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HomeMy WebLinkAboutBroadband Workshop Agenda Item # Staff Report To: Board of Directors From: Peter Holzmeister Date: March Subject: Broadband workshop Why this matter is before the Board: This is a workshop to discuss the status of the broadband business planning process. This is an item we have not talked about in any detail during the past several months. It is a matter that the Board has been eager to deal with, and a matter that needs the Board's attention. History: I have used the term" broadband business planning process". Actually, just prior to the filing of the Cebridge suit against LAFCo we had begun to use the term "broadband business plan implementation". The Board had reached the point where we had begun implement deployment of the broadband system. There were still off-ramps if matters proved unworkable. For example, we could terminate the project if the financing was unattractive. But the decision was to proceed with care. Things have changed a bit since then. The Cebridge suit caused a delay. The delay makes one consider whether prices and interest rates have changed. The Board of Directors has members who were not on the Board when the earlier extensive discussions took place. All of this suggests to me that we should not be in an implementation phase without conducting some level of review. This workshop, I hope, initiates the review. New information: To help start the review I have put thoughts together based on my continued review of the trends in communication technology. Please take a look at the attached document entitled Broadband Discussion. Alan Harry and I have prepared an outline of the topics we think would be productive for the Board to discuss. That outline is attached. We plan to be prepared to move through the outline on Wednesday evening. The Directors may, of course, have other topics you wish to add to this list. We want to make sure we deal with topics that are of interest to you. Our list is a place to begin. You will notice that we have included on our list a telephone conference call with Kim Kersey, Senior Vice President - Telecommunications at Jackson (Tennessee) Energy Authority. Jackson Energy Authority is a pubic agency providing electric, water, wastewater, natural gas, propane, and telecommunication services in the city of Jackson Tennessee. They have deployed a Fiber-to—the-Premises system. He has a perspective on the issue that is worth hearing. s` We will have other experts attend the meeting on Wednesday evening, including a representative of Wave -7 (providers of electronics) and representatives of Aggregate Networks (our finance consultants). Recommendation: This is a workshop. No formal decision is suggested. However, I would be helpful if the Board could reach a consensus on how it wishes to proceed to review the business plan process. What review process would get you to a decision on broadband. F s r r : ( s Broadband Discussion Outline Board Meeting of March 29, 2006 History The origin of the broadband idea — smart community, information economy The District's use of broadband — SCADA, meter reading, The customer survey The business plan No cross subsidy The technology chosen - FTTU The cost to build the system The source of funds to build the system —debt structure The revenue stream needed to succeed — services, penetration rate, and pricing The breakeven point The exit strategy— no recourse to water or electric funds Case Study: What is happening in Jackson Tennessee Telephone conference call with Kim Kersey, Senior Vice President, Telecommunications Division, Jackson Energy Authority Attempts to Work With Incumbents Community owns the highway, private business provides service USA Media Cebridge Connections What Next? Survey customers Review business model Review construction plans Review cost to build Review debt funding i Broadband Discussion We need to talk about broadband: We have not talked about broadband for several months, not since we applied to LAFCo for activation of the latent communications power and then waited for the Cebridge court action to be resolved. In the meanwhile, two new directors now serve on the District Board. They were not part of the earlier development of the broadband business plan. It is prudent to provide them with information on the history and status of the business plan, and to remind the rest of us how we developed the business plan. The time spent processing the application to LAFCo and defending against the suit filed by Cebridge caused a delay in financing and deploying the broadband system. That delay has resulted in questions being asked that should be answered before proceeding. Before we proceed let's define the question at hand: should Truckee Donner Public Utility District construct a state-of-the-art broadband system for the use and benefit of the Truckee community? To answer this question in the affirmative we need to demonstrate that there is an unmet demand for broadband services, that other possible providers are not going to meet that demand in the foreseeable future, and that a revenue stream is identified to pay for it. So let's talk about the questions being asked: As already stated, questions are being asked that should be answered. Some questions deal with the short term, the next five or six years. Other questions deal with a longer term, beyond six years. Understanding the issues presented in both time frames are important, even though they may be quite different. Understanding the short term issues helps us understand the financial performance of the business model. Understanding the long range issues helps us design the fundamental business model, the system technology, and the financial tools needed to mitigate possible problems in the short term. Let's talk about the short term first: One question being asked is whether years of poor performance by Cebridge has driven customers to satellite TV, and whether those customers will stay with satellite TV for the next several years even if the FTTP system deployed by the District offers vastly improved service. A second question is whether the offering of DSL by SBC/AT&T has penetrated