Loading...
HomeMy WebLinkAbout01 22 2013 EDA 7B Fiber Optic Network O .� PRIp N � u 4646 Dakota. Street SE Prior Lake. MN 55372 '�nvsso'��' ECONOMIC DEVELOPMENT AUTHORITY AGENDA REPORT MEETING DATE: January 22, 2073 AGENDA #: 7B PREPARED BY: Dan Rogness, Community & Economic Development Director AGENDA ITEM: FIBER OPTIC NETWORK DISCUSSION — DESIGN NINE, INC. REPORT DISCUSSION: Introduction Design Nine, Inc. was hired by the EDA to complete an independent evaluation of the Broadband Advisory Committee's (BAC) fiber network feability report. Andrew Cohill of Design Nine made a presentation to the EDA on December 17, 2012, and a written report was submitted by the end of December. His tON A Fiber Optic Network Feasibility report dated June 2012 was submitted to the EDA for its review and deliberation by the BAC. Subsequently, the EDA began to have meetings with the three local broadband service providers. The City Council requested that a meeting be organized as a key next step in the fiber deployment evaluation process. The Broadband Advisory Committee's recom- mendation is for the city to get into the business of providing Triple Play services in order to pay for the full fiber build-out cost. In doing so, the city would com- pete against the incumbent service providers, including Integra, CenturyLink and Mediacom. Another subsequent action by the EDA was to have an independent analysis done of the report due to the large public investment necessary�to im- plement the BAC's recommendation. , Conclusion � The Design Nine report includes four recommendations: 1. Clarify the city's long-term community and economic development goals in order to align the proposed fiber network investment with those goals. 2. Further evaluate the technical design to ensure that the nefinrork architec- ture also supports the city's economic goals. 3. Reconsider investment in television and telephone services due to recent technological changes, along with the added benefit of avoiding the cost of local technical staff. 4. Evaluate the risk of receiving one or more lawsuits from incumbent pro- viders by choosing the Hybrid Model; consider the impact of having a 65% local referendum in order to proceed. ISSUES: Design Nine was hired by the EDA to complete an independent evaluation of the BAC's fiber network feability report. Eric Lampland of Lookout Point Communi- cations has provided his preliminary feedback on Andrew Cohill's report (see attached comments from Lampland). The EDA now has hired finro consultants with differing approaches on how to best pursue fiber-to-the-premise throughout Prior Lake. In addition, the City Council approved a resolution on December 10 authorizing a fiber optic cooperative agreement between the city and Scott County. This ac- tion begins the process to construct a fiber optic system serving city buildings and four business parks. A request for proposals (RFP) is currently being writ- ten in order to obtain information from potential broadband service providers, including costs paid by those providers as partners working with the city and county. FINANCIAL Various multi-million dollar cost options have been provided to the EDA from IMPACT: both reports depending on the model selected for full or partial build-out of the fiber network. The estimated cost assocated with the cooperative agreement is approximately $320,000 to be shared befinreen the city, county and broadband service provider. ALTERNATIVES: 1. Request that the BAC meet again in order to review the Design Nine re- port and retum with any further changes to its recommendation. 2. Request that staff continue to schedule one-on-one meetings with Centu- ryLink and Mediacom. 3. Delay further action until the city has received and evaluated responses to the RFP related to the city-county cooperative agreement. RECOMMENDED Staff recommends Alternative #3 MOTION: ATTACHMENTS: 1. Design Nine Report 2. Response from Eric Lampland 2 ., ... 1'�ii ii ��iui�l� Ao � � +�...�-:. , � t _: �--� .�. ��--�— � � xS�;qNa^X .:.. _..., � . '� . . ':`� .',�.. . �S.f� � ��p'. ;f , , ,;� � ���> , .=:.%= � ��,. �" } ��x�` b „ '� � °"$ „ ,,� ,, �. > � , ��� � ��� „ , ,. � �, re -� � �f � �� ,; ru� a �� � i 4 � � /ku� � �M � :r fx , 3 • �a*r.. a ;' � � � ...: � �,..�, j�� � ��. �'' ' � � � �,� , ,, ���, ... � � . .. � � ��,: ' �� : ;,. Prior Lake Broadband Review and Next Steps DECEMBER,2OI2 . - DESIGN NINE � we build networks that perform , Contents Overview of the Work I Technical Design 3 Overview of a Modern Broadband Network .............................................................................................4 CoreNetwork .......................•--..................................................................................................................................5 Disuibution ................................................................................................................................................5 AccessNetwork ................................................................................................................................