120312-Arctic Fibre Presentation to Fed Gov-IEDE

Federal Government Presentation
Ottawa - March 2, 2012
Iqaluit – October 6, 2011 – A Single Point of Failure
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Technical Comparison - Satellite versus Fibre
Telesat Canada
Arctic Fibre
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Low bandwidth solution
Limited bi-directionality (2 channels)
Speed limited to 150 Mbps
Reaches 99.5% of population
Subject to atmospheric interference
No adjacent channel interference
Limited burstable capacity
Subject to catastrophic failure
Upfront capex $300 mln – 15 year life
No economies of scale with 4 Gbps
Requires external dish
Virtually unlimited bandwidth
Fully bi-directional pairs
Speeds to 100,000 Mbps
Reaches 89%-90% of population
Highly physically secure network
Pure signal-minimal packet loss
Virtually unlimited burstable capacity
OADM design for five-nines reliability
Upfront capex $264 mln – 25 year life
Tremendous economies of scale to
12.8 Tbps@40G > 32 Tbps @ 100G
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The Logic Behind Arctic Fibre
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Creates a physically diverse 15,439 km route from Japanese/Korean/Northern Chinese
markets to Europe avoiding problematic Luzon Strait, South China Sea, Red Sea, Suez
Canal and Mediterranean subsea issues.
Reduces the physical routing risk from earthquakes in Western Pacific and
Mediterranean as well as cable cuts or political unrest in Egypt.
Eliminates the need for transAmerica or transSiberia terrestrial crossings and
political/security risk concerns of Asian and Middle Eastern carriers at U.S. cable landing
stations
Provides the lowest latency route from Shanghai, South Korea and Japan to London 168
(ms) coveted by financial services clients and video-intensive services.
Bridges the digital divide between Alaskan and Canadian Arctic communities and the
south by displacing temperamental satellite feeds north of 64 degrees north.
Provides virtually unlimited bandwidth for Alaskan and Canadian communities to
address the many intra-territorial and federal issues identified in the Arctic
Communications Infrastructure Assessment, including CHARs and DND Cambridge Bay
Satisfies 52% of Nunavut population on backbone with secondary network reaching
89%-90%. Satisfies large unfibred markets in Labrador, Kativik and Mackenzie Delta
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Internet Traffic by Application
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Demand Only Goes Up
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The Fastest Route Over the Top
Estimated Arctic Fibre Latency (Milliseconds-RTD)
Halifax
Boston
NYC
Toronto
Shanghai
Seoul
Tokyo
Hong Kong
191
171
158
210
199
179
166
218
204
184
171
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Least Latency Alternative Carrier (Advertised)
Halifax
Boston
NYC
Shanghai
Seoul
Tokyo
Hong Kong
213
193
180
232
Arctic Fibre Advantage
Halifax
Shanghai
Seoul
Tokyo
Hong Kong
22
22
22
22
205
185
172
224
200
180
167
219
214
194
181
233
Toronto
192
172
159
211
(Disadvantage)
NYC
Toronto
Boston
6
6
6
6
-4
-4
-4
-4
-22
-22
-22
-22
Chicago
224
204
191
243
Chicago
182
162
149
201
Chicago
-42
-42
-42
-42
London
201
181
168
220
London
212
201
188
215
London
11
20
20
-5
Frankfurt
210
190
177
229
Frankfurt
199
200
187
224
Frankfurt
-11
10
10
-5
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Milton BMH to Iqaluit BMH
Start Position: 48° 13.33718' N, 53° 57.45940' W End Position: 63° 44.80158' N, 68° 31.01802' W
3D Distance on Surface: 2305.4 km
Vertical Difference (Start to Finish): 33.8 m
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Bude BMH to Chikura BMH
Start Position: 50° 49.59816' N, 4° 32.62068' W End Position: 34° 59.97547' N, 139° 58.46851' E
3D Distance on Surface: 14903 km
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Primary and Secondary Networks
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Past Arctic Telecommunications Ventures
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Original BT “Project Snowboard” subsea fibre proposals dating back to early 1980s
were abandoned due to proliferation of transAtlantic and transPacific crossings.”
The Alaskan-based ArcticLink $1.2 billion project through the far North West
Passage was promoted on the basis of U.S. Broadband stimulus funding ($350
million) which never materialized.
The Polarnet Project is proposing a $860 million Russian-financed system
(RUTACS) from Bude, UK through Murmansk, north across the Siberian Sea
through the Bering Strait south into Vladivostok and south into Tokyo.