the f Internet market in Truckee to the point where DSL, albeit limited in geographic availability and slower than FTTP, is currently satisfying Truckee's demand for Internet. Since the District's business plan assumes our services would cost more than the rates charged by Cebridge and SBC/AT&T, a question raised is whether Truckee customers will pay more for superior service. A fourth question is whether the cost to deploy the FTTP system has changed. s A fifth question is whether the cost to borrow money for a broadband deployment has changed. To answer the first three questions we may need to generate up-to-date empirical data by means of a customer survey. The fourth and fifth questions about the cost to deploy the system and to cost to borrow money can be ascertained by getting information from vendors. What about the longer term? Longer term questions go to the development of technology and changes in society. What does the future use of broadband look like? Are new technologies offering different ways for us to access movies, sporting events, news and weather, and games? Are people communicating by means of text using the Internet in place of telephone calls? Do customers want to up-load and down-load images as well as text? It would be difficult for TDPUD to generate data on its own to answer these questions, but we can look at research conducted by others. Another separate question deals with an exit strategy. Does the District have an exit strategy if the business fails? The World of Electronic Communication What does the long term look like? When we look at the research conducted by others in the world of electronic communication we see a consistent message. The times they are a changing. Technology is changing and society is changing. They are changing in step with each other. It isn't clear which is the prime mover. Perhaps they change each other, feeding off each other in a symbiotic manner. Electronic communication means the transmission and reception of voice, video and data by means of electronic systems and devices. The systems and devices that have traditionally transmitted and received voice communication include the plain old telephone system using twisted pair copper wire. Video has traditionally been transmitted and received by means of the over-air broadcast of television programming, and transmission of television programming by cable television systems using coaxial cable. Electronic transmission and reception of data has been accomplished using fax machines connected to the telephone system. These technologies all relied on slow speed, limited capacity analogue technology. k i Development of the Internet has changed all of this. The Internet is digital technology. It has the capacity to move vastly bigger amounts of content. Internet and digital technology led to development of electronic gadgets that connect computers, televisions, telephones and an increasing array of related electronic products to one another and to the Internet, potentially bypassing the telephone system twisted pair and the cable television coaxial system. This emerging high speed, high capacity, digital, Internet based electronic communication technology is termed broadband The development of wireless technology has lead to other societal changes in how we communicate. The development of microwave and cellular systems led to development of wireless telephone service. Society has so fully embraced the convenience and t 1 flexibility of wireless service that wireless will play an important role in electronic communication in the foreseeable future. A recent study commissioned by Yahoo/ Mediaedge concluded that "consumers are increasingly growing closer to multiple media, and are turning to the Web for deeper content, entertainment, and communication capabilities without forsaking other media. (1) Broadband users view twice as many pages per month as their dial-up counterparts. (2) The Internet is intersecting with all aspects of people's lives in dramatically new ways. The study showed that over half of broadband users say they are using online and offline media simultaneously, turning to the Internet to supplement other traditional media such as radio, newspaper and television. Broadband offers deeper information or differing points of view on subjects first learned about on other media." Studies show that broadband users rely on the Internet to send and download photos, streaming music, games and more. Home based or commercial based graphic designers require uploading and downloading of large files. Users are downloading video clips from the Internet. Computers are being used as telephones, television and computers simultaneously. Users are working on projects, talking with friends or colleagues, listening to music and monitoring news, all simultaneously on the computer via broadband connections. Broadband technology is changing the way consumers are accessing entertainment. Entertainment bypass is the term coined to describe the ability to download movies, music and games through the Internet directly to a computer or television, thus bypassing the cable television infrastructure. This service requires lots of bandwidth and a few electronic tools that can be purchased at any consumer electronics store. The traditional cable television infrastructure based on coaxial cable does not have the capacity, it has no real future. Consumers of electronic communication want time-shifting technologies. TiVo allows a person to record a program and play it at any time. Consumers also want place-shifting technology. They want to use their in-home Internet, computers and televisions to gain access to voice, video and data services, and then have it transmitted from their homes to any place they happen to be at any given time through Internet access. Businesses increasingly rely on access to broadband services to perform business functions. The District's Broadband philosophy: j The message is that communities that deploy high-speed broadband infrastructure are more likely to meet the needs of their customers and therefore are more likely to prosper. They will meet the growing demand for broadband services in our rapidly