••-•-••••-•..............5 Colocation Facilities ...................................................................................................................................................5 Bacl�aul ........................................................................................................................................................................6 N and Phone Analysis 7 Cost Analysis 8 Legal and Organizational Analysis 9 OwnershipOptions ..........................................................................................................................................9 Municipal Ownership .................................................................................................................................................9 Non-profit .................................................................................................................................................................. I 0 Ad Hoc and Informal Partnerships :......................................................................................................................1 I For profit businesses ................................................................................................................................................1 I Business Model Analysis I 2 PaimCoast, Florida .........................................................................................................................................12 Danville,Virginia ............................................................................................................................................... I 4 FarmersTelecom .................................................................................................................................15 Lafayette, Louisiana .........................................................................................................................................16 Next Steps 17 Qverview of the Work Design Nine was asked by the City of Prior Lake to review the F'iber Optic Network Feasibility study completed by the Broadband Advisory Committee. We agree with the committee's conclusion that a fiber network in Prior Lake is financially feasible, and our own independent financial analysis suggests that it could, over time, not only generate enough revenue to pay for the initial cost of construcrion but could also provide a modest stream of new revenue for the City over the long term. We offer the following summary of our recommendations: � Before making a final decision, the City should idenrify the long term community economic and development goals that would be supported by an investment in a fiber network. For example, if a primary economic objective is to diversify the kind and type of businesses in the downtown area, a more modest effort may meet that goal at substantially less cost. On the other hand, if attracting more work from home and business from home residents to the City is a strategic objecrive, then a full build out may well be justified. 1 We would encourage further evaluation of the technical design to ensure that the = network architecture also supports the City's economic objectives. If new job and business development is a key goal for the City, a carrier class Active Ethernet net- work capable of delivering very high performance business dass services may be a bet- ter option. � The market for TV and telephone services is undergoing major changes. The TV market is moving away from traditional packages of TV service and towards a wide variety of video streamed over the Internet rather than delivered via RF (on coaxial cable or PON fiber). 1he City has the option of not investing in a TV head and in- stead offering an IP TV offering purchased wholesale from an exisring IP TV pro- vider. The same approach is possible with telephone service. Rather than purchasing a telephone switch, the City could retail VoIP (Voice over IP) telephone services via a wholesale contract with an exisring VoIP provider (there are dozens). By purchasing TV and telephone wholesale, the City also avoids the very significant cost of technical staff that would be needed to maintain a TV head end and a telephone switch. Page I of 17 � The City may wish evaluate the risk of a lawsuit resulting from choosing the Hybrid Retail model, along with the significant requirement of ineeting the 65°ib affirmative referendum vote that would be required with the Hybrid Retail model. Other options that suggest additional evaluation would be a simple dark fiber leasing model or an open access model. In both of those business models, the City would NOT be offer- ing any retail services, and a referendum would not be required, and the risk of a law- suit is sharply reduced. Page 2 of 17 Technical Design 1he proposed PON architecture delivers TV as a separate RF channel on the fiber; this approach is functionally the same as the exisring cable system. Current DOCSIS-based cable TV is nearing a dead end as comperirion from IP streaming services like Hulu, Netflix, and many other emerging Internet-only video services are offering a wider array of oprions at lower cost. For the first time in decades, cable TV companies are seeing negative growth, with younger people uninterested in legacyTV cable offerings, and many other households forgoing the high cost of cable TV service because of the poor economy. It is our opinion that the City should carefully evaluate the proposed investment in a TV head end. If the City moves ahead with the proposed hybrid retail model, an alternative for TV service would be to sign a wholesale reselling agreement with an existing IP TV provider, rather than purchasing a head end. Not only would the City then forgo the capital expense of several million dollars, but would also forgo the requisite City staff required to administer the head end over time. In an open access architecture, many of the expensive components of the retail model are not required (e.g. PSTN