HomeMy WebLinkAbout10 Broadband Business planning Agenda Item # 10
UCK�uE�� DONNE,
DistrictPublic Utility
Memorandum
To: Board of Directors
From: Peter Holzmeister
Date: April 26, 2001
Broadband business palnning
This memorandum has as its purpose to develop the Broadband issue to the point
where the Board can consider making the next set of decisions.
The business planning process has been dynamic in that our thinking has evolved
throughout the process. We began the process three years ago with two related goals in
mind: (1) develop an advanced SCADA system that would allow us to manage our water
and electric systems more efficiently and (2) create a "smart community" in Truckee. We
retained Navigant Consulting to prepare a business case analysis to define how we
could develop an advanced broadband system to meet those goals. In that process we
learned about the inadequacy of current levels of service in Truckee. We learned that
there is a huge desire in Truckee for access to high-speed data services. We also
learned that in the community there is considerable interest in having improved cable
television service and in having choice. When the first business case analysis was
developed, it suggested that we build a fiber optic backbone network with coaxial cable
reaching to the customers. On this system we would operate our water and electric
SCADA systems and provide high-speed data services and improved cable television
service. The business case analysis showed that this set of services is needed in
Truckee and would be financially supported by the revenue streams.
We then retained Vectren Consultants to perform a validation study of the Navigant
study. Vectren verified the conclusions of the Navigant study and went one step further.
Vectren suggested that we consider adding voice telephone service to the mix of
services offered on the broadband network. This recommendation increased the
estimated capital cost of the broadband system from the original $8,000,000 to
approximately 14,000,000. It also concluded that the revenue streams resulting from the
provision of services would support the investment and operation of the broadband
system.
The addition of telephony pushed the investment significantly higher and introduced a
new element of risk. It also began to tie us to Vectren for the long-term. Paul Norsel, a
member of the tAFCo review committee, raised probing questions about the
assumptions in the Vectren report that needed to be answered.
Alan and I began a new due diligence process that included a trip to Glasgow, Kentucky
to see, in the field, a broadband system with several years of experience being operated
by a public power agency. Nelson Van Gundy, Alan Harry and I came away from
Glasgow with the view that it would be advisable to return to the basic plan: SCADA and
smart community. Eliminate telephony for now.
What this accomplishes is:
(1) Return us to our utility roots. We need the SCADA system for our utility operations.
(2) Returns us to the "smart community" concept wherein high-speed movement of data
is the goal.
(3) Reduce the investment back to about $8,000,000
(4) Reduce the business risk posed by the new and immature CLEC world.
(5) Permit us to deal with design consultants other than Vectren.
(6) Eliminate the need to consider funding participation by Vectren and a long-term
stream of payments to Vectren.
There are some next steps that we wish to suggest to the Board:
(1) Submit the required material to LAFCo to achieve final approval of activation of the
latent power (Master Service Element, in-lieu of franchise agreements and risk mitigation
plan).
(2) Design the final broadband system.
(3)Arrange for financing of construction.
(4) Visit Ashland and Alameda to complete the last of the due diligence.
At the Board meeting on Wednesday evening Alan and i will have a presentation that
provides additional information about Glasgow and the planning process in general.
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TRUC:KEE DONNER'
PUBLIC UTILITY DISTRICT
MASTER SERVICES ELIME'NT I i
FOR
BROADBAND TELECOMMUNICATIONS
SERVICES (,
NEVADA COUNTY
LOCAL AGENCY FORMATION COMMISSION
April, 2001
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Prepared by:
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TABLE OF CONTENTS j
I. INTRODUCTION . . . . . • . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .A, General Project Overview .
B. District's Sphere of Influence . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. 1
11. SPECIFIC ELEMENT REQUIREMENTS . . . .
A. Existing and Proposed Facilities . . . . . . . . . . . . ... . . . . . . . . . . . . . . . • . . . . . . . . .
Backbone Fiber Network . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Metropolitan Area Network . . . . . . . . . . .
