How a fiber-optic cable could forever change life in Arctic Alaska

NOME — Summer construction on the first fiber-optic cable to cross the Arctic has rural Alaska telecom providers promising a huge market shift in a region that is on the underserved side of the digital divide.

As two ships unspool cable onto the floor of the Bering and Chukchi seas, consumers in six coastal communities from Nome to Barrow anticipate cheaper, speedier internet and the ability to download more data without overage charges by the middle of next year.

The economics of bringing internet to rural Alaska are lousy, which is why the federal government, through various programs, subsidizes connectivity. And even then, rural consumers pay high rates for plans with low data limits and download speeds.

But these communities — Nome, Kotzebue, Point Hope, Wainwright, Barrow and the oil industry work camps at Prudhoe Bay — happen to be along the path of a fiber-optic line, financed by one of the world's richest men, to connect the global financial hubs of London and Tokyo.

The project run by Quintillion Subsea Operations is notable in many ways. If completed, it would take the first fiber-optic cable through the Northwest Passage. It would significantly shave trading times between stock markets in Europe and Asia and presumably make subscription a must for financial institutions and high-speed traders, who operate in a world where milliseconds can be worth millions.

[Subsea fiber optic connection could transform Alaska's Arctic future]

And it's being quietly backed by Leonard Blavatnik, whose global conglomerate Access Industries owns companies in plastics, oil and gas, fashion, telecom, tech, entertainment and real estate. Blavatnik's Warner Music Group owns the record labels of Bruno Mars, Blake Shelton and Coldplay. As of Sept. 1, Forbes' real-time wealth ranking listed Blavatnik as the world's 58th richest person, with a net worth of $15.6 billion.

But what matters most to consumers in the path of Blavatnik's history-making project is the prospect of solid internet connections with more speed and data that cost less than what regional telecom companies can provide through the satellite and microwave systems currently in place.

Sarah Bernick, the pastor's wife and Sunday school teacher at Bible Baptist Church in Wainwright, said her household pays $120 a month for a plan through Arctic Slope Telephone Cooperative Association. But she still uses the more reliable connection at the school to make important transactions online.

"They don't guarantee service or speed and the service goes out pretty frequently," Bernick said. "All of a sudden for a day we don't have internet and sometimes they have to fly a service person up here."

She called the internet "a lifeline," used heavily in the village of about 600 people for buying groceries, clothes, household appliances and, because there is no local bank, paying friends and neighbors for goods and services through account transfers.

In Nome, the fiber, encased in copper, steel and polyethylene, comes ashore about 2 miles outside town on the Nome-Council Road. The line snakes past corroded gold-mining equipment, down dirt alleys — to avoid water and sewer lines — and under the wood siding of the TelAlaska building, where equipment to run and power the cable now shares space with every phone line in the city of 3,800 people.

Outside St. Joseph Catholic Church in late August, a crew with an excavator and shovels placed a final section of cable overlaid with red warning tape.

Quintillion is entering territory held by GCI, the state's dominant telecom company, whose TERRA network provides broadband connections via microwave towers to 72 communities in rural Alaska. TERRA relies heavily on federal subsidies either directly or through programs such as the Universal Service Fund, which essentially gives schools and libraries a discount on communications services by compensating vendors. (TERRA stands for Terrestrial for Every Rural Region in Alaska.)

The two companies say there is plenty of business to go around. Martin Cary, senior vice president of business services at GCI, insists that Quintillion will not significantly affect market share.

He noted that Quintillion is focused on hub communities, with the exception of Wainwright and Point Lay, whereas GCI serves a much wider group of villages.

"Quintillion is not picking up any of the villages, they're just picking up regional centers and that's not a solution for the school districts and for the health corporations because their primary customers are in their villages, which is where we focus — putting complete solutions together for our anchor tenant customers."

GCI recently began expanding into Noorvik and Golovin. Construction in Buckland will begin once permitting is complete, according to a GCI press release Friday. The company expects to have TERRA in 84 communities by the end of 2016.

Arctic telecom providers are optimistic overall that Quintillion will expand choice and competition, improve service and potentially lower prices.

Quintillion plans to sell capacity on its 30-terabit line to the region's telecom providers. In turn, TelAlaska, OTZ Telephone Cooperative and Arctic Slope Telephone Association Cooperative all plan to either lower rates or offer data plans with better value to consumers. Cary said GCI is in "ongoing conversations" about purchasing capacity on the line. AT&T has also voiced interest, Quintillion spokesman Tim Woolston said. ACS, which has a far more tenuous foothold in rural Alaska than rival GCI, plans to expand service in markets served by Quintillion, according to spokeswoman Hannah Blankenship.

"In terms of the cost for consumers, those negotiations are still going on," said Dave Goggins, president and general manager of TelAlaska. "For consumers, even if the cost is exactly the same, the quality will be much better. People are not going have that little spinning rainbow-colored wheel sitting in the middle of the computer screen while it's buffering."

Farther north in Kotzebue, local telecom co-op OTZ is developing new data packages for customers, said CEO Doug Neal.

"We should be able to pass on significant savings to our users here in Kotzebue," he said.

The Arctic Slope Telephone Association Cooperative, which serves the North Slope, plans to transition from using expensive satellite bandwidth as the primary means of connectivity to purchasing it as a backup to fiber, said CEO Jens Laipenieks.

"We intend to roll out a whole new portfolio of internet products based on the new bandwidth and depending on the plan consumers select, the cost per megabyte will be reduced," he said. "Quintillion is definitely a game-changer at the end of the day."

Quintillion CEO Elizabeth Pierce said the up-front cost of laying fiber will be more than made up for in low maintenance costs and the opening of new markets. Pierce spent more than a decade in various roles at ACS, most recently as director of risk management.

"When broadband has limited ability and high cost, it stifles economic growth," Pierce said during at interview Wednesday at the company's Anchorage office. "If we can get the cost of broadband to a point that is palatable in these communities, the economies will blossom and the whole market will get bigger. And so, it is a long-term strategic plan to grow the size of our market."

Should the cost come down enough, the market does appear primed to grow.  In Wainwright, Bernick said, people regularly sit outside the school when it's closed, even in the dead of winter, to use the open wireless system.

"I can see the front of the school from my house and I'll see a half dozen teenagers sitting outside in a nook out of the wind. Or they'll be all bundled up sitting on a four-wheeler parked out behind the school getting on the internet and playing Minecraft."

For her part, Bernick said, she is looking forward to streaming video using the Netflix app on her television, "like people down south."