inukshuk internet inc. application for licences · inukshuk will adopt an open network approach to...

INUKSHUK: A Vision for MCS..............................................................................................................21.1 The Inukshuk Vision .........................................................................................................................2

Fulfilling the Connectedness Agenda...................................................................................................4A Competitive Force ............................................................................................................................5Responding to the Needs of the Canadian Market ...............................................................................8Developing Achievable and Responsive Learning Plans .....................................................................8Developing a Sustainable MCS Business.............................................................................................9

1.2 Inukshuk is a Solid Foundation .......................................................................................................10Telecommunications Experience: The Microcell Story ....................................................................11Wireless Broadcast Distribution Competition: The Look Story........................................................12

A Competitive Force in Broadcast Distribution .............................................................................12Pioneering the Internet: I.D. Internet Direct Ltd. ..............................................................................13Regional Partners................................................................................................................................14

A Strong Foundation in Saskatchewan...........................................................................................14Inukshuk in Northern Canada: Partnership with Nunanet .............................................................15Wholesale Partners and Service Providers .....................................................................................16Bringing the Benefits of Inukshuk to Manitoba .............................................................................16

The Inukshuk Base .............................................................................................................................171.3 Inukshuk is a Guide .........................................................................................................................17

Connectedness ................................................................................................................................18Content ...........................................................................................................................................18Continuity .......................................................................................................................................19

Benefits to the Learning Communities ...............................................................................................191.4 Inukshuk is a Service–Driven Network...........................................................................................20

Evolution to a Service-Driven Network .............................................................................................21Inukshuk Evolves Through Interaction with Customers ................................................................22

Building a Market for Information-Intense Networks........................................................................24Demand for High-speed Data Access in Canada............................................................................25Telecommunications Services Over the MCS Network .................................................................26Inukshuk’s Wholesale Business .....................................................................................................27

Integrating High-Speed and Mobile Wireless Services: The Residential Gateway ...........................271.5 Inukshuk’s Technology Strategy .....................................................................................................28

Spectrum Efficiency and Coverage: Radio Access ...........................................................................30Strategy: Leveraging Infrastructure and Expertise ........................................................................30Confidentiality: Securing the Air Interface ...................................................................................31Performance: Capacity and Throughput ........................................................................................31

Network Architecture .........................................................................................................................32Characteristics ................................................................................................................................32Services to be Supported ................................................................................................................33

Network Management ........................................................................................................................34Conclusions ........................................................................................................................................34

1.6 Inukshuk is a Viable Business .........................................................................................................35Developing a Business Plan ...............................................................................................................36Highlights: Investments and Profitability..........................................................................................37Summary of Key Assumptions...........................................................................................................37

Coverage and Roll-Out ...................................................................................................................37Conclusions ........................................................................................................................................38

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INUKSHUK INTERNET INC. APPLICATION FOR LICENCES2500 MHZ MULTIPOINT COMMUNICATIONS SYSTEMS 2

INUKSHUK: A VISION FOR MCS

1.1 The Inukshuk Vision

The Inukshuk is a guide, a beacon on the landscape, a system of permanent markers in human

form built to show the way through an often forbidding environment.

The founding and regional partners of Inukshuk Internet Inc. (“Inukshuk”) believe that this

symbol from the culture of Canada’s earliest peoples best expresses our vision for how the

Multipoint Communications System (“MCS”) frequency band at 2500 MHz can serve the needs

and interests of Canadians. The network of Inukshuit across Canada’s north guided travellers

through territories where the landscape was both ageless and ever-changing. Likewise, we believe

that MCS should mark a path through the vast, and constantly evolving, information resource that

is the Internet. Inukshuk will focus on giving Canadians the tools to reach where they want to go:

the information highway, certainly, but also, through our emphasis on life-long learning, their own

personal goals.

As Canada enters the twenty-first century, enormous changes are being wrought to how

Canadians lead their lives. The development of a global-scale, information-based economy poses

challenges to Canada that we can only meet by giving our citizens access to the resources they

need to participate fully in that economy. This includes education and access to resources that

allow us to continuously upgrade our skills and expand our interests. It is also increasingly

necessary that Canadians, wherever they choose to live, should be able to participate in electronic

commerce. At the same time Canadians’ needs will not be well-served unless they can be in

control of the informational and transactional interactions for which they increasingly use the

Internet.

The promise of MCS is to facilitate the development of a high-quality, low-cost information

infrastructure. Wireless technologies offer this potential. However, all approaches to the

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development and commercialization of wireless networks are not equal. We believe that the

approach to developing the MCS band outlined in this application represents the right

combination of competition, openness, facilitation of learning, and sound business principles to

use the public resource that is the MCS spectrum in the best interests of Canadians.

The approach taken by the Inukshuk partners to developing this proposal for the use of MCS

spectrum is guided by the following imperatives:

• We must contribute to the connectedness of Canadians;

• We must provide an alternative and competitive force that offers Canadians broadbandaccess to the Internet and other, developing data resources;

• We must respond to market demand and to the identified needs of Canadians;

• We must develop and implement a learning plan that meets the needs of learningcommunities across the country; and

• We must achieve these goals within the framework of a viable and sustainable business.

Applying the principles of openness, competition and innovation that have guided the

development of the founding partners of Inukshuk, we have developed an approach to MCS

which we believe satisfies the government’s objectives for this spectrum, meets our own business

needs in an increasingly challenging and competitive environment and, most importantly, can

deliver significant and measurable benefits to Canadians.

Inukshuk’s ability to exploit synergies between the new MCS network and the existing

infrastructure and management experience of its founding and regional partners means that these

licence applications represent the best chance of meeting the Industry Canada’s objectives for the

MCS band.

Inukshuk is pleased to be able to respond to Industry Canada’s call for licence applications for

all thirteen of the designated Service Areas. To be able to realize the promise of MCS as an

access technology in the information-rich environment we expect to develop in the next few years

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it is necessary that Inukshuk operate on a scale greater than any single licence area, or even a

number of non-contiguous licence areas. The positive impact of multiple licences, through

economies of scale and accompanying critical mass and, conversely, the negative impacts of

inadequate scale and market opportunities associated with some of the licensing scenarios enabled

by the government’s policy, are explored in greater detail elsewhere in the Detailed Submission.

In particular, the business plan (Chapter 6) evaluates two scenarios: First, the business assessment

impact for each Service Area in the context of a combined business case, where all thirteen

licences are issued to Inukshuk; and second, a business assessment and economic analysis for

each Service Area on a stand-alone basis.

Fulfilling the Connectedness Agenda

Inukshuk will contribute to the achievement of Canada’s connectedness strategy by deploying

a state-of-the-art, secure and open broadband access network across Canada. This network will

be based on the Internet Protocol (“IP”) to permit it to evolve continuously as the Internet itself

changes over the coming years.

Although the technology Inukshuk will deploy is new, it has been planned so as to leverage

the existing wireless networks of founding partners Microcell Telecommunications Inc.

(“Microcell”) and Look Communications Inc. (“Look”), as well as the Internet expertise of I.D.

Internet Direct Ltd. (“IDX”), which is working towards a full merger with Look. Regional

partners Image Wireless Communications Inc. (“Image”) in Saskatchewan and Nunanet

Worldwide Communications Ltd. (“Nunanet”) in Nunavut will also make a significant

contribution to network infrastructure and service provisioning. The new network is being

designed with a view to delivering Canadians a superb, and cost-effective, means of gaining access

to the interactive multimedia applications now being created for the Internet.