Arctic Fibre is a $640 million Canadian-led initiative through the southern
Canadian portion of the Northwest Passage to achieve economies of scale by
providing bulk bandwidth between Northern Europe and Japan with the need to
provide primary bandwidth to citizens in remote Arctic communities and to the
Canadian Government.
Any northern project requires profitable domestic demand because international
commodity pricing across the transAtlantic-US-transAtlantic routes cannot
support capital expenditure.
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Ice Creates Installation Time Issues
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Global Warming Has Created Window
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Along most of the Northwest Passage (southern route) route, the sun shines 24/7
from early June to late July. The ice now melts long enough for Arctic Fibre to have
an ice-free window from August 20th until October 5th either side of the Boothia
Peninsula.
Global warming has shrunk polar ice cap to point by 40% from 1968-2010.
Ice thickness in Arctic Fibre’s marine routing reaches maximum 2.6m thickness vs.
3.2m in 1971.
ArcticLink routing through northern portion of the Northwest Passage crosses
permanent polar ice cap and would require icebreakers.
Siberian ice now melts sufficiently to enable Polarnet Project installation: concerns
exist about ice ridge damage to cable in shallow Siberian waters.
In 2003 Tyco built SSOTS 2,800 km from Norway to Svalbard Islands (78 N) without
incident or subsequent technical issues.
In 2009 Tele-Greenland constructed Newfoundland-Greenland segment to Nuuk
(64N). No issues in “Iceberg Alley” but iceberg incident within Nuuk, Greenland
harbour being rectified with horizontal drilling.
Offshore pipelines buried off Alaska North Slope for decades without incident.
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Project Timetable
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PHASES 1 & 5 Newfoundland to
Iqaluit & Nain spur
PHASE 2
Hudson Strait BU to
Cambridge Bay CLS
PHASE 3
Cambridge Bay CLS
to Tuktoyaktuk LP
PHASE 4 EAST UK to Hudson Strait
BU
PHASE 4 WEST Japan to Tuktoyatuk
BU inc. Alaska
PHASE 6
Nunavik Spur
PHASE 7
Kivallik Spur
PHASE 8
Baffin Spur
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Marine survey2012Q3, Cable lay
2013Q3 RFS November 2103
Boothia terrestrial and CLS 2013Q3
Cable lay 2014Q3 RFS 2014Q4
CLS 2013, Cable lay and RFS 2014Q4
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Marine survey 2013Q2, Cable lay and
RFS 2014Q4
Marine survey 2013Q3, Cable lay and
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2015Q3 tentative
2015Q4 tentative
2015Q4 tentative
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Phases One and Five RFS November 2013
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Ice Management – Design for the Worst
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Arctic Challenges and Risk Mitigation
Challenge
Scope
Icebergs
Greenland icebergs 80-170m deep
Bergy Bits
Smaller icebergs (depth to 20M) can scour
seabed to 1.0-1.5 m
Ridge Ice Scouring
(bummocks)
Ice ridges to 18 m deep, scour depth 1.2m
Ice Covering
(seasonal)
Approx 37% route ice-covered >5 months
CLS Approaches
Landing at Cambridge Bay CLS
Approaches at Taloyoak, Boothia Ithmus
Risk Mitigation
Routing is 600-3500 m deep in Davis Strait
Ice Scour study integral part of marine survey
Burial to 3m where required
Deepwater approach to Milton CLS
Satellite monitoring of bergs
Choose deepest routing > 50m depth
Burial in all prone waters <40m depth
Avoid nearshore ridges, shoulders
Double-armored fibre in ice-prone waters
Rock armour where appropriate
Select deepest routing > 50m depth
Burial in all prone waters <40m depth
Choose wind-protected shore approaches
Rock armour where appropriate
Enlist icebreaker support with ROV capability
Utilize Canadian Ice Survey, C-CORE data
Minimize ice-covered route
Choose deepest routing > 50m depth
Horozontal drilling to 40 m
Duplicate, disparate shore approaches
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Risk Mitigation (continued)
Remote Spur Breaks
Between 11-14 Arctic community spurs
Utilize deepwater Bus and spurs
Distinct fibre pair from express routes
Horozontal drilling to 40 m depth
No service to vulnerable communities
Electrical Supply
Lacklustre, spikey supply in remote hamlets End feed from Tokyo, Cambridge Bay, Bude
DND multiple backups at Cambridge Bay
Insulate festoon system from express
Amplifier Failure
34 %subsea plant inaccesible 7 months p.a.