changing society. Truckee Donner PUD `s business plan vision is to deploy that broadband system, to wire Truckee for the 21 s`century. TDPUD could use the broadband system to improve operation of its water and electric utilities. The District's SCADA system and meter reading would use the broadband system. Load management, in-home security systems and smart home technology could be offered using the broadband system. s s i We believe it is prudent for the community to own, maintain and continually modernize important public infrastructure. Broadband communication infrastructure is the type of public system that should be community owned, much like the community owns the roads, sewers, water system and so on. We believe homeowners and businesses should use the broadband communications infrastructure, much like they use the roads, sewers and water lines to meet the needs of their families and businesses. We do not believe that TDPUD should be the communication service provider for the community. Private enterprise should provide Internet service, phone service and other broadband services. We envision a partnership between TDPUD and private sector service providers. We envision service being available to everyone. We would commit to maintaining state-of- the-art technology by continually investing in the system as changes in technology are available. Since TDPUD is non-profit we would utilize a cost based pricing method. The price we charge for use of the broadband system would be based on the cost to construct, maintain, operate and modernize it, with no mark-up for profit. The technology we have chosen: Broadband is sometimes defined as a telecommunications system with a capacity of 550 megahertz or more. This is an analogue definition since it uses megahertz as a measure. Digital broadband would use bits per second as the measure of broadband. Broadband is also defined as single directional versus bi-directional, bi-directional being far better. Finally, broadband can be defined as shared bandwidth versus dedicated bandwidth; with dedicated bandwidth being the superior performer. Choosing a broadband technology involves having an understanding of the current and future demand for broadband services. As discussed earlier, society is changing and use of computers and other electronic tools is changing rapidly. The demand is for increased speed and capacity. The question is which technology is best positioned to meet that increasing demand. The attached table compares the performance of various communication technologies. TDPUD has chosen optical fiber technology. Our plan is to deploy a fiber-to-the- premises (FTTP) system. The system brings fiber from the point of presence (the location of the communication service) all the way to the consumer's home or business. There is no other connection in the path that reduces the capacity of the system. This is considered the gold standard. It provides the greatest capacity with the greatest security. FTTP appears to be highly compatible with technological advances that will certainly appear. Research in broadband technology is focused on improving the electronics. The fiber remains the same, but electronic equipment is continually being developed to push greater signal down the fiber strands. Once a FTTP system is deployed, it will be relatively easy to modify it to keep current with changes in technology by changing out electronic devices, while the fiber continues in use. Fiber-to-the Premises The number of homes passed in the US with FTTP topped 1.6 million in April of 2005. In March of 2004 only 189,000 homes were passed with fiber. Verizon is committed to deploying FTTP to 3 million homes by the end of 2005. The Fiber-To-The-Home Council of North America reports that in 2002, 68 communities had deployed FTTP and in 2003 it had increased to 125 communities. In Utah, a group of fourteen communities have formed a joint venture known as UTOPIA (Utah Telecommunications Open Infrastructure Agency). UTOPIA is deploying fiber throughout the fourteen communities. Many other communities throughout the United States have deployed broadband systems, or are in the process of studying a deployment. Some of those communities include: City of Philippi, West Virginia; Lafayette, Louisiana; Glasgow, Kentucky; Kutztown, PA; Sallisaw, OK; Santa Monica, CA; Clarksville, TN; Bandon, OR; Alameda, CA; Ashland, OR; Norwood, Braintree, and Taunton MA; Lebanon, Indiana (may be a BPL with wireless technology); Fort Wayne, Indiana; Chelan PUD, WA; Burlington, VT; Auburn, Indiana; 17 communities in Iowa (Ackley, Anamosa, Asbury, Charles City, Dubuque, Hamburg, Hampton, Hudson, Iowa Falls, Lansing, Lenox, Maquoketa, Mason City, Parkersburg, Waterloo, Waukon and West Union) Deployments by public sector agencies now serve a third of the US homes passed by fiber. Let's Talk About Wireless: Customers of communications services have embraced the convenience and flexibility of wireless communication services. Wireless is here to stay and it will grow. Wireless community networks using wireless technologies are in and under construction throughout the Country to provide low-cost broadband connectivity to underserved households, community groups, and small businesses. Although this technology, due to its line-of-site nature and security issues, will not replace a wired system in Truckee, it can increase Internet accessibility through the installation of "Hot Spots" in specific areas such as the Commercial Row, community parks and schools. Wireless can fill a niche role in a community served by a FTTP system. In fact, the FTTP deployment could, given the right equipment, improve existing wireless service in Truckee What is going on in the world in general? Incumbent providers cannot be relied upon to deploy a state-of-the-art broadband system. Cebridge Connections cannot afford to deploy an advanced broadband system. Incumbent cable television operators generally cling to outdated poor performing coaxial cable systems. They make small incremental improvements to the coaxial systems, but the financial constraints they live under prohibit them from abandoning the coaxial system entirely and deploying