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HomeMy WebLinkAbout5A Broadband Fiber Network Subcommittee - Consultant Selection4646 Dakota Street SE Prior Lake. MN 55372 ECONOMIC DEVELOPMENT AUTHORITY AGENDA REPORT MEETING DATE: December 12, 2011 AGENDA #: 5A PREPARED BY: Dan Rogness, Director of Community & Economic Development AGENDA ITEM: EDA BROADBAND FIBER NETWORK SUBCOMMITTEE — CONSULTANT SELECTION DISCUSSION: Introduction Subcommittee members include Bob Morris (Chair), Christopher Mitchell, Matt Schmit, Mary Steinhoff and Dan Rogness (staff). A RFQ was sent to ten broad- band consultants with six responding by the deadline of November 4. Of those six, the subcommittee interviewed two on November 30. History The EDA asked that a Request for Qualifications (RFQ) be sent to qualified consultants in order to assess broadband fiber feasibility and options in Prior Lake. A subcommittee was selected to manage the process of solicitation, in- terviews and selection as a recommendation to the EDA. A $15,000 grant from the Scott County CDA is being used for this study along with EDA funds. Conclusion Six submissions were from a variety of broadband consultants, including: 1. CCG Consulting, Beltsville MD 2. Lookout Point Communications, St. Paul MN 3. Broadband Planning Group, Parker CO 4. Design Nine, Blacksburg, VA 5. Consulting Gateway Corporation, Fleetwood PA 6. U -Reka Broadband Ventures, Stillwater MN The subcommittee selected Lookout Point and Design Nine to interview, which took place November 30. Bob Morris supported Lookout and Matt Schmit sup- porting Design Nine, while Chris Mitchell supported both consultants. With a lack of a strong endorsement for one consultant, the EDA asked staff to request more work proposal information from each one. That information is provided for your review and summarized as follows: • Lookout Point: The consultant proposes a commitment and vision process to include three primary tasks: (1) build a vision; (2) develop a plan to evaluate the vision; and (3) build governmental commitments. A total 420 hours is estimated for this study at $125 /hour. Cost = $52,000 + $25,000 legal /design = $77,500. • Design Nine: The consultant defines a feasibility study over 3 months to include market/financial feasibility, pre - engineering cost estimates, busi- ness model analysis, management/operations planning, GIS -based asset mapping, financing strategies, and recommendations. A total 135 -150 hours is estimated for this study at $120 /hour. Cost = $19,900 (travel cost is $3,600 for 4 on -site visits). ISSUES: These two proposals provide different approaches to evaluate community fiber implementation in Prior Lake, so the EDA must evaluate them based on a clear understanding of their differences and corresponding costs. Eric Lampland of Lookout Point also said that he can do a more standard feasibility study to in- clude a financial pro - forma, market survey, educational information, high -level designs and estimated implementation schedules at a cost range of $30,000- $50,000 with an average cost of $50,000. EDA members may wish to ask themselves whether one proposal or the other has the greatest potential to identify critical information which will allow the EDA to determine if and how to proceed to the next stage of the Broadband project. EDA members may also wish to consider if each proposal provides more or less preference for one implementation approach versus more flexibility, which may be key in determining whether this project goes forward. FINANCIAL The EDA will need to provide resources for the professional consulting services IMPACT: once a selection is made; $15,000 of that total cost will be provided from the CDA grant and the remainder from the 2012 EDA budget.. ALTERNATIVES: 1. Select Lookout Point Communications, and authorize the EDA Executive Di- rector to enter into a contract for professional services. 2. Select Design Nine, and authorize the EDA Executive Director to enter into a contract for professional services. 3. Do not select either consultant; request additional information or an interview of both consultants. RECOMMENDED As determined by the EDA. MOTION: Dan Rogness From: Eric Lampland <eric @lookoutpt.com> Sent: Wednesday, December 07, 20115:10 PM To: Dan Rogness Cc: Bob Morris Subject: Re: Selection Process Attachments: Second Proposal to the City of Prior Lake.pdf, eric.vcf Dan, Attached is our re- submitted proposal. I look forward to discussing any modifications that you may desire or that the committee feels would be of benefit. Additionally, if the committee only wishes a feasibility study -- meaning financial pro- forma, a market survey, certain educational information, high -level designs (without actual outside plant GIS work) and perhaps marketing and estimated implementation schedules -- we normally provide such for between $30,000 and $70,000 ($50,000 is average). Standard marketing surveys normally used in feasibility studies would cost between $10,000 and $15,000 depending on its depth and precision. The final real result of such studies is usually two fold. First is the financial assessment -- is it doable? This is the part I have roughly done for you already. For Prior Lake, it's doable with normal constraints. The second is to answer that normal Council question -- is the public behind this? We can do that type of survey, but those we have seen -- including ones we have done -- are fairly useless for several reasons. There is a better time, and better ways, to do this later, but we can discuss it and even do it now if people want it. I look forward to working with you. We would be happy to answer any questions you might have. Eric On 12/6/118:34 AM, Dan Rogness wrote: Eric: The EDA met yesterday to review two consulting candidates that had been interviewed by the subcommittee, including your firm and Design Nine. They felt both consultants were extremely well qualified to work with Prior Lake. Therefore, they asked that you now submit a more detailed proposal with costs for the feasibility study. I realize that you've already submitted that type of information, but this is an opportunity for you to refine your proposal, if desired, with costs associated with each phase in your recommended tasks. The EDA meets again next Monday, Dec. 12, so I'll need this information by the end of the day tomorrow in order to get a staff report prepared this week. The need to get this study going in December is not as strong as I had believed, so we do have some additional time to make the best selection for Prior Lake. Please contact me if you have further questions. Otherwise, I look forward to receiving your information. Dan Rogness Community & Economic Development Director 4646 Dakota Street SE Prior Lake, MN 55372 952.447.9813 drosness @citvoforiorlake.com OSc PRlO4r Lek ti U A Proposal to the City of Prior Lake Initially submitted September 2011 Resubmitted December 2011 Toward a Connected Community Table of Contents Cover Letter for December Submission ....1 Executive Summary .............................. 3 Statement of Work .. ............................... 6 Initial Feasibility Estimates .................... 13 Submitted By: Eric Lampland Lookout Point Communications 880 Osceola Avenue St. Paul, MN 55105 Lookout Point Lookout 880Osoeola&axie Point Communications St. Paul, MN 551053208 Dan Rogness Community & Economic Development Director 4646 Dakota Street SE Prior Lake, MN 55372 Mr. Dan Rogness and Members of the Prior Lake EDA; We are extremely pleased to be selected as one of two finalists. Your other candidate, Andrew Cahill of Design Nine, is a well- respected consultant in this field and we are pleased to be in his company for your review. I personally have always admired Andrew's commitment to his customers and his efforts furthering the success of municipalities in this very difficult arena. Naturally, we believe there are several aspects that make our proposal stronger. Lookout Point's proposal speaks to driving success; it is not just another feasibility study. Ours is a tailored proposal intended to meet multiple City and EDA goals. The proposal speaks to building a very close and effective working partnership. It is a proposal that is mindful of the keys to success. The City is seeking knowledge and information that Lookout Point can develop and deliver, but not in the abstract. Lookout Point needs to understand the City and the City's potential partners in order to successfully build a connected community. We have begun that already. Communication networks are about much more than technology. Get the technology wrong and it's a disaster. Getting technology that you don't want or use is probably worse. Get it right, do it well, involve all and it is truly exciting and enabling. Lookout Point's proposal is stronger. These are but three areas we believe make our proposal superior. Building a close relationship is aided by locality— we are here We can meet with the City, County, Potential Partners, SMSC and others spontaneously as the need arises and at the "drop of a hat "; in addition to scheduled meetings. We know the local players and have connections with the County, State of Minnesota OET, the recently formed Midwest Internet Cooperative Exchange (MICE), members of the State's Broadband Advisory Task Force, local providers of a range of services from Internet to Telehealth organizations and the list goes on. Each of these organizations you will need and we know them, they know us. Seeking Prior Lake's goals and intentions — we have done our homework. => Our work for Prior Lake began in April, nearly eight months ago. During this time we have had numerous meetings with the City and County. We have digested information on City demographics, analyzed physical properties via GIS data supplied by the County, read and discussed the Economic Development Vision and Strategic Plan as it has emerged and more. The proposal we submitted to you was the result of this work. It was tailored to meet your goals. => We have also had numerous discussions with potential partners: fiber infrastructure builders to augment and make stronger the City's goals and use of Scott County fiber; Lookout Point Communications©2011 page 1 Telehealth, smart energy, ISPs, mobility (cell and WiFi) providers; local cloud and data center builders and more. The nature of these conversations was to prepare the ground for possible private company participation and to enhance support for the incubator and data center strategies. This work has begun. We are unquestionably the strongest technology consultants in municipal FTTH. => Our team has been involved in the build of numerous large -scale networks (including the largest FTTH network in the country). Our technology involvement extends to creating the very protocols in use today — we know how this works. We have been involved in every major standards body that Prior Lake's FTTH network will use — we helped create the protocols. We have direct and extensive experience. => Team members have held senior positions in large -scale and start-up technology companies. We provide industry analysis to the financial, consultative and vendor markets concerning technology — where technology is and where it is going. We can create doable and executable plans, help build companies and build and exemplary network with technological foresight. It has been a pleasure working with Prior Lake's EDA. The vision you seek for your community and its economic strategy is truly exciting. Advanced