Hybrid Fiber/Coax Network . . . . . . . . . . . . . . . . .
Network Operations Center . • . . . . . . . . . . . .L . . . . . . . . . . . . . . . . . . . . . . . . •
B. Services To Be Provided • . . . . . . . . . . .
Data Transfer Service . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . :
Cable TV Service . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Internet Access Service 4
Local Telephone Service . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
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C. Present Service Level Capacity . . . . . . . . . . .i4
D. Anticipated Service Level . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
E. Actions, Improvements, and Construction . . . . . . . . . . . . . . . . .
Actions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. . . . . . . . . . . . . . . � . . . • . . . . . . .
Improvements ( . . . . . . . . . ;'
Construction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
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F. Projected Revenue and Expense
G. Cost of Services . . . . . . . . . . . . . . . . . . . . . . . . . . !. . . . . . . . . . . . . . . . . . . . . . . . .
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H. District Enabling Legislation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
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I, INTRODUCTION j
the"Truckee Donner Public Utility District(the"District")intends to provide brt�adband
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telecommunications services to customers within its existing Service area and, as� evelopment
continues around the Truckee community, to future customers within its sphere o£intuence.
This Master Services Element will provide descriptiuns of the services to be provided,the
infrdstructure improvements and facilities necessary to provide the services, and rrojectiow of
the costs and revenues generated by the provision of the new telecommunications services.
Projections will be made over five year planning perinds consistent with the Dig let's existing
sphere of influence. This report is intended to satisfy the requirement of the Nev da County
Local Agency Formation Conmxissioii ("LAFCu") fur a Master Services Elemen to demonstra4
the District's ability to provide adequate and efficient broadband telecornmunica ions services
within its sphere.
A. General Project Overview
The District intends to construct and operate a network of fiber opliu and coaxial cables along
with electronic equipment to provide broadband telecommunications services for!the District's
existing water and electric facilities and for residential, commercial,and public a ency
customers. Generally speaking, the District will provide four types of telecomm.. nication
services. These are data transfer,cable TV,internet access, and telephone. In so no cases, the
District will be the actual provider of the service(data transfer and cable TV),w tie for others,
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the District will make capacity available for others to provide the service (inte access and
telephone).
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The District will provide a fiber optic cable backbone system extending througho1 t the existing
service area along with metropolitan area uctwurks providing fiber optic connections at various
locations within the District. A hybrid fiber/coax network will extend from the fiber backbone .
to provide service to individual customers. The District will also provide the elec onic
equipment necessary for the operation of the network.
R. District's Sphere of Influence
In 1998,the District completed an update of its"Sphere of Influence Report." The Sphere of
Influence Report was based on the District providing water and electric services, iThe report
describes the District's existing service area boundary along with projected spher s of influence,
in five year planning periods over twenty years. The District's sphere of influence as dcfiucd ii: i
the report has beta appiuvcd by LAFCu. j
The telecommunications services to be provided by the District as described in th s Master
Services Element are consistent with the District's existing sphere of influence. e District
intends to initially provide these services within its existing service area boundaries. Expansion
of telecommunications services iutu bphcir areas will occur as development occurs similar to th
expansion of water and electric facilities described in the Sphere of Influence Re ort.
The District's "Sphere of Influence Report,Reviseal January 1998,"is ineorporat d herein by
reference. The report includes maps of the District's existing service area and sp eres of
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influence in five year planning periods. The repot t also identifies existing land L ses and
projections of future land uses based on the General Plans of the Town of Truck e, County of
Nevada, and County of Placer. Future projections of telecominunication service in this Master;
Services Element are based on the planning perind.- of the sphere report.
