26 communities and covering an area of approximately 2,600 sq km. Page 20 of 44

21 Each community will have access to a 2.5 Gbs transport link and 8 x 1 Gbs Ethernet links. The total network comprises: 1,185 km aerial construction 140 km buried cable 1,320 km submarine installation. For approximately 90% of the NAN routing, either all weather or winter roads exist. This means that heavy equipment can be deployed along the roads to facilitate installation. For the Nunavik terrestrial installations, the study found that a number of construction techniques employed in Northern Ontario would not necessarily be applicable in Nunavik, primarily as a result of the lack of road infrastructure. 5. Microwave Radio Options The KRG Statement of Work required the study to review microwave technology options to provide high speed service to Nunavik communities. The study considered two microwave radio design alternatives based, initially, on the projected 2016 traffic requirements provided by KRG. i. A design using a combination of: An 11 GHz system operating at 1200 Mbps A 5 GHz system with a capacity of 200Mbps A 900 MHz administration and telemetry system The antennas for each system would share common tower structures with an average distance between towers of approximately 40 km. Hybrid power systems (solar, wind, battery and diesel generator back up) are proposed at intermediate sites. ii. A design using a 6Ghz microwave radio system. This system permits a longer "skip" distance between radio towers, and has the potential to eliminate the need for multiple radio systems to meet system availability requirements. The study focussed on an indicative network design using the 6GHz radio options. Three microwave radio options for the interconnection of a high speed Nunavik network to southern Canada were considered: Page 21 of 44

22 i. Connection from Kuujjuaq to the northern extent of the Hydro Quebec fibre optic network at Brisay, Quebec. After further evaluation, the study concluded that it is unlikely that Hydro Quebec would allow connection with their existing fibre network. ii. iii. A microwave radio link from Kuujjuaq to Schefferville. This has the potential to link with a proposed extension of a fibre link that currently extends from Sept Isles to Labrador City. The proposed right of way for the extension to Schefferville could follow the existing railway right of way. Connection to the existing Eeyou Communications system network at Chisasibi. a) Indicative Microwave Radio Design to serve all 14 communities in Nunavik, in a ring configuration Appendix 4 shows the network design, civil works, equipment and powering costs for a microwave "ring" network topology serving all of the communities in Nunavik, and having southern Canadian interconnection points at Chisasibi and Schefferville. The design is based on a total capacity of 1.3 Gbs. This figure can be doubled in size to 2.6 Gbs using the same civil works investment. Cost estimates are provided for both options. A key parameter for microwave radio design is radio path planning. This determines the overall performance of the microwave system, and provides the location, and heights, of the radio towers. Figure 7 shows the indicative radio tower design. There are a total of 50 microwave radio towers with heights that vary between a maximum of 90 metres to a minimum of 5 metres. Page 22 of 44

23 Figure 7 Indicative Microwave Radio Design Page 23 of 44

24 The proposed power system for microwave radio equipment is based on a hybrid design composed of the following components: 14 x 240w solar panels 2 x 1kw wind turbines 1 x 5kw arctic diesel generator The radio links have been design to a network carrier 99.99% availability. In summary: Capital Cost = $52M to $57M for a 1.3 Gbs capacity network. Recurring costs estimated at 4% of capital cost = between $2.0M and $2.5M, plus annual licence fees of approximately $0.5M per year. For a 2.6 Gbs capacity system, it is estimated that the: o Capital Cost between $65M and $70M o Recurring cost = $3.5 and $4.0M 6. Satellite Options All KRG communications needs in Nunavik are currently served solely by C Band satellite technology for internet and government administration. Since its initial deployment in 2002 on 11 MHz of satellite bandwidth, the KRG Satellite network has grown to today's 129 MHz. The current internet distribution service is based on a star topology, where each community is linked to a southern Internet Gateway at Sioux Lookout. The corporate internet network topology is based on a mesh architecture, where single hop remote to remote communication is supported. At the projected rate of traffic growth, current infrastructure using Telesat's Anik F3 C Band space segment is not technically scalable to meet demand. In addition incremental costs of increased C Band capacity, estimated at $25 million per year for a full C band payload, would be very challenging to support financially. The KRG network is experiencing exponential growth significantly exceeding the capability of the current C Band network. For future expansion of the KRG satellite network, the study proposes a network configuration consisting of: Ka Band technology to meet the majority of the increased demand, noting that Ka Band systems do not support a mesh network topology. Ka Band technology also offers a very significant cost advantage over C Band, sometimes as high as an order of magnitude less expensive. Ka Band technology would permit KRG to meet its forecast bandwidth requirements. Page 24 of 44