fiber systems. The small incremental improvements never achieve the performance that is demanded today. Incumbent telephone companies are investing in fiber, but only in lucrative markets. In small towns they invest in modest extensions of DSL service. DSL service will not perform at the speeds demanded today, and certainly not for the speeds demanded in the very near future. DSL services were measured in 2002 originally and the results showed that SBC had barely offered DSL (at 300k speeds and less)to about 7% of TDPUD service area. SBC, now AT&T, now provide DSL at speeds over 500k to 70% of the Truckee community. Satellite television has made significant inroads into the incumbent cable television customer base. Dish TV and Direct TV have increased their channel offerings and packages to be highly competitive with cable-based services. NFL packages and specialty packages are also a greater draw such as competitive DVR (Digital Video Recorder— like TIVO) hardware. What do we do next? Do we want to conduct a customer survey? Has Cebridge driven customers to satellite TV? Will customers leave satellite and subscribe to FTTP? Are customers satisfied with DSL by SBC /AT&T? Will Truckee customers pay more for superior service? Define clearly the business plan assumptions. Review the business model we envision. Review the cost to deploy FTTP today. Review interest rate assumptions. Review penetration rates. Review revenue stream assumptions Define the available financing. Define clearly the exit strategy. Define the go/no go decision tree. PLH/March 24, 2006 4 f t Comparative Service Levels Offered by Various Telecommunications Technologies • L Sly:; )nsY �a� i t }p4,, Y l AI �fit �o Niatraareas, 4 itCM#iQri$ Aval AA e t Truckee „u,.ivw,.c, ✓:wrw«,uty .oN.rsx;.�,.a....tu,,.+'n,4.,4'isa U.3+atr .4�L�`' �a. `01 �`Ij x g p }k may,, Ronraar PUR rfwaft wnstre tQ ` .9a2tf6F Ha 3s"e'�Srb�.Au$to aa"su"le++�.kb"",v'k+`x`U�` }w�Sk��twxlJkr.�,'�'"��k}`V.'dr`.ru";��' w«w€'+syk.+a�.vo�.«�..+•, uu�*.n:::�5xka'�":m.),�an5, u�..w.,:i ,Z.,,.., ppstrea ' fn { 1 a 6 th 4 ? ��to ri L YK ' Sh�r�d t 41 ` n� POO Q �4at$Ct ' , 14 s �v"`tejwmhlz U`"e4�.kv '"`„�` M`✓ "" ` t Z 4uxya%�x.L"r�Ftaa,"' Bioaranhy Kim K. Kersey Senior Vice President— Telecommunications Jackson Energy Authority Mr. Kim Kersey is the Senior Vice President of Telecommunications for Jackson Energy Authority in Jackson,Tennessee where JEA has deployed one of the largest fiber-to-the- home projects in the United States. Mr. Kersey is a 31-year veteran of the cable television industry in which he has held senior management positions for the past 24 years. In his position with JEA, Mr. Kersey is responsible for the planning and implementation of this $54.3 million fiber project and the rollout of cable television, high speed Internet access, and telephone services to this community. s' s r s t t s s F Jackson Energy Authority - One Thing You Can Count On: About Us - Page 1 of 1 About arkson Energy Authority Welcome to )ar_ksor cnergy Authority r a 3 qa- . —S toaP,o 7 .,= c .'er r, i" -`i t �r"C �0 ft r qas r S .x 1,00 =Y 0,,Wd LmdLr ?. ;1v: c xt passed by tP ninen ?rs;tore. 7E a r U fps a d ou z,ors mv ons or vrangh as , iE y rotes - �a r;<o. p c4:sor t riErc,y n= Jitre;ty is c� . ,_ ,y .2-m be E3c�:rc± A -irecsMr , -!r)PWqo0 r{zIck5o r S Vlavord Ciy f o nul, r a QMners come fir.- at. A A You have a gwesbon about your t s or; }so s,aat My of , r CuMmer Service GurJe, ,rsst caj! sls at 3...422 ,rC :a: send us an e- rnau: at jaxenerrjjy',:jaxenergy,corn. 7 rk oar Eneqy v, a* ar y a Tern x r Of the. Better Busw.,ess Eouacau t C)mmotred to p. tti_f na r cusfo rers - nvicy —hcn Tray use our z rthne s rvves. For t look at our pNvmy pm,cy, c$ick here, RC$IA$FdF7Y fRCt..4R:M 5 a i i http://www.jaxenergy.conVabout_us/about_us.php 3/24/2006 Jackson Energy Authority - One Thing You Can Count On: About US - History Page I of I A History of Servic� auson Triergy Amwvy ,, vv'� laqv rf "e"",�csr ItsiIrZed r; ate "n con 's sl `rmux 00a"T '&0r`Nh0cU,4d gas, and a uAlc nso r arn S"W&er W4a"I 00e f"Q�,jV:'JCd ir� j��',-Kya7l. iFA ,n, "'�ea�a'd �l ���-'9 "mllr, 'ts "nor -"Ma 0! "Un AVRV Fany&n "hen " "W WPOWLS Lalil!" Pjj"-ro a,i',. omu q Ty snd oneu o3sruwator -- 43-se unc,— c o _tilt' LR f rac, -o'1r'r"a'C0 iq AW A our kqwnk tnie T!"nw,ee Wowturn copromd anowir as mukunwd Wkson May Damon , ccrporaw samrii, oL o-ho t on, "Juo dck6n nAwnity. 0.1 ged (sui Preilefil, f'o,'o tho accea3nny and con"nonce one uAwy company brongs tnurl' Adve qrmvr through the yews to rent if eeos of tre ronsm.noy, Besides ou� adminatronve Woo at 119 E. CG59e St and our cidworner servace Murton at The Concoct con m Oid HICKOry `Jail wkoan Energy Asjtrto,try cas aiareahr and chymbution rote ve uvornes p6jars, sub statioi-, purnping stations and odher IscOltres ocated thiontgricut the Jackson area. , r r s rt r !of yan, 0 a 4Q00 oboat JEA and uuPty veirmwe rn fackson. For a copy Of the bOok. Ash so The Connechon, our downtown afnmer orDavis-kgd(I Eookscfleus On Norm Parthay. Coo is SI?95, if you experience any problems On the site obease click he http://www.jaxenergy.com/about_us/history.php 3/24/2006 Jackson Energy Authority - One Thing You Can Count On: About Us - JEA Services Page I of I WA Services, 0 r.- 13V� 110q,anr, �xwrr qas an oowt-, �:n �o a"C' �q goo "'"S, 0"OrkNSW 0011 !GGQ�W .7 Ehw hobo Cn!NjWM,on, to yadjun 000a; A"Qw�nw Go rot '�";QQAJ; W Q %Q 0MU;Wcor, o0"Q WOW XCUbMs! 