II. SPECIFIC ELEMENT RE,QUM MENTS
A. Existing and Proposed Facilities !i
Construction of the fiber optic backbone cable, metropolitan area network, and h brid fiber/coa
network will be similar in nature to the construction of other wire utilities such I electricity an'
phones. Fibcr optic and coax cables will installed on caisting poles where exist] g utilities are
overhead and in buried conduit where existing utilities are underground. Custo er service
connections will also be similar to other utility connections with either fiber optic or coax cable
installed to a connection at the customer's point of service. Facilities would alsg include a
Network Operations Center housing the electronic equipment;needed to operate t e network, an
core sites and nodes which include equipment for branching off of the fiber back one to
individual customers. 1
Backbone Fiber Network
The core fiber optic network that would initially be used to provide eommunieati nand service
between TDPUD's sites for the utility's Supervisory Control and Data Acquisitto (SCADA)
system to connect electric substations,water pumping stations, and other Distriettacilities. Th
District will utilize a minimum 96-count to 144-count fiber optic cable for the
telecommunications network. This should he snffncient for applications, such as he
metropolitan area network(MAN) and broadband services. This fiber optic baokYme will be
approximately 26.3 miles in length, based on the assumption teat the fiber will compose 20% o j
the distribution plant, and will have the capability to meet all the fixture telecom cations
needs of the District and its residents. II
The backbone fiber network will utilize a ring topology for redundancy and inert tscd rcliability�
A fiber ring architecture offers the customer built-in teduudancy for data in the s, stem and
therefore is much more reliable. l
Metronoli an Area Network 1
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The metropolitan area network, or MAN, will include the extension of fiber optic cable directly
to customers requiring a high bandwidth connection to the fiber backbone. These sites include
but arc nut limited to government agencies, substations, schools,hospitals, and c tnnter"al and j
industrial sites. Core sites, which include equipment to allow connection betwee the fiber ;
backbone and the MAN, will be located along the fiber backbone for branching t the customer 1
site locations. Fiber cable for the MAN will be installed on poles or in buried con duits
depending on the type of electric utility service provided in the area. f i
Hybrid 1"iber/Coax Network
The final phase in the Districts's telecommunications system would he. the deliv' y of high,
speed Internet and cable TV(CATV) services to the Distriet's'eustomers. This 111 require the I ;
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construction of a hybrid fibcdcoax(11M) nctwoLk. Tbo Disrict anticipates cons,i cling the
HFC network to be available to 9,480 horses in the initial year with up to 12,400 by thet t
year. Nodes will be installed along the fiber backbone and metropolitan area aet}vork which will
provide the connections between individual customer's coax cables and the fiber netwnr..k. A
node size of 100 homes per node was chosen so that CATV, Internet and telepho�y may be
offered to District residents. initially there will be approximately 126 mites of di tributiun plant'
(coax) fecdiug customers off the 26.3-mile fiber backbone.
Network Operations Center
The District will provide a network operations center(NOC)to house all of the c eetronic
equipment necessary to operate the fiber network and provide;dre Villiuus services. The NOC,
headend,holds all the electronics responsible for receiving signals from the charels, combinin
them and modulating them into a form that can be transmitted over fiber. Space ill be needed'
for the racks that to hold the electronics. This facility will need considerahla air .onditioning a
the heat gain from all the electronics will be great. The NOC facility/room will be in the range
of 1200-1500 square feet. The District anticipates housing the NOC at its exist'nt
building.
B. Services To Be Provided
The District will provide four classes of telecommunications services. in some c ses the Distri #
will provide both the infrastructure and the service (direct service provision),while in other
cases,the District will provide only the infrastructure, leasing capacity to anoArcr sci vice
pruvider(indirect service provision). The services to be provided are:
Data Transfer Service (Direct Service Provision)
Cable TV Service (Direct Service Provision)
Internet Access Service (Indirect Service Provision)
Local Telephone Service (indirect Service Provision)
Data Transfer Service
High speed data transfer would be available using the fiber backbone and MAN bcr systems.
This scrvicc would initially be used to provide conuuunicatiur and services betw the
District's own existing sites facilitating the modernization of the utility's Supervi ory Control i
and Data Acquisition (SCADA) system to connect electric substations,water p ' ping stations
and other District facilities. Data transfer services would he made available to ut1"trilds;
er customers
with similar needs involving data communication between remote sites within thservice area. .