An essential element of gaining market acceptance for the Inukshuk MCS network is to

ensure its security. In the context of MCS, this means that information must be transported in a

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secure fashion so that end-users develop confidence in the safety and confidentiality of their

transactions over the Internet.

For a wireless Internet access system, the challenge is to protect the wireless link now, and to

be able to accommodate future developments protecting the privacy of transmissions through the

Internet itself. Security in the world of data transmission means protecting user privacy,

controlling access, authenticating users, assuring the integrity of data, and ensuring that the

originator of data cannot subsequently repudiate messages.

In the Personal Communications System (“PCS”) network at 2 GHz operated by Microcell

and utilizing the GSM standard, these aspects of security are built in to every voice and data

transmission. While the solution to ensuring secure wireless access to the Internet may not match

the systems currently in place for GSM, Microcell’s experience with secret key infrastructure will

support Inukshuk’s efforts.

Finally, the Inukshuk partners recognize that extensive geographic coverage is both a major

objective of the government’s policy for MCS, and a differentiating feature for wireless

broadband data networks compared to their wireline competition. For this reason, Inukshuk is

committing to early and extensive deployment in all thirteen Service Areas, should it receive those

licences, and the network is being planned to accommodate further network expansion and

extension, as resources permit.

A Competitive Force

As companies seeking to break into and establish market share in the world of

telecommunications, broadcast distribution and Internet access in Canada, Microcell, Look and

IDX are all acutely aware of the need for Canadians to enjoy more true choice of access to the

Information Highway. The Inukshuk partners are committed to providing a viable competitive

alternative to the established wireline infrastructures upon which Canadians now rely.

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Given this reality, to compete effectively, Inukshuk and its partners need to have a realistic

appreciation of current challenges and anticipated developments in the world of high-speed data

access. We believe that the value driver for the communications industry in Canada in the next

few years will be the ability to support Canadians’ demands for increased information intensity

and immediacy.

To position a wireless network as the preferred provider of information intensity requires the

Inukshuk team to resolve technical and marketing issues. To meet this challenge, Inukshuk is

building on the wireless expertise of its founders and regional partners. Inukshuk will also be the

standard-bearer of the founding partners in the new world of service-driven networks that is

evolving with technological convergence.

Inukshuk will adopt an open network approach to inventing the wireless information access

industry. Thus Inukshuk itself will operate as a wholesaler of broadband network capacity.

Services will be developed and offered to customers principally by service providers and

wholesale partners. This approach can accelerate network deployment, encourage innovation,

and be conducive to efficient spectrum usage.

The wholesale partners and service providers will include, at first instance, the founding

partners and Inukshuk’s regional partners. Microcell’s retail service provider, Microcell Solutions,

will accept the challenge and opportunity of enriching its existing Fido product line by offering

services enabled by Inukshuk’s network. Similarly, Look/IDX will increase the range of services

it can offer by building Inukshuk wholesale offerings into its plans. In Saskatchewan, Image and

Inukshuk will create a new entity, with Image also acting as a service provider. Similarly, the

partnership with Nunanet will deliver services, initially in Nunavut, but eventually throughout the

North.

Inukshuk will actively seek other network and wholesale partners and service providers to

extend the reach of its network and the range of services it supports. Consistent with Microcell’s

philosophy with respect to PCS, the Inukshuk partners believe that the more varied the range of

service providers involved in finding ways to serve their own customers using the access

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technology offered by Inukshuk, the more innovation we will stimulate in the Canadian market.

Such innovation, based as it is on an IP network that is global in scale, will increasingly be

exported to markets around the world.

To this end, Inukshuk has also entered into Memoranda of Understanding with Bell Canada,

to act as a potential wholesale partner of Inukshuk, and Intasys Capital Corporation Inc.

(“Intasys”), to act as an MCS service provider.

The Inukshuk founding and regional partners recognize that the goal of offering the latest and

most useful Internet-based services is a rapidly moving target. An open network and multiple

service providers harness the ability of many creative individuals and firms to anticipate and

respond to changing market needs. For instance, current thinking in the communications

industry suggests that consumers and companies can best take advantage of technological

convergence by offering aggregated or bundled services. Service aggregation meets consumers’

needs for simplicity of access and, potentially, cost-effectiveness as individuals’ and businesses’

communications budgets are being asked to stretch to cover an ever-increasing collection of

“must-have” services. The logic of the technology and the marketplace at this stage of evolution

suggests that survival depends on the ability to offer attractive bundles of services. And with the

information industry evolving so quickly, Inukshuk must stay attuned to the requirements of the

market and retain the flexibility to offer both aggregated and stand-alone value-added services.

For its founding partners, access to an open broadband network is a necessary pre-condition to

being able to respond to the evolving access market in Canada.

The primary access infrastructures available today are used to provide fixed telephony

services, fixed broadband, mobile wireless and multichannel entertainment services. Neither

Inukshuk nor its founding partners have access to all four of these infrastructures at the present

time. However, if Inukshuk is licensed for MCS, Inukshuk and its partners will be able to provide

consumers with a full slate of access options.

Being a vigorous competitive force to incumbent wireline operators means committing the

financial and managerial resources required to support what might prove to be a lengthy and

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difficult process of becoming established in the marketplace. The Inukshuk partners recognize

this, and are able to raise the necessary financing to deliver the potential of MCS into reality.

Responding to the Needs of the Canadian Market

Because Inukshuk’s founding and regional partners will play a dual role in the company by

supporting the development of the network and building value by providing services to end-users,

we have been able to develop a realistic assessment of market demand and how it is expected to

evolve over the next few years. The business plan developed on the basis of this assessment is

focused on the wholesale services that are the basis of Inukshuk’s offering, and makes relatively

conservative assumptions about the service development that will be accomplished by service

providers.

At the same time, however, we realize that establishing this new wireless technology-based

industry demands that Inukshuk be capable of supporting newly developed services that meet and

even anticipate the needs of Canadian consumers. High-speed wireless data access offers the

potential to redefine the interaction that individuals and businesses have with the Internet.

As service providers, Microcell Solutions, Look/IDX, Image and Nunanet will focus on

driving the development of end-customer services that will appeal to their existing and planned

customer bases. Some ongoing developments are described in the Detailed Submission as

examples of ways in which Inukshuk’s network capabilities can be combined with existing

services and products to respond ever more closely to the needs of Canadian individuals and

businesses.

Developing Achievable and Responsive Learning Plans

Canadians support the government’s vision of the Information Highway as an important

enabler of life-long learning. Market research conducted for Inukshuk confirms that, although

they recognize and appreciate the potential of the Internet to entertain them, Canadians still

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perceive this new medium primarily as an information tool. Increasingly, Canadians also see the

Internet as a way to do business quickly, easily and on the global scale demanded in the economy

of the twenty-first century.

Inukshuk has designed a Learning Plan that is realistic, achievable, and meets identified needs

of learning communities across Canada. Moreover, the Inukshuk Learning Plan has built into it

the essential ability to continue to meet those needs as they evolve over time.

Focused on “the three Cs” – connectedness, content and continuity – the Inukshuk Learning

Plan is intended to complement, not compete with, other initiatives of learning communities,

communications companies and governments. It is flexible to be able to meet the different needs

of the learning communities in each of Canada’s provinces and territories, yet will create a forum

for the ongoing coordination of their efforts to respond positively to the challenges of the

information economy.

The most generous learning plan will remain exactly that – a plan – unless it is supported by a

sustainable business. Inukshuk and its partners have taken the approach that the necessary focus

on learning is not merely a requirement for obtaining a licence to use a valuable public resource.

