Residents of small northern communities are the ones who would suffer most if Northwestel Inc. is not allowed an extra $40 million to update its systems, the company says.

Company president Paul Flaherty says the extra cash, which still needs to be approved by the Canadian Radio-television and Telecommunications Commission (CRTC), will go directly to the communities getting next generation 3G or 4G cell services.

Without it, planned improvements would likely have to be cut, he warns.

"The majority of the $40 million is going to allow wireless and wireless broadband in all of the communities in the North as well as some of the transport infrastructure to support the wireless services,” Flaherty said in an interview today.

"So absent that money, the challenges we run into is that those small communities are the ones that aren't economical.”

The money in question would be available if Bell Canada, Northwestel's parent company, is approved by the CRTC to buy Astral Media for $3.38 billion.

Under the CRTC's rules, any purchaser of a Canadian broadcaster has to set aside money for a "public benefits” fund.

For this deal, that amounts to about $40 million. The package is meant to support the Canadian broadcasting industry.

Companies creating the funds are given the option of suggesting to the CRTC how the money should be used.

In this case, Bell is proposing to use $40 million from the package as part of its recently proposed modernization plan for Northwestel.

Last December, the CRTC criticized Northwestel for the age and state of its communications infrastructure.

Recently, the telecommunications giant announced a five-year, $273-million plan to upgrade its services.

About $233 million of that plan is coming from the company's existing revenue, but Flaherty calls the additional $40 million "critical.”

"This is really a unique opportunity for northerners. The stars seem to have aligned with this acquisition and the need for Bell to create a public benefit to be able to use the money to put broadband in every community in northern Canada, all 96.”

But Flaherty added, "Absent getting external funding, it just doesn't happen, it doesn't work.”

Companies looking to compete with Northwestel object to the company being given the additional money from its parent company.

As reported in Thursday's Star, officials with Ice Wireless and Iristel have said they don't believe Northwestel should get more public money and should foot the bill entirely with its own revenue.

They point to the $20 million a year the company already gets as a subsidy from the CRTC.

Flaherty said that money is not used for cellular services.

"$10 million of that goes to pay for a modernization program we did from 2001 to 2005,” he said. "We spent $85 million then to upgrade the network and extend service to people that didn't have any service whatsoever.”

The other $10 million goes to subsidize the cost of local phone service in the small communities.

"In the small communities, the average cost to provide phone service there is $67 a month, and we charge $31. So that's what makes up that difference,” he said.

Giving the money to Northwestel would create the public benefit required by the CRTC, Flaherty said.

Changes in the industry mean a lot of content is only available through the Internet, which residents will be able to access through their phones on this system.

"Wireless and wireless broadband become a real way to access broadcast content. So that's fully compliant with legitimate use of that money,” he said.

Flaherty said the majority of people using the 3G or 4G networks use their phones more for data and internet access than making calls.

"If you go to a community like Old Crow, that has some rich aboriginal history,” he said. "By putting this technology there, it allows those people to access content from anywhere in the world but it also allows them to upload their content and share their culture with the rest of the world.”

Like his competitors, Flaherty is asking the public to voice their opinions regarding Bell's plan to buy Astral Media to the CRTC.

"It would be very unfortunate if our competitors' actions resulted in the small communities getting nothing.”

Without the extra money, cuts will have to be made somewhere, he said.

"Obviously, we don't have $40 million, that's a lot of infrastructure you can't build if you don't have the money.

"So where would you make the choices? My guess is you would probably remove the smallest and most uneconomic from the plan because they're the ones that are the least self-sustaining.”

Bell's plan is open to public comment to the CRTC until Aug. 9.

The following month, a public hearing will be held in Ottawa.

See letters, p. 17.

By ASHLEY JOANNOU

Star Reporter