Before we go spending any more on it, Albertans need to know what the SuperNet has really cost

Nobody here but us chickens … and our $400-million-plus fibre-optic hookup, of course.

Alberta Premier Alison Redford says she wants to spend even more money on the Alberta SuperNet – the decade-old effort to hardwire rural Alberta with fibre-optic cable to carry high-speed Internet to small towns and farmyards.

Likely, most of the few Albertans who make note of this will shrug their shoulders and assume it’s a good idea. Who knows, maybe it is? One thing’s for sure, though, it’s been a remarkably expensive idea with limited results to date.

Really, we need to ask ourselves, should we be spending hundreds of millions on an effort to bring high-speed Internet to the most remote corners of rural Alberta when we’re supposedly too strapped to provide a reasonable degree of public safety, efficient public transportation, adequate social services or even keep all the streetlights burning in the province’s capital city, population one million?

Nevertheless, in her mandate letters to ministers at the start of this month, Premier Redford instructed Service Alberta Minister Manmeet Bhullar and Agriculture and Rural Minister Evan Berger to bring the undeniable benefits of Youtube and Twitter the half a million Albertans who are still suffering with “prehistoric” Internet connections.

Not surprisingly, the rural lobby is all in favour, although rather churlish about what they’ve received so far. “The time has arrived to finally deal with this,” the executive director of the Alberta Association of Municipal Districts and Counties told the Calgary Herald. “There’s no such thing as high-speed Internet through a cable company in rural areas. You can’t get DSL service from your local phone provider. What everyone takes for granted in the city doesn’t exist everywhere.”

Meanwhile, it’s quite hard to get a clear picture of what this massive 10-year project – which everyone seems to agree has failed to deliver on its expensive promise – has actually cost.

The Calgary Herald report referred to it as a $300-million network. It most certainly has cost taxpayers much more than that, though precisely how much is more difficult to pin down with any confidence.

Back in 2001, the Alberta government said in a news release that SuperNet would require a $295-million investment – which may be the source of the Herald’s estimate. However, this figure was based on the government fronting the project $193 million and a private-sector investment from Bell Intrigna and Bell Nexxia of $102 million.

Naturally, nothing’s quite that simple. According to the release, published on July 24, 2001, the province also signed an agreement “to purchase $169 million worth of telecommunication services from Bell Intrigna over a period of 10 years.” Surely it is not merely coincidence that this 10-year period happened to end just now, at the very moment Premier Redford is starting to talk about another major SuperNet project?

Regardless of that speculation, this additional expenditure alone would bring the total cost of the SuperNet to Alberta taxpayers to $362 million, assuming it’s part of the SuperNet deal, without calculating the cost of inflation, maintenance, repairs, tax breaks or other factors that may have increased the expense of the SuperNet along the way.

However, any attempt to get a grip on these additional costs – which certainly are lurking out there somewhere in the books – is extremely difficult for anyone without the assistance of a forensic accountant and the power to issue subpoenas. Reporting on ongoing general SuperNet expenses is hidden in various ministry financial reports. Since the SuperNet has been parked with various ministries over the years, you’d have to comb through the books of Innovation and Science (2000-01 to 2003-04), Restructuring and Government Efficiency (2004-05 to 2005-06) and Service Alberta (2006 to the present).

Even if you did that, however, the costs are still only expressed as general program expenses. This task would be further complicated by the fact that the format by which SuperNet costs are expressed changes continually from report to report.

To complicate matters further, while the Alberta government owns the rural portion SuperNet, and Bell Canada owns other parts, a Calgary company called Axia SuperNet Ltd. is contracted to run it.

Axia SuperNet, in turn, is a wholly owned subsidiary of Axia NetMedia Corp. of Calgary, a publicly traded company that reported profit of $28.9 million on revenue of $78.2 million in fiscal 2011. “Axia’s Alberta SuperNet business has consistently generated annual revenues between $51 million and $55 million,” the company’s 2011 “Progress Report” states without indicating whether this revenue comes from the Alberta government or other customers like municipalities.