Instead, we are convinced that the best approach values long-term partnerships with the learning

communities, and focuses on learning as one driver for the development of marketable services

and products.

Developing a Sustainable MCS Business

Developing and deploying an MCS network across the enormous geographic scope that is

Canada is an expensive undertaking. The business plan developed for Inukshuk must be capable

of supporting the business processes necessary in a wholesale business and take into account the

anticipated needs of service providers using the network. It must also be capable of attracting the

financing needed to build and operate such a network.

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To this end, the Inukshuk team has developed a comprehensive business plan that is both

realistic and achievable. The business plan is supported by Inukshuk’s partners and their

shareholders, has been reviewed by an auditing firm, and has been examined by potential

financiers, who have provided opinions in support of the strength of this venture and approach.

Among the strengths of the Inukshuk approach from the point of view of ease of financing is

the open network. Using the innovation and existing market position of related and unrelated

service providers to build market share will strengthen the viability of this network. With viability

comes the capacity to offer connectedness and to support learning initiatives.

In the age of networked intelligence, licensing MCS to Inukshuk is the best way to ensure that

Canadians derive the full benefit of this spectrum resource.

1.2 Inukshuk is a Solid Foundation

Inukshuk is built on a solid foundation.

Inukshuk’s founding partners, Microcell and Look/IDX, bring to these applications the

competence and experience to ensure that Inukshuk delivers Canadians all the benefits of MCS at

2500 MHz. They are delighted to be joined by regional partners Image in Saskatchewan and

Nunanet in the North, which will bring their resources and experience to Inukshuk.

Each of the founding and regional partners has considerable experience in the installation and

operation of competitive communications systems. IDX and Nunanet, for example, bring to

Inukshuk the lessons they have learned as pioneer independent Internet Service Providers

(“ISPs”) in different markets across Canada. And all of the partners have proven their

commitment to stimulating innovation while vigorously competing in the markets they have

entered.

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Inukshuk is hereby applying for the MCS licences at 2500 MHz in the following licence

regions: British Columbia, Alberta, Ontario, Eastern Ontario and Outaouais, Quebec, New

Brunswick, Nova Scotia, Prince Edward Island, Newfoundland and Labrador, Yukon and

Northwest Territories. In Saskatchewan and Nunavut, Inukshuk has teamed up with Image and

Nunanet, respectively, and hereby applies for licences in those two Service Areas on behalf of

companies to be incorporated.

Inukshuk will, at all times, meet or exceed the levels of Canadian ownership and control

required of a radiocommunications carrier.

Telecommunications Experience: The Microcell Story

In November, 1996, Microcell became the first company to launch PCS, the new generation

of wireless communications, at 2 GHz in Canada. Microcell pioneered the open network vision

in the wireless industry in Canada, so as to position Microcell’s PCS as the preferred

communications access technology of Canadians.

Microcell’s corporate structure internalizes the benefits of competition and encourages

continuous innovation by providing each of four subsidiaries with a distinct mandate and

challenge. The parent company, Microcell Telecom, provides direction to each of the

subsidiaries. Microcell Connexions has a mandate to deliver and sell wholesale access to and

value-added services on the PCS network at 2 GHz. Microcell Solutions is charged with

delivering retail PCS under the Fido brand name to the Canadian market. Microcell Labs is the

dedicated wireless research and development arm of the company, and Microcell Capital is a

wireless venture capital fund which has already achieved considerable success in North America

and elsewhere.

By the end of 1998, Microcell had launched commercial service in a total of fourteen Census

Metropolitan Areas (“CMAs”) and other smaller centres across the country. Direct network

coverage extended to some 52% of the Canadian population – over 16 million people – providing

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Microcell customers with the largest PCS at 2 GHz coverage in Canada. By mid-1999, Microcell

had deployed its network in each region of Canada. Microcell is working with potential network

affiliates in Manitoba, Saskatchewan and elsewhere to ensure that even more Canadians will soon

have access to the services enabled by Microcell’s PCS network.

This deployment schedule compares favourably with those of Microcell’s three competitors in

each province of Canada, as well as with Microcell’s own roll-out commitments. However

impressive they may be, these numbers mask the real story: how Microcell has marshalled the

financial, technological and, most important, the human resources required to build an extensive

wireless telecommunications network in this short period. More detail concerning Microcell is

provided in Chapter 2.

Wireless Broadcast Distribution Competition: The Look Story

A Competitive Force in Broadcast Distribution

Inukshuk’s second founding partner is Look, an innovative new Canadian company in the

home entertainment and information business. Look offers its customers the latest in digital

broadcast technology and provides them with superior sound and image, as well as flexible

choices in television and audio programming.

The Canadian Radio-television and Telecommunications Commission (“CRTC”) has, to date,

licensed Look to operate two broadcast distribution undertakings using Multipoint Distribution

Systems (“MDS”). In August 1997, Look was authorized to offer service throughout Southern

Ontario. Look was also licensed for Eastern Ontario and Southern Quebec in February, 1998.

Look began broadcasting in Southern Ontario in August, 1998 and in Montreal at the end of

1998. In the summer of 1999, Look has extended its network to offer service in Quebec City,

Sherbrooke and Ottawa. On September 29, 1999, Look notified the CRTC of its intention to

apply for a similar licence in British Columbia.

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Look’s digital broadcast service is distinguished by two main features: quality and choice.

Look subscribers enjoy superior picture quality and CD-quality sound. Most importantly, the

service enables customers to customize their own channel packages from among the more than

ninety video and thirty audio channels available. Look’s price structure compares very favourably

with that of the incumbent cable operators in its licensed territory, and the flexibility to select

among available channels, including local stations, is unprecedented in the Canadian broadcast

distribution market.

To assemble the human resources required to deliver a true competitive alternative in the

broadcast distribution market, Look drew from the telecommunications, broadcasting and cable

industries. Look’s current staff complement of 155 is led by a strong and experienced

management team.

More information concerning Look’s operations, management and service offerings is found

in Chapter 2.

Pioneering the Internet: I.D. Internet Direct Ltd.

IDX is the largest independent ISP in Canada, providing a full spectrum of Internet solutions

to customers in British Columbia, Alberta, Manitoba, Ontario and Quebec. As of September,

1999, IDX served almost 150,000 individuals and small businesses in Canada. In May, 1999, IDX

announced plans to merge with Look.

The company that is now IDX has maintained a continuous online presence since 1986, when

Bill Campbell started a single line hobby Bulletin Board Service (“BBS”) from his basement. He

joined with Colin Campbell and IDX President John Nemanic in 1992 to found a small chain of

retail software shops. Together, the partners converted Bill Campbell’s basement BBS to support

their growing customer list.

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By 1994, the increasing popularity of online communications had convinced the three partners

to sell their retail operations and focus their efforts on the BBS. The BBS customer base was

migrated to an ISP format in 1994 when it became impossible to manage the growth on the old

BBS software.

As the Internet evolves, it becomes ever more important for IDX to have access to state-of-

the-art broadband networks to reach its customers. This need spurred IDX and Look to work

towards amalgamating their operations. For IDX, Look’s existing MDS network provides one

way to have access to readily deployed broadband transmission infrastructure, as well as to leading

edge technology.

IDX’s investment in Inukshuk, through Look, continues this initiative. As a player in the

online market from its very beginnings in Canada, IDX brings to Inukshuk a wealth of experience

with the Internet and its protocol. In return, Inukshuk brings to IDX an exciting new means of

reaching present and future customers through a broadband medium capable of supporting all the

current and anticipated services delivered over the Internet.