gateway, TV head-end, subscriber services (e-mail, hosting, etc.)) and are left to the private sector. We would note that the PON architecture supports basic business services (mostly Internet) but can not offer carrier class high end business services like Transparent LAN (e.g. private VPN) services. This may be important if the City wishes to attract more high tech businesses into the community. As an alternative, it may be useful to evaluate an active Ethernet architecture, which can provide true Gigabit connectivity to both homes and businesses. If an open access business model was adopted (i.e. no TV head end or phone switch required), a carrier grade acrive Ethernet network would likely be less expensive while offering much more � flexibility in providing business class services anywhere in the City. If the City wishes to attract more work from and business from home residents, being able to deliver business class services to any locarion could be important. Page 3 of 17 OVERVIEW OF A MODERN BROADBAND NETWORK CPE (Customer wireless � � Premise Equipment) -�- � _ _ —C �__-- Access fiber Tower-mount radio/amennas Fiber or wireless core network Neighborhood with backbone routers cabinet or hut Interne � # �� Colo Facility Core network Distribution Backhau routes fiber � �.. Colo has multiple service Colo comains providers offering multiple network services, with single point management of access to all customers. servers. ,� Access fiber Neighborhood cabinet or hut Backhaul routes � .., Connections to other networks via leased line or middle mile fiber �pE Homes and businesses Page 4 of 17 CORE NETWORK The core network is often referred to as the "backbone" network. It is a high capacity route or set of routes throughout a community or region that provides transport between towns, neighborhoods, business districts, and other major facilities. Ideally, the core network is designed as a redundant fiber ring, which provides both capacity and gives the network the ability to continue operating even if the fiber is cut or damaged in one location. A fully redundant ring can be expensive to construct, and so the "ring" feature may be a long term design goal. DISTRIBUTION NETVNORK Distribution networks are connected to the core network, and provide primary network paths through a town, neighborhood or business district. Distribution networks are generally part of what is called "middle mile." Fiber-based distribution networks generally are built along most streets and roads, and can be aerial fiber (mounted on utility poles) or underground fiber (installed in underground duct or fiber cable that is buried directly without duct). 1he distribution network connects the core network (the network backbone) with the individual connections within a neighborhood or business district that connect to home and businesses. lhis portion of the network can be fiber-based or wireless, but fiber will be required over the long term to support video services and other kinds of high bandwidth applications like telemedicine, IP TV, business videoconferencing, and other emerging services. ACCESS NETWORK 'Ihe access network is what is commonly called "the last mile," although "the first mile" might be more appropriate, since customers should be a primary co�tsideration when designing a network. The access network is a direct fiber link between a fiber switch located within a neighborhood or business district, or it may also be a direct point to point wireless link from a wireless access point on a tower or building and the home or business. Network subscribers have to have Customer Premises Equipment (CPE) to get a network connecrion, and this is simply a small box that looks like a hub or switch. In a fiber network, the fiber cable is connected to one port, and one or more copper Ethernet RJ45 ports allow users to connect computers, phones, and TV set top boxes to it. In a wireless portion of the network, a small box with a radio and possibly an external antenna is mounted on a side of the home or business with clear line of sight to a nearby tower or building where the access radio is mounted. COLOCATION FACILITIES A colocation facility is a controlled environment (i.e. heated and air-condirioned) room with Internet access through wired and/or wireless systems. 1he colocation facility will be a place Page 5 of 17 where fiber, wireless, and copper-based network facilities meet. It will be equipped to house high-end network equipment, servers, and other electronic gear. A variety of middle layer network components and services can be located within the colo including, for example, directory services, replicated content servers, rouring services, and other elements needed to deliver new mulrimedia services to the home and small office from multiple, competing providers. Characteristics of a colocation facility include: � A reliable source of AC electric power is required, with backup UPS (Uninterruptible Power Supply) service available by an onsite generator. � Controlled access to the facility (e.g. by electronic keycard) 24 hours/day, seven days a week. � Racks for locating network equipment and servers, and optionally locked cages for equipment racks. Functions of colocation facilities include: � Hub for new broadband infrastructure development for the community. � Location for a regional and community network exchange point for local service pro- viders. Also called a peering point or inter-exchange point, this kind of facility can reduce costs and increase performance in a win-win-win