Copies available on the Internet of the Alberta Treasury Board’s Blue Book, which lists details of grants, supplies, services and other payments by recipient, indicate that the parent company, Axia NetMedia, received approximately $77 million in payments from Alberta taxpayers between 2006 and July 2011. Presumably these payments had something to do with the SuperNet. There may also have been additional payments between 2001 and 2006.

Given this level of (intentional?) confusion, it’s impossible to say with any certainty what this program has really cost, other than it’s certainly more than $193 million, possibly $362 million, maybe even $439 million, and quite likely even more than that.

Probably, if we had a fair accounting, the true cost to taxpayers would be closer to half a billion dollars – at least, if this is not correct, it would be a worthy challenge to the Redford Government to prove it.

In November 2000, Innovation and Science Minister Lorne Taylor described the SuperNet in a press release as “the Alberta Advantage for the 21st Century.”

Now that someone wants us to spend more money on it, it’s being described as a flop that made it no further than the town office and the public library in Smallsville and Elk’s Knuckle.

By the summer of 2001, Victor Doerksen held the Innovation portfolio. “I am confident Alberta SuperNet will continue to spur on Alberta’s high-tech economy five, 10, and 15 years down the road,” he said in a press release. “Once again, Alberta has established itself as a world leader in the new global economy.”

Well, here we are 10 years down the bumpy Information Backroad and the SuperNet has done no such thing. For its part, the new global economy is looking green and stumbling toward the facilities at the back of the Greek restaurant.

Surely Albertans deserve a fair and clear accounting of how much has been spent before we plunge holus-bolus into another subsidy program to bring city services to the country when we can’t even afford city services in the city!

It also wouldn’t hurt to have an honest estimate of how much more we plan to sink into this effort, and an honest cost benefit analysis of what it’s really likely deliver. Maybe the compensations of country life are such that people who choose to live there are also making the choice to live without high-speed Internet, just like they don’t have a Starbucks on every corner.

But don’t bet on any of this happening when it comes to expensive perks for rural Alberta. Instead, we’ll likely just have to close some more urban schools, de-list a few more essential health services and do without city streetlights at night, just like the countryside.

This post also appears on Rabble.ca.

6 Comments on "Before we go spending any more on it, Albertans need to know what the SuperNet has really cost"

  1. Alex P says:

    I worked for MacEwan College (remember them?) library up to about five years ago. I went to many library get togethers where the fear was the rural libraries were about to lose all catalogue functionality as a modem dial-up would no longer work.

    The convoluted 'consortia' model (apparently that meant Bell and a subsidiary of Bell) made knowing where the project was at really tough.

    That's how it goes here. Good idea? Lets mess it up anyway.

  2. Sam Gunsch says:

    David,
    re your comment: "Surely Albertans deserve a fair and clear accounting of how much has been spent…"

    Albertan's have been denied accountability for a long time. Our political situation seems so bad to me, that it actually makes your question sound a bit Quixotic.

    Your SuperNet critique raises the accountability and governance issues that Mark Lisac wrote about in the 1990's.

    Unfortunately today, among your peers there's not much work done on this kind of story.

    For a sampling of Lisac's work which your post echoes, see below:

    DISSECTING KLEIN'S CUTS
    Lisac, Mark. Edmonton Journal [Edmonton, Alta] 08 Dec 1996: F.3.
    "There is no place anyone — including other governments mining for enlightenment — can turn and quickly see in detail what has happened to Alberta government spending in the last three years."

    PCs use budget to hide mistakes: [Final Edition]
    LISAC, MARK. Edmonton Journal [Edmonton, Alta] 03 Mar 1994: A12.
    "Not Yelling About The Budget, Vol. IV: Sometime late last year someone in the Alberta government formally wrote off $54.8 million of a $103.8-million loan guarantee on the High River magnesium plant.

    The whole province would have noticed if Treasurer Jim Dinning had announced this separately. Instead, the decision showed up in a summary of loan guarantees on Page 61 of the main budget document last Thursday."