networks are fundamental to the future. They are so much more than telephone, television and data networks. They serve telehealth, keeping seniors at home longer, serving children in schools and adults at work and home — driving health care expenses down. They are about reducing costs through smarter energy delivery and use -- reducing costs and bettering public services. They are about seeking better education and support for private companies. They are about new ways to work and be productive. All of this is what you are deciding now. Getting this infrastructure right is difficult: understanding deep and changing technology; developing political and community commitments with staying power; seeking and maintaining private partners and a host of myriad details. Getting this right is powerfully enabling to all that a community does and is. We sincerely hope that Prior Lake will be successful. We would very much like to be part of your future. Sincerely, �- Eric Lampland Lookout Point Communications Lookout Point Communications©2011 page 2 Executive Summary Advanced communication infrastructures are an essential part of modem life. Throughout the world countries are investing billions to ensure that they are competitive and that their citizens enjoy the vast improvements brought by mobility and high -speed fiber connectivity. In the United States, and elsewhere, these investments have proven a substantial boon to economic development in virtually every municipality that has implemented fiber -based communications to homes and business — attracting business, increasing median incomes, reducing the drain caused by endless commuting, improving education, improving the tax base, reducing unemployment; the list is long. But to achieve these results is difficult — of the thousands of communities that have tried to go here, only a few hundred have made it. This proposal will document an experienced -based approach to success. Lookout Point Communications met with the Economic Development Authority during the spring and summer of 2011 as they began formulating a vision and strategic plans towards a fiber connected community. Further discussions were held with Scott County, various and alternative communication carriers, partnership potentials, and finally estimates were made for possible work elements. All of these discussions were directed at three core assessments. Vision: What vision is being pursued — not just fiber -to- the - home - and - business, but how is it related to overall City goals, the City's view of itself. What is to be achieved and how. Resource What general resources are available — what is the feasibility of FTTH for Prior Lake; who might be potential local participants: are there carrier and electrical services; is there external connectivity to carrier hotels, Scott County fiber, and more. Commitment: What commitment exists that will support Prior Lake in this effort? Finally, the EDA has pursued a number of experienced parties (e.g. providers, other cities, other co- development) and conducted extensive education on their own, some of which has been shared with us. All of this is good and will serve well. Lookout Point has worked with over 100 cities in the last seven years of FTTH involvement and observed many more. From that vantage point, Prior Lake stands in an excellent position to be successful. Lookout Point created a rough feasibility assessment (see Section 3) and found that — with general rules and normal success rates — that an FTTP `fiber- to -the- home- business - government - premise) network could be built costing roughly $25 to $30 million and that such a network would pay for itself. Indeed, that after ongoing operational and bonding expenses, such a network would likely begin returning profits to the City in three to four years, under the assumptions made. Excellent opportunities exist for partnerships, external connectivity, and for support of the EDA vision. In terms of commitment, natural hesitation was found. This is a very big effort, so how does Prior Lake proceed before everything is known? Hesitation is absolutely common to others that have tried. Those that won solved this. Commitment is the first focus; you have most everything else. Without at least some level of commitment, Lookout Point recommends that you not proceed. Cities have myriad responsibilities and, in general, proceed cautiously in new endeavors, as they should. But the path that many cities have pursued became formulaic, replacing process for thoughtful content, replacing process for commitment. Lookout Point has worked with many of these cities. We have been involved with what doesn't work. And we've been involved with what Lookout Point Communications©2011 page 3 has worked. This proposal contains our recommendation on how to proceed in building commitment, in reinforcing commitment for an ever larger audience, while ensuring that tasks necessary to successfully build an advanced fiber -based communications network are efficiently and effectively completed. And importantly, that tasks are done in a manner that allows early exit should something arise that requires the City to change course. Keys to success in the experienced -based approach are: • Do specific tasks versus "boiler- plate" tasks Begin with the intention to proceed to the next level (do better design early and gain more solid information versus doing the same work multiple times). This costs slightly more upfront on a per task basis, but reduces overall cost and significantly improves decision - making and schedule. • Do only what you need Significant expense can be avoided by not doing. For example, most cities proceed with feasibility studies containing market surveys and complex financial analysis. Market studies conducted before you really know what you are doing are rarely helpful. Feasibility and market studies with lengthy reports on other's successes were perfectly understandable in the early days of municipal FTTP. Consultants did not know whether municipal FTTP would work. Cities did not know how this would improve their communities. We know those things now. And can provide this level of detail easily and cheaply. Lookout Point created a rough financial analysis showing a very positive outcome for Prior Lake. We put the summary of this in Section 3; the detail of that analysis we will happily share. Don't spend money and time unnecessarily. • Do tasks when you need it. Much of the political confusion that harms these efforts stem from trying to know everything in order to gain commitment. Rather, seek commitment on intention, proceed with success in mind, but have clear milestones, decision points with exit strategies. Make sure that what you are doing builds on itself and is useful later as you proceed. • Set milestones and timelines. Establish milestones that must be met. Ensure that decision points — including exit strategies — are defined and included. Coordinate target dates with other aspects of related city projects and purposes. Often this creates a "working backward" schedule. There is obviously some realism that needs to be understood. Drive the FTTP work aligning with City requirements. • Pay for purpose. You need certain things — a good "how much" number, an effective Council education process, partnership outline (possibilities), an outline of legal issues, financing methods and alternative governance structures. Those are the first elements. Later you will need a marketing survey (maybe), but marketing plans for sure. You will need to put together an operational framework, partners, monetization, and so forth. These and other elements will come forward as you progress. It is only natural that as you learn more there will be areas you wish to (and maybe should) explore. With these caveats in mind, Lookout Point recommends that Prior Lake retain our services in a multi -phase effort. Three phases are identified in the Statement of Work section. The purpose of listing these major phases is to provide a look at the entire path to achieving FTTP. Individual phases will be segmented with milestones to be established in the first "vision and plan" document. At each milestone a benefit analysis will be provided and thoroughly discussed. Commitment will be sought from all major stakeholders. Stakeholders will increase as the project moves forward, building an ever - larger base of support. Initially the EDA, Mayor and City Staff, need to be involved as the first "vision and plan" document is assembled; you may wish to send Council an activity report along with a brief review of feasibility and benefits being pursued. Next, engage the Council with workshops, education, costs and benefits. Then add partners, add citizens, add business — at each appropriate Lookout Point Communications©2011 page 4 stage. At defined milestones more benefit(s), more "how- to(s)," and better knowledge can support a go -no -go decision. Each milestone and phase builds upon itself. Each phase builds commitment. Initially Lookout Point would assist the new EDA sub - committee in concretizing a connected community vision and specific implementation plan. This plan will further define subsequent decision milestones, target dates and funding sources through a full city-wide implementation of FTTP. If the decision is to proceed, further refinement to the vision is made by grounding that vision in organizational and market issues: governance, "must- have" negotiation elements, local service offerings, legal issues, perhaps with additional financial modeling. Next, explore bringing in partners by creating an "Attractiveness Plan." Partners need to be sold and an "Attractiveness Plan" identifies benefits to them including money — usually money — help desk and technical staffing and other costs, which secure those partners. The plan will capture refinements to the financial models reflecting alternative monetization models to be offered. This may also be a point to seek grants and /or other funding support. Phase One will provide a firm and grounded vision defining what is to be built, what benefits will be achieved, who might be involved including public and /or private partners, with specific costs, financial plans, governance and legal guidelines, marketing and implementation plans to achieve those results. Phase Two creates the Business Case for the investment community and prepares to seek funding. Critical to this phase is to harden all aspects of architecture and design; selection of vendors and contractors willing to commit pricing and schedules; detail for legal and governance issues; incorporation of public and private partners; establishment of final Financial Pro - forma; and, selection of an investment banker to solicit funding. Phase Three is the actual build and initiation of services. By far the most complex phase, its success will be a direct result of the quality of work in the previous two phases. Good planning and clear vision are the keys to success. At the end of each statement of work are expected time frames and costs. And finally, Section 3 Initial Feasibility Estimates contain the assumptions and summary of a financial pro- forma. We include it in part to calm that early hesitation — this is very possible, very doable. We will gladly sit down with you and the spreadsheets and detail everything. The data contained within comes from years of experience, recent pricing and City provided data. Naturally, you will wish to refine this to align with actual vision, even more recent quotes