scenario (because it helps keep local traffic local and reduces service provider costs, thereby reducing the price of services). In Prior Lake, a modest colo facility would provide the meet point for pri- vate fiber and any City-owned duct/fiber. � Insertion point for multimedia services from multiple competing providers to reach subscribers over single broadband medium (fiber, wireless, other). � Community, campus, or building point of presence for new middle layer components required to implement next generation Internet (directory services, caching, routin�. � Focal point for technical resources and management of community infrastructure. � Aggregation point for low cost access to gigabit scale network services. BACKHAUL Every community network requires one or more paths (routes) out of the community to carry voice, video, and data traffic (in both directions). Backhaul network connections can be purchased from a local incumbent telephone company. In some communities, there may be other backhaul providers available. Backhaul connections are usually terminated at the community-owned colocation facility. Any additional infrastructure constructed in Prior Lake would need to meet service provider networks at a mutually convenient colocation facility or meet point. Page 6 of 17 TV and PhoneAnalysis 1he cost of purchasing a telephone (PSTN) switch ($491,217) and the accompanying cost and risk of administering a referendum requiring 65% voter support to build the network of a can be mirigated entirely by utilizing exisring wholesale VoIP services (in a retail, hybrid, or open environment). If a ONT/CPE is chosen that has a SIP client and ATA built in, the VoIP traf�iic can be priorirized on the local network and the SIP traffic can be sent directly to a phone wholesaler. In this scenario, the City would still be the retail provider of services, but the VoIP wholesaler would actually be handling the voice call switching and most of the technical support needed to support dial tone. On the TV side, channelized cable TV content is dying. The proposed TV head end investment is old technology ($2,729,676 +$827,518 in Set Top Boxes). Not only is this expensive, but City would have to negotiate content agreements; a costly and difi'icult process that would require very specialized and expensive legal assistance.'Ihis cost could be avoided by purchasing IP TV packages wholesale from an existing IP TV provider. We would recommend a careful analysis of the take rate assumprions for TV prior to making a decision. While a TV package will make an important revenue contriburion to the enterprise, take rate is content oriented, and Dish Network and DirectTV will be hard to compete with (and has very low content costs due to distribution size). OTT (Over'Ihe Top) services (i.e. Internet based streaming video services like NetAix, Hulu, NFL.com, HBO-Go, etc.) will provide a majority of content in the future, and the Parks survey does not take into account that most of the OTT services are built into newer devices. Additionally, the price of OTT boxes has come down significantly (Roku is now $49 and OTT providers are offering them for free with a one year subscription). Page 7 of I 7 Cost Analysis The cost of purchasing a telephone switch and a TV head end could be avoided completely by a doser evaluation of the open access model, in which private sector service providers would offer those services. As noted elsewhere in this report, if the City adopted the open access model, it would likely avoid the cost of a lawsuit that could result from the City selling retail services directly to residents and businesses. A more typical cost for OSSBSS (Operations Support SystemsBilling Support Systems) software and hardware would be $100,000 to $200,000 as a one time license fee. Some OSS software also includes small per subscriber fees (e.g. $1/month/subscriber) which covers all software, upgrades, and ongoing technical support. The City may wish to consider contracting out all outside plant (OSP) maintenance and repairs, including emergency splicing. This approach eliminates the capital costs of bucket trucks, tools, and equipment, and is generally less expensive for a network the size of Prior Lake than the cost of dedicated full time City outside plant staff. As many as fottr full time staff might be needed by the City to cover vacations and sick leave; a crew of two is generally required to meet safety regulation when working on aerial or underground cable. In the open access model, the City would be able to operate and maintain the network with as few as four or five staff, assuming that outside plant maintenance is out-sourced to a qualified private sector firm. We would note that whether the City adopts the hybrid retail model or an open access model, it is likely that the incumbent providers might engage in a price war. In other communities where a new competitive network has been offered, the incumbents have made very sharp reductions in pricing to retain customers. Price-cutting by the incumbents could depress the take rate and revenue in the short term (i.e. the first two to three years of operation). We would suggest a careful review of the build out schedule (what percentage of homes passed over what period of time) and the expected take rate of services over time to ensure that these projections are reasonable and that the projections do take into account aggressive marketing from incumbents. If the City adopts the hybrid retail model, we would recommend that a minimum of $500,000 