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For rucire informaiaori about our servnes, check out our residential services pages or gave us at call at 731 V22-000. http://www.jaxenergy.conVabout_us/jea_services.php 3/24/22006 Jackson Energy Authority - One Thing You Can Count On: About Us - Board & Manage... Page I of I he and and Managerneirit "rearm �uchw y "'t PJIIII',I� icC,,'J 00cl of :FA A 1 9 East ii,w-er- P�exanjer, �-caw c?et%,CV n rm h-,.n. Sr, 6/30/06 Fx,b Carnpof H "eral exolres 6/3cl/09 od -omparry Hov,,Ird Bcnd Tatrn exp,00 C/3SIC8 State Farm T-I'surance L evv is Dunn Term expires 6/301,110 Lllv,'ts & '-lark DeVecprnunt Our Management Team 1 10hrIc',iolharns, President and Chief Executive Officer Cobb, General Counsel Charlie Ciockarell, Senior Vice President, Gas Division Kim Kersey, Seritor V;ce Pfosioent, j-ete Fommy Janney, Senice Vice President, electric Division FnIrnXI Murray, Senior Vice President, Wasteiciater Civision ic'n W tsOrc, Senior Vice President, Chief Opera.Ung Officer Seery VYhcelef, Seiler Vice ioesiderit and Chef Financia! officer Vicky Ohright, Corporate Secretary George Flew, V;ce President, E:ngineernq Mirriael johnston, Vice President, Infori-naffoij Technoioclv Anq Lnois, Vice President, Hurnar, Resources Dav d r4idorebro,-)k,,, vice Prerident, D;sumuttrin, Randy giipp, Vice President, Cipe,ahons Steve Raper. Vice President, BusMess Development and MalkAing Kyie Spurqlecin Vice President, Customer Service Nliech-fe %V0iiarnc, Vwe President, fnterrcl --Qn'roi http://www.jaxenergy.com/about_us/board_man.php 3/24/2006 W t • Multi-utility authority servrng; 34,p'pp customers in Jac son and surrounding west Te, s, counties. • Also own< 'I'enny, ticor, PoGas, andaterPro • Strong custom erervlce relationship • Began telecom constuctonn unary 2aQ4 and connected first custpnern M 20n4. • Currently tie largestTTH system in nation in terms of active p ant and customer ackson Energy Authority One e thing c can count can. Truckee Donner Public Utility District Board Presentation Update on the Fiber to the Home Broadband Network Program March 29, 2006 Topl des+ 6ption Changa since 81 t4 Impact on MR,, Win, General Aspects of the Project tives`: CTsrptr�ardf€rbe uartrs»rd u +utuS�)t ha. Tetttsai €u ; ";ebfust q sefvlces>{mcdt ' e tb video : 10003 Service ire . 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Technological With the rapid evolvement of Fiber Many Fiber optic systems have Positive: stabilization of Obsolescence optic applications,there was some been deployed, including many financial resources and question about whether the TDPUD FTTH, Municipally-owned' manufacturing practices should be on the"cuffing-edge"to systems successfully. has brought the price of implement one of the first FTTH> FTTH gear down, while= systems. standards have emerged. ifzz ettott icy er " vats' t t�tp rstght �etcal#iwstned pr�tstrotrrtrtrtS ate �:�icr��odd# i ate fsursruld t trdris ba, t s fte9al�€1cee���I?an t�u #ettrrtt �� "t 'I`� t a t;laftfgrrria%led a� .: stas ,57tt k a�"r �#o�tei owrte (la`s P �r cxrei that st�;..lt" p ih ,: tru wf #aft thaw. the I U0 staff al ser r>a tom, beerfJSRIJW farts rlthtd tat r rttu a,kw off" Peat ttva(t elyrgrt aprctuiddtmu€ietio '; unsiei3 . .. z 4 1 Truckee Donner Public Utility District Board Presentation Update on the Fiber to the Home Broadband Network Program March 29, 2006 Business Plan Market High-Speed Internet Services Broadband speeds (<256k Negative: the overall: Conditions: available were measured in2002 . according to FCC, but<1 meg impact of the proliferation High-Speed originally and the results showed by user definition), was about of broadband DSL and Bandwidth that SBC-was offering limited DSL 25%of all online users. Today Cable Modems means (at 300k speeds and less)and that it comprises about 56a/o+> that there may not be as USA Media was offering very Nationwide: Broadband`usage much need for the limited cable broadband (at return is greater than ever and the TDPUD to provide speeds that were dial-up). SBC online applications used today competitive broadband covered about 7%of TDPUD such as streaming video and services as before. This service area. USA Media covered j music downloads require will need to be measured about 17%of the service area with speeds of 1 megabyte and up. in an updated Market cable modern connection. SBC/AT&T now provides DSL Survey!Competitive at over 500k to 70%of the, Review. It will be town. We were quite accurate required for any financing in predicting the ubiquitous source as well: need for high-speed internet connections, Truckee Donner Public Utility District Board Presentation Update on the Fiber to the Home Broadband Network Program March 29, 2006 Market Video Services were offered by Cebridge bought USA Media in Mixed to Negative: Conditions: one company—USA Media, and 2004 and subsequently While quality has Video& Voice shown to be of sub-standard promised lots of upgrades to improved, pricing has quality. Limited digital tier operating the service quality. To date also increased at about off of a 330 Mhz system offering they have spent about$1 the rate of inflation. about 65 channels. million and have improved video quality primarily of off-air There is little that can be Dish TV and Direct TV also shared channels (local)while ongoing greatly improved upon about 8%of the market collectively. cable video quality has from existing services improved. without spending Voice Services were provided by considerably more on one company as they had since the Dish TV and Direct TV have programming content. late 1800's: PacBeIVSBC increased their channel offerings and packages to be However, these systems highly,competitive with cable- are stretched for based services. NFL packages maximum bandwidth right and specialty packages are now,and will be limited also a greater draw such as for further expansion. competitive DVR(Digital Video Recorder-like TIVO)hardware Voice Services are due installed for free, for an overhaul however,; as Voice-Over Internet Voice services are unchanged Protocol(VoIP) and still only provided by SBC proliferates throughout (and CLEC's re-selling SBC) the U.S. and creates very competitive pricing. The impact for the TDPUD is Positive for deploying VoIP. � . Et �pT #ortrtlrren�`€ot rsphip ��fr `` � �' � BiBtt ti( #ir� y�rhy� ;-:' tsszsknrrril � ly#)r�ie Competition Cebridge; Cebridge; Mixed. While cable Offerings 1 Basic Cable $33 95 Basic Cable $37 99 prices have gone up Pricing Digital Cable $12.99 Digital Cable $11.99 broadband data prices High Speed Data $34.95 High Speed Data $28.95 has come down, and will SBC sec continue to. DSL:$29.99 DSL: 15.99 to$29,99 z s 3 Truckee Donner Public Utility District Board Presentation Update on the Fiber to the Home Broadband Network Program March 29, 2006 Construetlon, Gonstructien costs were anticipated We anticipate being,abletol, Mixed to Positive: We fssuance