from vendors and specific outside plant (OSP) design. We wish you well as you proceed. Please allow us to work with you in refining this approach and achieving your success. Lookout Point Communications©2011 page 5 Statement of Work This proposal envisions a multi -phase effort. It is a proposal that speaks to building a very close working partnership. It is a proposal that is mindful of the keys to success. The City is seeking knowledge and information that Lookout Point can develop and deliver, but not in the abstract. Lookout Point needs to understand the City and the City's potential partners in order to build a connected community. Communication networks are about much more than technology. Get the technology wrong and it's a disaster. Getting technology that you don't want or use is probably worse. We discuss three major phases leading to an actual FTTP build. Woven into these phases are work elements that lead to successful results: sound financials, partnership development, marketing the vision, building and funding the delivery and ensuring commitment through close monitoring and information exchanges. Commitment and Vision - Phase One The first task is to build a vision. Much work has already been done by the EDA. This work needs to accelerate - become informed by technology choices; explore with potential partners; refine terms of build cost; identify and monetize services; and document results. This collaborative work can begin immediately upon "There is no substitute for vision: knowing why you are doing a project, what you hope to accomplish, and who you will benefit. If this is done well, the project will succeed. Municipal telecom networks are not for the feint of heart, make sure you have the fortitude to persevere." Gary Evans, CEO of Hiawatha Broadband selection of an EDA sub - committee. Lookout Point would act as an advisor; providing staff augmentation for the completion of the work elements listed below. It is anticipated that Lookout Point will conduct most of the investigations, provide leadership and prepare bi- weekly reports or summations of activities to the EDA sub - committee who may also choose to invite additional participation. Tasks are grouped by general category, not in order of occurrence. Schedules of activity will be provided following agreement on tasks. Initially, it is anticipated that Phase One would be completed in three months and produce the following deliverables: Deliverables 1. Documented vision for a connected community with measurable targets 2. Competitive market analysis 3. Proposed service offerings and pricing 4. Create an "Attractiveness Plan" for Open Access providers or partners 5. Financial pro -forma including capital costs, operating expense, revenue, cash flows, balance sheets, and income statements 6. Outline of governance principals and legal issues 7. Meetings - Bi- weekly sessions with EDA sub - committee - Council Workshop(s) - Providers, partners, vendors, City and County staff as necessary => Tasks Build a vision - we will: • Conduct committee education on high -level technology and trends - level set members Lookout Point Communications©2011 page 6 Document what you seek: triple -play (voice, television and Internet), high -speed business connectivity, city -wide mobility of all services, certain additional services such as educational improvements, healthcare, public safety improvements and other goals such as reduced cost for citizens, business or government; innovative environments and more. Establish target measures, or directional changes, in each defined vision attribute — define measureable results expected or desired. Form a basis, or set of criteria, for the network(s) adhere to: • Governance desires (e.g. local control, ability to effect change, improved and /or local customer service, city revenues, open access networks, more) • Integrate public /private participation desires with feasibility; monetize and model • Technical attributes (e.g. the design horizon in years; what technical or service properties are required or desired, general interface requirements, mobility and capacities and more) • Prepare a list of non - negotiable(s) or "must haves" for the network, from providers, for economic development, and more Obtain early legal soundings concerning Minnesota regulations (65% rule noting favorable recent new PUC rulings, franchise laws, new changes anticipated during 2011/2012, and more) Develop a plan to evaluate the vision — we will: • Rough out a feasibility plan — financial pro -forma • Get some basic equipment quotes: GPON /Ethernet Access; Softswitch; routers and transport; servers; OSS /BSS; 4G LTE/WiFi vendors • Do a OSP evaluation to determine layout, fiber counts, percent of underground rebuild necessary, determine if underground rebuild can include other utilities, develop an estimated materials list and costs and anticipated construction costs • Document the local competitive environment: services offered and pricing • Interview "new technology" vendors: video OTT space, mobility, application (app) and cloud providers, new data center(s) build • Engage with, perhaps visit, successful cities: Chattanooga, Kansas City, etc. • Explore and begin developing partnerships • Create a rough monetization plan and re -model with rough feasibility pro -forma • Re -state the non - negotiable(s) that are required, develop and "attractiveness plan" and prepare for negotiation • Determine backhaul potentials; consider pico -cell technology deployment (LTE Advanced), or wide -area WiFi for tablet, smartphone and laptop support • Solidify Scott County participation • Solidify SMSC participation • Explore Integra, Century-Link, Mediacom • Identify area fiber sources and vendors (Zayo, Century-Link, Windstream) • Identify alternate operating companies or define an operating organization • Explore funding arrangements • Seek foundation support (Bush, Opus, Knight, Blandin, others) • Determine whether Federal grant programs might assist (health care, smart grid, federal NBP pilots, Scott County grants, economic development) • Explore local angel community • Understand investment bankers and revenue bonds • Define a legal structure that would accomplish the governance goals • Create a summary document of findings Lookout Point Communications©2011 page 7 Build Governmental Commitments • Create an educational and information structure for the Council and City Staff • Initiate a work session explaining the concepts, benefits, rough financials being pursued and carefully develop feedback • Re -model with feedback as applicable • Develop a status update to inform and educate • Hold a final session prior to a go /no go decision — present justification, financials, approach /govemance, funding methods • Integrate City departments as participants • Define current uses on communication networks and their costs • Define new areas to integrate and their benefit (sensor systems, monitoring, public safety, etc.) • Build educational coalitions — ISD 719 Prior Lake - Savage Schools • Define desirable technology pilots: !PAD/tablet access; distance learning; server support • Define current costs and benefits • Identify early stage marketing efforts and create plans (perhaps engage a local marketing company) The anticipated schedule for Phase One would be three months: beginning in late December 2011 through March /April 2011. The actual schedule is a work item of phase one itself and is dependent on the elections of the City. Following further consultation with the City work elements and costs will be refined. The current projection contains 420 hours, plus outside efforts in legal and outside plant design of $25,000 for an estimated $77,500. In discussion with City staff, this can be partitioned, staged to a degree, accommodating budgets and approval processes. For example, the Scott County grant may initiate work should the City deem that a valuable use: partial work might begin and include a Council workshop. Stressed is the notion of seeking commitment up front and proceeding as if you intend to finish. Phase One will provide a firm and grounded vision defining what is to be built, what benefits will be achieved, who might be involved including public and /or private partners, with specific costs, financial plans, governance and legal guidelines, marketing and implementation plans to achieve those results. Create Executable Plans — Phase Two Following Phase One, Prior Lake is ready to move from conceptual understandings to the refinements that build a platform with forever increasing capabilities. Businesses can have world -class redundant connectivity and affordable high -speed access. Citizens who wish can work from home and children can have the technology and educational access that enables success in the 21S Century. Government can reduce the cost of certain services while leveraging technology toward community benefits. To make those ideas real requires in- depth work. The primary purposes of this phase are to ensure that technical, marketing and organizational elements are conformant to Phase One goals and objectives and within financial parameters. At the end of this phase, Prior Lake will have contractual agreements in support of the business case and an executable architecture, with component designs, all supporting the goals and objectives developed in Phase One. In short, Prior lake will have a Lookout Point Communications©2011 page 8 Business Case that can support an investment grade prospectus under which funding can be obtained. => Deliverables 1. Finalized Service Offerings and phased rollout plan 2. Competed network design, short of implementation 3. Contractual bidding and selection of all vendors and contractors 4. Partnership Agreements, with monetization plans 5. Governance Documents 6. Marketing Plan 7. Investment grade Business Plan with complete Financial Pro -Forma 8. Meetings - Bi- weekly sessions with EDA sub- committee - Council Workshop(s) - Providers, partners, vendors, City and County staff as necessary => Tasks Technical Design • Document design criteria and goals utilizing the Chattanooga has implemented a new application that scans crime scenes with a wireless laser. The 360- degree scan, which can cover an area the size of a football stadium, re- creates a crime scene with a billion points of data. Rather than sending ten detectives to the scene to record, measure and photograph, often taking several days, the scanner digitizes the scene in 10 minutes, which is then transferred via the fiber network and stored until needed. The city is also using its network for intelligent traffic management. Wireless sensors and cameras mounted on traffic lights or in the road surface measure traffic speeds and patterns and adjust lights based on current conditions. Chattanooga Tennessee has developed the most advanced fiber network in the nation with services few citizens elsewhere are even aware of, much less have. outputs from Phase One • Create and issue RFPs for all equipment: - Access (fiber termination and mobility) - Transport, - Routing and switching, - Softswitch (voice), - Video solution (content acquisition, IPTV, OTT and caching), - ISP functionality (peering, email, servers, etc.) - Network Management and backend software (OSS /BSS /EMS, etc.) o Note: Open access approaches will require a more extensive review - Other services as defined during Phase One - (note: individual functionalities may be sub - contracted to specialty houses) - Create testing protocols and