be budgeted for legal and marketing expenses. If the incumbents sue the City, they will also likely engage in a massive advertising campaign that would require a similar response from the City to ensure that citizens and businesses had appropriate information on both sides of the issue. Page 8 of 17 Legal and Organizationa) Analysis We would recommend that the City determine the ownership and governance of the proposed enterprise prior to moving forwaxd with any implementation plans. We note that projects which have not developed a solid business plan that answers these two important questions prior detailed planning activities usually develop financial difficulties. The City of Prior Lake should consider the following characteristics when making a decision about the form of governance and ownership. � Transparency - Does the governance structure provide adequate transparency about decision making? Do stakeholders and interested parties have adequate ways to obtain documents, financial reports, and related governance materials? � Timeliness - How quickly can the governance enrity be legally formed? Time is of the essence, as WiredWest must be able to leverage the funded MBI middle mile backbone. � Community Oversight - Does the entity have adequate community control and over- sight? Do the communities have adequate representation in the governance structure to ensure that assets are managed properly? � Legislative Authority to Build/Operate - Does the governance entity have dear legis- lative approval to build and operate a telecommunications network? � Financing Options - Are there adequate financing options available to provide the appropriate level of funding over time to meet the long term vision of WiredWest? � Tax Liability - Does the governance entity incur tax obligations? > OWNER O PTI O N S Prior Lake has at least four oprions available to it. MUNICIPAL OWNERSHIP Many communities in the United States have municipal enriries that offer services to the general public. The most common services are water and sewer, and are administered operationally either as a department of the government or as an authority. Typical water and sewer authorities are quasi-public entities that operate independently of direct local government oversight but operate as a nonprofit. However, most towns in the WiredWest area do not offer water or sewer services. .Also common are municipal electric service operations. Several hundred communities in the U.S. have municipal electric power, and some have moved into the telecommunications arena, Page 9 of 17 largely because it is convenient to do so--the organization already has utility pole access, eacperienced staff, and equipment like bucket trucks. Government operated networks using the muni retail model attract legislation forbidding localities from offering telecommunications services. Several states, including Pennsylvania, Nebraska, South Carolina, and Virginia, have enacted legislation making municipal telecom services illegal within the state shortly after a municipality or public service company started a data service. 1he Virginia bill was overturned by the Federal Circuit court in a remarkably brief decision that seems crystal clear: I find that the broad and unambiguous language of � 253(aJ [the Federal Telecom Deregulation Act� makes it clear that Congress did intend for cities to be "entities" within the meaning ofthe TelecommunicationsAct. Therefore, � 15.2-1500(BJ [the Yirginia legislation in guestion� is in direct conflict with federal law, and is void under the Supremacy Clause. Section 253(a) is a concise mandate that no state may prohibit or hatie the e�'ect of prohibiting the ability of any entity to provide any interstate or intrastate telecommunications service."47 U.S. C.A. § 253(a) ......Simply put, it strains logic to interpi-et the term "any entity' in � 253(a) to mean "any entity except for municipalities and other political subdivisions ofstates." While it is true that such an interpretation is possible, the Supreme Court bas cautioned that "[aJ statute can be unambiguous without addressing every interliretive theory offered by tz party. �........ ?he federal statute, therefore, not only mandates that no state statute "may prohibit" telecommunications competition, but also that no state statute `inay have the e�ect ofprohibiting"telecommunications competition. 47 U.S.C.A. � 253(a). While most communities that have been challehged by lawsuits have eventually won in court, the legal battles usually add years and significant expense to such efforts. Lafayette, Louisiana, as one example, spent substantial sums of money and nearly two years in court to defend the right to build a community-owned network. The city eventually prevailed and now has an outstanding network offering some of the lowest telecom service prices in the U.S., but the effort was delayed for years by the lawsuit from the incumbents. Monticello, Minnesota also eventually prevailed in its efforts, but only by enduring a lengthy court battle. NON-PROFIT 'Ihere are various kinds of nonprofit businesses. The most common is the 501(c)(3), which is limited to strictly charitable ef�orts. A 501(c)(3), according to IRS rules, must have a well- defined charitable purpose targeted toward a specific need and/or a specific target population. In other words, a 501(c)(3) cannot, according to IRS rules, operate as a nonprofit business that provides services to the general public. Many of the first community networking projects in the early and mid-nineties