PTC Breakfast 2014
Network Map 2
Arctic Fibre - Overview Subsea cable project that provides both transoceanic and domestic connectivity International: $620 million backbone network connects Tokyo to London via the northwest passage Arctic: 14 communities connected by spurs in Nunavut, Canada and Alaska, 13 of which do not have fibre access Separate branches connect Ireland, in the Atlantic, and Seattle, USA and Tomakomai, Japan in the Pacific 3
Network Design Provides connectivity between many of the world s largest markets Asia-Europe Asia-North America Europe-North America Shortest subsea route between East Asia and Western Europe Direct route between Asia and Europe Commercial advantages Low risk route High Speed Connectivity to the Arctic for the first time Catalyst to demand growth
Fibre Pair Routing Diagram 5
Demand Drivers Route Latency Demand Physically diverse route from Europe to Asia Avoids physical trouble spots fish trawling, anchorage Two fibre pairs avoid USA landings Avoids politically risky areas Egypt terrestrial crossing Reduces network congestion in NY/NJ cable stations Creates Hokkaido Honshu/USA route Lowest latency route from Tokyo to London (153.3 ms) Lowest latency route from London to Seattle (on to Chicago, New York) Measurable ROI from ULL routes for financials and Internet companies Internet traffic increasingly global in nature Bandwidth intensity of applications Smartphone adoption globally Subscriber growth in Asia Bandwidth to satellite dependent regions-communities, defence, mining, O&G
Arctic Route = Ultra Low Latency RTD (ms) Tokyo Seoul Shanghai HongKongSingapore Seattle LosAngel Chicago Toronto Montreal Boston New York London Frankfurt Paris Zurich GFC Ranking 6 5 21 3 4 n.a n.a. 12 11 17 7 2 1 10 23 8 Tokyo 0 19 33 46 77 79 111 125 135 130 138 140 153 163 161 167 Seoul 19 0 0 0 0 98 130 144 154 149 157 159 172 182 180 186 Shanghai 33 0 0 0 0 112 144 158 168 163 171 173 186 196 194 200 HongKong 46 0 0 0 0 125 157 171 181 176 184 186 199 209 207 213 Singapore 77 0 0 0 0 156 188 202 212 207 215 217 230 240 238 244 Seattle 79 98 112 125 156 0 0 0 0 0 0 0 129 138 137 143 Los Angeles 111 130 144 157 188 0 0 0 0 0 0 0 161 171 169 175 Chicago 125 144 158 171 202 0 0 0 0 0 0 0 101 111 109 115 Toronto (via SEA) 135 154 168 181 212 0 0 0 0 0 0 0 91 101 99 105 Montreal 130 149 163 176 207 0 0 0 0 0 0 0 82 92 90 96 Boston 138 157 171 184 215 0 0 0 0 0 0 0 90 100 98 104 New York 140 159 173 186 217 0 0 0 0 0 0 0 92 102 100 106 London 153 172 186 199 230 129 161 101 91 82 90 92 0 0 0 0 Frankfurt 163 182 196 209 240 138 171 111 101 92 100 102 0 0 0 0 Paris 161 180 194 207 238 137 169 109 99 90 98 100 0 0 0 0 Zurich 167 186 200 213 244 143 175 115 105 96 104 106 0 0 0 0 7
Latency (Advantage, Disadvantage) RTD (ms) Tokyo Seoul Shanghai HongKongSingapore Seattle LosAngeles Chicago Toronto Montreal Boston New York London Frankfurt Paris Zurich GFC Ranking 6 5 21 3 4 n.a n.a. 12 11 17 7 2 1 10 23 8 Tokyo CBD 0 0 0 0 0 1 1 3 3 18 12 4 34 24 29 24 Seoul 0 0 0 0 0 0 0 2 2 17 11 3 33 23 35 30 Shanghai 0 0 0 0 0 1 1 3 3 18 12 4 19 6 6 6 HongKong 0 0 0 0 0 9 7 8 3 22 15 7 33 18 21 15 Singapore 0 0 0 0 0 1 1 3 3 18 12 4-44 -46-44 -46 Seattle 1 0 1 9 9 0 0 0 0 0 0 0 1 2 1 1 Los Angeles 1 0 1 7 1 0 0 0 0 0 0 0-20 -20-20 -20 Chicago 3 2 3 8 3 0 0 0 0 0 0 0-20 -20-20 -20 Toronto (via SEA) 3 2 3 3 3 0 0 0 0 0 0 0-11 -11-11 -11 Montreal 18 17 18 22 18 0 0 0 0 0 0 0-12 -12-12 -12 Boston 12 11 12 15 12 0 0 0 0 0 0 0-30 -31-30 -31 New York 4 3 4 7 4 0 0 0 0 0 0 0-27 -28-27 -28 London 34 33 19 33-44 1-20 -20-11 -12-30 -27 0 0 0 0 Frankfurt 24 23 6 18-46 2-20 -20-11 -12-31 -28 0 0 0 0 Paris 29 35 6 21-44 1-20 -20-11 -12-30 -27 0 0 0 0 Zurich 24 30 6 15-46 1-20 -20-11 -12-31 -28 0 0 0 0 8