specifications, included in the RFPs where appropriate - Create and issue RFP for system integration (two approaches possible) - Internal: Establish job descriptions and teams to conduct integration designs /plans - External: vendor review, evaluation and recommendations Outside Plant Desiqn • Utilizing the Phase One OSP engineering, create a final level of engineering resulting in plans, bills of materials and construction specifications • Conduct complete field engineering (often referred to as a walk -out). • Surveys and subsequent GIS mapping identify fiber routes, services drop entry points, fiber transport, feeder, distribution and service drop designs along with fiber strand assignments and splicing documents. • Optimize routing and optimum placement of all network elements and support structure • Determine exact position and depth of construction running line Lookout Point Communications©2011 page 9 • Preparation and submission for all permits and easements • Create testing protocols and specifications • Digitizing all of the above information on GIS systems compatible with City and County requirements\ • Note: please consider that the final engineering surveys, particularly underground portions, cannot be performed effectively during snow cover seasons. Contractual Biddinq - Vendor review and evaluation - Equipment and Services: each specific design and integration component will be selected for best of breed and conformant to anticipated budget plans - Contractual agreements for content licensing will be estimated - Outside Plant bidding documents will be evaluated and assessed - Present recommendations and assist best - and -final agreements - Subsequent to decisions from City Staff and Council, issuance of Letters of Intent conformant to funding instrument requirements - Finalize Financial Pro -Forma Marketng Plans • Create a series of low -cost, informal meetings to bring vision to the community and obtain useful feedback • Coordinate with EDA and City efforts to harmonize efforts and ensure objectives are current and in line with community thought and plans • Create a full marketing plan: interim City referenda if applicable; pre -sign up; rollout implementation and customer acquisition • Execute those portions of the Marketing Plan that occur during this phase - Develop customer service approach and structure - Focus groups for service refinement - Marketing survey informed by specifics in service offerings and price. Organization • Finalize governance documents, create legal entity • Create a Board or establish a City Department • Finalize, or at least obtain strong commitments, from all partnerships: services, management, or other offerings • Finalize options for network operation - Internal: define job roles, organizational structure, facilities - External: complete negotiations and agreement(s) The anticipated schedule for Phase Two would be six to nine months; depending most significantly on the extent of Open Access Partnerships pursued. This might be scheduled for April through September or December 2012. Following Phase One and further consultation with the City, work elements and costs will be refined. The current projection estimates are based on like efforts elsewhere and may not be fully comparable with the goals, requirements and aspirations of Prior Lake. That said Lookout Point has estimated certain costs, such as the Outside Plant Design and large portions of the architectural design detail, legal work specifically for Prior lake as it is less subject to variation. For example the largest single work effort relates to OSP survey and design; estimated at $465,000. Other elements include architecture, electronics design and RFP creation $104,315, vendor review and evaluation $78,665, legal $50,000. Along with many variables this targets Phase Two in the magnitude of $700,000 to $800,000. This can be modified depending upon the informed needs of Prior Lake. Lookout Point Communications©2011 page 10 It should be remembered that it is the practice of most FTTP municipal builds to include full reimbursement of all of the above costs in the issued Revenue Bonds. Phase one and two then represent temporary and recoverable expenditures. Revenue bonds themselves are secured by the activities of the eventual FTTP build and do not generally have recourse to tax payers. Phase Two creates the Business Case for the investment community and prepares to seek funding. Critical to this phase is to harden all aspects of architecture and design; selection of vendors and contractors willing to commit pricing and schedules; detail for legal and governance issues; incorporation of public and private partners; establishment of final Financial Pro - forma; and, selection of an investment banker to solicit funding Bond Issuance and Build Supervision — Phase Three Much work needs to be done prior to entering this phase. Work and decisions made over the coming year will dictate the some of this content. Most significantly, are decisions involving the operating organization -- retaining an outside company, such as Hiawatha Broadband, a specific carrier, or establishing an independent City monitored organization. Additionally, the election of multiple providers engaged in an Open Access network structure will have impact. Finally, prior to this activity taking place, an investment banker(s) needs to be retained, prospectus created, funds raised and all of the financial management activities organized and executed. Whichever organizational or network architecture approach is taken, Lookout Point can help. We can help facilitate transfer to another organization or can manage the implementation. As such we are not providing costs or schedule information here. The generic costs of "doing things" will be contained within the Phase Two and One financial pro- forma. Lookout Points charges will be a function of decisions made and we will be involved to the degree that Prior Lake needs and wants our services. Mentioned below are basic tasks that will arise. These need to be anticipated in the previous phase and to a lesser degree in Phase One. The actual construction of a municipal FTTP network has testing, certification, interoperability, marketing, organization and roll out activities that need to fully understood early. Testing and certification apply to ensuring that outside plant construction meets the technical requirements for fiber qualities and, for electronics, meets the criteria evaluated on RFPs. Most construction companies expect that certain oversight and testing will be conducted by the buying organization. Equipment vendors often help facilitate testing of their equipment. Specific testing equipment needs to be acquired. Proper testing and certification of individual components leads to the next, often complex, phase of testing known as integration or interoperability (e.g. do these elements work seamlessly together?). Lab testing can be performed, next pilot projects meet and assure customer expectations and, when these tests are executed well, roll out plans can proceed upon more sound footing. Roll out plans relate not only to technical implementations and people management, but need tight coordination with marketing. Proper roll out is critical to achieving measured costs and ensuring revenue targets. All of this activity will occur at the same time as Prior Lake is building the organization itself. Hence, careful organization and staffing plans in phase two are important. The organization may be housed in a new Prior Lake data center, or other suitable building to be constructed. Customer service and marketing offices may also need a physical building and presence. When selecting and establishing a team, outside assistance can be invaluable. Lookout Point Communications©2011 page 11 Ultimately good execution of Prior Lake's plan is what creates success. There is much to be shared here with ever - increasing detail as we work with you to achieve a truly advanced fiber network. Phase Three is the actual build and initiation of services. By far the most complex phase, its success is a direct result of the quality of work in the previous two phases. Good planning and clear vision are the keys to success. We wish you well. Lookout Point Communications©2011 page 12 Initial Feasibility Estimates Lookout Point is providing Prior lake with a very rough, but experienced based, quick look at FTTP feasibility. Intended as a guide, which will be verified and augmented as the work proceeds. The detail for all statements made and associated spread sheets can be made available for discussion. These spreadsheets are extensive and beyond simple display. The intention here is to demonstrate that the feasibility for a Prior Lake FTTP is quite good. The financial analysis of the Prior Lake FTTP network includes the following areas: Individual Spread Sheets used in this pro forma — • Revenue In this area of the financial analysis, the general phasing of the network build was determined, how many homes and businesses the network passed and how many become customers. "Standard" service offerings were quantified, and market priced. Estimates were made of the up -take of these offerings to the customer base. • Cost of Services In this area of the financial analysis, the costs of the services were estimated. The most significant includes the programming costs for provision of video. Estimates were made from recent contracts on other customers. • Operating Expenses (OPEX) In this area of the financial analysis, expenses associated with the on -going operations were determined: day -to -day resources required to operate, service and maintain the network, software upgrades and service contracts, staff education and marketing. Estimates again were determined by Lookout Point experience and include such work functions as support for new customer additions (added and served) and the number of service engines delivered by the entity, management and technical personnel. • Capital Expenditures (CAPEX In this area of the financial analysis, all of the capital requirements for the initial build were determined: also any on -going capital required to either replace equipment or to accommodate additional customers were included. Capital expense includes both the fiber network and all network and services electronics. Depreciation schedules were established and developed so that they could be integrated with the standard financial statements. Capital pricing in this project was determined from "budgetary" prices received from vendors on recent projects. • Income Statement In this area of the financial analysis, three years of monthly income statements and annual statements were developed along with twenty -two years of annual income statements. • Cash Flow In this area of the financial analysis, three years of monthly cash flow statements and annual statements were developed along with twenty -two years of annual cash flow statements. • Balance Sheet In this area of the financial analysis, three years of monthly balance sheet statements and annual statements were developed along with twenty -two years of annual balance sheet statements. • Debt In this area of the financial analysis, debt financing was developed and integrated with all of the financial statements. Two models were created, one financing at 6.5% and one financing at 8 %. Highlight of Key Financial Parameters With any pro -forma financial development, many assumptions are made to Lookout Point Communications©2011 page 13 complete the