Cable TV Service [
for the cable television system, the District will provide an 870 MHz system. Ts enables the
District to offer up to 78 analog channels of video along with a digital channel ti , digital music,
and pay-per-view. A full 78-channel lineup may not be offered initially,but this into the
system the ability to expand the channel lineup and add otlicr broadband services n the funne.
Cable TV service will be made available to all residences and businesses in the se� ice area.
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Internet Access Service
For high speed internet,the District would provide only the ltcadend equipment�rrd hybrid fibei I'
coax network needed to provide customers access to the internet. The District itself would not
be an Internet Service Provider (ISP). Instead, capacity will be made avniinhle t�1 local ISPs so
that community members can keep using the ISP service they are currently using, The District
will rely on the individual ISPs to provide the cable modems, 'addicss any servic issues that
their customers have and take care of the day-to-day operations of the system. is internet i
access would be provided via coax through a cable modem,which offers speeds p to 10
Megabits per second(Mops).
Local Telephone Service
Another service to be offered by the District is cable telephony, As with internet access, the
District will only provide the headend electronics(digital switch)necessary for it� customers
along with access through the hybrid fiber/coax network. Through a partnership with a
competitive local exchange carrier, the exchange carrier would be responsible fpz'the operation 1
and service issues of the telephone system while the District would bo respvusibl for prvvidin
the ueccssary equipment. This basically involves providing the switch,which w uld be used to
give District customers access to voice services. Because of the intricacies that o;nerating a
telephony system would entail (e,g.Emergency 911),the competitive local excha ge.carrier
would be responsible for all operational and service issues,
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C. Present Service Level Capacity
'the broadband telecommunications services being proposed by the District are n t currently
available within the District's service area nor are they being provided by any other overlapping
service provider. The facilities needed to provide the telecommunication service$
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existent. Although some communication services are available such as telephuricl- cable TV, anlll
ltaditiuual internee access through phone lines,the level of service of these syst s does not
compare with that of the broadband network proposed by the District. The broa and
telecommunications service addressed in this Master Services'Element is consi 'ed a new
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service to the District's service area.
D. Anticipated Service Level 4
It is anticipated that all of the telecommunication services offered by the District ill be
available to customers throughout the District's service area within 18 months of decision by
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the District to proceed. This will likely result in telecommunications services bei g available to;I
all existing residences and businesses within the District's service area between t e years 2002
and 2003, This will include data transfer, internet access,cable TV,and local t-1(phone
services.
Once the fiber optic and hybrid fiber/coax network are completed,the telecommupication systerp
will be comparable to the District's water and electric systeurs in that it will be avtulable to all III
existing customers within the current service area. Expansion of telecommunicat#tons service
into the District's spheres of intluence will occur as development continues around the Truckee
community following the same patterns described in the Sphere of Influence Re' rt for water I
and electric service. However, unlike water and electric service where it is expec ed that
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virtually every residence and business will connect, it is not anticipated that ever potential
customer will desire telecommunications services. The District has made projec ons of the
number of customers utilizing each of the services based on the total number of omes passed by
the network and the penetration rate, or anticipated percentage of homes ntiIi7in the services.
Table 1
PROJECTED CUSTOMERS
Year I Year 10
Total homes passed by network 9,480 12,369
Data Transfer penetration rate 45% 81%
Data Transfer customers 4,266 10,019 ('
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Cable TV penetration rate 40% 45% j
Cable TV customers 3,792 5,566
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Internet penetration rate 66% 43%
Internet customers 6,257 5,319
Telephone penetration rate 1.0% 60%
Telephone customers 948 7,421
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E. Actions,Improvements,and Construction
There will be additional actions required by the District prior to implementation gf the i
telecommunications service project. FLA and foremost,the District must make I he
determination to move ahead with the telecommunications services plan. If the District I{
determines that it is in the best interest of its customers to provide the proposed
telecommunications services, the District, through its Board of Directors,will take action to
approve the plan. Following approval of the plan,the District'will take a number of other i
actions leading up to implarllculaGolt of the project. These actions include authorization for ,
financing the construction of the network, approval of network design, authorization of
construction contracts, and authorization of service agreements with service proyrders for
internet and telephone services.