were formed as 501(c)(3) organizarions; it was common for these entities to offer dial-up Internet access to the Page I 0 of 17 general public at a time when Internet service providers were still relatively uncommon. But by 2000, most of these organizations had closed their doors and/or disconrinued their Internet access services because of IRS challenges. Today (2012), we see new 501(c)(3) organizations repeating this approach by offering broadband services either directly or indirectly (using an open access business model). It is our view that eventually all these organizarions will receive letters from the IRS challenging their status. However, one or more nonprofit businesses may be useful as part of the overall effort. A 501c3 may be desirable as a mechanism to accept charitable donations, and more importantly, to apply for certain kinds of grants. Once the funds have been received by the 501c3, and the donors have received the tax credit, the nonprofit can, in turn, give or loan those funds to another organization (e.g. an authority or coop chartered specifically to provide services). AD HOCAND INFORMAL PARTNERSHIPS Some local governments have deployed duct and/or dark fiber and have made ad hoc arrangements to provide capacity to other institutions like K12 school systems or adjacent local governments. In some cases, they have a policy for leasing duct or fiber to the private sectar (the city of Sacramento, California has leased duct for over a decade) but have not developed a comprehensive plan for management and expansion. Prior Lake is currently evaluating a partnership with Scott County to extend the Scott County fiber to more areas of Prior Lake. FOR PROFIT BUSINESSES There are various types of for profit business organizations: individually owned businesses, partnerships, general business corporations, and limited liability companies. The City could issue an RFI asking for private sector proposals to extend fiber services to part or all of the City over a reasonable period of time. It may be useful to do this as a first next step--that is, to ensure that the private sector has had a chance to improve broadband offerings in the City before the City makes a decision to move forward. If the City does issue an RFI and the responses axe inadequate (or none are received), the City then has demonstrated there is jusrificarion for City involvement. Page I I of 17 Business Model Analysis Other communiries across the United States are already actively pursuing new and innovative public/private partnerships to improve the access and affordability of telecom services delivered via broadband. Communities that have affordable broadband are enjoying a faster rate of economic growth than communities that lack broadband, based on a CMLJ/MIT study (Measuring the Economic Impact of Broadband Deployment, Sirbu and Gillett, 2006). A Brookings Institution study (Crandall, Lehr, and Litan) in 2009 found that for every 1°�6 increase in the availability of broadband in a community, the level of employment increases correspondingly by .39�0 annually. 'Ihe study also found that as the level of Internet users increased in a community, there was a corresponding increase in economic growth, with a 109�6 increase in Internet use yielding a 1.3% increase in the economy. A new digital divide is emerging, with fiber as a differentiator. Communities with affordable broadband infrastructure and the ability (i.e. fiber) to expand capacity as demand grows over the next seven to ten years should enjoy a measurable economic development advantage over communities that lack such infrastructure. A variety of business models are being explored, but most community-owned networks can be classified as either Municipal Retail (similar to the Hybrid Retail model proposed for Prior Lake) or Open Access. Open access networks have several advantages that the City may wish to consider, including: � Lower cost of build out because no TV head end or telephone switch is required. � Lower cost of operation because all retail services are sold by private sector companies. � Less risk of expensive lawsuits because the City would NOT be providing any retail services. Some additional informarion on some of these projects is provided below. PALM COAST, FLORIDA In 2008, the City of Palm Coast began exploring the potential of making existing City-owned fiber assets available for business and commercial use. Exisring Palm Coast businesses were expressing concern to City leaders about the high cost of Internet access and the limited bandwidth available in the City. After a six month study of various business and financial options, the City decided to focus on developing the network as a"carrier class" commercial network capable of supporting virtually any level of business service that might be needed. � As of early 2012, all four redundant fiber loops had been completed. The City invested in a dedicated colocation facility with both shared rack space and private cages for service providers, Page I 2 of I 7 and purchased "carrier class" network switches and routers to light up the fiber. Palm Coast FiberNET was made available for service in May, 2010 (http://www ci.palm-coast:fl.us/ PalmCoastF'iberNET�, and had three service providers committed on day one. Palm Coast F`iberNET provides service to City buildings and locarions, and successfiilly won a bid to provide services to Flagler County Public Schools. The local hospital also uses the network to connect hospital medical records and data services with several