Best of Breed Partners Network Engineering: TE Subcom Completed 2013 Canadian landing site and terrestrial survey Undertaking additional engineering work in Alaska Proven expertise in ice-prone Arctic waters Terrestrial Fibre Network: Ledcor Group Supplier of terrestrial fibre network at landings Diversified construction company with +$2B revenue One of the most experienced telecom suppliers in Canada Environmental Design: AECOM Technology Environmental services including Assessment and landing plan Global professional and technical services company AECOM (NYSE:ACM) serves diversified markets, +$8B revenue Network Design: WFN Strategies All network design and engineering elements Negotiation consultant on supplier contracts Subsea network engineering specialists
New Developments 2013 has been a transformative year for Arctic Fibre Significant progress on the overall development of the project Several modifications to the network design Market demand has been the primary driver 10
New Transpacific Route 11
Transpacific Route Japan-Seattle Provides a new direct Transpacific route from Japan-USA 4 Fiber pairs with 80 wavelengths lit at 100G on the route A few factors drove decision to implement this design change Almost 3000km of the Transpacific route is shared with the Arctic route Northerly route across Pacific is the shortest route low latency Allows for ring topology around Alaska Enables development of additional market (Unalaska) in Alaska Commercial structure of the route differs from Arctic route as Arctic Fibre will own fibre pairs and other carriers can purchase spectrum or individual fibre pairs on route 12
Branch into Hokkaido 13
Hokkaido Branch New branch into Hokkaido to provide capacity both west to Tokyo and east to international markets Arctic Fibre was approached to consider building into Tomakomai on northern island of Hokkaido (population 5.5 million) for following reasons: Transition power-hungry data centres from energy constrained Honshu to Hokkaido s green energy (hydro, wind, geothermal) Increase capacity to Hokkaido Improve resiliency of connectivity between Hokkaido and Honshu Relocate mission-critical technology centres away from Tokyo to lower seismic risk areas on Hokkaido Catalyst to economic development Arctic Fibre is developing the Hokkaido branch in conjunction with local partners and carriers 14
Sakura Internet Data Centre 15
Ireland Branch into Ireland is a relatively low cost build given short distance between the backbone and the landing Ireland is a hub for data centers with many of the largest IT companies in the world having operations there Desire to have additional international connectivity and diverse routes out of island 16
Landing Points Japan: Ajigaura Enables the removal of several hundred kilometers of cable length due to approach over the Japan trench United Kingdom: Highbridge More northerly route into Highbridge allows for a shorter route into London Wet plant is longer but terrestrial connection is much shorter 17
Build Schedule Network build has been scheduled over a two year period using a phased approach First phase is the Arctic network and the second phase is the international network Seasonal window in Arctic necessitating concurrent mobilization of numerous marine resources and the availability of fiber manufacturing capacity means a phased build is the most prudent schedule Marine survey and civil works begin this year with wet plant construction beginning in 2015 18