and at about$i miifilcnafl•lli; decrease the construction costs, wit!need to re-bld the Operationat: Additional costs of deptoyment,cost by j to$2 iitrron ot�ra#� �� costs,anticipating. Casts 66stk iiaterestcosts,etc brotat t,, based ort design,Materiels acid ' savings on c struction this total project to about 24. deplciymenty;Financing costs and possibly,isstiarace miliit ma r'l as higher dus tot costs. Ong vtn iraoreasein interest rates,but:', operatiorra! the Ti pub,Ma}r be able to: liksly retitain and at ed; defarandforpasa oft set tht t4 partnerlivesttifs . '- Vendors Bids were received and accepted All bids have expired and are services can be re-bid, or for the project in 2004. no longer valid. negotiated. Vstitiettsns T ri at fiber Paeitive Cttrttr =;; ... diYlsir tsrT edt✓tu titiiltneecl tt tic rittr MOT' SONW0,404.11,190 Pmn n�a ;? in 0041tta 4`af'a ter r3t&�t Stilt dflt#,.i`9S(eft � t�a11�'$ft anC# ortttup�fue �J nga � tbni ytithe -, cirrlpty ,, prtcrng;�iW#fif#C#'� a'ar'fi[f oasts vr�l , hvs ti' Vendors: Optical Gear: Wave 7 has kept a$400,000 Positive: Prices have Wave 7 deposit with the TDPUD as come down and winners "good faith"to insure its have survived.Also,there chances of staying in the deal have been advances in< the technology that should be evaluated and several other vendors have expressed strong interest in the project. Also;standards have evolved and consideration should be evaluated for standards. There are probably 4 or 5 viable solutions that could be re-visited. 3 4 Truckee Donner Public Utility District Board Presentation Update on the Fiber to the Home Broadband Network Program March 29, 2006 V"dc :, VIdeq Voice,&Data- : Jraqfe Srcadbandk �agfe gy ` Mixed: Se vide . actle Brrradbarxd~ , :, cu ay nbt be hg' t�able., Otoviders;Ttsera. ve . to verSONWOS 00€ €tnaliy : been many advano s in, eap d;brit ottier i+ertd s W yidacs et 1 avtF aiso ex#nassad :str� d6ntarit IP6&and arrp desiaa t0proividO vide o :: other apple diaa ; 06d date torthe Tt Ptl irurever,f to t u Ft#+I . . art IP Headoind'romairm very eensfv �,n 'ten pm T OW s , +g a � { i } F } S Y 5 Truckee Donner Public Utility District Board Presentation Update on the Fiber to the Home Broadband Network Program March 29, 2006 Financing Combination of players worked for Aggregate Networks remains Very Positive: many months to get the pieces in involved and continues to We believe that financing place for financing. While no final explore all options for TDPUD's is available, though it may sources was identified due to the interests. A new engagement not look&feel like a LAFCO approval and subsequent, for Services Agreement will straight-forward municipal immediate lawsuit from Cebridge, need to be executed. finance deal. it may many potential sources have been require some combination contacted, qualified and remained Rivers Jenison remains of sources that work interested or fallen be the wayside. interested if the project goes together in order to ahead and still feels confident it generate financing for The financing package presented to can raise institutional funds short-term project and approved by LAFCO directly or indirectly for this financing, equity, muni- contemplated issuing Certificates of project. Paul Jenison has 2.5 Certificates of Participation (COPs) which do not years of experience with this Participation with take-out require the guarantee of ratepayers project. Rivers Jension would from Revenue Generation or taxpayers essential to getting need to be engaged in a new bonds and/or Public- financing for the TDPUD's Agent/investment Banking private partnerships that broadband start-up. Agreement. contribute resources, ' deferred financing debt The following list describes the Legg Mason sold its municipal; and/or equity to this sources involved in financing: Division to Lehman Brothers. project. While there may be potential to Aggregate Networks: work with that group, it is not As long as LAFCO Consultants necessarily the optimal choice: requirements are met that Responsible for strategic direction, do not put ratepayers of financing package, legal review, Greenberg Traurig has water/sewer/electrical at coordination of the Program, completed 75%of the PPM risk,we have a wide financial projections&relationships. which are costs already into the range of flexible options Rick Kaufmann project and have 1.5 years for structuring the Laurance Lewis experience working on this with financing. TDPUD. They would need to Riviera Jenison: Placement be re-engaged pursuant to the The$2 million+of costs Agent— needs. that have gone into Responsible for structuring the deal, exploration, studies, legal finding sources of financing and ADDITIONAL SOURCES challenges, research, and•` coordinating the Memorandum and LedGor Technical Services— structuring of the program Investment Banking roles. Ledcor Construction is a very will also need to be Paul Jenison large construction firm out of included in any financing Rob Riviera Vancouver, Canada.;They package per LAFCO. bought TetraTech's fiber optic Legg Mason: Investment Bank, division and are able to do Municipal Division many services regarding fiber Responsible for contacting& raising optic network infrastructure and funds with institutions, negotiations management. with investors. - Tom Coverick Ledcor has expressed interest in potentially offering 3 Greenberg Traurig: Law firm financing terms with Responsible for writing Private equity/debt components that placement Memorandum. would go toaward the project Bill Gehrig for construction services. This will vastly increase the probabilities of obtaining financing for this start-up s project. Motorola—is able to provide debt financing for projects that they have their products in as long as there is a"date-certain Truckee Donner Public Utility District Board Presentation Update on the Fiber to the Home Broadband Network Program March 29, 2006 Structure . Straight issuance of Certificates of We anticipate that there will be,, Neutral to PostOW Any Farticipafiszrt(COPS)structured as a more sophisticated structure way that gets the deaf "{?rojt Bids°beginriin9 w a for ttsaownershtp if there are done iecrr effisa Y> year sf no}ayents,wine more span sane equity provictet: and meets the needs of, capitalized ihte ast;famed by a if Ladd6r,for instance; .puts tha'ThPUD, iAFC{?and- tiered payment strupfiur h "equity lrlta tho deal—say up Irlvost6m,allows us to, `.,... shows to pad lessJo"gears one-- tp 0 011"M lrttz i cost of�� � ,cast a:*kfer net for theee a Subscribersi and reveriue ; construction,with the pmeribat sources of cor€ie:iutitaEhe,systerzrw ff ncreases exp tstiontfia theywiftget,a financin rrrzzr , astfierevtirsue ,flow r, 'on6'_' mateyabq ipef jverates: in or >:,Issued kstr sirigfaetitit and beyprtii ttte of tFie witFi ltio oirrershiP artd liagiy .,' cesnstnietiisii,as anjr invests eg �It met. wigs She lC?PllLt:: woigd,,there will hasre s.