Last week, $163 million in Federal funding was announced to bring high-speed broadband to 7,772 households in Northern Ontario.
On average, that works out to $21,000 per household, a substantial government subsidy. But there is also additional detail provided on the various communities that is worth examining.
- $46,637,325 for 182 households in the communities of Fort Severn and Peawanuck (Weenusk)
- $12,806,675 for 3,060 households in the communities of Angling Lake, Bearskin Lake, Cat Lake, Deer Lake, Dufresne (Wapekeka), Kasabonika (Kasabonika Lake), Keeyaywin, Kingfisher Lake (Kingfisher), Kitchenuhmaykoosib (Kitchenuhmaykoosib Inninuwug), Mishkeegogamang, Muskrat Dam (Muskrat Dam Lake), North Spririt Lake, Ojibway Nation of Saugeen, Osnaburgh House, Poplar Hill, Sachigo Lake, Sandy Lake, Slate Falls (Slate Falls Nation), Wawakapewin, Weagamow Lake (North Caribou Lake), and Wunnummin Lake (Wunnumin).
- $62,665,952 for 689 households in the communities of Aroland, Calstock (Constance Lake), Ginoogaming First Nation, Long Lake #58 First Nation, with a component of this project also targeting the community of Wunnumin Lake First Nation
- $2,035,881 to improve access for an estimated 258 households in the communities of Armstrong and Whitesand First Nation
- $35,730,000 to improve access for an estimated 2,565 households in the communities of Conmee, Gillies, Neebing, O’Connor, Oliver Paipoonge, Shuniah and Thunder Bay
- $2,448,446 to improve access for an estimated 327 households in the communities of Frenchmen’s Head, Kejick Bay and Lac Seul First Nation
- $1,318,561 to improve access for an estimated 691 households in the community of Ignace
The first project listed (Fort Severn and Peawanuck) implies a subsidy of more than a quarter million dollars per household, the highest level of government funding that I can recall. At $256,000 per household, it is 60 times the level of per household funding calculated for the second project ($4,185 / household for Angling Lake, Bearskin Lake, Cat Lake, Deer Lake, etc.).
The third project works out to just under $91,000 per household for Aroland, Calstock, etc.
The magnitude of funding in this announcement demonstrates why these areas have not previously been able to attract private sector investment. At $100 per month per household, and zero cost of money, it would take more than 200 years to repay the shortfall. In other words, absent a substantial government subsidy, there is no possible way for a private sector service provider to make the financials work.
Government subsidies cover the shortfall in projected revenue on a project-by-project basis. Consider this to be an addendum to “The economics of broadband expansion” that I posted a couple years ago.
These projects are examples of some of the most extreme costs for serving remote communities located in challenging geographic areas. Lower population densities mean greater distances between households and frequently, there are new backbone facilities required to connect the communities.
What led the government and the proponents to choose an architecture and solution that required such a high level of subsidy? What led the government to prioritize the allocation of more than $46 million to serve less than 200 households, as opposed to other unserved areas. Recall, when the Auditor General reviewed broadband funding programs, it found that the government did not implement its broadband improvement program in a way that ensured “the maximum broadband expansion for the public money spent.”
We know that providing broadband to rural areas is expensive. It is less clear that we have an understanding of how funding priorities are being set. Are we optimizing the allocation of limited public funding?