Regional Partners

In addition to its founding partners, Inukshuk will benefit at the outset with the substantial

contributions of two regional partners, Image in Saskatchewan and Nunanet in Northern Canada.

A Strong Foundation in Saskatchewan

In Saskatchewan, Inukshuk will incorporate a new company in partnership with Image.

Image has a history of providing communications in Saskatchewan dating back over forty years.

Beginning in 1959 with off-air broadcasting to Saskatchewan’s urban and rural residents, by 1980,

Image had expanded to include cable television operations. In 1995, Image began research and

development into digital MDS.

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Licensed by the CRTC on December 4, 1996, Image launched Phase I of its MDS system

from its Regional Operating Centre in Yorkton on March 5, 1997. Image’s MDS system

currently offers customers more than eighty digital video and audio channels. The fully

addressable technology offers a choice of more than seventy combinations of service tiers, with

the potential to move to a complete pick and pay environment as the industry matures.

Today, Image distributes broadcasting over its MDS system, the footprint of which reaches

80% of the province’s population. Its network of 32 broadcast towers is linked by in-band

trunking and uses “drop and insert” technology to provide local broadcast services to customers.

With the anticipated activation of a further 10 towers in the last quarter of 1999, Image will be

providing MDS services over 199,000 square kilometres, making Image’s the largest contiguous

MDS network in the world.

The MDS network currently serves rural as well as urban areas. Crucially, it reaches parts of

Saskatchewan where cable television – and, in some cases, telephone service – is not yet an

option, including a number of First Nations reserves.

Inukshuk in Northern Canada: Partnership with Nunanet

In Northern Canada, Inukshuk will partner with Nunanet in a new entity to be created.

Founded by Adamee Itorcheak in 1995 and based in Iqaluit, Nunanet offers a complete range

of Internet, telecommunications, networking and general computer services throughout Nunavut

and beyond. In addition to being Nunavut’s first and largest ISP, Nunanet offers hardware and

software sales and service, office networking and automation services, consulting, training courses

and wireless communications. The company is 100% Inuit-owned.

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The founding partners of Inukshuk are delighted to have access to the expertise of Nunanet,

which enjoys an excellent track record of providing community-oriented telecommunications and

technology services in Canada’s North.

Wholesale Partners and Service Providers

As mentioned above, Inukshuk is very pleased that Bell Canada has entered into a

Memorandum of Understanding to act as a potential wholesale partner of Inukshuk, while Intasys

has agreed to act as an MCS service provider. Further descriptions of these two companies and

their arrangements with Inukshuk are set out below in Chapter 2.

In the case of Bell Canada, the agreement achieves an appropriate balance between the

interests of the incumbent and its customers, on one hand, and the needs of a dynamic new

entrant such as Inukshuk on the other, ensuring the delivery of tangible consumer benefits and

effective and efficient spectrum usage.

Bringing the Benefits of Inukshuk to Manitoba

As the Department had previously approved a proposal for extensive use of the 2500-2596

MHz frequency band for province-wide interactive ITV systems in rural Manitoba, it excluded

Manitoba from the MCS Policy and Call for Licences. Notwithstanding this, Inukshuk entered

into discussions with the Manitoba Education Research and Learning Information Networks

(“MERLIN”) to explore ways in which Inukshuk could develop a commercialization plan in the

province, and provide substantial benefits to Manitoba’s learning community. Inukshuk intends

to continue to explore areas of mutual collaboration with MERLIN and other educational users

over the coming months.

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The Inukshuk Base

In sum, the Inukshuk partners, founding and regional, known and future, can and will

contribute to the achievement of the Inukshuk vision using the open network that Inukshuk will

build.

Inukshuk will work with its founding and regional network partners to build the MCS

network to the highest possible design standards consistent with economically viable deployment.

In practice, this means that Inukshuk will take advantage of the infrastructure assets already

owned and managed by Microcell, Look/IDX, Image in Saskatchewan, and Nunanet in Canada’s

north to build a network that achieves coverage objectives in a cost-effective manner.

Inukshuk will also reach Canadians through its service providers and wholesale partners.

Microcell, Look/IDX, Image and Nunanet, along with Bell Canada and Intasys have indicated

their desire to design and market MCS services that showcase the abilities of the Inukshuk

network while meeting the specific needs of the customers they want to attract.

The breadth of experience and market presence brought to Inukshuk by all these companies,

and future partners, will ensure the success of the proposed MCS venture.

1.3 Inukshuk is a Guide

Following extensive consultation with the learning authorities designated by the Department

of Industry in every region, Inukshuk has developed a learning plan based on long-term

partnerships with the learning communities across Canada.

Facilitating education and life-long learning using MCS technology and the 2500 MHz

spectrum is a balance best achieved through playing to the respective strengths of the learning

community and of Inukshuk and its partners. The learning plan developed by Inukshuk is based

on “the three Cs”.

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Connectedness

The universal response of learning authorities to the question, how can we best use the public

resource of MCS spectrum in your interest, was: “help us become connected.” Accordingly,

Inukshuk will dedicate resources to building its network in unconnected and under-connected

communities. (By “under-connected”, we mean communities where access to the Internet is only

available at speeds less than 56 kbit/s.)

To promote equity of access among northern and southern communities, and between urban

and rural locations, Inukshuk has developed an aggressive roll-out plan, which will see 50% of

Canadian households covered within the first year of deployment, and all 13 licensed Service

Areas built by the end of year three. This deployment can be accelerated and extended if the

Partnership Committee in a given licensed Service Area recommends that funds allocated to the

three Cs, described below, be expended in this way. In addition, learning communities will be

treated as wholesale customers of Inukshuk, and benefit from access to the network at wholesale

rates. This proposal also contributes to the connectedness agenda by making it more economical

for educational institutions to create high-speed intranets on the basis of the Inukshuk network.

Content

Most learning authorities also identified support for the creation of learning-related content as

a high priority. From computer tools to help teachers build and deliver on-line courses to their

students, to assistance in the process of setting standards for digitized content, the form of

support desired varied considerably.

Inukshuk will support the innovative approaches of learning communities and authorities to

facilitate the creation and distribution of Canadian on-line educational content. We will act in

concert with learning communities that wish to promote, develop and commercialize innovative

web-based tools or middleware to aggregate, distribute and create Canadian learning resources.

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To demonstrate the types of projects that can be carried out together, as part of the licence

application process Inukshuk developed the “Learning Portal”, a navigational tool which offers

the members of a learning community a fast and easy way to interact over the Internet. With this

welcome screen, teachers and students can easily share information. In addition, software

accessible from the portal (on display now at www.inukshuk.ca) can facilitate the design of on-line

courses, as well as the administration associated with teaching.

Continuity

Assisting Canada’s diverse learning communities to make better use of high-speed data

networks is not a matter of designing products or services that the Inukshuk partners think will

appeal to educational authorities. Rather, to ensure that spectrum-derived resources are deployed

effectively to meet the priorities of learning communities over time, Inukshuk will work in

Parnership Committees with experts in applied educational research and other members of the

learning communities to identify priorities, planning, and desirable projects, as well as to

implement and carry out ongoing evaluation of the learning plan for each region.

Building on the founding partners’ core strengths in research and development, Inukshuk will

also encourage applied research programs and, where possible, join existing initiatives aimed at

developing new instructional models for web-based education and life-long learning. Inukshuk’s

Partnership Committees will identify and propose research programs which focus on the

objective of making telecommunications and computing resources an integral part of education

and life-long learning in Canada.