work. Below are the major assumptions made in the development of the financial statements: • FTTP build time: 2 years; 38% complete in year one • Miles built: 46 miles of feeder cable; 164 miles of distribution cable (extrapolated from City provided information, deliberately high) • Revenue and Take Rate Assumption in models: - Total Homes passed 8,600, increasing yearly by 1% - Residential Take Rate (YE = year end) - YE One- 10 %; YE Two- 26 %; YE Three- 38 %; YE Four- 50% • Business Take Rate - Total Businesses 350, increasing yearly by 1% - YE One- 13 %; YE Two- 23 %; YE Three- 34 %; YE Four- 35% - Lower take rates expected due to existing contract terms • Service pricing intentions - Less than incumbents with better features for telephone and Internet - Equal to incumbents with more local content and VOD for video - Modest Over - the -Top (OTT) and ancillary income • Debt/loan assumptions for the models: build and own assumption, $0 down, - Revenue Bonds at $28,000,000 at 6.5 %/8.0% interest Rate, 25 year bond - Fixed Payment schedule with principal payments starting in year 4 - First three years payments are interest only - Normal reserve account assumptions made, Debit reserve is one year P &I Financial Summary With the completion of the financial statements, conclusions can then be made as to the financial viability of model that was analyzed. The following is the financial conclusion: Lookout Point Communications©2011 page 14 25 Year Revenue Bond 6.5% Interest 8% Interest Bond Requirement $26.7M $28M Build Capital $18.458 $18.458M EBITDA Positive Year 3 Year 3 Annual Direct Expense $1.3 - $1.5M per yr $1.3 - $1.5 per year Annual Cash Flow Positive Year 4 Year 4 Net Cash from Operations $3.5 in yr 3 and increasing $3.5 in yr 3 and increasin Annual Debt Payment P&I $2.187M $2.593M Debt Coverage 1.6 in yr 3 and increases 1.07 in year 3 and increases Lookout Point Communications©2011 page 14 Prior Lake, MN Feasibility Study for Community Fiber Cost Estimate and Detailed Scope of Work Proposal LA 4-J 41 O V 4— O _Q) F L 0 _ DESIGN NINE we build networks that perform A Letter of Transmittal B Detailed Scope of Work Key Staff Assignments D Proposed Work Schedule Cost Proposal Design Nine is pleased to respond to the Prior Lake request for a detailed work and cost proposal. We have recently finished two other feasibility studies for communities of a similar size, and we have the time and ca- pacity to start work immediately. Based on our understanding of the effort, we believe we can complete all work items in approximately three months. We are currently working in Eagan, Minnesota, and have staff there on a regular basis, including at least one or two visits in January. In our Cost Proposal section, we have indicated our willingness to cost share travel expenses when we can coordinate simultaneous visits to Eagan and Prior Lake. This has the potential to cut travel costs in half. We are also prepared to cover the travel costs of our first visit at no charge, which further reduces the overall cost of travel. In between face to face visits in Prior Lake, we will make full use of technology to stay in steady contact with the Subcommittee and City staff. We regularly use email, the phone, and two way videoconferencing tools to the fullest extent possible. For videoconferencing, we use GoToMeeting, which supports both high quality multi -party video and screen sharing. No special equipment or hardware is needed to use this, and our clients have found this extremely effective as a way of keeping travel expenses to a minimum while improving be- tween meeting productivity. The Design Nine team provides broadband planning, survey work, and infrastructure analysis in the same way that architects and planners offer services for building and community development projects. We provide a single point of contact for the client throughout the various phases of the effort. Our experience working with more than one hundred -fifty communities on broadband planning and feasibility studies indicates that technical specifications alone are not enough. In our experience, we have found that highly collaborative efforts with the widest possible group of stake- holders leads to successful outcomes. We are fiilly prepared to work with City staff, stakeholders, service pro- viders, and other interested parties to meet the goals of this effort (identify broadband needs and areas of at- tention throughout the City). Our goal is to help increase the capacity of City leaders to make prudent broadband investment decisions after our work is completed. The team that will perform the work has a total of more than 120 years of combined experience in telecom- munications and community broadband design and engineering —we do not believe any other company in the United States has the same depth and breadth of experience in this field. Design Nine has extensive hands —on experience with community broadband planning operating an ISP business, broadband network construction, and network management and operations. We are confident that we can not only meet, but exceed your expectations for this work, and can do so af- fordably. We look forward to the opportunity to work with you. Sincerely, 4 , et'zo L,- Lo Andrew Michael Cohill, Ph.D. President Design Nine, Inc. 2000 Kraft Drive, Suite 2180 Blacksburg, VA 24060 Voice: 540 - 951 -4400 Email: cohiU@designnine.com Web: www.designnine.com Prior Lake Broadband Planning Cost Proposal Page I of 19 Prior Lake has requested assistance with the development of a Broadband Feasibility Study. The diagram below represents a high level overview of our experience with this process. The goal of a feasibility study is to provide City leaders with enough information to make an informed decision about whether or not to move to the next steps. Our job is listen closely to the Broadband Advisory Subcommittee, collect information from other stakeholders and interested parties in Prior Lake, and to ensure that our recommendations will sup- port the broader community and economic development goals of the City. We also have an obligation to make recommendations that are affordable, that can be financed without burdening taxpayers, and that can be managed without undue stress or strain by the City and City employees. Phases of Broadband P mwv and Project Ww n+eni Decision point Is this something the community wants to do? u *13 3013 311 6A Moms Vaia86 onpoiq Prior Lake Broadband Planning Cost Proposal Page 2 of 19 3 Monks Over the next thirty years, the citizens, businesses, and institutions of Prior Lake will spend nearly half a billion dollars on telecom services - -at today's prices (see the table below). The expenditures identified in the table below are at today's prices, and do not include price increases or adjustments for inflation. One goal of our work will be to help Prior Lake understand how some of these ex- penditures can be redirected to more directly benefit local service providers and businesses. In other communities that have made broadband investments, the benefits to the business community and to local government have been immediate, in the form of sharply reduced costs for Internet access and telephone service, and it is not unusual to see cost reductions of fifty percent or more. Financial and Market Feasibility — In this portion of our work for the City, we answer fun- damental questions about the size and potential of the market for broadband services. That information is used as inputs to a comprehensive set of ten year financial pro forma studies that will answer questions on the cost of building the network, the kind of revenue that can be ex- pected, and the cost of operating the network over time. Business and Network Design Options — This effort will include detailed cost estimates of potential pilot or "starter" projects, cost estimates of a full build out, recommendations for the basic business model (what fees to charge and how to charge those fees), and technology and network design recommendations. Operations and Management Analysis — This effort will include detailed recommendations on how to manage and operate the network if the City decides to go forward with an initial investment. Our analysis will include projections for staffing costs, recommendations on out- sourcing versus using City staff for some functions, and recommendations on network opera- tions and maintenance. Prior Lake Broadband Planning Cost Proposal Page 3 of 19 Our work for the Broadband Advisory Subcommittee and for the City will include three broad sets of work activities: Financial and Market Feasibility Our work will include: • An analysis of current and future projections of bandwidth needs. This analysis is needed to help determine the level of investment and the kind and type of network architecture needed. • A market analysis, with an examination of the services demand and revenue potential for busi- ness, government/institutional, and residential markets in the community. • Economic and community development factors that may influence how infrastructure dollars are spent, and potential jobs and economic development benefits that can accrue from community -owned broadband infrastructure. • Meetings with the Broadband Advisory Committee, service providers, stakeholders, and other interested parties in the community (e.g. business owners and IT managers) to collect informa- tion on current and future uses of broadband. • We will also develop a series of ten year pro forma financial studies that will provide detailed information about: • Revenue by market segments — Revenue studies in the pro forma can include market break outs by business, government/institutional, and residential as required. • Operating costs (Opex) — We include a detailed analysis of GS&A (General, Staff, and Administrative) costs, which are somewhat independent of the number of connected prem- ises; typical GS&A costs include staffing costs, office expenses, insurance, marketing, legal and related costs. We also include a detailed estimate of direct operational expenses (these tend to grow in direct proportion to the number of connected premises). • Capital costs and expenditures (Capex) — Our model includes detailed estimates of both initial expenditures needed to bring the network online but also is fully integrated with future growth and take rate targets. Capital expenditure projections are fully integrated with the other portions of the model. • Take rate projections — Estimates of take rates (e.g. how many businesses agree to purchase services on the network) are a critical input, and need to be considered carefully when con- structing a financial model of the network. • Cost of any debt —The financial assumptions automatically calculate the interest and prin- cipal payments for multiple loans or bonds. Each bond or loan can have different interest rates, different terms, and can accommodate periods of interest only payments. • Cash flow and balance sheets —These are essential components of any financial model, and provide guidance on the how to adjust take rate targets, borrowing, and capital expendi- tures. • Income statement — This includes an EBITDA analysis (earnings before interest, taxes, depreciation, and amortization), which is typically needed if financing or borrowing is re- quired. The Income Statement is a convenient one page summary of all major inputs and outputs from other parts of the pro forma. • Our financial pro formas typically are 35 pages of spreadsheets in length, and we usually