Ensure amplifer spacing is adequate
Minimize spur amplifiers
Employ flexible OADM design
Utilize proven technology
Maintenance Interval 34 %subsea plant inaccesible 7 months p.a.
Over design and over build
Join Pacific and Atlantic mtce associations
Enlist icebreaker support with ROV capability
Adapt local shallow-hulled vessel for repairs
Other Physical Threats Trawling
Little trawling in ice prone Arctic
Anchorages
Proactive charting and communications
Establish "No Anchor" zones
Proactive Canadian Coast Guard program
Seismic
Install BU offshore Japan for China link
Take wider SE approach to Japan fault zone
Few seismic issues in Arctic
Pipelines
Avoidance or burial where appropriate
Learn from Beaufort experience18
Risk Mitigation (continued)
Ice Scour Risk and Mitigation
Region
NORTH PACIFIC/BERING SEA
Length
km
Seabed Depth
Shallow
Deep Average
(m)
(m)
(m)
Ice
bergs
Ridge Maximum Margin
Ice
Keel (Shallow(m)
Keel) (m)
Scour
Depth
(m)
Risk
Level
Ice
Bound
(weeks)
5,803
n.a
n.a
n.a
No
No
0
n.a.
0.0
Low
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BERING STRAIT/CHUKCHI SEA
982
42
65
45
No
Yes
12
30
1.0
Low
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ALASKA NORTH SLOPE
879
200
1850
500
No
Yes
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173
0.8
Low
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BEAUFORT SEA (CANADA)
213
221
1830
340
No
Yes
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191
1.0
Low
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1,052
120
567
310
No
Yes
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104
0.3
Low
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SPENCE BAY/CAMBRIDGE BAY
627
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100
50
No
Yes
10
14
0.3
High
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BOOTHIA GULF
592
41
260
70
No
Yes
8
33
0.5
Moderate
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FOXE BASIN
688
40
210
125
No
Yes
10
30
0.6
Low
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HUDSON STRAIT
890
165
650
250
Limited
Yes
40
125
3.0
Moderate
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NORTH ATLANTIC
4,189
600
3800
1800
Yes
No
540
60
4.0
Low
0
LABRADOR SEA/NEWFOUNDLAND
1,787
155
3620
2800
Yes
Limited
70
85
1.0
Low
0
ADMUNSEN SEA/CORONATION GULF
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Network Design and Connectivity
•Three intercontinental pairs with 80 wavelengths @40 Gbps = 9.6 terabits total capacity. Additional
festoon pair with similar capacity 80@40Gbps = 3.2 terabits. Theoretical capacity at 100G = 32 Tbps.
•AFI-1,AFI-2, AFI-3 are express fibre pairs from Tokyo-London without terrestrial landings aside
from Cambridge Bay midspan CLS.
•AFI-4 (in the same cable sheath) will be festoon system Tokyo to NYC with spurs to:
Alaska – Gambell, Nome, Point Hope, Wainwright, Barrow, Prudhoe Bay
Canada–Tuktoyaktuk, Cambridge Bay, Gjoa Haven, Taloyoak, Igloolik, Hall Beach,
Cape Dorset, Iqaluit
•Community access spurs segregated electronically and electrically so express backbone survives
any nearshore incidents. OADM allows east and west sections of network to operate autonomously.
Backbone will operate from east or west in unlikely event of backbone incident.
•Cable landing points in Bude, United Kingdom and Chikura, Japan facilitate access to other
international and domestic networks in Europe and North Asia. Offshore BU stubbed SE of Japan
will eventually connect to Chongming (Shanghai) and reduce seismic risk.
• Duplicate approaches from east and west into Cambridge Bay CLS and Boothia Peninsula reduce
risk of backbone failure due to ice scouring.
• Eventual mesh ring connected through Tuktoyaktuk, NWT and Prudhoe Bay, Alaska will provide
terrestrial links to North American networks.
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Network Maintenance
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No failures of TE Subcom subsea optical amplifiers in more 30 years
Amplifier spacing and design can accommodate failure of single amplifier
OADM architecture permits routing around any problematic areas
Arctic Fibre will belong to maintenance consortium or private agreements in North
Pacific and North Atlantic with repair vessels based in Yokohama and Halifax.