25 Retaining a modest C Band capability using existing network equipment to support current customer MESH based. It is estimated that MHz capacity will be required to meet this requirement. Tables 2 and 3 provide an estimate of capital cost expenses to support a Ka Band ground station capacity in Nunavik to meet KRG's traffic requirements, based primarily on information provided by Telesat. Summary RF equipment Baseband Equipment Construction Installation Professional Services Logistics Total Per site Est. Price $1.7 M $4.0 M $0.5 M $0.23 M $0.26 M $0.15M $6,8 M $0.43 M Table 2 Estimate of Capital Expenses required to deploy proposed Ka band network infrastructure in existing KRG Remote Earth Stations Summary Electronics Professional Services Total Est. Price $3,7M $0.12M $3,8M Table 3 Estimate of Capital Expenses required to deploy the proposed Ka band network infrastructure in the gateway earth station The Ka Band network topology is limited to a star configuration. Using an estimate of 2 Mbs per community for the mesh network demand, this translates into a total requirement of 28 Mbs. Using the current technical configuration of the C Band network, this represents approximately 16 MHz or 50% of a transponder. Page 25 of 44

26 Estimated Cost for C band Network Assuming that all internet traffic is transferred to the proposed Ka Band network, it is estimated that an additional 5 MHz of C Band capability will be required in the out years of the study to maintain a minimum MESH network capacity. The estimated cost to KRG of this C Band space segment is between $200K and $250 K per year, once existing contract agreements expire. 7. Summary of Operating Expense Estimate The following tables provides an estimate of the operating expenses for a combined Ka Band and C Band network, assuming a STAR configuration for a 7.2 Gbs Ka Band network, and a 20 Mbps MESH C Band network. Years (2016 to 2030) Ka-Band Space Segment C-Band Space Segment Internet Connection Ka-Band Uplink C-Band Uplink Network Operation Totals $70M to $90 M $1.8M to $2.5M $6.3 M $9 M $1 M $24 M Table 4 Estimated costs of an indicative satellite network using C band and Ka Band technology for 15 year period from 2016 to Environmental Assessment Considerations It is anticipated that the environmental assessment costs and time frames will vary between the different technology options. a) For the Fibre Optic alternatives, the following assumptions have been made: For the portion of the network that falls under the Nunavik regulations (Nunavik Land Claim Agreements, James Bay Agreement, Kativik Environmental Quality Commission, Municipalities as defined under the Kativik Act etc), that the project would be likely considered in the "grey area", as defined by regulations. This could mean that the project would likely not be considered in the same way that, for example, a mine would be considered, but that the project would need to identify potential areas of risk (including potential adverse affects) and possible mitigation options. Public consultations would be a critical part of the process. For the portion of the project that falls under the Nunavik Marine Area, it is anticipated that responsibility would be shared amongst: Page 26 of 44

27 i. Federal Department of Fisheries and Oceans ii. The Canadian Environmental Assessment Agency iii. Nunavik Marine regional Impact Review Board iv. Federal Environmental and Social Impact Review Board (COFEX Nord) For those areas where the cable passes close to offshore islands under the responsibility of Nunavut, it is likely that Government of Nunavut regulations would need to be met. It is estimated that the Environmental Assessment and Permitting requirements could extend for a period of between one to two years. Note: Arctic Fibre believes that this estimate is conservative, and that permitting could be accomplished in several months. b) For Satellite Systems, the following assumptions have been made: Environmental Assessment and permitting considerations are considered to be minimal for satellite options. c) For microwave radio systems, the following assumptions have been made: Microwave radio towers will need to be located at approximately 50 km to 70 km intervals. Each tower site will consist of the tower plus a shelter that will include hybrid powering equipment. A fuel storage facility will also be required. Depending on the land classification, it is estimated that the EA and permitting process could take between 9 months and 15 months. Cost estimates for environmental assessment (EA) and permitting processes are difficult to assess until the relevant regulatory authorities have assessed potential projects within their respective areas of responsibility and have made determinations with respect to the rules and regulations that may apply. For similar scale fibre optic projects, the estimate for the EA and permitting processes can vary substantially. In the event that regulatory authorities determine that a full environmental impact review is required, the process can take up to two years (including consultations) and costs could vary from $1M to $4M. For the purposes of this study, a conservative estimate of EA costs have been assumed in the Executive Summary Conversely, the EA and permitting process for the satellite options are likely to be minimal EA and permitting cost for the microwave radio is likely to be more substantive than for the satellite options. Fuel storage facilities will be required at remote sites, and it is likely that this will trigger a Page 27 of 44

