Will oil price drop stifle broadband access in Western Canada?

Crude oil prices have plunged below the US$44 per barrel, and publishedreports today indicate oil could hover at US$43 per barrel early nextyear.

This should provide relief to truckers, cab drivers andanyone else who can’t afford the high gas prices we’ve seen over thepast couple of years. But the plunging petrochemical prices could havean indirect effect on broadband Internet access to isolated areas inWestern Canada, if oil prices get much lower.

Theprice of oil will affect development in the oil sands region ofAlberta, which is one industry requiring wireless access for fieldworkers.

Media sources quoted Merrill Lynch this week as sayingif prices fall below US$38 per barrel, then Canadian production couldbe cut by 800,000 barrels a day because some producers will no be ableto cover their costs.

So how could this affect broadband Internet?

Insome rural and isolated areas, the best way of getting broadbandInternet service is through wireless. In its 2007 financial review,Telus Corp. stated; “Within the oil and gas sector, TELUS extended itsfootprint through significant investments in the growing northernAlberta communities of Fort McMurray and Wood Buffalo, expandingwireline and wireless networks, including TELUS TV, and securingseveral contracts.”

Statistics Canada this week released revenue figures for September crude oil.

It said domestic production was down 4.3 per cent from the same period in 2007.Statscan says a total of 43 per cent of crude oil production was from Alberta’s oil sand, compared to 28 per cent in 2000.

Soif the price for oil craters and oil sands projects slow down (or getmothballed), it would stand to reason the companies would spend lessmoney on wireless and wireline services. This would probably not affectTelus Mobility service. Its coveragemap shows most of Alberta – save for the northeastern cornerand a few pockets – already have third-generation coverage.

Butit stands to reason with the recent AdvancedWireless Spectrum auctions and WiMAX technology, morecompanies were counting on the oil and gas boom out west for businessrevenue. A major cutback of oil production could make or break thebusiness case for emerging broadband wireless providers.

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Jim Love, Chief Content Officer, IT World Canada

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