work closely with the City and the Broadband Advisory Committee to provide multiple versions, modeling various financial and business scenarios, giving the Advisory Committee detailed "what if" financial scenarios to assist with decision - making. • As part of the financial modeling, we will also provide recommendations on funding strategies, including grant opportunities and case studies of how other communities have financed similar projects. Prior Lake Broadband Planning Cost Proposal Page 4 of 19 Business and Network Design Options For the City and the community to make a prudent decision about how and whether to invest in broadband infrastructure requires an analysis of the technical and business options of such invest- ments. We will: • Provide a detailed analysis of various last mile (first mile) connectivity options and their advan- tages and dis- advantages, including a comparison of PON (Passive Optical Network) and Ac- tive Ethernet architectures. • Provide GIS -based maps of current fiber and broadband infrastructure. Map City facilities, prospective anchor tenants, major businesses, areas targeted for economic growth, and other areas and locations in the City that would benefit from improved broadband access. • Provide detailed pre- engineering cost estimates for at least two "first step" pilot projects, and at least one full build out deployment cost estimate (using a ten year pro forma analysis). • Provide a detailed network architecture design that will meet the needs of both large and small businesses, including attention to providing both fiber and equipment redundancy at several levels, which is often critical to getting local businesses to use the network. • Provide a recommendation on the advantages and disadvantages of the basic business model options available (e.g. wholesale, retail, dark fiber only, open access, etc.) to the City. We will work closely with the Broadband Advisory Committee to explore these options and to identify a "best fit" business model based on local conditions and local, state, and Federal regulatory is- sues. • Provide a detailed analysis and recommendations on options for service and connection fees. We will provide the City with a detailed discussion of various approaches for charging for ac- cess to the network, including service provider fees, use fees, pass by fees, tap fees, and connec- tion fees. This analysis will also include recommendations on how to work with service provid- ers; providers often need "coaching" to help them understand how to adjust their internal busi- ness case analysis when using a community -owned open access network to sell services. • The financial pro forma scenarios we will prepare for the City will include detailed cost esti- mates of operational expenses, including staffing costs, office and administrative overhead costs, legal and insurance costs, and costs related directly to network operations (e.g. outside plant maintenance costs, equipment repair and replacement costs, extended warranty costs, etc.). Prior Lake Broadband Planning Cost Proposal Page 5 of 19 Operations and Management Analysis Operational success requires much more than a technical specification and a cost estimate for the initial construction work. Design Nine's long experience advising our community clients on opera- tions and maintenance, coupled with almost two decades of hands -on experience operating open access networks enables us to identify with precision those areas that will require attention. We will provide the City with: • Recommendations on the kind and number of staff, including an overview of their roles and responsibilities. Key staff positions will also be included in the ten year financial pro forma, including estimates for the cost of salaries, benefits, and staff - related office expenses. • Recommendations on financial oversight, including billing processes, accounting procedures, working with service providers, asset management, and financial and regulatory reporting. • Strategies for handling network operations and maintenance, including an analysis of the ad- vantages and dis- advantages of outsourcing the work versus having it performed by paid staff. Our ten year financial pro forma studies will include cost estimates for the costs of both out - sourced network operations and outside plant maintenance and estimates of the costs of City staff doing some or all of that work. • Marketing and public awareness are essential components of a successful community broad- band effort, and we will provide recommendations for the kinds of public awareness and mar- keting strategies that will be needed to promote and publicize the network. This discussion will include how to work with service providers that would be offering services. We will also pro- vide examples of the kinds of handouts and brochures that will be needed to explain the project to citizens and businesses. • We will provide recommendations on the kind and type of business agreements that will be needed. If the City makes a decision to move forward, contracts and business agreements will be needed for service providers, construction firms, and network operations and maintenance firms. Our team includes a business and contract law legal advisor (Ken Maready, Esq.) and a telecom legal advisor (David Shaw, Esq.). Shaw has extensive experience with community broadband service provider contracts, financing, and regulatory issues. Prior Lake Broadband Planning Cost Proposal Page 6 of 19 Approach to the Work In partnership with the EDNs Broadband Advisory Subcommittee, local government staff and offi- cials, and interested parties and stakeholders, we will strive to: • Identify strategies to help make broadband affordable and accessible in Prior Lake, based on the broader community and economic development goals of the community. • Engage stakeholders and service providers in an ongoing dialogue to identify opportunities for collaboration. • Identify ways to maximize the investments of private sector service providers. • Provide a road map and options for the City to ensure that public and private investments have the most impact, especially from an economic development and jobs attraction perspective. • Evaluate the existing telecom infrastructure in the area, identify potential areas of need, and describe strategies for working with the private sector and local governments to meet those needs. • Identify opportunities for the City to attract new Knowledge Economy businesses by having the right broadband infrastructure to complement the excellent quality of life and scenic beauty of the area. • Design Nine will work with City leaders to identify Federal and state broadband funding op- portunities. We have helped our clients attract more than $20 million in grant funds in just the past three years. • We work as your partner and advisor to identify your broadband requirements now and in the future; we help you future —proof your community or residential development. • We are one of a very few broadband planning firms that takes a "whole community" approach to broadband - -we incorporate your community and economic development goals fully into our plans. • We are technology- neutral - -we identify the broader business and financial goals and objectives first, then identify appropriate technology solutions that meet those goals and reflect local re- source availability and funding constraints. We help you engineer and provision both wireless and fiber broadband systems, according to your needs and financial goals. The City of Prior Lake has asked for assistance with the development of comprehensive review of options related to a community fiber network. Design Nine is prepared to assist the City with this work. In our illustration below, we have identified eight factors that we have found must be ad- dressed to successfully build and operate a community -owned network, and our recommendations for the City will focused on analyses that take each of the eight factors into consideration. Prior Lake Broadband Planning Cost Proposal Page 7 of 19 Pmw* a network design that supports the business modal, Previte the needs engineering detail 'VIII needed to _build Me network —\ I uredte physicu network is bulk propery and within budget 400ment to operate dw Identify and select network software to ` simple* management and bong Ensure thatthe right NIII� business agreements and contracts are in place �' ProWde funding and f handal pionning including ten year pre fbmras • Network Design / System Design — The network design must support the selected business model. We will provide an analysis of various technical considerations that the fiber infrastruc- ture and network equipment will be needed to ensure that the physical network supports the business requirements. • Business Model — The business model drives nearly all of the other activities related to starting up a network. Our track record of implementing municipal networks gives us the experience and insight to assist the City with options for a robust business model. We will provide our knowledge and experience with a wide range of possible business models (e.g. wholesale, retail, open access, triple play, etc.) to the City. We will share our extensive knowledge of attracting and negotiating with providers, advise the City on how to best take advantage of public/private partnership opportunities, and can assist Prior Lake with the business negotiations, pricing, and technical requirements needed to attract providers. • Build Out and Construction Preparation — Our detailed cost estimates will take into account local costs for any needed construction and labor work. If the City decides to move forward, Design Nine can assist the City with construction planning, and if any construction work is bid out, including the identification of licenses, agreements, approvals, and authorizations required to get construction underway. Design Nine can also assist with the preparation of bid docu- ments at a later time. We are currently managing more than $22 million in community network construction three states, including Minnesota. • Network Management Software — If the City moves forward, choosing the right network management software (OSS- Operations Support Systems and BSS - Business Support Sys- tems) is a critical task, as this software can simplify the effort of managing provider services and Prior Lake Broadband Planning Cost Proposal Page 8 of 19 T Assist Wa the development arsustatnoble business and operations plans subscribers using those services. This software should also be selected to ensure that billing (like a split fee with two different kinds of billing scenarios) can be managed easily and with minimum effort - -we can provide insight and recommendations in this area. • Financial Planning — Design Nine will assist the City in the development of long term finan- cial pro formas, and we will provide multiple business model scenarios as needed to make an appropriate business model selection. We can also provide neighborhood level planning pro formas that will allow costing and take rate projection analyses for individual neighborhoods. • Legal Counsel — Our legal team, with their experience developing the business agreements and funding strategies for community networks, will be available for consultation as needed. Broadband has become essential infrastructure for communities, businesses, and local government. Design Nine specializes in municipal and multi- provider fiber and wireless networks