28 review process. A conservative cost estimate for the EA and permitting process of $1M has been assumed. 9. Fibre Optic Network Cost Comparisons In addition to single technology network models, KRG required the study to evaluate combinations of technologies that could be economically employed as the network demand increases. The following "mixed" technology models were considered: A fibre ring, with a microwave radio linking Kuujjuaq with Schefferville, as shown in Figure 8. This model employs a 1.3 Gbs microwave radio link to complete the telecommunications ring between Kuujjuaq and Schefferville. The microwave radio link replaces a proposed terrestrial fibre link between these communities. From a capital cost perspective, this alternative reduces the overall network capital expenditure by approximately $20m, but with a reduced capacity between Kuujjuaq and Schefferville. By doubling the radio capacity to 2.6 Gbs (using the same civil works and tower structures), the network option meets the KRG requirement in the Statement of Work of providing network diversity and redundancy of 25% of total network capacity. Page 28 of 44

29 Ivujivik Salluit Deception Bay Proposed Fibre Link Kangiqsujuaq Akulivik Quaqtaq Puvirnituq Kangirsuk Existing Fibre Links Inukjuak Aupaluk Tasiujaq Kuujjuaq Kangiqsualujjuaq Umiujaq New Digital Microwave Link Kuujjuarapik Chisasibi Radisson Brisay Existing Fibre Links Figure 8 combined fibre, with radio link to Schefferville Page 29 of 44

30 A fibre ring, with microwave radio serving smaller communities, as shown in Figure 9. This option provides for an extension of the microwave radio system to smaller communities that can be more economically served by radio. The mixed fibre/radio network fully meets the KRG 2021 forecast demand requirement. Figure 9 A fibre ring with radio providing service to smaller communities Page 30 of 44

31 A fibre ring with satellite proving service to smaller communities, as shown in Figure 10. This option provides a combination of satellite (both C Band and Ka Band) together with a fibre backbone network. The network fully meets the KRG 2021 capacity requirements. Ivujivik Salluit Proposed Fibre Link Akulivik Puvirnituq Kangiqsujuaq Quaqtaq Kangirsuk Existing Fibre Links Inukjuak Aupaluk Tasiujaq Kangiqsualujjuaq Kuujjuaq Umiujaq Kuujjuarapik Chisasi bi Radiss on Brisay Caniapiscau Existing Fibre Links Figure 10 Combined fibre and satellite network option Page 31 of 44

32 Table 5 shows a capital cost comparison of fibre network options: In this analysis, the baseline cost estimate of the indicative fibre optic network, which assumed all landings would be implemented using split pipe technology, has been increases by $15M (for Option 1) to provide an allowance for Horizontal Directional Drilling in those circumstances where it is necessary to protect the landing cable and meet the overall system availability requirements. System Configuration Capital Cost of Fibre Optic System ($M) Fibre Optic Cable Distance (km) Other System Costs ($M) Comments Option 1 All Fibre Indicative Network $154M 3,566 Landing option buried plus split pipe construction. Marine 2907 km Terrestrial 659 km Option 2 Arctic Fibre Proposal Secondary Network Primary Network $80M $90M 1 1,400 $55M $65M 1 1,400 Excludes land link to Schefferville diversity provided by Arctic Fibre main network. 1 Calculated using 5% contingency Option 3 Indicative Fibre Network serving all communities with Radio linking Kuujjuaq to Schefferville Option 4 Combined fibre and microwave radio. Option 5 Combined fibre and satellite $125M 3,050 $10M 1.2 Gbit/s capacity microwave radio system from Kuujjuaq to Schefferville. $98M 2,546 $31.2M (Microwave radio) $98M 2,584 $27.1M (Satellite) Landing option buried plus split pipe construction. Marine 2907 km Terrestrial 143 km * Assumes additional $12.8M for HDD Landing option buried plus split pipe construction. Marine 2415 km Terrestrial 131 km * Assumes additional $10.7M for HDD Assumes satellite serving 5 communities plus ring backup from Kuujjuaq. Table 5 Capital Cost Comparison for fibre optic network alternatives Page 32 of 44