    Klein's corporate state: [Final Edition]
    LISAC, MARK. Edmonton Journal [Edmonton, Alta] 09 Sep 1993: A1.
    "Business executives will lay hands directly on some of the most crucial management activities of government.
    Budgets are being stripped of meaning.
    Debates once held in the legislature have started to shift to unelected round tables operating under government guidance."
    ==================

    Seems to me on the evidence since the late Getty period and given today's stories like your SuperNet coverage, 'fair and clear' accounting is always being drowned in a corporate bathtub designed and financed as a P3.

    Our provincial conservatives that continually parade their claim of being the best managers of Alberta's economy have become world-class at cooking the books or tearing out pages to hide their boondoggles. During the KleinDinning period, maybe Madoff gave them private seminars.

    Reading provincial history, and watching conservative operations today, the evidence stacks up that Alberta's provincial conservatives long ago abandoned everything but the pretense of citizen-based democracy.

    Provincial conservatives have fully morphed provincial governance into corporatism on all substantial files, and "accountability" has been reduced to no more than a talking-point that ends at the news scrum.

    Sam Gunsch

  3. Denny says:

    I agree with you that there needs to be more accountability and transparency, but I have to take issue with your comments about people who "choose" to live in rural areas as well as your comments about what services would need to be cut or urban schools needing to be closed to pay for Supernet.

    I'm willing to bet a good number of the people living in the rural areas you mention would love to live in the city and have all of the services available to them, but have to live in rural areas because that's where their jobs are. They don't chose to live in rural areas in the same way that someone who works in Edmonton might chose to live in St. Albert or Sherwood Park knowing that 100% of the services offered in the city aren't available there. The reality is that broadband internet access is required these days for everything ranging from keeping business viable and transmitting health records to ensuring rural students have some of the same education opportunities as those in the city regardless of where their parents apparently "chose" to live whether that's having access to the online databases that students in the city have or schools pooling their resources so that a teacher can offer a university-stream math class via videoconference that those schools wouldn't have been able to offer on their own because of low enrolments.

    The question about how many urban schools would have to be closed to pay for Supernet is really only as valid as someone in a rural area asking how many rural schools or hospitals will have to close so that the government can fund the LRT or a museum in Edmonton.

    I also have to wonder how many of those who are against funding for Supernet in rural Alberta are also the ones who cite improvements in technology as a reason why rural areas don't need as many MLAs as they have in the past (because of videcoferencing etc) since these technological improvements would require broadband internet.

  4. Robb Stoddard says:

    David, you have certainly made a valid point that not all rural Albertans have access to high-speed broadband today, which was the vision when Alberta’s SuperNet was built. We are a lot closer to that vision today than we were before the SuperNet was built, when only 7 communities in Alberta had access to high speed broadband. Today, 429 communities in Alberta have access through 83 Service Providers.

    However, the question you raised was whether or not the effort is even worth it. We believe it is.

    The Government of Alberta invested $193 million in the SuperNet in 2001. This was a one-time investment to put the infrastructure in place to allow the government to deliver leading edge, broadband dependent services throughout the province. The balance of the investment to build SuperNet came from the private sector.

    86% of the population of Alberta has access to high-speed broadband, as part of the original SuperNet investment, a significant accomplishment. Premier Redford’s mandate involves getting the balance of the unserviced locations in rural Alberta connected, something that can be accomplished purely by leveraging private sector investment.

    There have been numerous studies conducted around the world that point to the very positive and very real impact that access to broadband has on rural economic development, as well as general quality of life (for example greater access to educational opportunities and improved healthcare). In a province like Alberta, this is a benefit we cannot afford to turn our backs on.

    As you mentioned, Axia SuperNet Ltd. is contracted by the Government of Alberta to manage and operate the SuperNet (including maintenance and repairs). We operate SuperNet based on an “open access” model, which means that in addition to government use, the network is open to rural Internet Service Providers and the rest of the private sector to connect and offer their services. Bandwidth services from Axia are sold to these companies at the same low rate across the province, regardless of location or purchase volume. This is in stark contrast to the closed networks traditionally operated by incumbent telcos which do very little to spur any type of economic development.