Benefits to the Learning Communities

In addition to the benefits derived from the early and extensive deployment of a wireless

broadband IP network to every region of Canada, Inukshuk’s learning plan provides a number of

other tangible benefits. Notable among these is a guaranteed source of financing to each licensed

Service Area to support the three Cs (connectedness, content, and continuity) that we estimate

Chapter 1


will be in the order of $20 Million over five years, if licences for all of the 13 Service Areas are

issued to Inukshuk.

Inukshuk’s learning partnership will produce additional benefits that, while they may be more

difficult to quantify, should prove tangible nevertheless. These include the value to teachers and

students from immediate, platform-independent access to the Inukshuk Learning Portal and

associated content-creation tools; the potential savings to educational institutions and school

boards resulting from access to Inukshuk’s network capacity at wholesale rates; and the benefits

associated with Inukshuk’s plan to accelerate deployment to unserved and underserved

communities. Benefits to schools and libraries taking advantage of the Sun Microsystems of

Canada equipment offer described in Chapter 3 will also be tangible and ongoing.

Further details on the benefits and quantification of each component of the Inukshuk learning

plan, both on a country-wide basis and for each Service Area, are provided in Chapter 3.

1.4 Inukshuk is a Service–Driven Network

For Inukshuk and its partners, value will be created to the extent that the network supports

Canadians’ demands for increased information intensity and immediacy. Inukshuk will be the

standard-bearer for the founding partners in the new world of service-driven networks that is

evolving with technological convergence.

In deciding how to approach the Canadian market to ensure Inukshuk’s success, we needed

first to determine – from the point of view of Canadian individual and business consumers –

what the network would be and do. Then we needed to assess the likely demand for the products

and services that would be offered over the network, and develop a marketing plan that would

effectively and efficiently reach those consumers.

Chapter 1


Finally, to illustrate how the concept and the marketing data come together, we provide an

example of a mode of interaction between network and customer that will be actively pursued by

Microcell as a service provider for Inukshuk.

Evolution to a Service-Driven Network

Traditionally, the process of delivering information services to customers involves distinct

forms of information and a range of service providers to perform different functions. Thus, for

example, data in the form of an image will be created, collected, displayed, stored, processed and

distributed by photographers and studios. The same functions are performed with respect to

voice information by the telecommunications industry, and by the entertainment industry with

respect to audio and video signals.

Figure 1. The Information Industry Today

PPPPHHHHOOOOTTTTOOOOGGGGRRRRAAAAPPPPHHHHYYYY

PPPPUUUUBBBBLLLLIIIISSSSHHHHIIIINNNNGGGG

TELETELETELETELECCCCOOOOMMMMMMMMUUUUNNNNIIIICCCCAAAATTTTIIIIOOOONNNNSSSS

CCCCOOOOMMMMPPPPUUUUTTTTIIIINNNNGGGG

EEEENNNNTTTTEEEERRRRTTTTAAAAIIIINNNNMMMMEEEENNNNTTTT

IMAGES TEXT VOICE DATAAUDIO/VIDEO

FORMS

CREATE & COLLECTCREATE & COLLECTCREATE & COLLECTCREATE & COLLECT(CONTENT)(CONTENT)(CONTENT)(CONTENT)

DISPLAYDISPLAYDISPLAYDISPLAY(DEVICES)(DEVICES)(DEVICES)(DEVICES)

STORESTORESTORESTORE(MEMORY DEVICES)(MEMORY DEVICES)(MEMORY DEVICES)(MEMORY DEVICES)

PROCESSPROCESSPROCESSPROCESS(APPLICATIONS)(APPLICATIONS)(APPLICATIONS)(APPLICATIONS)

DISTRIBUTEDISTRIBUTEDISTRIBUTEDISTRIBUTE(TRANSPORT)(TRANSPORT)(TRANSPORT)(TRANSPORT)

FUN

CT

ION

S

Source: International Engineering Consortium

Chapter 1


The Internet Protocol (“IP”) collapses all these discrete forms into a single language. Other

developments, notably the advent of micro-processing technology applied to embedded devices

and increasing competition in the telecommunications industry, create a parallel convergence to

integrate functions such as distribution and processing. The result is fundamental restructuring of

the industry sectors identified above:

Figure 2. How the Information Industry Will Realign

Original content will be stored digitally, along with the programming instructions needed to

comply with copyright and syndication rules, the needs of particular viewing “appliances”, or

processes required to customize it. This enables the next great functional leap for

communications firms and other information transporters: to evolve to become processors of

information. In effect, they become the sole interface between the content and the end-user.

Inukshuk Evolves Through Interaction with Customers

In the service-driven network, a range of different communications networks interacts

seamlessly. The customer has full control of the devices and services provided at all times,

through an always-on home access, office Local Area Network (“LAN”), or a mobile device. In

this vision of the future, the mobile terminal becomes a “command and control” point, allowing

IM A G E S T E X T V O IC E D A T AA U D IO /V ID E O

F O R M S

C R E A T E & C O L L E C TC R E A T E & C O L L E C TC R E A T E & C O L L E C TC R E A T E & C O L L E C T(C O N T E N T )(C O N T E N T )(C O N T E N T )(C O N T E N T )

D IS P L A YD IS P L A YD IS P L A YD IS P L A Y(D E V IC E S )(D E V IC E S )(D E V IC E S )(D E V IC E S )

S T O R ES T O R ES T O R ES T O R E(M E M O R Y D E V IC E S )(M E M O R Y D E V IC E S )(M E M O R Y D E V IC E S )(M E M O R Y D E V IC E S )

P R O C E S SP R O C E S SP R O C E S SP R O C E S S(A P P L IC A T IO N S )(A P P L IC A T IO N S )(A P P L IC A T IO N S )(A P P L IC A T IO N S )

D IS T R IB U T ED IS T R IB U T ED IS T R IB U T ED IS T R IB U T E(T R A N S P O R T )(T R A N S P O R T )(T R A N S P O R T )(T R A N S P O R T )

FU

NC

TIO

NS

IN F O R M A T IO N H IG H W A Y SIN F O R M A T IO N H IG H W A Y SIN F O R M A T IO N H IG H W A Y SIN F O R M A T IO N H IG H W A Y S

IN F O R M A T IO N A P P L IA N C E SIN F O R M A T IO N A P P L IA N C E SIN F O R M A T IO N A P P L IA N C E SIN F O R M A T IO N A P P L IA N C E S

IN F O R M A T IO N C O N T E N TIN F O R M A T IO N C O N T E N TIN F O R M A T IO N C O N T E N TIN F O R M A T IO N C O N T E N T

S o u rc e : In te rn a tio n a l E n g in e e r in g C o n s o r t iu m

Chapter 1


the user to manage a range of other devices connected to residential or office LANs from

wherever that user happens to be.

The most important element of the service-driven network is the opportunity it provides the

carrier to adapt each customer’s interface to the network to the individual needs and interests of

that customer. To do this effectively, however, the network must support the Internet Protocol –

and it must be capable of delivering broadband access to data networks.

The evolution to a network capable of this degree of customization follows several stages.

In the first stage, the network operator concentrates on developing and delivering individual

services that meet the tastes and interests of its customers. For a wireless network, such services

might include voice mail, fax mail, and mobile data and dial tone services.

Service aggregation, or bundling, is the second stage. Currently this practice is seen by

telecommunications carriers as a way to offer one-stop shopping and single billing, thereby

eliminating some redundancy. However, the greatest value to be realized from service

aggregation lies in the economies of scale that can be achieved as transport services migrate

towards the Internet Protocol.