Timeline Market Assessment and Feasibility Capacity Nomination Process Completed in Arctic Desk Top Study Completed TE Subcom selected as supplier Term sheet with institutional Civil Works investor Started Marine Survey International Network In-Service October 2016 Arctic Network In-Service January 2016 2010 2011 2012 2013 2014 2015 2016 Project Costing and Supplier Engagement Partner with Quintillion Networks Closing of Equity Transaction Construction of Wet Plant in Arctic Begins RFP Issued to TE Subcom and Alcatel Lucent Environmental and Community Consultations completed in Canada Cable Manufacturing Begins Construction of Wet Plant in Pacific & Atlantic Begins
Sales Arctic Fibre has had tremendous success this past year in its presales activities Listening to carriers and letting the market drive the network design changes and solidifying the build design has created momentum on the sales side We have begun executing long term, take or pay, capacity leases with terms of 10-20 years 20
Financing Progress Arctic Fibre has engaged Oppenheimer & Co., a leading middle market investment bank based in New York to act as agent for the equity private placement As typical with any project of this nature, the equity component of the financing is the key component as it is the first money spent with the debt following it All sources of debt provisionally secured and contingent upon the successful raise of the equity 21
Thank you Douglas Cunningham Chief Executive Officer doug@arcticfibre.com 416 613-6263 Mike Cunningham Chief Operating Officer mike@arcticfibre.com 416 575-6453 22
Alaska Network 2016 Point Hope Wainwright Barrow Prudhoe Bay Arctic Fibre Nome Kotzebue Fairbanks A second fiber optic cable is under construction from Fairbanks to Prudhoe Bay Bethel Anchorage Dillingham Kodiak 4 4 Cables run run to to landings in in Oregon and and Washington
Alaska Network Developments Accepted two Alaskan companies as equity investors Executed capacity lease contracts with more in final negotiations Dalton Highway terrestrial build cancelled securing capacity on new fiber currently under construction from Fairbanks to Prudhoe Bay Additional landing points Point Hope, confirmed Shemya Island, subject to Federal Government approval Unalaska, potential to extend spur off trans-pacific route 24
Alaska Network Permitting & Licenses TE Subcom site visits to confirm landing site design in May/June 2014 State and local government permitting processes in progress and on schedule for 2015 build FCC Landing License applications will be submitted spring 2014 following TE Subcom site visits 25
Alaska Network Risk Mitigation Risks: Bering Sea gold miners, ice scour and coastal erosion Mitigation: Use horizontal directional drilling to place spurs ~ 1 mile offshore Used in the oil industry to place subsea pipelines off the north coast of Alaska Northstar and Endicott Pipelines Allows placement of manhole closer to the Landing Site facility, colocated with the local exchange carrier Risk: Competition from satellite and microwave providers Mitigation: price compete less than half the cost of competing technologies on a per Mbps basis - with better technology and service provided over fiber optic network 26
Alaska Network Stimulating Development Arctic Data Center developing on schedule 2 Alaska Native Corporation partners Green power solution Land selection complete and acquisition in process Consulting with customers and end-customers on technology solutions to serve 5+ new businesses that would not be possible without high-speed broadband Assessing and selecting additional terrestrial fiber builds to serve commercial and government customers Infrastructure support for Federal Government agencies implementing US Arctic strategy 27
Thank you Elizabeth Pierce Chief Executive Officer Elizabeth.Pierce@quintillionnetworks.com 907-440-4511 Hans Roeterink Chief Operating Officer Hans.Roeterink@quintillionnetworks.com 907-632-8724 28