local health clinics and medical offices. FiberNET was operating in the black operationally in year one, and continues to do so as it enters its fourth year of operarion. Palm Coast FiberNET is owned by the City of Palm Coast. City enterprise funds were used to pay for the initial $2.5 million in fiber construction, equipment, and the colocation facility. FiberNET is operated as an open access network. Providers pay a monthly fee per customer, based on connection size. The City IT Department manages network operations, and private sector contractors are used for outside plant maintenance and construction work. FiberNet is an active Ethernet network that provides symmetric 100 megabit, Gigabit, and lOGigabit connections as standard. DWDM cir- cuits can be provided upon request. Page I 3 of 17 DANVILLE, VIRGINIA The City of Danville, Virginia is operating an open access, open services network (www.ndanville.net) focused on creating the right kind of economic development incentives and accompanying infrastructure that will help retain existing businesses and help attract new ones. Danville has a City-owned electric utility, and the growing fiber network is being managed as part of the electric urility operations. Using a multi-phase approach, the City first hooked up government offices and local schools in 2004, and in 2006 began planning for extending the high performance all fiber network to local businesses and residents throughout the electric service area, which includes a large part of very rural Pittsylvania county. The first businesses began to get hooked up in late 2007, and Danville had fiber passing parcel in its business parks before the end of 2008. 1he City-County business incubator was one of the first locations to receive the fiber services. The network has been operating in the black and has generated enough revenue to make an annual contriburion to the City's General Fund, and a portion of the nDanville revenue is being used to expand the network. 1he City has completed the construction of Fiber To The Home (FTTH) to some of its residential neighborhoods (a total of about 1600 premises), and has been able to sign up an IP TV provider as well as Internet and telephone providers for the residential customers. The City is not selling any services to businesses or residents; all services are offered by private sector service providers that use the network and pay the City for the use of the network via a revenue sharing agreement. The availability of business class fiber has been a significant boost to the downtown area of Danville, and the City has counted at least 150 new jobs within walking distance of the Main Street commercial area of town. nDanville is part of the City of Danville Utiliries Department. The City of Danville Utilities Department has used a combination of loans and revenue to fund the construcrion of the network. Revenue from key institutions like the City and County schools have been a significant factor in the development of the network nDanville is an open access, open services network. All services provided to resi- dents and businesses aze offered by private sector providers. Network operarions are managed by the City. Some outside plant maintenance is ' performed by City utility crews, and some work is outsourced to qualified private sector firms (e.g. splicing, some construction work). nDanville is an acrive Ethernet fiber network, providing a 100 megabit symmetric connection as the standard service. Gigabit and lOGigabit point to point connec- tions are also available. nDanville has two colocation facilities available to busi- nesses and providers, and the nDanville MSAP (Multimedia Services Access Point) provides access to more than twenty-five local, regional, and national service provid- ers. Page I 4 of 17 FARMERS TELECOM COOP Farmers Telecom Coop serves 17,000 subscribers in rural Georgia (www farmerstel.com), and the customer-owned enterprise has begun executing on its plan to take fiber to every premise. 11ie telephone company chose an active Ethernet network design because an active network can scale up more easily to meet future demand than an equivalent PON system, and because network troubleshooring and diagnostics was deemed easier to perform, Customers receive a 100 megabit fiber connection capable of delivering a wide variety of services, including the traditional triple play of voice, video, and Internet, but also video and movies on demand, HD business videoconferencing, telemedicine and telehealth services, and a wide variety of other business and residential services and applications. The coop has an eight member board of trustees, and coop members elect board members. The coop is financing the network upgrade with internal funds and loans. The coop is offering traditional triple play service bundles. 'Ihere is no competirive service offerings. 'lhe coop handles both network operations and outside plant maintenance with existing staff. The network offers a standard 100 megabit symmetric fiber connecrion that supports voice,TV, and Internet access, and Gigabit connections are also available. Page I 5 of 17 r LAFAYETTE, LOUISIANA Lafayette, Louisiana is perhaps one of the best known community broadband projects in the United States. 1he City announced its intentions to go into the broadband business in 2004, and was promptly sued by the incumbent cable provider. 