33 Table 6 shows recurring cost estimates for fibre optic network alternatives: In this analysis: Licensing cost for Microwave Radio and Satellite options have been included. Maintenance costs have been included on the following basis: o Fibre Optic systems 1.5% of capital costs annually o Satellite systems 1.7% of capital costs annually o Microwave Radio systems 4% of capital costs annually These costs include maintenance and repair, system operation, technology (hardware and software) upgrades System Configuration Total Estimated System Capital Costs Estimated Annual Operating Costs (excluding system expansion costs) ($M) Total Cost in $2013, excluding inflation over 20 years (15 for satellite) ($M) Option 1 All Fibre Indicative Network $154M $2.3M $277M Option 2 Arctic Fibre Proposal $143M Arctic Fibre uses a "Utility" business model, and ongoing costs are dependent on the number of users on the system Arctic Fibre uses a "Utility" business model, and ongoing costs are dependent on the number of users on the system Option 3 Indicative Fibre Network serving all communities with Radio linking Kuujjuaq to Schefferville $135M $2.4M $259.4 Option 4 Combined fibre, microwave radio. Option 5 Combined fibre and satellite $129M $3.1M $268.4 $125M $1.9M $184.4 Table 6 Fibre Network Options, Recurring Costs Page 33 of 44

34 10. Interconnection Options For the microwave radio and fibre optic network alternatives, two network interconnections are required to the southern Canada mainline telecommunications network, to complete the recommended "ring" configurations in order to meet network availability requirements. Four alternatives have been considered: a) Connection to the Hydro Quebec network at Brisay this alternative has been proposed by i Comm as a component of their microwave radio proposal from Kuujjuaq to Brisay. After further consideration, the study concluded that is extremely unlikely that Hydro Quebec would permit public, carrier type, telecommunications traffic that may be subject to regulation, over its internal communications network. This network alternative was therefore not considered further. b) Connection with a proposed fibre link at Schefferville this alternative is based, in part, on a proposed extension of the fibre link from Labrador City to Schefferville, using the right of way of the Tshiuetin Rail Transportation Inc (Tshiuetin Rail Transportation Inc. has acquired the northern section of the rail line of the QNS&L Railway, including the Menihek Subdivision, which runs between Emeril Junction, Newfoundland and Labrador and Schefferville, Quebec). Figure 11 shows route of the right of way. Figure 11 Map of Railway right of way from Sept Isle to Schefferville Page 34 of 44

35 The connection with a high speed fibre link at Schefferville, perhaps with a partnership arrangement with the current fibre optic project proponents, would provide high speed access to southern Canada networks that would meet the network capacity requirements of KRG. c) Connection with the Eeyou Communications Network (ECN) at Chisasibi. Figure 12 shows the current ECN fibre network. Figure 12 Eeyou Communications Network Eeyou Communications have expressed an interest in working with KRG providing a high speed fibre optic transport facility to southern Canada. Traffic from the proposed KRG high speed network would terminate in Chisasibi, and be transported by ECN to St. Felicien, for onward connection to southern telecommunication networks. There is a potential long term issue of capacity. The current capacity of the network is 2.4 Gbs. ECN has a plan to expand the James Bay network, which would significantly increase capacity. From the perspective of KRG, there are three options for connection with the ECN. Page 35 of 44

36 i. Include a capital cost allowance in the KRG network estimate for expansion of the ECN network, to meet the term KRG traffic requirements. This could be implemented in terms of: 1) An Indefeasible Right of Use (IRU) agreement, where KRG would have unrestricted access to a defined number of fibre pairs or Dense Wavelength Division Multiplexer optical channels for a specified period (e.g. 20 years). In this arrangement, ECN could be contracted to maintain and operate the IRU channels for an agreed fee. 2) A partnership arrangement with ECN that could include the right of ECN to use a potential southern interconnection gateway at Schefferville using the proposed KRG network, to provide route diversity for the ECN network. ii. A long term bulk purchase agreement that would be similar to agreements in southern Canada with respect to interconnection at defined Points of Presence (PoP). In southern Canada, PoP agreements are often regulated by the Canadian Radio and Television Commission (CRTC), but a similar legal framework could be adopted for the connection to the ECN network. iii. A partnership with ECN for an extension of the ECN network into Nunavik. d) Arctic Fibre in this network option, Arctic Fibre would inherently provide network diversity through interconnections in southern Canada through an extension of the Arctic Fibre network through Chisasibi to Montreal, and utilizing links through other interconnection points in the Arctic Fibre network. For each of these network alternatives, there are two costs to be considered: 1) The cost of transport from the southern termini of the proposed KRG network to a southern Canada Point of Presence (PoP). 2) The cost of interconnection at the southern Canadian PoP to Tier 1 carriers. For satellite network alternatives, the cost estimates include backhaul to a southern Canadian PoP, but the incremental costs of interconnection at the PoP need to considered. Interconnection Cost Assumptions a. For a bulk transportation cost from Chisasibi to St Felicien, and similarly from Schefferville to Sept Isles, $50,000 per month per Gbs has been assumed. b. For interconnection costs at southern Canadian PoP locations (St Felicien and Sept Isles), an average of $15 per month per Mbs has been assumed Page 36 of 44