Progress Report to NCIS-WG October 30, 2012

Minor Route Amendments > Major Impact

Backbone Route Changes Add Value

Hudsons Bay East Shore route facilitates landings in Nunavik Hudsons Bay East Shore route facilitates eventual mesh ring with Kivalliq spur at Arviat Hudsons Bay East Shore route facilitates eventual fibre connection to Sanikiluaq at cost ~$8 million Hudsons Bay East Shore route extends Eeyou Network reach to Whapmagoostuui and Kuujjuarapik Second Canadian international gateway created from Montreal hub to Europe Revised routing reduces subsea network build by ~ 580 km - capex reduced Tokyo-New York City distance lowered by ~2,300 km Arctic Fibre latency < 137 milliseconds (RTD) fastest route between Tokyo & NYC Greater international traffic creates domestic economies of scale

Over the Top Telecommunications

Estimated Arctic Fibre Latency (Milliseconds-RTD)@100G Boston NYC Montreal Toronto Chicago Shanghai 178 170 162 171 179 Seoul 163 155 147 154 164 Tokyo 145 137 129 136 146 Hong Kong 195 187 179 186 197 Least Latent Alternative Carrier (Advertised and Inservice) Boston NYC Montreal Toronto Chicago Shanghai 181 174 200 171 161 Seoul 166 159 185 156 146 Tokyo 148 141 167 138 128 Hong Kong 197 192 197 188 176 Arctic Fibre Advantage Boston Shanghai 3 Seoul 3 Tokyo 3 Hong Kong 2 (Disadvantage) Montreal Toronto Chicago 38 0 -18 38 2 -18 38 2 -18 18 2 -21 London Frankfurt 192 201 172 181 159 168 209 218

London Frankfurt 212 199 202 200 189 187 215 224

NYC 4 4 4 5

London Frankfurt 20 -2 30 19 30 19 6 6
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Progress Regulatory and Permitting

Formal application for landing licence filed with Industry Canada on October 2, 2012 Application amended this week to enable Hudsons Bay landing alternatives near Chisasibi and Moosonee Permit Coordination underway with CanNor, Nunavut Impact Review Board, Industry Canada WFN Strategies completed Desk Top Study on original route Tokyo-London in July and amendments this week ice issues manageable Close to agreement with American carrier on spurs to Alaskan ports Landing permit process in Japan and United Kingdom underway

Progress Technical Network Backbone

Decision made to utilize 100G technology over four fibre pairs = 32 Terabits system capacity Formal request for turnkey proposal issued August 2012 to TE Subcom and Alcatel/Lucent Revised RFP amendments will delay submissions until end of November Discussions underway with various entities on terrestrial fibre builds, swaps and dark fibre leases in Ontario and Quebec Marine surveys will commence in 2013Q2 and continue through October 2013 Terrestrial civil works to be undertaken in 2013Q3 prior to marine operations in 2014 Nearshore landing alternatives identified in DTS Partnering with existing telcos in most Arctic communities for collocation Cambridge Bay CLS alternatives being evaluated Arctic Fibre will sponsor Inuktitut-language internet portal in Iqaluit RFS date of November 2014

Technical Microwave Extensions

Arctic Fibre collaborated with WireIE to engineer microwave extensions from backbone CLS Each community will receive minimum 50 Mbps with low-cost upgrades available to 1Gbps Hybrid fibre optic microwave network reaches ~96.5% of Nunavut population at capital cost of $9 million (inc. power) over and above Nunavut fibre spur cost of $111 million. Communities served by microwave: Kimmurut, Baker Lake, Whale Cove, Kugarruk, Repulse Bay, Arctic Bay Residual satellite-dependent communities: Resolute Bay, Grise Fiord, Sanikiluaq (combined population 1,233) Sanikiluaq (population 850) could be fibred off Hudsons Bay backbone for ~$8 million Fibre-microwave outlay of $128 million leaves only 343 Nunavut residents (1%) on satellite Virtually unlimited (100Gbps) fibre capacity inc. 1 Gbps microwave links for $128 million Satellite with limited 3Gbps capacity costs $300 million and has shorter lifespan

Progress - Marketing
Domestic Open Season Capacity Nomination Process concluded successfully with seven entities participating Three other entities still in negotiations based upon specific technical requirements Tuktoyaktuk spur dropped due to lack of demand > potential terrestrial fibre Assurances received from Nunavut Government on migration to fibre as satellite contracts expire in 2015-16 working toward MOU Representations being made in November to Industry Canada on funding and operation of secondary spurs and microwave extensions based upon revised routing. Immediate requirement for Federal/provincial/territorial upfront commitment by year end on 11 backbone underwater branching units for secondary spurs retroactive installation impossible Immediate requirement for other NCIS-WG connection requirements to be identified Canadian carriers enthusiastic about prospect of second network connection to Europe American carriers and HFTNs enthusiastic about Asia-NYC low latency improvement International carrier negotiations concluding at PTC in January 2013

Progress - Financial
Financial models being revised to reflect route changes > increased demand > lower costs Strong investor interest from financial institutions and foreign carriers ownership likely a hybrid carrier consortium + institutional investor model

Progress Corporate Resources

Arctic Fibre has recently hired North American carrier sales staff Potential marketing partnership with major carrier collocation entity Arctic Fibre has engaged former Iqaluit Mayor Madeleine Redfern to assist with Nunavut permitting issues Search for in-house legal counsel underway Bennett Jones acts as regulatory counsel in Ottawa

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Required Steps NCIS-WG

1. Ensure Shared Services Canada is fully aware of your Departments short-term and longerterm bandwidth requirements having taken price-elasticity into effect 2. Ensure Shared Services Canada and Arctic Fibre are aware of your High Arctic requirements which might require additional underwater branching units 3. Ensure Shared Services Canada and Arctic Fibre are aware of subsea sensor requirements/ locations on an immediate basis for engineering purposes

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Cable Ships in the Arctic

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CS Peter Faber in Lancaster Sound

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