'llze court case ground on slowly, and it was not until the City had spent nearly $4 million on legal fees that the Louisiana Supreme Court decided that the City had the right to compete directly with private sector telecom companies. Since then, thousands of customers have been connected and Lafayette is now famous for having some of the lowest rates for Internet access in the United States, with a 50 megabit symmetric package of Internet access for only $58/month. 1he network has now been operational since early 2009. Cox Communications, famous in Louisiana for regular rate increases, froze its rates in Lafayette for several years following the city's initial announcement that it would offer telecommunications services. Meanwhile Cox continued to raise its rates in other parts of the state.'llie result was that even before Lafayette's system began operating it had saved its residents and businesses nearly $4 million. The network is owned and operated by the City of Lafayette and is part of the Lafayette Utilities Department. The City raised $110 million in funding to build the network.'Ihe long term plan is to pass all 57,000 homes in the city. Services are sold direcdy by the City in a traditional triple play retail model. The City Urilities Department operates the network and handles outside plant maintenance. LUSF'iber is an acrive Ethernet system with a standard 100 megabit symmetric fiber connection. Gigabit connections are also available. Page I 6 of 17 s Next Steps As the City moves forward, several options could be pursued. � 11ie City could issue an RFI immediately that asks for private sector proposals for a public/private partnership. It would be very useful to ask the private sector, including the existing incumbent providers in Prior Lake, to step up and make an offer for a publidprivate partnership prior to committing the City to a major expenditure. If no practical proposals are received, then the City has demonstrated that there really is a need for government to become involved. This could also provide some protecrion against lawsuits later. ' � Evaluate the benefits of an active Ethernet network or a hybrid PON/Active network to take advantage of the lower equipment costs for residential customers, but include active Ethernet equipment so that any site on the network could subscribe to a dedi- cated 1Gbps up to lOGbps services. � The City could take an incremental approach to improving access to affordable, high performance fiber in the community by building basic infrastructure only on an in- cremental basis. By building just duct and dark fiber and leasing fiber pairs, the City reserves the oprion to offer a lit open access or hybrid retail network later, but in the short term could lower the cost to private sector providers of adding new services in the City. Duct and dark fiber leasing is simple and easy to manage, and helps lower provider costs. �'Ihe City should consider "dig once" and joint trenching ordinances to leverage road, sidewalk, and water/sewer improvements. With streets and/or ditches already open, every project should be evaluated to see if telecom duct should be added at a small ` incremental cost. The City could also require all new development to have telecom infrastructure (i.e. duct from the building to City right of way) just like water, sewer, sidewalks, and other improvements are built by the developer but are handed over to the City. P�ge 17 of 17 Email comments from Eric Lampland, Lookout Point Communications,l/10/13 (comments on the Design Nine report for Prior Lake, Dec. 2012) Andrew recommends Active Ethernet (AE) architecture -- we used a hybrid architecture of AE and GPON for a number of reasons, but all of Andrew's concerns were covered. We focused AE architecture on the business community and GPON on the residential community and we added a wireless overlay. Most importantly, the hybrid structure we recommended was driven by two key factors: cost/performance & manageability is better, and alignment with future architectures is more secure (higher PON/AE speeds; Wave Division PON; alignment with the standards bodies; things yet to come, etc.). Less informed arguments often get into "my architecture is better than yours." It is not an either-or argument, it's both or all. Its use is best suited in all cases. That is what is in your design. Andrew recommends against an RF head-end -- we're not using one, not recommending one. The recommended video architecture anticipates everything that Andrew points to and implements an actual path to getting there. Video is a difficult market and I would be careful of generalizations without a deeper understanding. On the BAC, Wayne loved our approach and that is his business. Andrew promotes Open Access and even provides ideas about private VoIP providers versus Prior Lake implementing a soft-switch. We modeled several open access approaches and were not able to find a sustainable model. The issue here is monetization. Who gets the money and how do you pay off the bonds. A current client of mine uses a very good private VoIP provider. The provider gets $16.95 per month for each customer my client charges $29.95. Prior Lake's FTTH is likely to have approximately 4,000 phone customers. That is $813,600 ep r year (4,OOOx16.95x12) that you would give to someone else versus a soft-switch (roughly $400,000; a one-time cost) and for the other $413,660 I am sure you can find an adequate staffer, even two! There is a whole complex of issues in Open Access. I really do understand this as I have wanted to see this model work for years. We're not there yet, but as you know, we looked long and hard at that approach during the BAC study.