Imgrovcmcnts I)
None of the improvements needed to provide the telecommunications services ar currently in
existence. All of the infrastructure including fiber optic cable,coax cable, and el ctronic .I
equipment needed to create the broadband network will have to be installed in or er to provide
the proposed level of services.
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Conetruotion �,
In order to provide the proposed telecommunications services, the District will b ve to construct
the fiber optic backbone network,the metropolitan area network, the hybrid fib' coax networkP
and the network operations center. Construction of the cable networks will involve installing
fiber and/or coax cable along existing poles or in buried conduits depending on e type of
electric service(overhead or underground) in the area. A'odes�which. allow i1 v5dual custome�$
to connect to Ozc fiber network, will be installed at a rate of approximately one p r every one
hundred homes passed by the network. A conditioned space will need to be mad available for
the network operations center. This will likely he at the District's existing facila
F. Projected Revenue and Expense
The District has prepared revenue and expense projections for a ten year period:, he projections
indicate that the District will be operating the service at a loss for the first two ye rs. Starting
with the third year of operation, the system will generate revenue in exceas of ex enses,
according to the projections.
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Table 2
REVENUE AND EXPENSE PROJECTIONS
OPERATING REVENUE Year 1 Year 5 Ye r 10
Data/Intcruet Service $ 773,058 S 1,456,148 $ 4,970,216
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Cablc TV Service 912,260 2,969,397 1, �42,388
Telephone Service 2,884,355 4,467,339 7,)23,690,648
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Other Services 1,242,931 2,418,873 3s
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Total Revenue $5,812,624 $11,311,786 $17; 26,853
OPERATING EXPENSE Year I Year 5 Ycttr 10
Programming S 506,314 $ 803,466 $ 1,,1I84,667 j
Depreciation 1,110,565 1,265,258 1;4I 4,315 l
Payroll & Benefits 579,t59 676,889 656,552 j
Telecom Plant O &M 480,574 80,428 �5,232
Marketing &Advertising 340,311 34,601 3,063
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Admin& General 654,482 812,166 1;137,046 I j
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Non-Video Services 2,547,099 4,409,688 6,819,861
Tn-T.ieu of Franchise Fees 45,613 148,470 248,511
Total Expense $6,264,120 58,230,966 $11,6 9,247
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G. Cost of Services
The District has estimated the cost of services for a ten year period. Because
telecommunications services are not considered essential services such as water nd electric
services, costs will only be incurred by consumers who choose to take advantage of the service$
provided. Residences and businesses may choose to utilize some or all of the so icesoffcicd
and will be billed only for tho services provided.
Table 3
BILLING RATES
BILLING RATES Year I Year 5 1;ear 10
Data Transfer Service $175.00/mo $193.00/mo S219.00/mo 1
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Internet Service S21.94/mo S13.01/mo $10'81/mo
Cable TV Service(Basic) $29.95/mo $36.40/mo $461 6/mo
Local Telephone Service S17.00/mo $17.00/mo $17.00/mo 11
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H. District Enabling Legislation
The enabling legislation for the District is the California Public Utility Code,Di Vision? - Publi
Utility District Act. Of particular pertinence to this Master Services Element is Chapter 4,
Powers and Functions of Districts, Article 3,Utility Works and Services, Section]16462,
Acquisition, construction, and operation of utility works and services which state j the followinO
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"A district may acquire,construct, own,operate, control,or use,
within or without or partly within and partly without the district,
works for supplying its inhabitants with light, water,power, heat,
transportation, telephone service,or other means of
communication, or means for the disposition of garbage, sewage,
or refuse matter,and may do all things necessary or convenient to
the full exercise of the powers granted in this article."
•emphasis added by author j i
Other pertinent sections of the District's enahling legislation are included in the istrict's Sphere
of Influence Report which has been included herein by reference.
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