    The Government of Alberta purchases services from Axia on an on-going basis so they can deliver the benefits of advanced education and healthcare to all Albertans, urban and rural. And because the network is operated on a business model that is properly structured for long-term sustainability, the government benefits by simply being a customer of services they need at competitive prices; prices that represent a significant savings over what they would have been spending for similar services prior to SuperNet.

    The Axia revenue reported for fiscal 2011 include monies from the government for services they purchase from us directly for more than 4700 Government, Education, Healthcare, Municipal and Library locations, as well as revenue from the private sector.

    Robb Stoddard, Commercial Director, Public Sector, Axia SuperNet Ltd.

  5. Graham Fletcher says:

    As the guy who started the Internet in Alberta and the guy who came up with the idea of how to make the Supernet commercially sustainable (by having the Government act as an anchor tenant all over the Province, and allow commercial users access) I can tell you that the Supernet provides a backbone that the private sector would never have built, because the low hanging fruit for them is in the cities. That doesn't mean the Supernet is unprofitable, it just means that the Incumbent phone companies get a better yield in the more concentrated centres. More importantly, you can't have the rapid growth of rural development – oilsands, drilling, mining, agriculture, forestry – without providing the digital highways that connects these locations. Whether we pay for that infrastructure through higher rates from the phone company, or through our taxes, the fact is that the infrastructure has to be built. I would argue that this is too important a mandate to leave to the shareholders of Telus and Shaw.

    The real impediment to small town take up of Supernet was the CRTC Decision that denies all Albertans competitive access to the last mile copper wire that is the piece still missing. My company, among others, would have been delighted to spend our own money connecting a couple of hundred communities and tens of thousands of Albertans with 25 Mb/s Symmetrical DSL to every home and office within a 2 km radius of the centre of that town. Telus and the CRTC, however, said "forget about it"in what I believe was a thoroughly incompetent and one sided CRTC Decision. Why, for instance when Bell wanted to stop competitors using this last mile copper in Ontario and Quebec, did the CRTC require Bell to strengthen and enlarge the regulation to provide even more services around copper wire. What are we in Alberta – some kind of backwater 'Jethro' who can't be trusted to run a quality and responsible service here that our betters can provide back east?

    Everywhere in the Free World competitors have access to ILEC phone infrastructure that drives broadband costs down by simply using the power of competition – except in Alberta and B.C.

    You can follow the arguments here:
    http://www.crtc.gc.ca/PartVII/eng/2008/8622/t114_200809403.htm

    I am of course very disappointed that the Service Alberta Minister, after repeated requests (I can't for regulatory reasons go back and argue at the CRTC since the Decision was made) flatly refused to talk to the Federal Government to discuss a Federal Policy standing in the way of a Provincial policy of broadband access to rural Albertans.

    But the fact that small Service Providers can form a sustainable business in broadband, that rural Albertans can stay in the world's most resource-productive remote areas and be connected to the rest of the world, that High Definition Video Conferencing allows "you are there" discussions without car travel on Alberta's icy roads (don't the environmentalists love this green tech?) is a huge advantage for all Albertans.

    The country of Australia has now copied the Supernet, and other Provinces in Canada are looking to do the same. Frankly you can trust the large telephone companies to build an open, competitive, accessible and ubiquitous digital highway as much as you could trust FedEx or Greyhound to build a national highway system and let others use it. Which is to say not at all. The people who nay say the Supernet are people who don't use it, don't really know what it is providing now, and don't know the potential still to come.

    Graham Fletcher

  6. J Cousteau says:

    From the start Supernet has been about making the people at Axia huge amounts of cash. The Supernet is not used for any thing close to what it is designed for other than making Axia millions of tax payer dollars a year. Supernet sites have in many cases from 1 to 3 connections if that many. The costs to splice a fiber connection are quoted at $1800 when actual cost is about $5.00.

    If you want rural Internet then the Government needs to get off its ass and require Telco’s to spend the money to install rural broadband. This is all about the Government and their friends in Corporations making big cash. The network could have been built for much less money in far less time but, that would make so much sense.

    My 2 cents.

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