Bundling evolves into customization proper, which lays the foundation for differentiation

based on the content and packaging of information, rather than the characteristics of its transport.

Individual portals and customized web pages for each user are the first products to emerge, built

on customer profiling, filtering and pattern recognition.

The fourth stage of this evolution is to “infomediation”. To the portal services provided in

stage three, the carrier adds security and authentication features to facilitate electronic commerce.

Infomediation also means the provision of personal agents, which seek information on the

Internet tailored to one’s individual needs, and even notify the customer of new resources that

could be of interest, based on the customer’s profile. With the right combination of network

Chapter 1


functionality and terminal devices, infomediation can include the provision of health monitoring,

home security and automation and load management services.

At this point in the evolution the customer enjoys personalized interaction with his or her

communications environment. Information is delivered at the right time, on the right device and

in the right format as determined by the customer or the customer’s personal agents.

Without access to a broadband network infrastructure, the partners of Inukshuk will not be

able to provide the full panoply of services developed through interaction and customization.

Broadband delivery in the Internet Protocol is the fundamental building block for all these

services and interactions.

Building a Market for Information-Intense Networks

Inukshuk’s business plan is based on solid market research and analysis, both primary and

secondary. We believe that service providers will deploy the capabilities of the MCS network to

evolve from bundling, to providing portals, to enabling true infomediation. However, Inukshuk

must first prove itself to be viable on the basis of services for which we can identify and measure

Canadians’ demand today. The marketing plan provided in detail in Chapter 4 demonstrates

strong demand for the core suite of capabilities that Inukshuk’s network will enable, so as to

justify the expense and complexity of deploying the network.

Inukshuk’s marketing focus will be on its activities as a wholesaler of network capacity.

Current distribution of Internet access among Canadian consumers suggests that the market

segments likely to be most attracted to a new, fixed wireless broadband data service are the

residential, small-office/home-office (“SOHO”) and small and medium business markets.

Primary and secondary research identified the target market segments and their geographic

distribution across Canada. In order to take into account regional disparities in demand for the

core services that Inukshuk will enable, the business plan identified four distinct zones based on

population density.

Chapter 1


We believe that the introduction of wireless high-speed data access services will provide a

substantial benefit in all of Canada’s regions and geographic zones, to residential, SOHO and

small and medium business users alike. The SOHO and small business market is, additionally,

one of the fastest-growing market segments in Canada.

Inukshuk’s marketing plan assumes that many of its service providers will aggregate the

services enabled by the MCS network with their existing portfolio of offerings. One example of a

suite of services enabled by bundling with broadband networks, the “residential gateway”, is

described briefly in Chapter 4 and in Appendices 4:3 and 4:4. Adding a fixed broadband network

also permits the Inukshuk founding partners to progress along the value-chain of services

available to Canadians: narrowband access services, through to fixed wireless broadband, through

to mobile broadband.

Demand for High-speed Data Access in Canada

According to primary research conducted for these applications, 38% or nearly 4 in 10

Canadians use the Internet. The growth recorded by the Internet in the past few years in Canada

can be attributed to its low access cost, the enormous wealth of knowledge and information

accessible through the Internet, and the increasing degree of interaction with users. The rise of e-

commerce also plays a part in stimulating demand for access, although Canadians remain quite

conservative in its use. The Internet is now becoming an essential business and knowledge tool

for many Canadians, and electronic mail is now a preferred means of communication.

Although 85% of consumers polled confirmed that their telephone lines remain their primary

source of access to the Internet, demand is growing for high-speed access that does not

monopolize the telephone line. Polling done for Inukshuk suggests a very high level of interest in

a high-speed Internet access medium that does not use the main residential telephone line, with

demand highest in regions such as Canada’s north and the Atlantic provinces.

Chapter 1


Competitors offering high-speed access to the Internet at this time consist of those cable

companies offering cable modems, and telephone companies which have introduced Digital

Subscriber Line (“xDSL”) services to increase the bandwidth available through the traditional

twisted copper pair infrastructure.

As the wireline carriers are rapidly implementing these high-speed services in Canada, it is

widely expected that broadband will become the preferred mode of access to the Internet as early

as 2005. These carriers are powerful competitors, as both are able to leverage existing subscriber

bases built up over years of broadcasting or telecommunications monopoly and use bundling as a

tool to stimulate acceptance of new services.

However, a fixed wireless infrastructure such as MCS offers Inukshuk the opportunity to

extend a competitive alternative beyond the urban areas served by cable and xDSL plant.

Suburban areas, industrial parks, lower density residential and rural sectors – all promise strong

unmet demand for high-speed data access services. Moreover, licensing the Inukshuk

applications will provide the founding partners the opportunity to properly meet the market

demand for aggregated service offerings.

Telecommunications Services Over the MCS Network

By implementing an IP-based fixed wireless network, Inukshuk will be positioned to

supplement its Internet and data offerings with Voice-over-IP (“VoIP”) based traditional

telecommunications services. One attraction of such telecommunications services in a bundle

with high-speed, bi-directional data services is being able to tell the customer that access to the

Internet need not come at the cost of other voice services.

Offering VoIP telecommunications over the MCS network should also be timely. As

Competitive Local Exchange Carriers (“CLECs”) begin to become established in Canadian

markets, particularly business segments, Canadians’ willingness to experiment with other forms of

access service than the traditional wireline model will increase.

Chapter 1


Inukshuk’s Wholesale Business

Inukshuk’s objective as a wholesaler is to sign up a number of service providers in each

region, including the founding and regional partners described in Chapter 2. Ideally, the service

providers would have complementary distribution strategies. The strategy is to be able to

accelerate deployment of the network by driving up its usage and the revenue derived from

service providers.

Service provider contracts will vary with volume commitments, coverage areas and contract

duration. Irrespective of these factors, however, service providers will have access to trained

customer care personnel, dedicated to their particular needs and applications. During the initial

phase of this business, it is anticipated that Inukshuk will be able to leverage, in particular, the

expertise and infrastructure of founding partners Microcell and Look/IDX to build its customer

care strength. Reaching the market through service providers with different approaches and

target markets will allow Inukshuk to achieve maximum usage of its available capacity.

Integrating High-Speed and Mobile Wireless Services:The Residential Gateway

As an example, service providers can stimulate the market for Inukshuk’s broadband IP

service and advance their own progress by developing the types of residential gateway services

described briefly below.

Technology is now being developed to enable a wide range of computerized devices within a

household or office environment to interact intelligently without needing to be physically linked –

in effect, an in-house wireless LAN. The developments that are driving the evolution of the

service-driven network are also enabling the use of the mobile terminal as a command and control

point for any such LANs. In the home, this means that the mobile terminal can control home

automation devices such as thermostats, utility consumption meters, and information or

entertainment terminals.

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For a communications network to be able to deliver maximum value to customers by building

on this in-house wireless LAN concept, it must enable every member of a household or employee

in an office to access the information highway through the LAN. And for this to happen, there

must be an effective, secure interface between the in-house LAN and the wider network – in

effect, the full Internet.

With this link, and with access to Inukshuk’s high-speed broadband data network, a service

provider can provide a package of information and access services that will respond to Canadians’

needs for simplicity in a complex world, and for “no new wires” in their homes and office

environments. Providing access to the Inukshuk network, in addition to wireless in-house LANs,

mobile wireless networks, and the equipment needed to link them all, will unify the customer’s

information delivery and telecommunications services into a coherent personal framework,

available anytime, anywhere to anybody.