For repair in Canadian Arctic or Alaskan North Slope, company will either:
1. Modify Class-1 rated shallow draft vessel to serve as repair ship;
2. Lease vessel from a private Arctic operator;
3. Negotiate agreement with Canadian Coast Guard to accommodate
grappling equipment and spare cable and ROV;
4. Combination of above arrangements.
Critical time frame is during spring melt (May-July) with MTTR of six weeks
Arctic Fibre will lease redundant satellite capacity to ensure continuity for small
communities. Backbone customers will use alternative mesh fibres.
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Corporate Structure and Governance
•Arctic Fibre Inc. incorporated within Ontario, Canada to hold assets within Canada and its
territorial waters to comply with Telecommunications Act foreign ownership restrictions.
• International segments owned by Bermudian company to facilitate low-tax treatment.
•Hybrid ownership consisting of Canadian financial institutions, pension funds, territorial
development corporations and management. International carriers permitted to own IRUs
or minority equity interest.
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Experienced Board of Directors
Chairman – The Hon. James Farley QC, Counsel to McCarthy Tetrault, has extensive
telecommunications experience both as an investor to fibre projects and as a bankruptcy
court judge in several telecommunications matters.
President – Douglas Cunningham, has 40 years telecom investment experience and has
constructed or financed such projects as TeleBermuda, GlobeNet Communications, Antilles
Crossing, TeleBarbados and TeleCayman and North Atlantic Fibre. Former top-ranked
telecommunications analyst with experience in 13 countries. Former senior executive with
major international investment dealers and Canadian chartered banks.
Director – Jim Meenan, is a retired President of AT&T Canada, and former CFO of AT&T
Long Distance Company Inc. Until recently he was a Director of 360 networks. He serves as
a Director of a number of technology start-ups and is a mentor at the MaRs Discovery
District.
Director – Mike Cunningham, is the President of Storemarker Inc., an internet location
software company. He previously founded Speak Telecom, sold to Distributel in 2008 and
has managed wholesale telecommunications carriers in the Caribbean. He holds a Masters
in Finance degree from Queens University
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Utility Pricing Structure
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Canadian wholesale is pricing based upon traditional rate-of-return utility model
which:
1. Provides a satisfactory return for investors on the actual invested capital;
2. Facilitates capital raising;
3. Enables use of U.S. Exim Bank financing at low rates to provide the lowest
overall cost of capital;
4. Ensures non-discriminatory pricing between user groups on the
backbone network;
5. Reduces per gigabit unit prices as volumes increase due to lack of variable
cost.
Based upon fibre mileage allocation, 27.7% of foreign revenues will accrue to
Canadian company, subject to $20 million ceiling.
Foreign carriers will subsidize Canadian backbone between $15-$18 million per
annum, thereby reducing Canadian tariffs by 40%-44% from standalone model.
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Project Financial Summary
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Segment
Start Point
End Point
Primary Network
One
Milton, NL
Iqaluit, NU
Two
Segment One UBU Cambridge Bay, NU
Three
Cambridge Bay, NU Tuktoyaktuk, NT
Canadian Total
Four (East & West)Frobisher Bay-UK Tuk-Alaska-Japan
Primary Total
Secondary Network
Five
Segment One UBU Nain, NL
Six
Segment Two UBU Kuujjuaq, QC
Seven
Segment Two UBU Arviat, NU
Eight (main)
Frobisher Bay UBU Pond Inlet NU
Eight (extension) Pond Inlet NU
Resolute Bay, NU
Secondary Total
Capital
Cost
Revenue Gov't/Carrier
Reqm't Funding Reqm't
$64.7
$134.6
$75.2
$274.5
$328.1
$602.6
$11.3
$21.2
$11.7
$44.2
$54.4
$98.6
$0.0
$0.0
$0.0
$0.0
$0.0
$0.0
$13.5
$45.4
$47.9
$54.6
$30.6
$192.0
$2.3
$8.5
$9.3
$9.6
$5.5
$35.2
$2.3
$8.5
$9.3