( Isaokmore like tile: ss gtypq cs"f?fit pri�rate >:- fc�ilocvir ..: :. llaltrstr cceetesl Mier fipancn o?ir wffetermvtw= tveraH lr stature of erctlty, rn�n " stogy thst� ' 'f'IFct,3i ., 1 ? f : ovrinttaeeructureT titorof rne rrlmn:, S V0,s, Conclusion We believe there remains a strong case for moving ahead with the TDPUD Fiber to the Home project, though with continued caution. A project of this type that contemplates a start-up business with uncertain revenues requires that steps be taken to understand the market demand and competitive forces. Since there has been a mountain of work already accomplished, updated information can be obtained at incrementally little cost focused primarily on marketing and possibly pre-signing subscribers to ensure a high degree of comfort on the part of investors, partners and lenders. We recommend the following: f. Engaging Aggregate Networks to an extended contract for assistance in strategic planning, workload and coordination of efforts; 2. Engaging Riviere Jenison for Investment Banking/ Placement Agent services (no or minimal ongoing cost as they are paid on a success basis only); 3. Authorizing Aggregate Networks to structure a program that will gauge demand for services in the TDPUD service area that addresses what our potential for subscribers and revenue will be given today's services offered by competitors vs. what the TDPUD can potentially deliver weighed against the costs of providing those services; 4. Explore financing options that decrease TDPUD and/or investor risk for the project such as Ledcor, Hitachi, Motorola. Aggregate Networks will negotiate with these companies on behalf of the TDPUD. 5. Explore and negotiate financing options simultaneously for financing the project. 6. Explore and negotiate potential terms with service provider and optical gear providers. MAR-23-2006 05:20P FROM: TO:15305875056 P:1 2 'I Fax Cover Sheet MEN HYATT 11330 SKYLINE Cf. TRUCKEE.CAUF.96161 530587-6694 Phone number 530587-0107fox number ilium 1v�v.t r✓ llsa +s2:o� .TV 11end to: lions �� -P j !"ao � 1441 C 1.t .0 r . t C1 t Attentrcm: Date: Office location: Office Iocaf on: Fax number: Phone rwmber: Urgent i lea J Reply ASAP j Please comment ;J Please review For yaw Warma l m Total pages,k)ckm*g prover. Conunadse Y-X-t.k C C:) V1 V-VIE . +5T , J f t r 3 MAR-23-2006 05:20P FROM: TO:15305875056 P:2/2 BROADBAND ISSUE MARCH 23.2006 WE, AS RATE PAYERS WOULD LIKE ASSURANCE THAT WE WILL NOT BE RESPONSIBLE FOR THE DEBT INCITRRED AS A RESULT OF STUDIES, LAWSUITS AND THE IMPLEMENTATION OF BROADBAND. WHY DO WE NEED BROADBAND? I'I'COULD BE SOON OBSOLETE? WE ALREADY HAUL: SBC AND CEBRIDGE FOR HIGH SPEED INTERNET AND IN TALKING TO i MANY SECOND HOME OWNERS; THEY FEEL THAT THEY WILL PROBABLY USE SBC. THE CHARGES KEEP GOING DOWN DUE TO COMPETITION SO WHERE DOES THAT LEAVE:THE, PUD? IIOW MUCH DEBT HAVE YOU INCURRED TO DATE PERTAINING TO THE STUDIES, THE LAWSUIT AND OTHER EXPENSES FOR BROADBAND? WHAT TYPE OF SURVEY WAS GIVEN TO TIIE RATEPAYERS and HOW WERE I'HF.PARTICIPANTS CHOSEN? I READ THAT ONLY APPROXIMATELY 100 INDIVIDUALS WERE GIVEN THE SURVEY ."PHIS ACCOUNTS FOR APPROXIMATELY]/2 Oi PERCENT OF OUR POPULATION. IN ADDITION, WHAT TYPE OF PLAN IS SET UP AT PRESENT TO PROVE THAT THE COSTS CAN AND WILL BE RECOVERED BY USERS? , WHAT WILL BE THE EXPECTED CHARGES FOR THE USE OF BROADBAND AND HOW MANY PEOPLE, DO YOU PROJECT TO SIGN UP FOR THE PUD BROADBAND? MOST PEOPLE A COUPLE OF YEARS AGO WERE, LOOKING FOR HIGH SPEED INTERNET BUT THAT HAS COME TO TRUCKEE AND MOST APPEAR TO BE HAPPY WITH THEIR SERVICE PROVIDEP,Jr, YOU THINK THAT 40% WILL CHANGE TO A MORE EXPENSIVE SERVICE, I THINK THAT YOU ARE GRAVELY MISTAKEN. TIM PRICES TIIAT I NOTED ON THE NET ARE VERY HIGH COMPARED TO WHAT WE ARE PAYING AT PRESENT. WHY WOULD WE CHANGE TO A HIGHER PRICED SERVICE..? YOU HAVE A FISCAL RESPONSIBILITY TO THE RATEPAYERS TO NOT INCUR DEBT AND HAVE A BUSINESS PLAN FOR FUTURE ELECTRIC AND WATER CHARGES. THESE ARE UTILITIES NEEDED BY TIIE RA"I'F,PAYERSi I AM TOTALLY OPPOSED TO MORE RATE INCREASES AND WILL FEEL THIS t WAY UNTIL YOU CAN ASSURE ME THAT WE WILL NOT BE ASSUMING THE EXTRA BURDEN Or, BROADBAND SERVICES. THE PROJECTIONS 'CHAT I FOUND ON THE NET WERE DONE A WHILE AGO. TIMES HAVE CHANGED! } FOR YEARS, OUR NEIGHBORHOOD IIAS BEEN REQUESTING IMPROVEMENTS TO THE, WATER TANK ON THE TOP OF III LLTOP SO THAT WHEN WE LOOSE POWER, WE STILL HAVE WATER AVAILABLE TE: TO FIGHT A FIRE. WE NEED A GENERATOR FOR A BACK-UP. } MAR-23-2006 05:21P FROM: TO:15305875056 P:1/1 OUR TANKS, PIPES, ETC_ ARE AGING IN OUR TOWN AND THESE ARE THE ITEMS THAT NFED TO BE BROUGHT UP TO DATE AND FIXED WITH THE RATE CHARGES. THANK YOU IN ADVANCE FOR COVER.NG THESE; ISSUES. ELLIE HYATI' 11330 SKYLINE CT. TRUCKEE, CALIF.96161 E s E s a' Mar. 17. 2006 9: 05AM Western Money Sysf, 775-33i-209 No: 7560 P. VI [Click here and Type address] To: Pat Sutton Fax 587-4182 From: Ann Penfield Date: 3/17/2006 Re. PUA Broadband Project Pages: 2 CC: Jim Taylor 581-3162,Bill Thomason _ 582-9993,Joe Aguera 587-3887 Pup 5 Y 7_5'©s 6 ❑Urgent ❑For Review ❑ Please Comment U Please Reply ❑Please Recycle attached letter of concern for your review 1 i f . . . . . . . . . . . . . . . . . . . . . . . Mar, 17. 