that deliver results. We don'tjustgive our community clients a technical specification —we help our clients create networks thatperform. • Economic Development Performance — Investments in basic broadband infrastructure should help attract and retain businesses and support job creation. Our networks are designed to en- hance your economic development goals and objectives. • Financial Performance — Our financial analyses consider build out costs, take rates, opera- tional costs, staffing, maintenance, and operations, and project cash flow, revenue, and income revenue. We will identify funding strategies and assist with funding proposals. • Market Performance — Successful networks have a marketplace of services and providers. We bring our extensive knowledge of providers and provider contacts to your project. • Technology Performance — We will help you identify the right technology including systems like wireless mesh networks, community broadband fiber, and open access business models. • Project Management Performance — We get the network built right. We will manage the bid process for engineering, contractor, and equipment selection, provide oversight of design/build firms that are constructing the network, and make sure the system works properly when con- struction is complete. • Operational Performance — Once built, the network has to deliver services reliably. We will make sure you have the right expertise to run the network. Prior Lake Broadband Planning Cost Proposal Page 9 of 19 The Design Nine team brings a broad range of diversified broadband planning experience to each client we serve. Every Design Nine client has access to a team of broadband architects and engi- neering professionals who are recognized worldwide as being at the forefront of broadband plan- ning and implementation. Dr. Andrew Cohill and Mr. Sid Boswell will be the primary staff assigned to the effort, and both Cohill and Boswell will make the first visit to the City to start the work effort. Other staff listed below will assist with various research and analytical tasks as needed. Prior Lake Broadband Planning Cost Proposal Page 10 of 19 Andrew Cohill, Ph.D., Broadband Architect /Project Lead Andrew Cohill is President of Design Nine and will be the project manager and will provide overall supervision and management of the project. He will provide the strategic planning and design for the project, and he will directly supervise the work of the other Design Nine staff, will make all work assignments, and will review and approve all work items, reports, and recommendations before releasing them to the client. Experience with related projects Cohill has been helping communities develop effective broadband strategies since 1993, when he began directing the start of the Blacksburg Electronic Village, the world's first Internet - based community broadband project. His re- cent work has included helping local govern- ments develop open access networks in four states. Cohill has worked with more than 150 com- munities worldwide on telecommunications planning, design, and engineering of open ac- cess broadband systems. Cohill has provided assistance to community broadband projects throughout the United States, and is currently working on broadband feasibility studies and on the design and engineering of fiber build - outs in eight states. Cohill has written and spoken extensively on the relationship between economic develop- ment and broadband telecommunications, and has a worldwide reputation for his work in helping states and communities make wise technology investments that will directly sup- port jobs creation and economic renewal. Background Dr. Cohill is a broadband architect and consultant who is passionately committed to ensur- ing that communities get the right telecommunications infrastructure and services that sup- port their long term health and viability. Advanced education and training in architecture, computer science, and ergonomics, along with more than thirty years experience in business, academia, and the telecommunications industry enables him to develop creative and fresh solutions to community challenges and opportunities. He has worked for both large and small businesses, and in the eighties worked for AT &T on a variety of telecommunications and technology projects. He founded Design Nine in 1987 to provide technology advice and services to communities, government, and businesses. While at Virginia Tech, he served as Director of the Blacksburg Electronic Village for nearly a decade, beginning with the project's start in 1993. Blacksburg has been widely hailed as the most wired community in the world, and Cohill's work has been used as a model for the development of other community telecommunications infrastructure projects throughout the Prior Lake Broadband Planning Cost Proposal Page I I of 19 world. National and local government officials from more than 25 other countries visited Blacksburg to take seminars and workshops from Cohill, and more than 100 representatives from communities in the United States visited Blacksburg to learn from Cohill. • His latest book, Broadband forAll.• The Road to Economic Prosperity, will be published in the spring of 2012. He has published numerous papers and articles, and has spoken widely on networked information systems and community network design. • Cohill is an adjunct faculty member of the Urban Planning department at Virginia Tech and teaches a graduate class on telecommunications and broadband planning. • Cohill served four years on the Board of Directors of the Association For Community Net- working (AFCN), and completed two terms as President of the AFCN. • He is keenly interested in the linkage between community investments in telecommunications and economic development, and speaks and lectures regularly at economic development confer- ences. He has served three years on the faculty of the Virginia Institute for Economic Devel- opment. • In 2000 -2001, he designed, developed, and managed Hewlett- Packard's $15 million Digital Villages initiative. More than 220 communities submitted proposals that were reviewed and analyzed by Cohill and his project team. • During 2000 -2001, he was co -chair of the Virginia Governor's Task Force on eCommunities. The group published an extensive guide to broadband initiatives that was aimed primarily at small and rural communities. • In 2001, he was one of small handful of technical experts asked to review and comment on the National Research Council's comprehensive study and book, Broadband.- Bringing Home the Bits. • In 2005, the Canadian government invited him to be the only American to advise a national committee on rural broadband policy in Canada. • He is an author and coeditor of Community Networks: Lessons Learned from Blacksburg, Virginia and widely recognized as one of the seminal works on community technology issues. Prior Lake Broadband Planning Cost Proposal Page 12 of 19 Sid Boswell, Senior Broadband Analyst Sid Boswell will assist with the Financial and Market Feasibility study, pilot fiber route identifica- tion, business park infrastructure analysis, market analysis, and business case analysis. He has exten- sive experience with the deployment of broadband infrastructure. His prior work experience as a senior consultant and project manager for Accenture included extensive work with some of the country's largest service providers, including AT &T, Verizon, Sprint, Comcast, Nextel, and Iridium. Boswell will also assist with vendor and system evaluation and will work closely with service provid- ers to document their current service offerings and coverage areas, and will assist with public/private partnership development. Experience with related projects Boswell has extensive experience with the design, development, and management of broadband networks. Some of his recent accomplishments include: • Project manager for the stimulus - funded FastRoads project in New Hampshire, which includes 120 miles of fiber backbone and fiber to the home in two communities. • Project manager for Phase One build (integrated fiber and wireless) for The Wired Road in rural Virginia. • Technical lead for the development of a carrier class open access network for the City of Palm Coast, Florida. • Led team in planning, developing, and testing a successful multi- vendor proof -of- concept IPTV Service. • Improved broadband provisioning development program operational efficiency by introducing stage entrance criteria and cross- project issue, risk and jeopardy management for Comcast. • Led a proactive data quality audit team for Comcast which uncovered revenue recovery oppor- tunities on the order of $2M every six months. • Plotted a multi -year operational strategy for AT &T to supplant current technologies with a `cybernated' network with an IP MPLS /Optical core and a multi- service edge. • Supported international field deployments of Iridium (satellite) hardware and software in 16 countries including designing and troubleshooting LAN/WAN and platform related outages (NT & Unix servers, Cisco Routers, Firewall-1, XOT (X.25 over TCP/IP), Aventail VPN). Background Sid Boswell has twelve years of experience in the information technology and telecommunications industries. He has a Bachelor's degree in Telecom Engineering Technology from Texas A8,--M. His technical skills include hands -on experience with optical networks, Voice over IP systems, TCP/IP (Internet) networks, and LAN/WAN (network) design. Prior Lake Broadband Planning Cost Proposal Page 13 of 19 Matt Bussing, Broadband Planner Mr. Bussing is an experienced broadband Planner. Bussing has worked extensively on municipal network design and construction, is familiar with a wide variety of fiber and wireless network configurations, and has worked on a wide variety of work efforts, including network design, wireless signal propagation studies, service provisioning, radio testing and configuration, and colora- tion center, fiber and equipment manage- ment. Experience with Related Projects Bussing has extensive experience with the design, development, and management of broadband networks. Some of his recent accomplishments and related activities include: • Technical lead for a $2 million dollar network expansion of The Wired Road, project included middle mile fiber, last mile fiber, tower construction, point to point wireless and broadcast wire- less design and installation, building renovations, and design of a public community computing center. • Preparation of multiple ARRA Broadband Stimulus applications, duties included direction of workflow, collection of information with a focus on quality assurance, design and estimation of multiple middle mile and last mile networks, and thorough review of environmental effects of network construction. • Bussing has worked extensively on the New Hampshire FastRoads middle/last mile stimulus work, including pre- construction planning, detailed network design, and early network con- struction cost estimates. He is also on the project team for a fiber to the home build out for The Wired Road, and is providing the day to day project management oversight. • Network architecture design for the 138 mile fiber backbone for the Rockbridge Area Network Authority. • Network architecture and cost estimates for the 47 town Wired West fiber to the home project in western Massachusetts. • Fiber design and cost estimates for the Stuart, Virginia downtown fiber project. Bussing has assisted with planning and detailed network