$9.6
$5.5
$35.2
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International Carriers Subsidize Canadian Traffic
Year
Phase One Rev Rqmt
One
Two
$11,351,532
Three
$10,988,008
Four
$10,700,155
Five
$10,413,216
$10,127,213
Less: Intl Revenues
Net Revenue Reqmt
Monthly Revenue Rqmt
Forecast Throughput
GBps
Monthly Price per Mbps
$0
$11,351,532
$945,961
$0
$10,988,008
$915,667
-$3,830,895
$6,869,260
$572,438
-$4,035,843
$6,377,374
$531,448
-$4,002,784
2.0
$473
2.4
$382
3.0
$191
3.5
$152
4.0
$128
Phase Two Rev Reqmt
Less: Intl Revenues
$0
$0
$21,174,131
$0
$20,427,636
-$8,712,197
$19,836,954
-$9,178,287
$19,247,384
-$9,103,105
Net Revenue Reqmt
Monthly Revenue Rqmt
Forecast Throughput
GBps
Monthly Price per Mbps
$0
$0
$21,174,131
$1,764,511
$11,715,439
$976,287
$10,658,667
$888,222
$10,144,279
$845,357
0.0
$0
0.5
$3,529
2.0
$488
2.1
$423
2.2
$384
$0
$0
$0
$0
$11,700,496
$0
$11,700,496
$975,041
$11,279,465
-$4,510,570
$6,768,894
$564,075
$10,946,362
-$4,751,879
$6,194,482
$516,207
$10,613,800
-$4,712,955
$5,900,845
$491,737
0.0
$0
0.5
$0
1.0
$0
1.0
$0
1.1
$0
$11,351,532
$0
$11,351,532
$945,961
$43,862,634
$0
$43,862,634
$1,890,709
$42,407,256
-$17,053,662
$25,353,593
$1,136,515
$41,196,532
-$17,966,009
$23,230,523
$1,047,657
$39,988,397
-$17,818,844
$22,169,553
$1,002,108
2.0
$473
3.4
$556
6.0
$189
6.6
$159
7.3
$137
0.0%
0.0%
40.2%
43.6%
44.6%
Phase Three Rev Reqmt
Less: Intl Revenues
Net Revenue Reqmt
Monthly Revenue Rqmt
Forecast Throughput
GBps
Monthly Price per Mbps
Total Cdn. Rev Reqmt
Less: Intl Revenues
Net Revenue Reqmt
Monthly Revenue Rqmt
Forecast Throughput
GBps
Monthly Price per Mbps
Foreign Rev Subsidy
$6,124,429
$510,369
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Relative Economics of Satellite and Fibre
Telesat
Canada
Mhz per transponder
Mbs per transponder @ 1.4 mbps
Wholesale Cost per month
Cost-bidirectional 100 Mbps circuit/month
Wholesale Cost per Mbps
Year One Fibre Cost per Gigabit/month
Year One Wholesale Cost per Mbps
Initial Percentage Savings
Year Three Fibre Cost per Gigabit/month
Year Three Wholesale Cost per Mbps
Year Three Percentage Savings
Arctic
Fibre
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50.4
$120,000
$240,000
$2,381
$473,000
$473
80.1%
$159,000
$159
93.3%
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Strong Carrier Interest
Foreign Carriers & HFTN
Domestic, U.S. & Content
Providers
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China Unicom, China Telecom,
China Mobile, PCCW
Chunghwa,
Korea Telecom, SK Telecom, LG
Softbank (Japan Telecom), NTT, KDDI
British Telecom, Cable & Wireless
Telia
Sprint International
Vigilant, BATS, Interactive Brokers,
Interactive Data, Citi-Hub
Northwestel, Bell Canada, Bell Aliant,
Ice Wireless (Rogers), Lynx Mobility
Tamaani Internet, SSI Micro,
AT&T, ACS Alascom, GCI Alaska
Century Link, Verizon
Google, Facebook, Twitter, YouTube
Microsoft/Skype
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Decision Making Time is Near
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Long lead times for manufacturing of 17,000 km of fibre
Long lead times to procure increasingly few cableships
Ice interval forces Arctic Fibre into tight late July-September window
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Phase 1 – Newfoundland to Iqaluit – need decisions by May for 2013Q4 RFS
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Phase 2 – Iqaluit to Cambridge Bay – need decisions by August for 2014 RFS
Phase 3 – Cambridge Bay to Tuk – need decisions by August for 2014 RFS
Phase 4 – Major carrier commitments secured by mid-June
Phase 5 – Nain Spur – need decisions by May for 2013Q4 RFS
Phases 6 & 7 & 8- Nunavik, Kivaillik, Baffin – BU decisions need be made by May
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Failure to respond within these time lines will result in project cancellation due to
carrier defection to other competing Russian terrestrial and subsea projects.
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3 Otter Crescent,
Toronto, ON, Canada
M5N 2W1
416-613-6263
[email protected]
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