1.5 Inukshuk’s Technology Strategy

Designing the MCS network to bring Inukshuk’s business, learning and service objectives to

fruition is a challenging task. Because the technology for use with this spectrum band is in its

infancy, we must bring a critical eye to the claims advanced by potential equipment vendors. We

must consider how best to meet Inukshuk’s connectedness objectives in a way that is both

efficient as to spectrum use and cost-effective. And because the services to be delivered over this

medium are themselves constantly evolving, the network must be flexible, scaleable, and capable

of delivering high quality services both now and in the future.

A network of this type has three major components: radio access, which describes how the

customer will be connected over the air to the network; network architecture, which defines how

data generated and received by the customer is to be carried between locations; and network

management, which is the essential task of provisioning and supervising network elements,

customer profiles, billing information, and alarm reporting.

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There are critical objectives to be achieved in the design of all three of these major

components. To the fundamental objectives that should always be met in the design of any

wireless network, the Inukshuk team added some essential elements to reflect the objectives of

the partners.

Fundamental objectives include: using radio spectrum efficiently; enabling the proposed

service offerings; maximizing coverage and quality; ensuring appropriate scalability; keeping

capital and operating expenditure to a minimum to facilitate market entry and to manage growth;

and providing broad coverage in both connected and under-connected areas.

To these considerations, Inukshuk added the question of how best to use its founding and

regional partners’ existing network infrastructure and to ensure consumer acceptance by

considering their needs for a minimum of customer-premises equipment, including antennas.

At this stage in its evolution, most technology that can be used with MCS is proprietary in

nature. Microcell’s commitment to open networks and interoperability, however, drives the

evolution of this technology towards standards. It was an essential requirement that each element

of the network comply with existing and emerging standards as they are defined by accredited

standardization bodies.

The Inukshuk partners decided that the best way to meet these design challenges would be to

work with a manufacturer who could supplement the expertise of the internal design team with

product knowledge applicable to each of the three major components of the system. Further

information concerning the vendor selection process, plus a detailed review of the solutions

proposed by Cisco Systems Inc. (“Cisco”), the vendor chosen to assist in the licence application

process, is provided in Chapter 5. Because much of the technology proposed by Cisco remains

proprietary, and the specifics of Inukshuk MCS network design are confidential technical

information, Chapter 5 is filed in confidence with Industry Canada.

Chapter 1


Spectrum Efficiency and Coverage: Radio Access

Strategy: Leveraging Infrastructure and Expertise

The Inukshuk network will comprise both large and small footprint cells. This design allows

Inukshuk to take advantage of the existence of MDS infrastructure and other high antenna sites

where its founding and regional partners can make them available. It also permits the cost-

effective deployment of small cells to improve coverage.

The large/small cell design proposed by Inukshuk’s selected vendor meets all the fundamental

design objectives outlined above. It meets spectrum efficiency requirements, which will also

improve the capacity of the system. It also permits scaleable coverage at high quality, so that

network roll-out can be managed to provide broad coverage and at the same time keep capital and

operating expenditures manageable.

Using existing MDS antennas to locate transmitters for large cells also contributes to the goal

of encouraging customer acceptance. As long as MCS transmitters are co-located with MDS

ones, Inukshuk’s MDS partners, Look and Image, can bundle the new MCS services with existing

broadcast delivery services so that both are received on the same subscriber antenna.

While planning coverage requirements, Inukshuk has considered four distinct types of market,

based largely on population density. The combination of large and small cells permits Inukshuk

to scale its initial deployment and growth strategies in all four types of market. Thus, for instance,

in dense urban markets where Look facilities are in place, Inukshuk can begin deployment by co-

locating on such facilities, supplementing the resulting large cell or cells with several small cells to

improve coverage. Small cells can often be co-located with existing Microcell sites. Adding small

cells as well as more sectors to existing large cells accommodates growth requirements. If no

MDS facilities exist, the large and small cell network design allows Inukshuk to plan the required

coverage for dense urban markets according to the specific geographic and market characteristics

of those locations. In very small markets, small cells may, by themselves, prove capable of

Chapter 1


meeting initial deployment demand; growth can be accommodated simply by adding sectors to

small cells.

Confidentiality: Securing the Air Interface

To ensure public acceptance of wireless as a means of gaining access to the Internet, it is

crucial that Inukshuk address concerns about the security of data transferred over the air.

Although Internet security concerns are often generated within the web of wireline networks that

forms the bulk of the Internet itself, the design of the Inukshuk MCS network must include

encryption of the air interface.

It is also important to select a network vendor that will accommodate upgrades to the degree

of security that the network must support. For instance, as the Internet comes increasingly to be

used for commercial and other transactions, encryption will likely have to be made stronger.

Microcell’s experience with managing encryption in its GSM PCS network will improve

Inukshuk’s capacity to ensure that the MCS network is secure.

Performance: Capacity and Throughput

The capacity of Inukshuk’s MCS network depends on a series of interrelated design

considerations. In general, Inukshuk is designed to use the 16 channels (plus the single return

channel provided for) as efficiently as possible and to serve the most symmetrical possible

number of subscribers. In general, the bandwidth chosen for each downstream channel is 6

MHz, which permits a burst rate of 17 Mbps. For each upstream channel, the bandwidth selected

is 1.5 MHz, which enables a burst rate of up to 3.2 Mbps. These rates compare very favourably

with rates commonly achievable using wireline infrastructure. Moreover, the planning process

does not assume significant improvements in the available technology, although the design of the

Inukshuk network is sufficiently flexible that such improvements will be incorporated as they

become available.

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Each service provider reselling the capacity of Inukshuk’s network will be able to set its own

maximum customer throughput rate, or otherwise manage contention among customers with

respect to the speed of transmission of data uploaded to or downloaded from the Internet.

Network Architecture

Characteristics

In selecting the architecture and technology to be used between nodes on the Inukshuk

network, the following objectives were established:

• The technology must be at the forefront of the convergence of computing and

telecommunications standards;

• It must provide for scalability to cover market segments ranging from dense urban to

sparsely-populated rural environments;

• It must provide feature-rich protocols to support enhanced, flexible service offerings

across the network;

• The vendor of the chosen technology should have a successful track record;

• The technology must be capable of direct interconnection with both telecommunications

and data/computing networks, and of transparent transmission in either direction;

• The architecture selected must be capable of functioning as a single unified product,

irrespective of the number of components it contains;

• It must be managed in a logical and functional manner; and

• It must have a defined evolution path for services offered, functionality and available

components over the next three to five years.

It was important that the network be capable of supporting an IP-based customer interface

from the day it is first made operational, and be set up to evolve with the Internet protocol and

asynchronous transfer mode (“ATM”) technology. Using ATM through the core of the network

Chapter 1


ensures consistent quality of service, as well as efficiency. As far as interconnection is concerned,

the architecture selected must interface efficiently with Microcell’s current PCS network at

2 GHz. It must also support the suite of services now offered on the PCS network, and continue

to do so as the two networks evolve. For operational reasons, it is also important that customer-

premises equipment can be maintained from the network side.

Though it is crucial that the Inukshuk network interconnect seamlessly with Microcell’s PCS

network at 2 GHz and other telecommunications networks, the fact that the MCS network will be

packet-switched and based on IP, rather than circuit-switched and based on traditional telephony,

offers both challenges and opportunities. The strength of IP as a customer interface is its

ubiquity, and its ability to enable a wide range of customer services; alone, however, it cannot

provide the quality and consistency of service required. Using ATM in the core network

strengthens the ability of the Inukshuk network as a whole to deliver services such as video and

voice over IP without unacceptable time delay and jitter problems.