2006 9: 06AM Western Morey Syst, 775-331-2639 No. 7560 P, 2/2 March 15,2006 TDPUD To the TDPUD Board I have recently read the TDPUD Fiber to the User FTTU Business Plan dated 7/30/2004. As a twenty plus year resident and controller for a business in Nevada for the last 15 years I have found that the data in the report does not provide me with evidence to support the plan. The weaknesses are many and the benefits are few. Truckee currently has both DSL and Cable available at reasonable prices which have dropped an avg.of at least 10%per year if not 201/o. We currently pay about$70 per month or$840 for combined cable TV and DSL and a phone line. Your proposed rate requires a$370 hook up and wiring fee plus$125 install fee. The monthly fee is not even suggested anywhere in the report so I have tried to calculate it based on the cash flow projections in the plan. In year 4 the report is suggesting 7.5 million in revenues on maybe 5,000 possible customers which would be$125 per month per customer or$55 more than what I pay today for DSL. If there were 7,000 subscribers the cost would be$90 per month. At that rats who would want to subscribe? I would like to see an updated report show how many subscribers they expect and what they estimate the monthly rate will be per subscriber. Since the plans were originally proposed,I would guess that the current installation costs have gone up considerably while the competition has been able to lower their rates each year. This makes it important to revisit the entire concept of the PUD Fiber plan. In a paper by Thomas Lenard of The Progress&Freedom Foundation Feb 2004 he states that in the three case studies done one in Kutztown,Pennsylvania they found the following: "None of the municipally owned entrants is able to cover costs without being subsidized. The subsidies are conservatively estimated to range from$350 per customer to over$1.000 per customer,excluding any capital costs." These subsidies appear to be covered primarily by the surpluses of the municipally owned electric(and other)utilities. In the absence of these subsidies,electric rates could be lower, or the utility could contribute to the operating costs of the municipality,which would lower taxes." "There seems to he very little prospect of any of the municipalities paying off its initial investment. Indeed,in all the cases,it looks as if the telecommunications venture will be an indefinite drain on the city's taxpayers." Since we already have similar services the paper points out that"It also makes it exceedingly difficult for the municipalities to attain the combination of market penetration and price level necessary to make their investments pay." "Moreover,since all the municipal telecom providers require a subsidy to be viable,whatever might be gained in"lower"telecom prices is offset by higher prices for other services,such as electricity,or higher taxes." In light of the above evidence,I do not support the TDPUD in their current Business Plan for Broadband in Truckee. I love the intemet and spend many hours on it,but I find my current DSL choice adequate and my utility rates are already increasing each year without the additional burden of the Broadband. Sincerely, Ann&Fred Penfield�l(269 Skyline Ct. Truckee Ca 96161 — ffred@pacbell.net Alan Harry From: MRC -James A. Sanwick James@stmgilc.comj Sent: Wednesday, March 22, 2006 9:14 AM To: Alan Harry Subject: TDPUD support Aian, I will be unable to attend this meeting as I will be out of town, however, I do want to stress my support for this initiative and the need for competitive services in Truckee. As I have told Katrina in the past, I had my house wired with fiber when it was built and would be happy to be a beta test site when you are ready to go. James James A.Sanwick, President Sierra Tahoe Management Group, LLC 264 Village Road, Suite 201 Incline Village, NV 89451 Phone: 775-772-4898 Fax: 775-832-5810 Email : James@STMGLLC.com I t z r S i z 1 Page 1 of i Alan Barry From: Sahra H [sahra@lightspeed.net] Sent: Thursday, March 23, 2006 10:17 PM To: Alan Harry Subject: broadband _+ . ci, i he ers`iai' t u_. Wc be, c 1.*E "1 h iy the ee ,i'..a , e}r eveek, but '.,n1u c c Ct7 ( :.t ,,.` or o` brnadba,�id mo r s,o £a`Y.'a,d, Any loea ,s no r.' t es -,.ate? 'hank youl Ca-,ra A. erpry Cn-,Silt 5 3/24/2006 ragetoti Alan Harry From: Vrover@aot.com Sent: Thursday, March 23, 2006 2:44 PM To: Alan Harry Subject: Re: Support TDPUD Broadband at March 29 Meeting Hi, I can't make this meeting, but please add my name to support list for broadband services, We have a place in TD on Viking way. Victor Gold Berkeley 3/24/2006 From: "Dave Whetstone" <dgwhetstonecyahoo_com> Date: Thu, March 23, 2006 5 :30 am To: " 'Katrina Paz ' " <katrina@gilweepr.com> Unfortunately I cannot attend this meeting, but please note that there are many of us who support your initiative. One other thought. You've seen recently that Tahoe Donner is considering burying the utility poles. I wonder if there is a way to combine the efforts and save some money. Dave Whetstone -----Oriainal. Message----- From: "John Shaw" <John@shaweng.com> Date: March 22, 2006 3:39:08 AM PST To: "'Katrina Paz... <katrina@gilweepr.com> Subject: RE: Support TDPUD Broadband at March 29 Meeting Reply-To: <John@shaweng.com> Katrina You can tell your Board that I have moved on. Waiting the past couple of years for the PUD to get their#*&%$ together was no longer bearable. I have since installed a dedicated T-1 line to my home and constructed a wireless wide area network(WWAN) so that all of my neighbors can use it as well. This was a costly venture both in capital as well as ongoing, but you left me little choice. I paid several thousand dollars in capital and in addition receive a$450/mo bill for the T-1. That said, at least I/we have broad band service rather than an empty promise. In my opinion, the PUD has lost an opportunity to provide a needed service to its community. Too many promises, too little progress. In short too little too late. John Shaw, P.E. John Shaw Consulting, LLC PO Box 4259 Truckee, CA 96160 Phone: (530) 550-1576 Fax: (530) 579-3388 www.shaweng.com From: "Don Smith" <smithdslC acbell.net> Date: March 22, 2006 7:41:55 AM PST To: "'Katrina Paz"' <katrina@gilweepr.com> Subject: RE: Support TDPUD Broadband at March 29 Meeting Alan, I will not be able to attend. But I fully support the project and only wish I had the service today. Thanks -Don Smith