design efforts for more than a dozen other Design Nine projects. He has a Bachelor's degree in Computer Science from Radford University. Prior Lake Broadband Planning Cost Proposal Page 14 of 19 Mike Vellines, Broadband Planner Mike Vellines is a broadband planner with a background in civil engineering work and net work design and construction. Mike develops fiber route cost estimates, provides GIS and CAD mapping support on Design Nine plan- ning projects, and also assists with the devel- opment of market cluster maps, service area identification, and demand aggregation studies. Experience with related projects Mike has experience with the design, develop- ment, and management of broadband net- works. Some of his recent accomplishments include: • GIS and mapping development for ARRA stimulus project proposals completed in 2011. • Last mile and middle mile fiber route layout for the 120 mile fiber middle mile route for New Hampshire FastRoads. • Fiber route and layout development for a FTTH expansion project for The Wired Road. • Fiber switch cabinet planning, fiber drop mapping, and network planning for the 138 mile Rockbridge Area Network Authority middle mile backbone and last mile fiber extensions. • Needs assessment and demographic analysis for numerous early phase broadband planning studies. Background Vellines has a B.S. in Civil Engineering from Virginia Tech. Mike is a key team member on two large ARRA stimulus proposals being managed by Design Nine, and contributes mapping and GIS expertise, performs fiber route layouts and cost estimates, and assists with proposal writing and due diligence. He works closely with Design Nine fiber engineers and contractors to ensure the net- works are designed and built correctly. Prior Lake Broadband Planning Cost Proposal Page 15 of 19 David Shaw, Esq., Special Counsel on Telecom David Shaw is partner in the law firm of Kirton &McConkie, P.C. He is a skilled negotiator, advo- cate, and government law and telecom infrastructure project specialist with eleven years' diversified experience and particular emphasis in utilities and municipal law. Expert counsel and director of legal policy for a com- plex governmental agency on a broad range of issues, including regular interaction with mayors, city council members, city managers and city attorneys. Prior in -depth experience representing a municipality with emphasis in telecommunications utility issues. Demonstrated expertise in all legal aspects of telecom- munications and municipal representation while em- ploying creative approaches to solve difficult legal prob- lems to achieve a proven track record of meeting and exceeding client expectations. Shaw currently represents the Utah Telecommunications Open Infrastructure Agency, the Utopia open access network, and has assisted the City of Powell, Wyoming with key financing advice on Powell's highly successful open access network. Shaw has extensive experience using municipal and revenue bonds to develop financing packages for muni networks. Ken Maready, Esq., Business Counsel Ken Maready is a corporate and technology attorney managing the Blacksburg, Virginia office of Hutchison Law Group. Ken graduated magna cum laude in 1997 from Wake Forest University School of Law, where he also served as Editor -in -Chief of the Wake Forest Law Review. After law school, Ken worked in Charlotte in the corporate and finance department of Smith Helms Mulliss & Moore LLP. He then moved to national firm Brobeck Phleger LLP, working in Washington, D.C., representing technology companies in connection with formation, financing, M&A and general contract issues. He worked in the Research Triangle Park area of North Carolina from 2001 through 2008, working at Hutchi- son Law Group and serving as General Counsel to Integrian, Inc., a venture- backed technology company. In 2008, Ken moved to Blacks- burg, Virginia where he regularly represents technology -based compa- nies in connection with company organization, intellectual property protection, financing and general business matters. Ken provides busi- ness contract advice to The Wired Road and other community -owned telecom projects. Prior Lake Broadband Planning Cost Proposal Page 16 of 19 Why the Design Nine Team? Inclusiveness We always meet with all interested parties and stakeholders. Through our work in hundreds of communities, we have found this is the fastest and most effective way to reach consensus on plans and strategies. We wel- come a variety of viewpoints and opinions in our meetings. By being open to all points of view, we can more easily identify where resistance may exist, and this allows us to modify and adapt partnerships and to adjust and change planning to meet and address legitimate concerns. The introduction of new technologies and sys- tems in a community or region creates legitimate concerns and worries. We focus on the human factor in the deployment of new technology and systems, always looking for the right fit in local conditions. Strategic Thinking Our diverse background in planning, design, architecture, economic policy, engineering, and networks enables us to rise above the details of plans when needed and identify the big picture strategies that give elected and appointed officials the tools and plans they need to accelerate broadband availability. Our graphic design ex- pertise allows us to represent complex ideas and strategies with visual clarity; we have an intense focus on presenting technical concepts and ideas in "plain English" so that leaders and decision - makers can both un- derstand the key issues and can communicate them effectively themselves. Partnership Development We can assist as an honest, fair, and neutral broker. Telecom and broadband, by its nature, requires public/ private partnerships. For example, virtually all privately -owned networks use public right of way. Our job is to listen to all stakeholders, identify legitimate needs and concerns, and to assist our clients with the devel- opment of deals that makes fair use of local assets and right of way. Teamwork We bring an enthusiastic and professional team to every project. We are the only team that offers such a wide range of skills, which include planning, network design, legal counsel, data and statistical analysis, meeting facilitation, experienced public speakers and teachers, marketing and public relations experience, GIS and mapping, Web technologies, and graphic design. Our entire mission focus is on broadband planning, map- ping, and network implementation. Communications We use a range of communications mediums, including face to face meetings and presentations, project Web sites, specialized handouts and brochures, books, and posters and charts. Different people each have their own preferences for learning new ideas and concepts, and Design Nine produces different materials as needed. Younger workers and residents tend to prefer online news and information, and Design Nine has high performance Web servers that can deliver broadband information in a variety of formats, including on- line calendars of events, RSS news feeds, blogs, and Twitter feeds. Next Steps With the policy goals and scope of work outlined by the RFP and the need to create positive and measurable results, a constant focus on "what's next? "will be very important. Design Nine will continually maintain, modify, and update a set of Next Steps that will identify short term actionable projects, activities, and strate- gies that can be implemented quickly. These next step items will always be aligned in careful coordination with longer term strategies and comprehensive goals. In our experience, a concurrent effort of continual re- finement of longer term objectives and strategies in concert with short term actions and activities provides a valuable feedback loop of information that allows for continuous improvement -- creating for the City a na- tional reputation as a technology innovator. Prior Lake Broadband Planning Cost Proposal Page 17 of 19 Month One • Hold first meetings in Prior Lake to explain project process, outcomes, and goals. • Begin market feasibility and bandwidth project studies. • Develop first ten year financial pro formas. • Develop first draft reports on business models. • Develop first draft report on technology options and network fee structures. Month Two • Complete second round of meetings in Prior Lake. • Present ten year financial pro forma models to the Broadband Advisory Committee. • Present business model analysis and draft recommendations. • Provide GIS -based maps of current and proposed fiber and broadband infrastructure, city fa- cilities, anchor tenants, public safety and first responder locations, schools, major businesses, and other key stakeholders and broadband users. • Provide draft recommendations on management, financing, and operations strategies. Month Three • Complete third round of meetings in Prior Lake. • Present draft reports and recommendations to the Broadband Advisory Committee and City staff. • Update recommendations and reports based on Advisory Committee comments and input. • Issue final versions of all reports and deliverables. • Make final visit as needed to make presentations to City Council and other stakeholders. • Delivery of printed copies of final reports and documents. Prior Lake Broadband Planning Cost Proposal Page 18 of 19 We are prepared to offer a fixed fee contract for Professional Services of $16,300, payable in four equal installments of $4,075, with the last installment due only after all deliverables and work items as specified in a formal Scope of Work have been delivered. All work can be completed within 90 days of receiving a signed contract (estimated date of comple- tion is 4/1/12). As an alternate, we are also prepared to bill hourly for our work according to the schedule below, with a Not To Exceed of $16,300. All normal and ordinary travel expenses (estimated at $6,000 for an estimated four on -site visits) will be billed at actual cost and we will provide receipts for all expenses. Design Nine will cover travel expenses for the first visit by Dr. Andrew Cohill and Mr. Sid Boswell at no charge, which will reduce the estimated travel budget for the remaining three visits to $3,600. Design Nine is prepared to cost share travel expenses when visits can be coordinated with simulta- neous visits to Eagan, Minnesota. That is, costs like airfare, meals, lodging, and car rental will be divided appropriately between the two projects based on the time spent in each city. We estimate this could further reduce the cost of travel expenses by as much as 81,800. Cost for Professional Services plus estimated travel without travel expense cost sharing: $19,900. Cost for Professional Services plus estimated travel with travel expense cost sharing: $18,100. Financial Design Nine will present itemized invoices, detailing work completed. Invoices are payable within 45 days. Interest is, therefore, charged in the event of non - payment within 60 days. An interest rate of 1% per month will be charged to the unpaid balance. Work requested outside of the Scope of Work will be billed at the rates below, per written change orders. Rate Schedule for Staff Broadband Architect Hourly Rate $120.00 Senior Broadband Planner $100.00 Legal counsel (billed as straight pass thru cost with no markup) $240.00 Financial engineering $100.00 GIS /CAD design and mapping work $80.00 Technical support and Web development $65.00 Prior Lake Broadband Planning Cost Proposal Page 19 of 19