The addition of an IP-enabled network to the range of technologies to be managed by

Microcell and Look/IDX creates another challenge: managing the much faster rate at which

standards are being set and changed in the IP world, compared with the traditional

telecommunications standardization process. Because IP is, by definition, a single global

application, there is no delay due to the need to accommodate legacy systems. Moreover, the

large number of participants in the IP world drives the rapid development of innovative products

and methods.

Services to be Supported

It is important that the network architecture chosen be capable of supporting a core set of

services both within the world of the network’s own users and across other interconnected

networks. Using MCS for the Inukshuk “intranet” and ATM from the base stations to the points

of interconnection with other data networks lets Inukshuk maintain a high quality of service

within the user group, and minimize difficulties associated with quality of service on the public

Internet.

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Network Management

The final component of Inukshuk network design is to ensure that the network management

and operational systems are going to be available when they are required, and will support the

high quality of service to which Inukshuk is committed. Here again, Cisco provided the level of

comfort needed to proceed with the licence applications.

In determining what network management systems are necessary and choosing among those

available to meet identified needs, the Inukshuk partners have also had regard to the existing

experience and skill sets within Microcell, as well as the level of utilization currently experienced

in the Microcell network.

Conclusions

At this stage of the evolution of MCS technology, the challenge is to plan, and ascertain costs

for, a network that Inukshuk can modify, re-size, and enrich as Canadians become more

sophisticated in the demands they make on the Internet. By choosing Cisco as the technology

partner to assist with network design issues, Microcell and Look have established a solid base of

planning and research from which to build a network capable of covering geographic areas

ranging from Canada’s most densely-populated cities to its most remote rural areas.

Inukshuk has the resources to design and build such a network, using the existing infrastructure

of network partners to reduce cost and maximize service provider revenue – and hence network

usage.

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1.6 Inukshuk is a Viable Business

Increasing the penetration of broadband data services in Canada will play a key role in

improving Canada’s competitive position in the global market, and is an important component of

the Inukshuk learning partnership. Inukshuk’s contribution to this objective, the deployment and

commercialization of the Inukshuk MCS network, is also intended to meet the policy imperatives

underlying the Industry Canada’s call for applications: making efficient use of the spectrum

resource and encouraging effective competition on the Information Highway.

For residential customers, Inukshuk will mean rapid access to information, skill improvement

tools and a variety of new services enabled by the broadband IP network. For SOHO and small

or medium businesses, it means access to information and, perhaps more important, an access to

markets that is today only available to large corporations. The benefits of Inukshuk to these

segments of the market can be summarized as access to information intensity.

The wholesale model adopted for Inukshuk will result in Canadians having more choices of

services, service bundles and customized functionality than if the only source of innovation for

the use of the MCS network were Inukshuk itself. Inukshuk will expand the choice of

information-intense services available to Canadians in a number of ways:

• Inukshuk will offer a cost-effective alternative to xDSL and cable modems;

• As a wireless medium, Inukshuk can be made available to Canadians in locations notpresently or easily served by the wired infrastructure of the telephone or cablecompanies;

• Its wholesale offering will be a set of building blocks permitting service providers andwholesale partners, both known and future, to assemble a variety of services andbundles that are closely adapted to the specific needs and interests of the client base ofthe retailer;

• The standard, open and rapidly-evolving Internet Protocol, in which the Inukshuknetwork will interact with end-customers, permits third parties such as Inukshuk’sservice providers or wholesale partners to define and implement new services andbundles; and

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• In partnership with Canada’s learning communities, Inukshuk will develop newapplications and services which may then be made available through its serviceproviders to the Canadian population at large.

Developing a Business Plan

The methodology applied by the partners to the development of the Inukshuk business plan

started with the extensive research and analysis of market demand and demographic data that was

the foundation of our marketing plan (see Chapter 4, filed in confidence with Industry Canada).

The second step was to identify the main factors involved in projecting cost and market

demand assumptions. These factors were identified on the basis of market research and

experience of the founding partners, as well as available data concerning operational costs.

Decision support models were then developed so as to determine optimal product offerings and

pricing.

The next step was to assess the opportunity and define acceptable operating results, then

finally to assess the value of Inukshuk both on the basis of a business operating in all thirteen

Service Areas, and for individual Service Areas.

The business case was assessed on the basis of a combined value of Inukshuk’s wholesale

operation and that of the service providers, taken as a whole. It was then evaluated for each of

the wholesale and retail operations on a stand-alone basis.

The business case was developed on the basis of a five-year deployment strategy, but a ten-

year horizon is displayed to provide an understanding of the assumptions for the long-term

evolution of Inukshuk. The business plan is described in greater detail in Chapter 6, which is filed

in confidence with Industry Canada.

Chapter 1


Highlights: Investments and Profitability

Inukshuk’s applications for MCS licences are supported by the positive results of a detailed

demand modelling and financial analysis. Some highlights from the business case:

! The network will cover 50% of Canadian households by the end of the first year of

deployment, reach all 13 Service Areas by the end of Year 3, and cover 70% of Canadian

households by Year 5;

! By the end of the second year of deployment, capital expenditures in the order of $190

million will have been made to build a cross-Canada MCS network. The total investment

is projected to be more than $540 million by the end of Year 5;

! Achievement of an internal rate of return superior to the weighted average cost of capital;

! Projected subscriber growth from 59,000 in Year 1 following deployment to 757,000 in

Year 5;

! Projected job creation is 330 new jobs by the end of Year 1, rising to 528 by Year 5.

Summary of Key Assumptions

Coverage and Roll-Out

The business case described in detail in Chapter 6 also explores the impact of being licensed in

fewer than all thirteen Service Areas by developing a business case on the basis that each Service

Area is a stand-alone operation.

The results of this analysis are, in brief, that the six largest Service Areas (Ontario, Quebec,

British Columbia, Alberta, Eastern Ontario and the Outaouais, and Saskatchewan) can produce a

positive value on a stand-alone basis. The remaining seven Service Areas, taken alone, cannot

generate positive returns or support a viable business in accordance with the quality of service,

technology, learning plan and deployment commitments that are part of Inukshuk’s proposal.

Chapter 1


This analysis has the following implications: Inukshuk and its regional partners can meet the

learning plans and deployment commitments if licensed for any of the five largest Service Areas,

for the licensed area or areas in question. If licensed for Saskatchewan, the sixth largest area, then

due to the strength of Image, the regional partner there, the commitments for that Service Area

can be met if the licence is issued on a stand-alone basis, or with any of the five largest Service

Areas. If licensed for all five of the largest Service Areas, Inukshuk will achieve sufficient critical

mass to meet the learning plan commitments and deployment schedules for all of the seven

smallest Service Areas.

Wholesale Pricing Assumptions

In the wholesale/retail split envisioned for Inukshuk, the wholesaler will take responsibility

for designing and building the network, and will define the choice of customer premises

equipment (“CPE”) to be made by service providers or wholesale partners. Inukshuk will also

provide customer service to its wholesale customers, and will perform all network-related

functions including spectrum coordination. Wholesale access is projected to be provided at a

price that reflects the avoidance of various retail-level costs as well as volume and term

commitments.

Conclusions

Inukshuk’s business plan is realistic and achievable, and the company’s vision encourages

competition and openness. Our vision strikes a balance between facilitating learning and sound

business principles so that the public resource that is the MCS spectrum is used in the best

interests of Canadians.

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