HomeMy WebLinkAbout8 Broadband Business Planning Agenda Item #
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Workshop
To: Board of Directors
From: Alan Harry; General Services Manager
Date: January 4, 2008
Subject: Broadband Business Planning
1. Why this matter is before the board
The purpose of this memorandum is to provide the Board with a status of the District's efforts to
utilize existing telecommunications assets. As you are aware, the District has endeavored to attract
potential telecommunications providers capable of providing "state of the art" technologies including
high-speed data, video and telephone services in the Truckee area.
In June and August of 2007, representatives of 180 Connect and North Sky Communications
presented a report to the Board regarding the concept of a design/build and lease-back of a
broadband system (broadband infrastructure) within the District's service area. At that time staff
agreed to meet with 180 Connect, review operational and financial documents and soon thereafter
report back to the Board with recommendations.
2. History
Since 1999, the District worked diligently toward the possible provision of broadband services within
its service area. Staff has prepared various business plans, system designs and has gone out to bid
for the construction of the systems backbone and purchase of system electronics. Great strides
have occurred since we began the project including the opportunity to utilize District "dark fiber" from
Reno to Sacramento. However, great hindrances have occurred as well. The greatest of which was
the lawsuit filed against Nevada County LAFCo by Cequel III following LAFCo's approval of the
District's proposed business plan to construct a fiber-optic system for the provision of broadband
services including voice, video and data services. The filing of this lawsuit in 2004 stalled the project
by making the necessary financing of the proposed system unavailable. Since that time, Cequel III
lost their case at the County level, appealed the Nevada County Courts findings to the California
Appellate Court and in June 2007, lost that appeal. Now, with the removal of legal barriers, is an
opportune time for the District to once again look seriously at the construction of a fiber-optic
broadband system to provide video, data, voice, meter reading and SCADA services.
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3. New Information
Following 180 Connect's presentation in August 2007, staff awaited the proposed financial
documents, proposed project structure, including draft contracts, and a list of similar public/municipal
projects 180 Connect had under contract. To date, District staff has received only a draft contract for
services from 180 Connect. We have been advised that the financial documents have been drafted,
and will be available soon; however as of this date, we have not received them. We have also been
advised that 180 Connect's planned financing partner Victor Capital is no longer an "investment'
partner. The loss of Victor Capital is a setback in that a new financial structure will need to be
flushed out and fully reviewed by District general and bond counsel. Lastly, staffs due diligence of
180 Connect has found that although they are under contract for the management of a 350,000 unit
fiber to the home construction project in Ontario California, they have not entered into a design,
finance, construct and manage arrangement like that they have proposed to the District.
Further, staffs discussions with potential broadband service providers (video/data/voice) have not
proved fruitful. Most recently, the District has had discussions with 180 Connect and Surewest
Communications in order to develop service provider agreements for Board review. The effort has
been hampered predominantly by the instability in the telecommunications markets and the attention
to other market opportunities. As an example, Surewest Communications has recently sold their
"Yellow Pages" division, and purchased Everest Broadband, a cable television provider serving
approximately 50,000 customers in Kansas City Missouri.
It is important to remember that the District's broadband assets will continue to have value as
providers investigate opportunities in the Truckee market. It is probable that service providers will
see a distinct advantage in working with the District in that the use of District facilities will be the most
cost effective manner to access potential customers and efficiently expand their system. It is
recommended that the District continue to communicate with potential providers, including Surewest
Communications; and recognize that when the market is less volatile, potential service providers can
focus on the opportunities available in Truckee, that its existing broadband assets will have value.
4. Recommendation
It is recommended that the Board direct staff to continue communications with potential broadband
service providers pertaining to the use of District broadband assets, and provide the Board with a
status report during the 2"d quarter of 2008
Alan H7�lneral Services o n Ulrich, InterhW GM
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